What You Missed October 2016 General Meeting
by Rob Earhart
Rehabbing for Quick Cash
Robyn Thompson - Rehab Queen
October 4, 2016
I got into real estate investing 20 years ago by default. I worked at IBM and was set, but all 503 of us were summoned to the ballroom and a guy went up on the stage. He said, “IBM never laid anyone off in 116 years but I’m here to let you know that there will be 270 of you left in 90 days.”
I had to check to see how I could make it if I got laid off. I had just bought a car and had a house payment with little in savings. Luckily, or unluckily, I was one to stay for 14 months until I could find out how to make real estate work. My first year I had no money but I did 6 houses, then I did 17 the second year and quit my job. I then did 51 houses in the third year and did over $2.1 million in rehab costs and I was then named the rehab queen. I saw how everything worked and figured out it was an assembly-line process.
I speak about 180 days a year and tonight I’ll teach you four steps to getting a fat check.
First is to find a good deal. This market is hot and it’s hard to find a deal. Because there are a lot of people in the game, you have to find a different way to locate deals. I had 34 rentals in Connecticut and moved to Ocala and did not want to do long distance management. As they moved out, I sold them off. There was one left and she finally wanted to move out two days before Christmas. The temperature was 0 degrees and I was worried about freezing pipes. If the pipes in the master upstairs froze, the pump in the basement would continue pumping water until the house filled up. I would have gotten rid of that house at any cost at that time. “I was a desperate seller,” instructed Robyn.
I thought about it and figured, “if anyone lived more than four hours away from their property, they would not like to own.” I researched the desperate owners who are out of state and have owned it for more than seven years. Then I contacted Listsource.com and they said they could give me that list with info on what they owed, how big, how many bedrooms, etc. They had 3,100 names in Ocala and the whole list was only $310. I ordered it and, due to Ocala’s slow Internet, it took quite a while to download such a large spreadsheet.
“I decided to send a direct mail letter without the fancy stuff, not wanting to turn off the normal person.” I wanted to “be just like them, not showing off how important I am, or how much money I had.” If you want to relate to the mass audience, just be a parent, a grandparent, or a pet lover; or any combination of two.” I decided to send 1000 letters and, with a 2% expected return, I figured I could find a deal.
Since I was sending to people who probably used to live in Ocala, I created the “Horsey Letter” with a picture of my horses. Then I had someone print out the letters, signing my name; they were paid 60 cents each. Within four days, she mailed all 1,000 out, and I ended up with 127 calls on my cell phone. Not the most efficient way to follow up leads.
“If someone does not get a live human, 75% of them will hang up,” exclaimed Robyn. “I had to get someone to answer the phone, so I used Patlive.com. and wrote the scripts for them to use. If you go to Patlive.com/robynthompson, you can print out the scripts I use. I keep it short and ask only the pertinent questions.” “I’ve seen 20-page scripts but if you get too nosy too fast, you will lose them.” “I just want your name, address, phone number, and why you are selling? The next question is how much do you owe on your house?” If nothing is owed, I will make sure to get there quickly.
When I go, I automatically construct three offers for the seller. Robyn then described a small house in Port Orange and the owner was in New York. The husband had died and she needed to get it sold. It was listed at $150,000 by a Realtor but had not sold. She said it did not need any work so I looked at it. The carpet had a wear pattern from the front door to the kitchen to the bedroom. The bathroom was all gold with Elvis wallpaper. When someone dies, the relatives don’t have any money for the burial expenses and the taxes, so my first offer is cash. I always write on a yellow paper pad so it’s not confusing. “If a seller is confused, the answer is no,” advised Robyn.
I had to figure the Maximum Allowable Offer (MAO) based on the After Repaired Value (ARV) times 70% less repairs. I figured it would be worth $150,000 after repairs, so I offered $87,000 cash. I could sell the rehab for $7,500 on a quick flip, or could afford to do the rehab myself. Offer #2 was a split-funded deal: some now, some later. I could give her $105,000, with $25,000 now and $80,000 in five years. It would be better for her than trying to rent it. “Why would she want the $25,000?” queried Robyn. Once there is a death, it helps pay for the burial and expenses. If I rent the house out for $1,200 a month, I’ll have $200 for expenses and can save $1,000 a month towards the five-year payout.
Offer #3 is for the owner to finance it at $130,000, with $30,000 down and $1,000 a month for 100 months. If she asks for interest, I advise her, “I just gave you $5,000 in interest upfront.” She took offer #3 and never even countered. “I keep the $200 for expenses and $1,000 goes directly to her. There is no extra cash coming in but I get the house paid off in 8 ˝ years. “How would you like to have a house paid off that quickly?” asked Robyn.
Once you get to up to $1,200 per month in rents, you always get it on time. “I would rather have a $2,000 a month payment that I get automatically, than a whole bunch of $600 per month with complainers and late payments. With the higher rents, we do not have evictions.
Robyn said that Sunday we’ll go over a lot of things. “First we’ll go over the ‘horsey letter,’ but you cannot mail into Ocala, or I’ll hunt you down,” warned Robyn. Then we’ll go through nine types of houses never to buy. I want to show you how to flip so you can make some money. Then we’ll cover contractors and how to handle them, how to find them, how to control them. We’ll go through the contract to show you how to make sure they perform.
Robyn then asked, “how many buy the materials for the jobs?” I had a friend that had a contractor he had used for years that was working on a roofing job. We were down the street and an ambulance came whizzing by. A worker had a worn out pair of sneakers and slipped off the roof, fracturing his spine. My friend had done 450 houses and the man died nine days later. They were served a $3.5 million lawsuit in their name and the name of their LLC. The IRS states that they were considered employers because they bought the 12 sheets of plywood for the roof to save some money. They lost the case and had to pay out the money. They are still around but just working for wages and broke because of their mental issues about investing and losing.
“You need an Independent Contractor Agreement showing there is no employer relationship to the subcontractor. Do not buy materials,” warned Robyn. I will teach you how to build a team to go through the rehabs, and then show you how to go through the loan process to know which 30% of the buyers can actually close.
There are two types of contractors: “Handy Harry the hacker,” and “grown-up adults.” I have used both. I started with one man who did not speak English. Within two years I had 16 guys, 3 who spoke English, 13 without driver’s licenses.
“Tom the contractor came to me and gave me a price that was a little higher but would be finished in 12 days,” exclaimed Robyn. “I said there was no way, but they did it and the house was gorgeous. Tom and I did 170 houses together after that.”
Robyn gave out a cd on how to control contractors like a dog on a leash.
Flip This House asked me to rehab 15 houses but they wanted me to lose money on three houses. I refused to lose money and ruin my reputation. They then hired Than Merrill, one of my students.
Now that the market is hot, direct mail works great. I will teach you how to market in slow markets also, if things change. Once I teach how to market, I teach how to wholesale.
Two ways: assignment and double close. Any deal under 10k you will shuffle paper. When its assigned, the buyer knows how much you paid. In a double close, you just need money for a few hours, but the closing does not show how much you paid. If you want something that’s fire-damaged, you can sell to a contractor.
The next thing is multiple offers. There are five types. If you can give a seller a choice of three offers, it never occurs to them not to pick one.
Then I’ll teach you the renovation process. You should improve a house by 10k per week. If it’s a 100k house, every day costs you $113. The higher the cost of the house, the higher the carrying costs.
Time is money, git r done. The last thing is how to sell. All young couples only know how much they have to put down and how much a month they can afford.
Multimillionaires ask someone for help, broke people do not.
Robyn then gave out some of her courses on contracting, on marketing, and on making the jump into real estate.
It does not matter who gets into the White House, I know that Social Security is a thing of the past.
The last program she gave out is her subconscious retraining program. Then she invited all to the Sunday program and explained her bootcamp: Thursday through Sunday, with a lot of information.
“I want you to wholesale a house by the 7th of the month, every month, and you will have $7,500 to cover all your bills and it will release any money pressures,” ended Robyn, ”People make more money when they don’t need it.”