What You Missed September 2018 General Meeting
by Rob Earhart

Rehabs Done Right - Get Chunks of Cash

Robyn Thompson

September 4, 2018

Robyn began by describing the way she got started in investing. I was an accountant at IBM when they had a meeting to say that IBM had never laid anyone off, but now the consultant was hired to lay off half the staff. I had just bought a condo, had not paid off my car or my student loans, and needed the income.

I panicked when I got laid off and took a job as a waitress, working later each day and adding more hours to keep up. I came home one day and my neighbors were moving out. They could not sell their condo because the prices were down.

I watched the bank price go down and down and ended up buying it for $26,000, while I owed $80,000 for mine. I rented it out and decided that if I could get 10 of these, I could quit my job. “Today after 340 houses, life is good,” exclaimed Robyn.

The first year I got loans, but the second year I started using hard money and bought 17 houses. The third year I did 51 houses and had a team of 22 contractors. I made over a million dollars that year.

“I want to teach you how to move your career to the next level,” she advised.

How many are struggling to find good deals? I can speak to that tonight. After 22 years in this business, I have learned to look where nobody else is looking.

“I started to do a lot of direct marketing and direct mail. A lot of young kids think that the post office is dead, but the post office is my friend,” she proclaimed.

Before I moved to Florida, I had bought a few houses in Connecticut and, as the tenants moved out, I would fix them up and sell them. I had one left that was on section 8 for 14 years. She called me up on Christmas day to say she was out of the house, and I rejoiced. Then I realized that the heat was not going to be on and the hot water heat system would freeze and ruin the house.

I called everyone I could and, finally, one contractor whom I left a message with called me back and turned the water off. “I then realized I was 2000 miles away and could do nothing. Now I look for out-of-state owners who have owned a property for seven years or longer. I found a company, Listsource.com, who could give me that type of information. In researching for Ocala, Florida, they found 3,100 houses and the whole list cost $300. Now the listing company has the information down to 8.5 cents a name.

Another company I use is Listability.com/robynthompson. They will do it for 3.5 cents per name. These two brokers scrub their lists every few months so the names you get are current.

I wrote a pretty simple four-paragraph letter that does not brag about who I am and what I can do, but it talks about “little ole me” and “little ole you” and only one house. If I’m dealing with older people, I have to talk slower and simpler.

I put a picture of a mother horse and a baby horse in the background and sent 1,000 letters. Then I received 127 phone calls over the weekend. They all went to my cell and blew up my phone. “If they call and do not get a live person who speaks plainly and slowly, they will just hang up,” warned Robyn. Now I use PATLive because they cost $109 per month, work 24/7 and will use my scripts. We keep it simple: how many beds, baths, does it have a garage? It is mandatory that it has a garage or it takes an extra four months to sell.

The most important question is “Why are you selling?” If they have to sell, they are a good prospect. If they owe $70,000 or less on a $100,000 house, it is worth my getting into my Mercedes and going to see it.

I had a house where the lady told me she had to sell because her husband had cancer. To build rapport, I talked to her about my father’s cancer and then asked her if she had had other offers. She said yes, but they were lowball offers and two realtors who said she had to clean out all the stuff. The house had a lot of stuff collected over the years. She wanted to take her husband back up north to see their kids before he passed away.

I told her we would go through all the stuff and mark whatever she wanted to take with her, would have a truck take their stuff to where they were going, and I would pay for a plane for them both to fly to their grandchildren. I would then present three offers. The all-cash offer would be the lowest and would be based on 70% of the After Repaired Value (ARV) less repairs. It was worth $150,000, so I could offer $90,000 cash.

The second offer was a split: some money now, and some later: $115,000 with $25,000 down, and the rest in five years. If I kept it for five years, I would collect $60,000 in rent.

For the third offer, I could pay $130,000 with $30,000 down and $1000 per month for 100 months. If they wanted interest, I would extend it to 150 months and the payment would go to $700, so they choose to get the $1,000. In four years, it’s half paid for.

If you look at an amortization schedule, in your first $1,000 payment there is $998 interest. In 15 years, you are paying half interest, half principal. I would rather have my house half paid for in four years, wouldn’t you? asked Robyn.

I like buying houses in really nice areas that have the best school districts where the tenants pay really well. CEO’s still rent because they know they will not be there in a few years and don’t want to have to sell a home to move.

I have a house in Ormond Beach that rents for $2,300 per month to a guy who just went through a divorce. He just wants to go to work, come home to a nice house with no upkeep and enjoy his kid’s visits.

Profit center number one is appreciation and you need to ride it when it’s hot. I watch the sales, days on market, etc., so I know when to sell.

The second is how quickly it pays down. The quicker, the more profitable.

The third is vacancies. High-end professionals just want someone else to handle everything. I have a doctor who has a four-year grant, will pay $2,500 per month for four years and will pay off half the house. How would you like to have one tenant pay off half your house in four years?

We found that having 22 houses on golf courses are easy to manage, so we do it ourselves. I found that no one cares about my houses as much as I do. We do criminal background checks in all 50 states, eviction background checks in all 50 states, and eviction in all 50 states. If they do not have a 750 to 800 credit score, they don’t get in. I use Mysmartmove.com and they pay $40 directly to them for the reports.

When I list it, I use Rentals.com and it goes to 26 different rental sites.

I use only mature, grown-up adult contractors who pull all the permits, pass the inspections and complete the rehab in a timely manner. I have a penalty clause of $100 per day they are late for most houses under $300,000, but it could go to $500 per day for more expensive houses.

I’ll pay the contractor a little up front, a little during the rehab and the majority of the money on completion.

“He who buys materials becomes the employer, according to the IRS rules,” warned Robyn. “I never buy materials, just pay the contractor to buy them.” I provide the SKU numbers and they buy what I want. That way they cannot be considered employees.

You also must have an independent contractor agreement with each contractor so there is no employer relationship.

Robyn taught a class on Saturday from 9 – 4:30 and covered a lot more information.

She also has a bootcamp in September and January. It’s a five-day “Junkers to Millions” event with three binders and a set of DVDs, which sells for $995. You get the bootcamp for $1995 for one and $2995 for two.