GI219: Virtual Real Estate Investing with Paul Lizell

GI219: Virtual Real Estate Investing with Paul Lizell

Paul Lizell has bought and sold hundreds of properties in 44 states during his real estate investing career that began in 2001 with flipping properties. Since 2009, Paul has been virtually wholesaling properties throughout the United States; while being focused exclusively on online auctions, bank REO’s, buying off the MLS, and from wholesalers nationwide.

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Announcer:
Welcome to the Global Investor Podcast, a show that focuses on helping foreign investors enter the lucrative US real estate market. Host Charles Carillo combines decades of real estate investing experience with a professional background in international banking to interview experts in all areas of US real estate investing. Now, here’s your host, Charles Carillo.

Charles:
Do you have money sitting in the stock market? And you’re worried about it or worse. You have money sitting at the bank, not keeping up with inflation. My name is Charles Carillo, founder and managing partner of Harborside Partners. And since 2006, I’ve been investing my money and my family’s money into income producing properties. These are real assets, real properties with real addresses that produce real cash flow. At Harborside Partners, we provide passive investors who love real estate with a turnkey investing solution. If you want to put your money to work in real estate, but can’t find deals, don’t have the time to get funding in. The last thing that productive people want to do is manage real estate. We find the deals. We fund the deals and we manage the tenants, the termites and the properties. Partner with us at investwithharborside.com. That’s investwithharborside.com. Go to investwithharborside.com. If you love real estate, you like the idea of passive income and believe that income producing properties will appreciate over time. Go to investwithharborside.com. That’s investwithharborside.com.

Charles:
Welcome to another episode of the Global Investors Podcast; I’m your host Charles Carillo. Today we have Paul Lizell. He has bought and sold hundreds of properties in 44 states during his real estate investing career that began in 2001 with flipping properties. Since 2009, Paul has been virtually wholesaling properties throughout the United States; while being focused exclusively on online auctions, bank REO’s, buying off the MLS, and from wholesalers nationwide. So thank you so much for being on the show today, Paul.

Paul:
Thank you, Charles. I appreciate you having me on.

Charles:
It’s awesome. Yeah, it’s great to have someone on that is out there in the trenches finding deals and then working with other investors doing the same. But before we get into too much about what you’re working on now, can you give us a little background on yourself, both personally and professionally, prior to getting involved in real estate investing back in 2001?

Paul:
Absolutely. So I graduated from Drexel University in 1998 with a degree in finance and minor in economics. So I went into banking. I, I started as a commercial loan underwriter and I did that for about a year with them. And then I became a business development officer at B D O as it’s known for another year and a half or so with them. And then I moved on to Citizens Bank. They offered me, you know, a great package, great deal, and I was A B D O for them for a couple years. In the meantime, as I was even with a community bank, I started doing fix and flips in, in end of 2001. So that’s, that’s my background as far as education when I got there. But let’s actually take one step further back and why it helped me to actually get into real estate.

Paul:
So from junior high all the way through college, I worked with my uncle who’s a general contractor. So I learned every aspect of fixing up a home, plumbing, electrical. We did framing, we did additions, we did roofing, siding, windows, doors, foundation, sidewalks, everything you can imagine, pavers and all. So that was one of the greatest skills I’ve ever picked up in my life. And, and there’s not enough people that get into the trades, right? But the trades have helped ’cause one, I learned what kind of, how labor intensive they were and what kind of cost and materials were at that point. Anyway, so that really helped me flow naturally into real estate. And my uncle was doing buy and hold investing. He was buying duplexes, quadraplexes, triplexes and holding those properties. So it got me interested in real estate. And then, you know, as I was in the banking industry there, it, you know, I, I decided I like the fix and flip side ’cause I wanted that quick cash.

Paul:
You know, I was young in my early twenties there. So I started in that, did a little bit of dabbled with wholesaling here or there. And then really it, it changed in 2008, nine when the whole financial crisis happened. So I’d made a total pivot in my business from being about a 90% fix and flip guy and 10% wholesaling to a 90% wholesaling and a 10% fix and flip guy. And the reason was the market kind of forced it. I was able to pick up these HUD properties and these Rios so cheap ones that were listed and, and, and Charles, I don’t know when you got started in real estate investing, but the, the market was so crazy back then that properties were listed at 2 20, 2 30. I was picking them up from 90,000 and then selling ’em to other investors for 150, 155,000. So we’re making huge spreads on bank res, which isn’t the norm, but that was kind of, you know, inventory had been built up so crazy. So that was kind of my foray into getting into the whole wholesaling aspect of it.

Charles:
Yeah, no, I’ve been investing myself since 2006 and then I kind of rode my dad’s coattail since 1984 when I was born. But that’s when he started investing in the real estate multifamily. So my whole childhood was meeting with contractors and knowing it. And it’s funny it’s great also that you were getting involved with the trades because my dad had a partner that was a construction owned construction company. I remember him telling me when I was a kid, he was like, it’s all the money’s made on the estimating. Yes. And understanding it. Nothing’s made behind the hammer. It’s made in front of the hammer and it’s made on the estimating and like understanding that. And then it’s also something today is when I have it, like for I self-manage from oh six to 2012, my own properties and dealing with contractors, dealing with handyman, going into you know, getting on roofs and seeing everything.

Charles:
And now, not something I do, not something that was great, but the education that that provides you is that when someone’s asked, telling you about something and you see something, you’re like, this is like, this is, you know, you know, you can just, you, you, you understand exactly how to estimate better and you become a better real estate investor, especially with what you’re doing with the virtual wholesaling and everything there. Because you really have to, from the little information you have, you have to figure out exactly what this repair cost is. And I mean, you’re in and out, even if you’re wholesaling and you’re walking through properties, you have to know if you’re the flip, even if you’re just buying from the wholesaler, you’re the flipper. You have to know exactly within a few minutes like what it’s gonna cost. And knowing that, oh, a new roof is $10,000, well, there’s a lot of plywood that has to be replaced probably under that. So now it’s like 13, you know what I mean? And you work these numbers out so you don’t get yourself into too much of a hole when you start getting it on. So that’s a, that’s a great background that you had teamed with the with your banking. I mean, you got pretty much both sides of it when you’re starting out.

Paul:
Yeah, that was huge. That was really, really helpful for me. It really did help propel me and, and it gave me an advantage that maybe some people don’t have starting, starting out investing, but it’s something that, you know, I can for our students that and, and how I teach ’em, I kind of explain that whole background there, how I came from that and how they need to really focus on that because most people lose money on these flips because they underestimate the rehab, like you said. Right? And you always want to over, over, not over leverage, over account for the, so if it’s, if they have a $50,000 cost count for 65 just to be safe, ’cause you’re gonna have all kinds of add-ons and goofy things that they didn’t see. Contractors are famous for coming up with other stuff. So

Charles:
<Laugh> we really talk about on the show. Can you briefly explain what wholesaling is and then further what virtual wholesaling is?

Paul:
Totally. So there’s two different types of wholesaling. There’s your traditional wholesaling where most people know in a business where it’s an assignment of contract. So you meet with a seller, home seller, maybe you’re doing direct mail advertising to them and you come up with a price we’re picking up for 50,000. You have maybe an end buyer who’s coming in at say 70,000 and you are assigning that contract to your end buyer for 70,000. And you could do it multiple different ways. You can take that 20 K on the hud, you can take that 20 K off the hud or if you don’t think your buyer’s gonna be comfortable with that spread, you do what’s called a back to back closing where you buy it and resell it that exact same day, simultaneous close. In some states it’s called as well. So we have to do this when we’re buying bank eos.

Paul:
‘Cause The banks will not allow you to assign the contract on occasions. They will allow you to change entities. Like let’s say you have it in your, in your flip entity, but you wanna put it in your buy and hold entity. As long as you’re on that, they generally won’t have an issue with you on that. But you really generally need to come up with your own capital and cash to do the back-to-back closing with the bank res. It’s a whole different animal. Yeah. Again, costs no money for marketing costs, so you save on that end. But you do have to have, it is capital intensive, so you do have to have money, that’s for sure.

Charles:
Yeah. I, I don’t know. I’ve never had the luxury of dealing with a bank with r e o that they allow me to change entities. I’ve always had to really like take it in my own name and then do the quick claim later. So they do not easiest

Paul:
Way to do it. Yeah.

Charles:
Yeah. And then also when you’re providing bank statements, you can provide ’em in your personal name if you want, you know, proof of funds, they freak out and you’re like, even if you show ’em Secretary of State, I’m the only person owning this L L C, they do not like it. Yes. They will not do it. Yeah, you’re gonna get a discount. But the thing though is that, I mean, that’s just what it is. You know what I mean? So. Totally.

Paul:
Absolutely.

Charles:
So let’s talk about, we went through a few different things about how you were finding one in the, in the in the intro about how you really look for finding these motivated home sellers. How have you found how have you kind of worked, you said r e o, but how else have you been finding distressed homes and motivated home sellers most efficiently?

Paul:
So for us, we’ve done, we’ve started television advertising in southwest Florida here about nine months, 10 months ago now. I think we started in August right before the hurricane, right before Hurricane Ian hit Timing ended up being perfect for that because yeah, and we didn’t see it. We didn’t expect it, but we didn’t expect to get that much homes like we had down in this, this area here. But we end up picking up some good distressed homes because of that. And that’s, so it’s, you’re paying a monthly fee for the television advertising. And it’s the same concept of whether you’re doing direct mail, whatever, you still need that acquisition manager. Whether it’s yourself or whether it’s somebody you hire. We do have somebody and then a disposition position manager too, which I, I kind of take the, the reins in on a disposition side that’s been kind of specialty mine over the years.

Paul:
So you do need to have those two different things. But direct mail is your traditional one. People spend anywhere from three to 20 grand per month when direct mail advertising. Some people do pay per click advertising and some people we also buy from wholesalers too, by the way. So people that get their own deals, if it’s a good, good deal, I’m still gonna buy it regardless because I’m gonna take it down and either fix it up and keep it as rental or flip it depending on what market it’s gonna be in there. But no, that’s been a great source for us over, over the time. And then we try to layer it. So if we find particular areas work really well, let’s say Port Charlotte, Florida, or Cape Carl or Fort Myers, now we’ll layer it by doing direct mail to certain areas to try to, you know, ex accelerate, you know, buyer leads coming in.

Charles:
Interesting. So you’re working more on the disposition side, which is working really with the ultimate property buyers. How have you found it, obviously you just mentioned that you, you do your farming in like one area and you layer down, so you probably are working with a lot of the same buyers, but how are you finding the ultimate property buyers after you’re doing these, the assignment?

Paul:
So it’s shifted over the years, right? For, so from 2009 when I first started doing this all over the country, Craigslist was the main resource. And you might’ve heard something, some of the listeners might have heard something called Backpage, which I think still exists, but it’s, it was not, it’s not a great source anymore as far as I know. And eBay occasionally where we would list properties on eBay, but that doesn’t really work anymore. But Facebook marketplace has really been a great resource lately. And there’s so many different investing groups inside of Facebook that you can participate in different wholesaling groups that you can really find a lot of buyers in. Or you could post your deals in there and find buyers. That’s been my best resource for finding cash buyers when you post a deal. And again, it’s gotta be reasonable. And when I’m on these things, I see these people listings, properties, they aren’t deals.

Paul:
These are m l s style deals, right? Yeah. You’re, you’re, you’re either you didn’t negotiate it right or your margins you’re looking for are too large. So when you put something there that’s priced right, you will get hounded by buyers and the kind of buyers you want. Generally cash buyers, you’ll occasionally get some wholesalers too ’cause they want to wholesale your wholesale deal. But that has been a great resource for us. Craigslist is still a good resource. It still works in a lot of different markets, but Facebook marketplace continues to eat that up over time.

Charles:
Yeah, I’ve definitely bought properties to flip off of Craigslist many years back. So you can definitely find deals or back then we did find deals on doing it. So it’s interesting where you’d find them or where people are putting ’em up. And if you kinda you idea of what the market is and what you’re actually looking for, what’s in your buy box. I mean, that’s where you can, you know, really, really work with these deals. So just giving a little bit, I know you gave a brief overview earlier about wholesaling, but so you’re finding these, you’re finding the sellers, they’re distressed for one way or another. You’re now gonna put that property under contract. So can you give us a little bit more, you put the property under contract, it’s at a discount for whatever you feel for your profit and then whatever repair costs are gonna be. ’cause You’re gonna sell it most likely to a flipper, not to an actual homeowner. What is the process from putting the property under a contract to actually, and then say you have, you found the buyer? What’s that process now to close over those? Like, I guess it’d be one to three weeks in most cases. Can you give us a little overview of what that process is?

Paul:
Absolutely. We’ll do a high level one. So you got your A to B side where you’re doing your acquisition, your purchase, and then there’s the B two C side where you are reselling it to your, to your end buyer or you have your end buyer they’re bringing in. So the process goes more or less. You, you, you, you field a phone call from the home seller. You try to set up an appointment to go take a look at. If first you kind of, you gotta find out is this a deal, right? Because you wanna make sure you’re going out to a lead that’s worthwhile. If they owe 280,000 and the property’s worth 280,000, it’s probably not much you’re gonna do with it unless you’re gonna keep it, keep it subject to and they’ve got a great mortgage rate on it, which we would do.

Paul:
You can actually wholesale those subject to deals too, believe it or not. But let’s say it’s somebody who owes a hundred thousand and it’s worth two 80 and you come to a deal with them and you’re picking it up for 200, right? So they’re gonna get their spread a hundred k, they’re going to, they’re happy, they want to be done with it, they don’t want to deal with a realtor. And then you’re gonna bring your buyer in and if it’s worth two 80 as is, you’re probably gonna be able to sell to them for 2 40, 2 50. And that could be your fee. That’s a great wholesale fee by the way. If you can get a nice little deep spread like that. So then you find your end buyer when you advertise this, right? You advertise this on whether it’s Craigslist or you can advertise on Zillow too, by the way.

Paul:
Zillow’s a great resource. You bring in so many, there’s way more views on, on Zillow than there are on m l s properties ’cause anybody can go on there and look. Whereas opposed to M L S, right? You have agent’s eyes on it more or less. So you, you put on Facebook marketplace, you field calls, take that in, find out if they’re a cash buyer. You wanna make sure you verify that one. They have funds, they’ve done deals before. You wanna do a little background check to make sure you’re not just bringing in some other wholesaler. ’cause So many wholesalers will come in and, you know, act like their end buyers when they’re really not. ’cause They wanna wholesaler your wholesale deal,

Charles:
Right?

Paul:
So you bring that end buyer in and let’s say you’re selling to ’em for two 40. Now you’ve got that spread that two 40 and you’re, your end buyer’s getting it getting or your, your seller is getting 200,000 for that. So that your seller may not like to see you making 40 K on it. Say you may wanna do a what’s called a back-to-back close. And you could use transactional funding on that where you’ll pay say 1500, $2,500 to a lender to, to borrow that, those funds for the day. And you’ll, you’ll close on for 200, sell for two 40, you’ll have closing costs. So your net may be 32, 33, 30 $4,000 with closing costs and everything. And that’s your spread there. If you do it as a straight assignment and your, your seller’s good with it, your buyer’s good with those numbers, which I always try to do ’cause it’s cleaner and easier, then you just assign it, collect that fee. You can put it on the hud, do it as a consulting fee. Boom, you’re paid on the HUD and and you’re good to go.

Charles:
Yeah, very good. Lots of lots of great information there. So when you’re doing the back toback closing, so people it also is advertised or explained as being a double closing. Correct. You’re closing on a one day and it might be a day, it might be the same day, it might be whatever it is. But the transactional funding, I think they charge usually, like you were saying, like a half percent or something and whatever it might be. And that is where they’re gonna fund it. And then they know that they’re gonna get their money back no later than a month later. You know what I mean? It’s not, they’re not, you’re not buying it from them. So, and there’s a lot of firms that do that as well. And of course, just like hard money lenders, once you’ve built a reputation and an, you know, experienced track record with them, you probably can save on them.

Charles:
So Yeah, absolutely. But so, and then one other thing about this going through all these different routes to finding discounted properties is that people listening, they don’t have to wholesale it. These are just great ways that Paul’s explaining where you can find discounted properties if you want to flip ’em or if you want to flip ’em and then rent them, flip ’em and sell ’em, whatever it might be. There’s, you can use this, but the key is we’re finding the discounted properties upfront. So when you’re going through this, you are already have equity in the deal and this is gonna allow you the more equity it’s gonna allow you when you refinance this to take out more hopefully all of it, but usually the majority of your money out of, out of the deal.

Paul:
Yes. That, and I wanna bring one more point here too. And we’ve, we’ve kind of focused on this ’cause you know, inventory has been tight over the past few years here since Covid and everything. So we tried to maximize our deals as much as possible. So in that instance, with that last E O R was telling you that we were picking it up for 200,000, selling it to an investor at a discount for two 40, if you know it’s worth two 80 as is and you have agents that have confirmed it, it may pay for you to take that property down list on the m l s for 2 79 9 or even cheaper and to get a bidding more. And you know, you’re gonna get some additional funding or additional funds out of it. It may pay, especially if you’re a new investor right now, while the market is the way it is, you kind of want to, you always want to do this depending on what the market is telling you.

Paul:
And right now the market is telling you to do it this way to maximize your profits as much as possible. Now if you have a ton of deals coming in, you don’t need to worry about that. You have more deals than that, and you want, you just want to go through deal flow and you want to just get in and out and not have holding costs, then you just sell it that way. Right. And I know a lot of companies are wired and that’s how they do it that way. But if you’re newer to investing, it may pay for you to just list on the m l s, make some more money and then be done with it, and then use that extra profit towards marketing, additional marketing costs or towards another rental.

Charles:
Yeah. The m l s people historically think that’s only going to be going to a home buyer, right? That’s gonna live in it. But especially with the rise in str short-term rentals, you have tons of people that are paying retail for properties not getting any deals on ’em. ’cause They’re hotter areas so that they can turn around and put ’em on one of the short term rental sites and you know, make a lot more money than you would typically be doing with a 12 month rental. So there’s, there’s not just home buyers on the m l s, which is important. I mean if you’re buying, which is one, one thing we’re gonna get into here next is like on the R e O department, part of it, you might be buying bank owned properties off the M L Ss. So can you talk about buying properties from the R e O Department of Banks?

Charles:
And can you explain, you know, how you make the relationships, whether they’re with agents or with the banks directly. Obviously that’s your background, but I’ve, when I’ve purchased R e o, it’s been through the agent, through an agent, you know, listed m l s mm-hmm. <Affirmative>, but obviously the seller is the bank. But I’ve also seen it, and I get listings before years back, which would be like the bank would list properties that are defaulting that they’re taking over to sell directly to an investor, a home buyer or whatever. So how, how do you, how do you work with that Paul?

Paul:
Yeah, this is, this is a great one. And this has evolved and changed over time. So when I first got into investing in, in 2001, HUD HomeStore was a great resource for you to go on there and pick up HUD properties that were foreclosed on. Now they’ve, over the years, they’ve tried to get away with that. They list a lot of the HUD properties on auction.com, hub Zoo, zoom, and these other online resources where we pick up a lot of those. But these are properties that are make, that maybe need more work than ones that you’ll find on your traditional m l s. Like you and I have, have bought in Charles on off the MLS that are eos, where they’re in better shape, you know, not in great shape, but better shape. And a end buyer may be willing to buy them.

Paul:
So they, they’ve gotten, they’ve kind of gotten away from them though you probably notice less regular traditional bank eos less on the ML s and more of them thrown on the online auctions because they, they, this new program was created about three or four years ago called hud, C W C O T. And I, I forget what that acronym stands for, but it was a HUD property, f h a or va, and they foreclosed on a property and they just listed on the auctions and they’re usually occupied at the time. So that’s kind of been a shift over, over the years with that. So that has been, and a lot of those, by the way, Charles are not listed on the M L Ss too. So there’s no agent attached to them. They are a an R E O, but there’s no agent attached to ’em. And sometimes they’ll have really high price points that are unreasonable and over time they have been. And then sometimes they’ll give you great discounts and you gotta be on there and ready to see ’em. Like we’ve picked up some phenomenal discounts over the past, even the past six months or so through the HUD C W C O T program.

Charles:
So with this, obviously if someone’s in the house, that adds another level of complexity. ’cause Really you’re just buying like bad debt at this point, right? Yes. With the house being a collateral for the loan. So tell us about how, have you done that before? Like, or you just wholesaled this? I mean, tell us about how you’re dealing with it when someone’s actually in the house.

Paul:
Yeah, whole different animal, right? A vacant as compared to an occupied property. We try to focus, especially with new investors, we try to get them into the vacant properties, not to the occupied. Occupied is higher level investors there who one to understand how you, you’re gonna have to evict them from the property or file for a check depending on what state, what the municipality requires there. But generally speaking, they do go at a 25% discount because they’re occupied. And that 25 per percent discount may work in some instances and it may be just a complete dump where you’re still overpaying at that discount. So that’s where you gotta be careful. You gotta hopefully have some boots on the ground so people that can go take a look at the property, maybe peek in a window and get an idea <laugh> mm-hmm. <Affirmative>, I mean, it’s kind of dangerous to do it, but you send your H in here, maybe they knock on the door, talk to the people and can kind of see inside a little bit.

Paul:
If you could do that, that’s the greatest way to do it, then you know what you’re into. Otherwise it’s a guessing game, getting into some of these properties. And recently what they’ve done, the HUD C W C O T program, they, they have vacant properties, but they try not to let you get access to those vacant properties. And I always tell ’em like, that’s a red flag if, if you don’t want me to get ACC access to it. Yeah. I must mean it needs way more work than what you’re giving me here. So we try to get people to, you know, peek in the windows of those vacant ones. Less issues there, right? No peep and Toms coming on there, but the agents that can, can take a look at those. And those have been some of the great deals that we’ve gotten more recently too.

Paul:
‘Cause There’s such an abundance of those properties right now. And it’s kind of an untapped market. So that’s been a great resource, but it’s changed over the years. You know, going from the HUD home store to now the online auctions and now the online auctions doing the Hud c of your cts as well as your traditional from Wells Fargo, from Chase, from Ocwen, on all these different mortgage companies out there that in Bank of America. So that they still have those and they still have the really nice ones that are ready to go on the m l s ’cause they know they’re gonna get top dollar for those.

Charles:
So I mean, obviously most people are gonna be focusing, if they have boots on the ground, they’re gonna be focusing on like one market. You’ve done this in, I think it was 44 different states. You’ve been actively investing. I mean, how does, I mean I obviously, I would imagine for new investors you’re telling them to start in one market. Yeah. how are you running a team or have, have the ability to use a team, let’s just say. That is, that is in all these different markets. So when something comes up, you can quickly find them, evaluate it, and make an offer, buy it, whatever, you know.

Paul:
So yeah, that’s, and that’s kind of evolved over time as well too. But especially with the tools that we have now available to us online to make investing a lot easier. Right. Zillow, when, when it originally started out, wasn’t as good at comping as it is now. I could really comp properties extremely well with Zillow in any different market and, and know what things are selling and know what a three bedroom, two bath, 1500 square foot ranch is selling for and a quarter of an acre. ’cause I can comp it all out in that particular area. The only thing I don’t necessarily know is street to street. This could be a bad area. This could be a really great area. So that’s when you get into the inner cities, it gets a little tougher when you’re out in the suburbs. It’s not really like that you, it’s a, it’s much simpler to decipher.

Paul:
But basically, so for me, for boots on the ground has been making great relationships with agents in different markets. Being from Pennsylvania, I have a bunch of ’em in pa I have some in New Jersey. I have, I have some great ones in Texas in Casper, Wyoming, Gillette, Wyoming and Tucson, Arizona and Knoxville, Tennessee. And Geor, Atlanta, Georgia area and, and Carolinas as well. So I’ve made so many relationships with these guys over the years and I tell ’em like, it doesn’t have to be a bank r e o. If you find a deal that looks like it could be a great deal, I’m still interested. So occasionally I get off market deals that aren’t bank owned that I can get and I hopefully can assign a contract. If not, it might be a good one. I’d either keep as a buy and hold or a fix and flip in that particular market.

Paul:
But the boots on the ground has generally been r e o agents. For me, that’s my first eye. Mm-Hmm. <Affirmative> and I, I look for agents who have 10 plus years experience minimum. ’cause One, they know that particular market very, very well. They understand it from an investor’s perspective, being a bank r e o agent. And they understand what the as is condition is what the after repair value is. And they have great resources, they have great contractors that they can refer me. And, and this is a piece of advice I’ll give to anybody. I’ve, when I’ve gotten my own contractors in different markets, I’ve been burned at times, knock wood when I say this, I’ve never been burned by a, a realtor referral contractor. I think it’s ’cause they’re not gonna bite the hand that feeds them. These are the leads that they’re getting Yeah.

Paul:
From this agent. They’re keeping ’em busy and they don’t have to pay for marketing. So for them to screw over that agent, they’re not getting anything anymore. Plus their pricing is good and they know what investor pricing is compared to retail pricing for doing a rehab. So that’s been our, our boots on the ground. We occasionally send some people out there take pictures. If we can’t find a realtor in that particular market, you could do that off Craigslist or, or a few other resources there to be able to utilize that. BPO photo flow.com is another one that’s in a lot of different markets that you can utilize too. So there’s a lot of different tools that you can do. And from even further to how to analyze and figure out if it’s a deal, we use a va a virtual assistant. In, in Philippines we actually have two of them.

Paul:
So when we get a list, it’s usually an Excel spreadsheet list of properties are coming up for auction. We’ll have them go through and do the first level of due diligence to see, all right, is this a deal or is it not a deal? We, we train them on that and they let us know and we start bidding on those properties. Now I’ve since hired a, an acquisition manager who has taken me away from that. And I only focus on certain markets and I let them focus on the majority of them allows me more time to do other things, which is good.

Charles:
Yeah. Well Paul, that’s a lot of great information there. I love the idea of getting referrals. I’ve, I’ve gotten great referrals from agents, but one thing I’d just like to caveat to that is the agents that I got great referrals from, they were, like you said, they’re investor agents. Yeah. Or if they were on the commercial multi-family side, they were dealing with the size property I was buying. So if I was buying a 40 unit property, they had sold those and they had management for that. Not a 400 unit property. Right. And not a four unit property. So it’s, you’re if the r e o person’s working all day with, between the banks and investors. So that’s, that’s a great place. ’cause Every conversation they have is gonna be about the work that needs to be done. That’s all it is. Anybody can pull up on Zillow and see what the after repair value is. It’s how much work has to be done and how much it’s gonna cost. So that is a great tip for people to kind of build out their network and their team by utilizing their r e O agent and making sure, ’cause a lot of agents might say they work with investors, but they really don’t.

Paul:
Yes, very true. So

Charles:
<Crosstalk>, yeah. So just, you really have to, Hey, what have you sold before? Or what are you buying? And if you speak to them for 10, 15 minutes, you’ll find out, you know what I mean? What they’ve worked with. When you have people dropping have contractors, they’ve done work here, they’ve, you know, all this kind of stuff and you’ll know, you know what I mean? That they’re are a seasoned person and, but many people aren’t. You know what I mean? So it’s just, you really have to sort through, find other people if you can find other people investors in your area possibly that see who they’re buying properties from. You know what I mean? If it’s a different area. ’cause You have agents that might have a much larger market that they work in versus where you might have flippers that just work in one town or one part of town. So that’s

Paul:
A great point. You know, you could, you could join a local R group or a meetup group and find some of those good resources for those. You know, that’s kind of how I started out going to oria, a local R and meeting a lot of different, I’d say I found private lenders as a matter of fact too. Mm-Hmm. <Affirmative> people do partnerships with on, on different things. So great resources there. And, and again, you like you’re saying, you, you can get faked out by some of these agents. So it’s, wouldn’t Ronald Reagan say trust but verify

Charles:
<Laugh>? Yes.

Paul:
That’s one of the great terms. Trust but verify. So we, we’ve actually were burned on a deal this past year by an agent giving bad information in a particular h o a community they didn’t know enough about. And my acquisition manager didn’t do enough due diligence. Get a second age, get somebody who really has a lot of listings or has had a lot of listings in that particular community. ’cause You’re gonna get so much better information from that person. You’ll get from the other. We’re gonna up losing money on that particular deal, which really sucks. Great learning lesson for us though, by training ’em. Like you gotta, it can’t just be one agent unless that agent is totally immersed and really knows that h o a better than anybody else. But you still wanna find a secondary person just to verify numbers. Yeah. And sometimes, and and depending on how rural areas, we’ll try to find three different agents and get three different perspectives and then it ki it kind of gives you a low medium and a high and then you just kind of figure out from there. But always err on a side of caution and go with a low side.

Charles:
Yeah. And you can find who the brokers are that sold properties in these areas. You can just Zillow ’em who sold ’em, find out the broker’s content and you keep on seeing the same broker over, you know what I mean? That’s where, that’s a, that’s a sign. You know what I mean? But yeah, a lot of great information there. One last thing is I, you know, the r e a is any local RIAs? I, I was speaking to someone and they were telling me they, they’re a successful hard money lender and how they got started and how they were taught. They’d go to the r e you know, and they would talk to people and they’d talk to person running the thing. Be like, who here has like done a lot of like closings and like flip properties? Like not just the first time here. ’cause You say you’re a hard money lender and you’ll have a line of people with, you know what I mean? Yes. That want to get loans. And he was, he was just like, they would tell they’d point ’em out and that’s the people he started giving really good deals to on lending. And that built his whole network by going to one of those events and dealing with people, speaking to people, building relationships and finding out who was actually the serious people there that you know, probably he wouldn’t lose money on.

Paul:
That’s so true. And when you go to these different s 90 plus percent of the people are just tire kickers. They’re constantly located. They suffer from analysis paras, they’ll never do a deal, but they constantly go. It amazes me. And you have that segment of people that are very, very active. The smaller groups and they tend to go to these smaller meetup groups outside of the regular rea is where you’ll find a lot of those. But that is a great way to do it, to talk to the person who runs it and find out who the big players are. ’cause They know who the players are. Yeah. And they knew who the people who are just tire kickers and aren’t really doing anything are. So

Charles:
Yeah, for sure. For sure.

Paul:
Great direction.

Charles:
A lot of great information. Paul. Paul as we wrap up here you do a lot of coaching, you have a lot of coaching programs. You’ve 20 plus years of doing this. What are common mistakes you see real estate investors make?

Paul:
So the most common mistakes are not doing enough due diligence to find out to really comp the place. Right. And that’s where a lot of people lack confidence in doing comping. And it’s really they suffer from analysis paralysis because of it. They don’t end up doing enough deals and they don’t do enough deals ’cause they don’t trust their numbers. It’s pretty black and white to me when I’m looking at comping a property, if I’m seeing this three bedroom, two bathroom, 5,000 square foot property selling at 1 75, right? And I’m seeing this routinely within a six month period, six or 12 month period, I know this should be worth 1 75. So you gotta trust that number. Take your, you know, use that as your after repair value. Subtract out the repairs, give yourself a little buffer and maybe if you wanna do a little wholesaling fee in there, that’s your maximum allowable offer. So that’s how you kind of figure that out. But people don’t trust their numbers so they don’t act. That’s the biggest thing we we see.

Charles:
Yeah. Yeah. I had, I had a mentor years back tell you just do fat deals. You know what I mean? So it’s difficult pushing deals away that don’t have that much on there. But he’s like, just, you don’t wanna do any skinny deals. You do fat deals and that’s where if anything goes awry, anything happens that you don’t know, COVID for instance mm-hmm. <Affirmative>, whatever it might be. This is where you have that extra buffer on there and it’s like raising extra money when you’re doing one of these projects. You won’t have a problem with something pops up and even if you’re breaking even or you’re not gonna make as much money you’re gonna be able to finish the deal and get it done. Mm-Hmm. <Affirmative> so, so, so true. That’ss

Paul:
The best piece of advice you could possibly get right there. We’re pushing our students same different deal there. Like you gotta be careful in this particular market only look for, I’m saying I’m only looking for the home run deals. I’m not even looking for the doubles. I want them to be home runs. I want them to be nice meeting ones. ’cause I know if something goes wrong that you can lose 10 or 20% pretty quickly in a short period of time. Interest rates shoot up to 8%. That changes everything, right? With your value of your property. It’s all about the affordability. So like you said, raising more money than you necessarily need to. Just to be sure always a great way. ’cause I see a lot of people don’t raise enough then they have to come up with their own funds for the finish the rehab app or they have to sell or partner with another investor and you don’t want to run into that.

Charles:
Yeah, you can pick up, I’ll, I’ll look on sometimes on BiggerPockets and it’ll be like once a week you’ll see people asking about that. I’ll see probably a lot more. They’ll be asking about having to partner with someone or they are partnering with someone on a deal that went one thing before I, we we wrap up when we get information on you, on you Paul contact info. Mm-Hmm. <Affirmative>, you, you were wholesaling and investing you know, through oh 6, 0 7, 0 8, 0 9, all these different times. How, and I imagine some of that’s coming back with how you’re putting offers in. Are you were, because I’ve talked to wholesalers back then and they’d be like, I do 5% less or they had this number, whatever, they’d be like, yes. Are you doing any of that? Did you do any of that and are you doing any of that now? Yes,

Paul:
Absolutely. So, you know, people were running it up to 75% of RV and in different markets in Phoenix, people were going to 80%. And I saw some people doing 85 and I always thought that was crazy. The highest I was ever going to is 75. We have since scaled it back to our traditional 65% of after repair value minus repairs do that. That assures you got some meat on the bone there, you’re gonna be in pretty good shape, it’s really gonna protect you. Yay. You’re gonna miss out on some deals. I know it hurts. Run away from ’em. You do not wanna get yourself caught. This is a weird market we’re in. I don’t know which way it’s going. I think because inventory is so low that we’ll be pretty stable in pricing and interest rates as long as they stay stable will be fine. But if interest rates shot up, we had some kind of weird event. Go World War ramps up, who knows? Goofy things that we can’t account for. That’s where you wanna protect yourself with and you’re just gonna be always safe and better off. And especially if it’s your first deal, you wanna make sure you got a nice meaty deal because that’s gonna give you an incentive to want to do more and more.

Charles:
That’s got a lot of great information Paul. So how can listeners learn more about you, your courses and your business?

Paul:
So if they want to follow us just on YouTube, you can go look for the virtual investor on YouTube and we have links in there. Also have the Flipping Out podcast on that channel as well. And then r e o auction academy.com. They can they can sign up for our, our course. We have a couple different courses. We have one that’s at doit Yourself course for like 4 97. If they just want to jump on monthly coaching calls, there’s a $97 a month option on flip realestate virtually.com. And if they want the full scale coaching where they really learn a lot and we connect them with private lenders, we connect them with insurance companies nationwide to do stuff that, that is a $5,500 program right now.

Charles:
Okay. Well thank you so much for all that information Paul. And just let people know if your, your main goal is not to wholesale properties or to flip ’em. You can utilize a lot of strategies that we’ve spoken about today and what Paul specializes in about buying properties at discount, renting ’em out yourself and you know, possibly all different size properties. So thank you so much for coming on today, Paul, and looking forward to connecting with you in the near future.

Paul:
Thank you Charles. I appreciate it. Thank you for having me on your show.

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About Paul Lizell

Paul is the founder of The Virtual Investor, The Flipping Out Podcast, The Crypto Degen, and TCKS Holdings, LLC.  He has been flipping properties since 2001 and is the original virtual wholesaler having purchased all over the US since 2009. He has bought and sold properties in 44 of 50 states and will continue to look at expanding into new markets. He contributes his success to utilizing systems and processes that simplify the online buying process.  He has focused exclusively on online auctions, bank REO’s, buying off the MLS, and wholesalers across the country since 2013.   A graduate of Drexel University in 1998 holds a degree in Finance & Economics.  Avid Crypto investor since early 2017 and creator of The Crypto Degen educational program.

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