The Science of Flipping - Episode 94: Mastermind Series with Francesco Moracci

Episode Date: April 1, 2017

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Welcome to the Science of Flipping Podcast. I'm your host, Justin Colby. What is up, everybody? What is up? Welcome back to the Science of Flipping. I am your host, Justin Colby, back with another awesome episode with our Mastermind series. And again, if you're watching on YouTube, awesome. You'll see exactly who I'm talking about. Before I introduce our billionaire boardroom mastermind member, I just want to get some housekeeping out of the way. I've been getting a lot of feedback that you guys are absolutely loving this series, loving knowing that there's other individuals out there in the market, absolutely crushing it in markets that you guys felt like could not compete, right? The Atlantas of the

world, the New Yorks and Jerseys of the world, the Texas areas of the world. So long story short, I'm happy to be doing this. If you are just starting, if you are just hearing this episode, if this is your first time to the podcast, go to the science of flipping. There's a bunch of cool stuff on the website, but most importantly, guys, download the free book. It's called the science of flipping. It's a book I wrote. It's a book that can, uh, consistently is selling on Amazon for $10. It's a real book, but I'm giving it to you in ebook format because you're a loyal listener. Go on to The Science of Flipping and download that book. Another favor you could do for me is if you're listening to us on iTunes, give me a rating. Be honest. Be real. If you absolutely think this is terrible, tell me about it. If you think this

is awesome, give me five stars. Give me a good rating. iTunes loves to get ratings. They love to get reviews, and it really helps the podcast. So just be genuine, be authentic when you give me a rating, but I'm always here to help you guys. And so hopefully you guys are enjoying what you hear. And lastly, guys, people are saying, hey, I'm not sure if I deserve to be in the mastermind. So I'm scared to fill out the application. Don't be scared to fill out the application. We do not take everybody, right? The people you've been seeing are a select hand few that we have chosen to be in an elite level. But even if you're in, you know, a step under them and you're like, you know, I make 150 grand a year. I don't know if I'll make it. Just fill out the application. Don't give yourself or

don't sit on the bench, right? Try to get in the game. And the best way to get in the game, the best way to be around these people, myself and Kent and Sean, is just fill out the application. Go to the science of flipping. Don't be scared. Nothing will happen.

The best thing that can happen is you become part of the family. The worst thing that can happen is it's not a right fit. No harm, no foul. So get to the science of flipping. Fill out the application. It's absolutely free. Give yourself a shot to get in the game. With that being said, I want to introduce my man, my guest. You guys are going to love talking to this guy because everyone loves talking to this guy. Francesco Maracci from Jersey, baby. From Jersey. what's going on francesco i'm good how are you guys i'm doing great it is roughly 79 degrees here in phoenix right now

uh i had the windows down the roof open blazing music this morning i'm away to coffee um i've already had several cups of coffee because I'm a morning guy, but man, it's good. How are you out there in Jersey? I'm kind of jealous. We're recovering from 12 inches of snow and a blizzard, so we're doing good. No big deal. No big deal. Well, let me tell you one thing. I couldn't make it in Jersey. I lived in Boston. I don't know if you know that about me, but I'm a California boy. I'm originally from California. I lived in Boston for one entire year, meaning summer, spring, fall, and winter.

I caught full-blown pneumonia in the winter. I was such a baby, and I had to move back to California, which is really funny. So, man, let the listeners know, I know your story, but obviously you have an awesome accent, where you're from, how you even started this. I know your story. So I'm allowing you to kind of let everyone know, you know, you and I were joking the other day, you're like, I still don't speak English. And I'm like, you're killing me here. And I, you know, you and I were joking the other day, you're like, I still don't speak English. And I'm like, you're killing me here. And I, you know, listen, at the end of the day, Francesco, there are tens and tens of thousands of people that listen to this podcast all over the world. It's not just in the U S and there's people in Australia and there's people in Europe and there's people in

Asia that listen to us, Canada and Mexico, obviously. But I think a lot of people, one thing I want to bring up about you is you aren't from here and you were able to make it here in this industry, in a market, Jersey and New York and that whole metropolitan market, that there are a lot of people that say it can't be done. There's too many, the prices are too high and there's too much. You A, are not even from here. It's all good. You're not even from here. And B, you've been able to build a seven figure year business in a market that people can't, they're too caught up in their own heads. Jersey's too hard. New York is too hard. It's too expensive and blah, blah, blah. Man, tell everyone

a little bit about yourself, right? Where you came from, what happened, how you got in. Just go, man. Just go. So, I'm from Italy. I'm from Florence. I'm a retired police officer. I used to work for the Italian Carabiniere, which is a police officer in, it's police

in Italy. Okay. And they also, we also go out to the country as a military police. I was in Iraq in 2004 for one tour. And I was stationed in Milan, serving the government official, Secretary of Transportation, Secretary of Defense, Prime Minister from time to time and on a side in it I was doing some small real estate investment with a friend I did some training in Italy from from the pioneer in Italy of the real estate you know training alfie bardola okay from that um how i got here in 2006 uh during

during work i met my wife my wife is an olympic athlete and she was competing at the olympic games in turin in 2006. uh she was competing i was the security for the team um i didn't speak english she didn't speak italian but you but we kind of understand each other. At the beginning, for us, we didn't speak much, so it was okay. We went back and forth one year from 2006 to 2007. I was coming to the US, she was coming to Italy, and at one point we had to make a decision. we like each other, what we do, what we don't do. And I decided to take one year off and to move to the US, begin to work as a security specialist for a company.

And at the same time, I didn't speak English. When I moved here, I really didn't speak English. So I had to go back to the basics and learn English. And then I wanted to be in real estate so I went to different training different real estate investment club I even went to Trump University people I complain about but really there is nothing to complain about it is the same like it was good information it gave me the basic and the base how to start and be here today. Yeah. So if you had to put a number on from even Italy and then here in the U.S.,

what do you think your financial investment has been in education? In education like Trump University, in education like the masterminds, in education from books to DVDs to recordings, to what would you guess you've spent in education? Probably well over $100,000. Yeah. I want to tell everybody, you start with a book. I have a lot of books.

You were joking. Did you read all of them? I read most of them. I just have a few that you know i just got and they're in english yeah so it took me a long time to you know to to to go from italian to to to english just the the mind shift the thinking from you know whatever was that i was understanding italian i just found my notes from the really first seminar trump university and half of the notes are in italian

and half of the notes are in english and the half in english they are wrong so you gotta start from somewhere and and again the investment can be minimal just buying a book you know it's 2017 i'm sure if you have any problem there is out a book that address your problem, especially in real estate. So the investment can be very minimum, just like a few bucks, you know, like $10 to buy a book to,

you know, while you grow and, you know, when you grow, you can do different mastermind investment, cloud training. It's, there is real estate is for everybody. Yeah. Yeah. You know, investment, cloud, training. There is real estate for everybody. Yeah.

Yeah. Listen, at the end of the day, your story is great. You came over, spoke very little English, just studied, worked your tail off. None of this, I say this a lot in my podcast, but this business is simple. It's not easy. It's not easy, but it's simple. And you're a great example of someone who just learned the simplicity of the business and then worked your ass off to get to where you're at, right? It's not rocket science. You didn't need to have some degree of PhD in

real estate. You just worked your butt off, right? And on top of all all that your English wasn't great and now you've built this incredible business I mean tell talk to us a little bit about your business you know you're in Jersey where do you invest how do you invest are you wholesaling more are you rehabbing and flipping more are you buying rentals are you doing all three what are you currently doing in your business right now um what i'm doing now is um i i shift from i used to wholesale much more um the the you know a couple of years ago and i transitioned from from wholesaling to to rehabbing i did a few property last year and i have now eight properties under construction under renovation and i have two more that I'm looking to buy. I'm wholesaling too.

Yeah. But it's, let's say, like 30% of my business now. Okay. Before it used to be like 90% of my business. So I'm just growing on the rehab side. Yeah. It's giving me, you know, good return. I use private money, private investor.

And that's how I was able to scale it from being, you know, just wholesaling and to do all this. Yeah. So what I would ask you is I just did a yesterday, we did a recording with Rob and John from Billionaire Boardroom, if you remember there in St. Louis, right? They have actually, they're similar to you where they do both, but they're going from doing way more rehabbing, going into basically opposite of what you're doing, right? Where you're doing 30% of your business is wholesaling, 70% is rehabbing and flipping. They're going from 70% of rehabbing and flipping into 70% of wholesaling, and only about 30% of their business is wholesaling.

So what are you, I asked them this question, how do you make that decision, right? When a property comes up, you send out direct mail, or you're're doing PPC or you're marketing, the property comes into you. Where is that decision made for you? Is this a wholesale deal? Is this a rehab deal? How do you make that decision? It depends where it is.

I'm very close to New York. I'm in Bergen County. I'm 15 minutes off New York, I'm in Bergen County, I'm 15 minutes from New York and I invest in for rehab purpose in two counties which is Middlesex County and Bergen County but I market out in different in different areas where I have investors that you know buy properties that I know that they're looking for properties so Bergen County or Mid middle south county and in the town that i you know i'm willing to do the rehab then the decision is very easy i come in i look what's the spread what we can what the house need and and and then most likely going to go into rehab but why is

there is there a number behind it is there a percentage is there like the market here in Bergen County, again, it's very close to New York. So a lot of commuters from the people working in New York, the towns, all of them are well served with transportation, either buses or train. And prices are, let's say here, first time home buyer is half a million, like 400, 400 to 500,000. Obviously, a lot of towns have new construction and they go over a million. But where I try to stay, I try to stay between like 300 and 600. That's where is the soft spot. Here almost, I don't want to say everybody but the majority of people

can can buy this this property so um and the inventory is very low especially in county in every town the inventory is very low and and um i just enjoy doing the rehab and the spread in general, very healthy spread. Yeah. Do you make a decision based off spread, right? So if you're doing 30%, let's say you do 50 deals this year, right? So you do 15 wholesales and 35 rehabs. Those 15, why did you wholesale those 15? The spread wasn't that big?

It may be a little far from where I want to stay. Okay. I market in different counties. Between I market in four different counties. Not the whole county, but in a few different cities.

So, based on where the lead comes from, then I make the decision. Again, wherever it is in Bergen County, which is in half an hour, you can reach all the towns, I'll rehab. I can make much more if I can do the rehab. The wholesale feed, they are not small, based on the price that we can buy and sell the houses. You average like $10,000, $15,000, up to $25,000 for a wholesale fee.

Nice. They are a good chunk of profit. But what do you average on your rehabs? What's your average rehab? Let's say between 80 and 100. Yeah. So I mean I would do if make 15 now and net 80 grand later, I mean that is a substantial, right?

That's like 25%, right? Um, of your, what you could make on a rehab. So man, that you're crushing it. That's an obvious no brainer. Make 15 now, 20 now, or 80 in how long your rehabs take 120 days between four to six months. Yeah. That's not much of a, uh, much of a... I count the acquisition, the renovation, and the sale. So within six to eight months, we buy,

we fix the place, and we sell it. And we close on the deal. Yeah, I do the same thing. The actual rehab for me takes 30 to 45 days. But talking about acquisition, rehab,

listing, getting the buyer, loans, closing on the deal, it takes typically about four months. But I'm also not like you. You're in a market where you probably have older homes. You probably have bigger square footage homes. You probably have more work than I do where I market. The homes are usually built in the 60s or 70s.

There are 1,500 square foot homes. It's pretty typical, right? You're not going to go recreate the world there. I'm assuming based on, I know Burgin County pretty well. I've been there several times. We have plenty of students there actually, which you probably wholesale to or buy from, right? So at the end of the day,

I know that you have to put in more work in your rehabs. Yeah, I just bought a new family that has been built in 1908 and has been in the same family since 1912. Wow. So the house is attached in the last 50 years. So that is going to be a huge rehab. That's a huge rehab.

How long, I mean, what does that look like? I'm still looking at six to eight months. Really? But it's going to be $130,000 worth of everything. You have to redo everything. You mentioned it already, but it sounds like you use private capital. You have people, not banks or anything, that come in and lend you the money?

Correct, yes. Where do you find those people? I started with a friend that he knew what he was doing. He just retired. He had some money on the side. And he approached me and said, I have this money. Can you use it pretty much? That was his question.

I was like, sure. And then from there, I did this money, can you use it pretty much? That was his question. I was like, sure. And then from there, I did one project, another project, another project. And then from there, they begin to talk to friends, talk to each other. And I have now, you don't need many people. You need a few that are willing to invest with you. Right. And I just turned their money on one project, then I finished the project, go to another project, then go to another project. I have about 10 people

now that I can count on for investment. And I just started trying hard money for two projects and it's going well so far. didn't you know the investment there is very minimal and you can borrow all the money yeah so I'm into I never did until this year I mean until until December November but it just for me a way to grow out of the the people I know and the people are really best It's a little different the way you approach it, but if the spread is there, it's good for everybody. What do you give your investors?

What kind of returns? It depends. There are some people who just want a fixed return, a fixed percentage, and work on that. Other people, they want to be a little more involved or their risk tolerance a little bigger so they they want to stay on the profit spread sure so

it depends you know everybody say i just want my i don't know let's say a number like eight percent ten percent i don't know, any number, which have 2%, whatever they want. Say, I just want to make sure that I get that at the end of the year and you work with that. And somebody say, what do you think the profit is? I say, okay, like 50, 60, 70, 100. And then we work a percentage of the profit split. It can be good for everybody. If we make more money or if there is some issue, maybe they can make less than what they will make with a percentage of the profit split. It can be good for everybody. If we make more money or if there is some issue,

maybe they can make less than what they will make with a percentage. But it didn't happen so far. So when you do give a profit split, because I've done this a lot, right? And I've structured it so many different ways. What is the most you give away? And then what is the least you end up giving away right so when you're doing an equity split not debt servicing but equity what's the most you're willing to give away and then what's more typical in terms of your low side to my first two investor uh we start at

one third of the net profit okay and uh for start um, auto, I would say like, I'm giving them just to two of them, like 50%, because without them, you know, without the first two, I probably will never be where I am today. Yep. So I feel some kind of, I owe them. Yeah. Which I don't, but that's, that's, you know. Sure.

Sure. Uh, that's what I feel. But you can structure 25%, 15%, 10%. It depends. It depends on the profit split. It depends on how long the project is going to last. The involvement from the investor, if they want to be involved, people say, okay, just call me when you're done yeah so i just go you know i'm italian restaurant i go to meet with them when i get

the check i do my you know my renovation my project and i call them okay time to go to it again i have your profit and that's the way we we structured the deal everything's secure you know with mortgage you know private mortgage mortgage note so everybody is you Everything is secure, you know, with mortgage, you know, private mortgage, mortgage note. So everybody is, you know, is secure that we are not going anywhere. I mean,

I'm not going anywhere, but. Right. Just, you know, just something to be safe. Yeah. And I think it's funny,

you know, so I started in the rehab world first, and then I've slowly transitioned into being a very large wholesaler here, but we still do our rehabs. We just do a lot less of them. Um, and I think it's funny because I might even do like a rehab series because a lot of people ask me how, you know, how do you get someone to lend you the money? And you know, how do you know you're working with the right contractor? And there's no one size fits all or absolute right answer. Right. But I can tell you this, money is a relationship game. Money is a relationship game. And you need people to trust you initially. So you have to give away

a bigger piece of the pie and that's okay. And then once they trust you and they see that the money's coming in, you can renegotiate and everything is ultimately negotiable, right? right and so you know you know do you have any thoughts to behind that you know in terms of you have ten people now I mean I'm assuming you gave away more profit to the first couple and now you kind of have a little bit more of a traditional like hey I'll give you 15% 20% of net equity if you fund all of it right and I'm assuming they fund everything from the purchase to the rehab, correct? Correct, yes. I try to put no more than two people together.

My ideal situation is when one investor brings all the capital. But just to give you an idea, we just bought a project and we need half a million. So obviously you can fund an investor that has this kind of capital, but it's most likely you put two people together. So when you have two people there. So again, you do the agreement. How do you divide the agreement? So let's just say you're willing to give 15%

of net profit away or 20%, just make math easier. So if you make 100 grand. Let's say we. 20 grand is going to go out the door. Out of those two investors, who makes what portion of that 20 grand? There is always one investor that put a little bit more capital. So just to make the mortgage first or second position. So the investor, we split based on their capital.

So it can be like, let's say somebody's say somebody make $11,000 and somebody $9,000, somebody make $12,000. We split exactly by their capital contribution. Yep. So percentage of capital contribution. So if you need $500,000 and someone comes in with $350,000, they get 66% of the profit. The other $150,000 gets 33%. Correct. And everything is decided at the beginning.

So it's clear for everybody. Everybody has a certain expectation of what will be the profit and what will be the timeline for the project. So there is no discussion. Everybody is on the same page. Everybody is secure secure which is the most important thing for me you know people give you money and invest with you but it's money that they you know they work very hard for it yeah so and my math was just wrong right there if they

gave you 350 out of 500 they'd get 70 but hey i was just you know just going and flowing with you man just going so listen francesco, I know you are very busy. I know you got a baby and a family and you got your real estate venture. So for me, I just want to let you know I really appreciate you being on the show. I know our listeners are probably more excited about hearing you and the fact that you're not even from the U.S. than hearing from me. So I just want to say thank you from the bottom of my heart, giving back. I'm a huge person that loves to give back. For these people who

maybe some of them are beginners, maybe some of them are making $500,000 a year and everywhere in between, I just appreciate you coming on. Let people know where to find you. I know you're in Jersey. I know you can be in around New York. What websites, what emails, where do they find you?

They can send me an email at francesco1800fairoffer.com I'm a S&C for 1-800-FAIR-OFFER, the company that Sean Terry and Alex Young work for. I run most of my marketing through it, and it's been great. I actually encourage everybody

if your area is available to ask and together because it gives you an edge on the market. It's a lot of Joe by houses, Mark by houses, and houses. This gives you a national

recognition brand. Even if you are a small operation, it makes you look more professional. It can give you an edge. If if you are interested to Francesco's point if you're interested just email me directly info at the science of flipping.com I'm happy to put you together

with Sean obviously you all listeners know I'm very close with Sean we have a partnership with the mastermind so just email me if you're interested I'll get you together with the right person info at the science of flipping.com and I will make sure if you're interested. I'll get you together with the right person. Info at thescienceofflipping.com. And I will make sure if you're interested in 1-800-FAIR-OFFER, we set you up. We get you connected with the right person.

So you just let me know. Email me, info at thescienceofflipping. So Francesco, what was your email again? Francesco, F-R-A-N-C-E-S-C-O. Yes, at 1-800-FAIR-OFFO. Yes. At 100fairoffer.com. And you can... At what? 800fairoffer?

1-800fairoffer.com. 1-800fairoffer.com. Francesco at 1-800fairoffer.com. He's crushing Jersey. He's in four different counties. Anything you want to leave with the people? Maybe someone who's just getting started or maybe someone who's on their way and they just need a little more motivation it's easy never give up never

never never give up because it's it's uh it it's not difficult you can do it just just keep pushing and uh you'll make it it's very a very basic, basic business. Yeah. Yeah. I'm in LinkedIn too if anyone wants to reach out. So Facebook, if you need,

you know, if you are in the area, you have any question, you need any help with anything, again, I'm also believing giving back.

Yeah. So it's, I'm here. Right on, man. Well, I really appreciate you. You can get back to being a father

and a business owner and a husband and everything, but thank you very much for coming back, giving back to the guys on Science Flipping. Guys, that's it for today. Again, get yourself in the game. Apply. It doesn't hurt. It doesn't risk anything. It just allows us to make an opportunity for yourself and see if there's going to be a good fit to be a part of our mastermind, whether you're making 500 grand a year or you're just getting started, just apply the scienceflipping.com application, hit it, submit the application and we'll review. So thank you, Francesco. Peace out, everybody. We'll see you on the next episode. Peace.