Welcome back to the payneless flipping podcast investors. Dr. nation. We got some special guests today that literally, it sounds like got crushed on his first deal. And now he’s crushing it. So we want to talk to TJ and Nick, How’re you guys doing?
Great, man. Thanks for having us.
TJ man throw you under the bus there bro saying you got crushed. But it sounds like you did.
I’m the only guy that I know that gets up in front of 300 people and says who hears lost 3 million bucks on their first deal in front a big old stage. But you know what the heck it is what it is? Well, you
set yourself apart for sure, man, I love it. So what the payneless flipping podcast is guys, and for anyone that’s listening is brand new is our goal is to make getting into real estate, wholesaling, fix and flip whatever you decide to do, as paynless as possible. I know it can’t be completely paynless, but we’re going to try our best. That’s why I bring on experts so we can learn from their experience of where they started and where they’re at right now. So let’s dive into both your guys first deals, and let’s find out where you’re at right now. So people can learn how to get to where you’re at. As soon as possible. TJ, let’s go first, how did you lose $3 million? Oh,
it’s easy. Just buy stuff in 2006. So my first deal was 112 apartment units in Memphis, Tennessee, I found it off of Craigslist, of all the places I did a bunch of research on the market, competing inventory, other deals that were available, that kind of stuff, it looked like a really good deal, it was a really good deal. 2006 was it 2008 2008 leads to kind of 2010. And when what just cap rates with commercial, right? If you’re raising rents, and let’s do a 10 cap, nothing, anything trades at a 10 cap anymore. But if you got 100 units, and you’re operating a 10 cap and you raise rent by 100 bucks, you just made a million bucks. If you drop rent by 100 bucks to say occupied, you lose a million bucks. That’s the unfortunate part of commercial real estate, and then maybe compound that if we’re working on five caps. Now that’s how some of these guys are getting into trouble in the current market cycle. For the most part, it was a very successful project, we did the capitalization the improvements, well, we get up to about 93% economic occupancy at the peak. And then the market just decided to do it the market decided to do to us because we were in a fundamentally market those a little bit over built in that particular asset class. So it is what it is. But you dust yourself off you learn from what happens and kind of keep going.
Wow. So did you raise capital for that? Or was it all your own money?
No, if you’re gonna lose money, lose, like family and friends. So we raised some money here and there. But it was all pretty close. So that’s a doesn’t make it better or worse. I don’t know. Maybe they forgive you. Maybe they don’t I don’t know.
Yeah, that happens. You know, it’s a risk. And I think everybody knows that. But until it happens, you don’t really see what happens or who’s your friend or who’s not who’s forgiving, right? Oh, for sure. Okay, well, so definitely want to come back to you and see how you bounce back and where you’re at right now. Nick, tell us about how you got started.
So I actually got into the family business, in a sense. So used to be an offshore engineer. And
hold on, hold on, hold on, hold on. Hold on, we’re not related. I just want everyone to know that Oh,
no, not him. No, I’m not families of anybody in California. So I was working offshore. And then I had to take a shift just because my kids, I was missing them. They I was working about 10 months out of the year offshore and it sucked. So I said screw it, hung up the boots and got into the family business started working. My brother formed the Sicilian brothers, and we just been crushing it since our first deal. Lo Now speaking of first deals, it was a like a nine month flip headache that we made like five grand on so it was like an education that we paid for.
So what ended up happening? Was it that you got your rehab wrong, you ran everything
we got in there, we got the rehab wrong every time once you start putting walls down, right, we finding plumbing, we have to replumb the house three times. It was just a nightmare. It was just a nightmare. So but again, it was an education one way or another your opinions. So
what would you guys do differently? If you could start over again, will not start over again. But if you you knew the result, what would you do differently? Would you’ve not bought those? Well? No.
what would you guys do differently? If you could start over again, will not start over again. But if you you knew the result, what would you do differently? Would you’ve not bought those? Well? No.
I mean, all right. Well, his way different than mine. I’ll let you answer for for you. But for my no again, I it was an education. I learned a shitload through it. So every deal is gonna be different. Some are gonna be winter, some are gonna be losers, you’re gonna buy things and find out that holy hell, the whole thing needs to be replumbed. And you never had it even in the budget, or you find out that the house has a California Foundation, right? You didn’t even know what that was. And then you have to we’ve read foundation to house like eight times, and it still has issues. So I mean, you’re always paying for an education one way or another and you’re always learning so dang.
Okay, and how about you, TJ?
No, because you can’t change the numbers going through something like that. The outcome obviously likes to change so you can never predict the exact outcome you’re going to have. But I go back and do a different now like knowing absolutely everything that I know now. Yeah, of course, I would have gotten Dallas instead of Memphis. But that being said, like you can’t you can’t undo that education. You can’t undo that knowledge base. You can’t undo that experience. And it made me really realize especially in life, that it really is about the experiences it’s about going through the process. It’s not about the outcome. Obviously, we always shoot for a favorable outcome and we try to stack the deck in our favor as much as we can, but sometimes that doesn’t happen. So it needs to be then about the experience of doing it about what we got from having done it. And then now how do we apply that to regardless of the outcome success or failure? How do we apply that to projects going forward?
Love it. Yeah, progression is the key, right? always progressing. So tell me guys, where are you at right now? What’s your business look like? What are you doing?
Yeah, so we partnered up a couple years ago, actually, which was, I guess what we got double booked on a podcast, which is actually pretty cool. And we operate out of North Dallas. So we mark it all around North Texas, we have a basically distressed residential business where we move a high volume, or at least in our opinion, relatively high volume of distressed residential properties. Our marketing channels are heavy in Google PPC mailers and referrals were those were the best at our dispose strategies, we really tried to merge a dispose strategy with an insurance strategy, it kind of allows us to provide more value to the sellers and allows us to really optimize the profitability of a deal. I’ve talked, we’ve touched some commercial since then. But it’s more like kind of by accident or as a subset of doing our fundamental business we’d like we’d like to space so on the exit side we do maybe 30% wholesales maybe 30% wholesales, maybe 20% seller finance, where we’re providing seller financing terms to an end buyer, and then 10 to 15%. On the flip side, we were probably a lot heavier and flips about two and a half, three years ago, during COVID flips were selling for 2530 40k over asked like all day long, the market made an adjustment last fall. And we made an adjustment prior to that because we saw it coming and we adjusted the business to do a higher volume of still fantastic deals. And we still do you know, we still do a lot of flips. But we supplemented by doing a lot of other stuff too,
is that mainly wholesales, so you don’t have to take them down now, but not all
the above. So only about 30% wholesale, we do a lot of wholesaling. And it’s definitely the best turnover and bang for the book, especially if you’re getting a big spread. But no, we do a lot of seller financing. So we’ll sell a house on terms where we are the bank, we provide financing to the end buyer, and then they make payments to us or we sell the note to recapitalize. So that’s another pretty big, like part of the business, I would say there’s probably about 20%, somewhere in there. And then the other 30% is more of a whole tale, which is not a flip not a wholesale, we take down the property to gain control. And then maybe we do minimal repairs, maybe we don’t, it just depends. So if we, for example, in our company, if we have a really juicy wholesale, if we’re gonna make 100 grand, but the seller like is really desperate, we don’t have a buyer that’s gonna make it like just line up perfectly. Well, you know what, screw it, it doesn’t matter close on this deal. Even if we only own it for a week, we don’t care, it’ll cost us $5,000. But you know, we don’t want to pinch that to lose out on the deal entirely. So we’ll close it ourselves. We’ll dust it off, we’ll do whatever we have to do, and then we’ll resell it then. So that’s probably still about 30% of our deal volume as well. I think we have 32 or 35 active deals. So it’s you know, we missed most of the stuff.
That’s quite a bit, bro. That’s a lot of anything you want to add with that to that.
No, I mean, he hit the nail the nail right on the head right? Crushed it the thing that we realized that we don’t have to blow out full rehabs, you know, we can do a lot less, give them a little bit of sweat equity, not push the market and sell them a lot quicker. That was a that was another huge realization. We did that. A year and a half ago, we started switching more toward hotels then full on retail remodels. So that was good to get to we made that
sound like I bumped into it. We saw the market shifting. So it was very intentional in terms of like changing the objective. And we still do a bunch of flips. But we saw the market shifting not I wouldn’t even want to say it’s softening. Yeah, but softening from like way overheated, but really, you know, what can what can we do to increase our velocity, our turnover ratio, and protect our downside risk, it was really more about protecting yourselves on the downside, because we didn’t honestly we didn’t think that it would stabilize kind of where it was we thought it probably keep drifting down. We’re like, alright, well, let’s let’s speed it up and just move stuff faster. And you know, we’re really good at that we always have, but we kind of preferentially like take that exit strategy over flipping now. But we still flip. It’s got a it’s got to be a good reason to flip it though. Of course, yeah.
Do you do Novations at all?
We do. Yeah, that’s probably the extra we’re not huge in innovation space. But when we do it, we think it works well for a certain seller profile. So if you do the math on all the deals that I just said in terms of like percentages, there’s probably about 10% left over maybe 7% left over that’s probably the motivation, Space Force.
So when you break down when you said you partnered a couple while ago who does what? In
our space? We don’t we try not to work the team does stuff we don’t do shit. We hired
out the best roles possible. So right where the where the admin side, though, so I
grew from a position to pay and like I don’t like talking to sellers fundamentally think I’m pretty good at it. But it’s not really interesting to me, you’re having the same conversation over and over again. So let’s hire someone for that spot. Well shoot now we got to generate more leads to make sure that they’re able to feed themselves and me Well, that’s not there’s no redundancies there. So now let’s generate enough leads to have a couple of acquisition guys. So it kind of grew up that way about two and a half years ago. Nick, my wife and his brother Tony, kind of formalized. The thing we kind of tested out a couple JV deals together. And turns out we have a really complementary skill set. So I’m pretty good at the business development. And directionality likes during the boat, Nick’s brother is fantastic at sales training. So he basically heads up the sales and dispo teams both were obviously really active in the transactional nature of what’s going on with the different deals, I handle the marketing. And then Nick handles a lot of the other stuff, he handles the systems processes, putting together paperwork for the funds, sending like stuff for the attorneys back and forth. So it works. Well. The important part is to have complementary skill sets that you can merge into a cohesive company that is going in the same direction. Because if you’re all if you if you both have the same skill set are both really gonna buy them, you know, why partner up? Because neither one you bring something different to the table?
Yeah, one plus one can equal one or negative one, I had a bit as well, it was it was kind of like, you know, awesome guy. But we both have the same skill sets, right? So let’s talk about marketing. I’m curious with doing that many deals, which channel is working the best? And which channel would you drop? If you had to drop one,
we actually just dropped one. So that works out? Well. We dropped one on our end just because it was the least producing and with the highest manpower to make it work, right, you had to sit there and monitor and that was just cold calling when our VAs right, we weren’t monitoring them enough or in spending the time to actually sit there and work them. So we just cut it during them for about six months. TJ is in charge of the PPC. And I’ll let him talk about
that. So Google PPC has been I’ve been doing it almost six years now. It’s been a good performer. It’s got logistical issues with scaling, it’s got a bunch of issues. But it’s it’s an inbound lead is fantastically, that’s great for the company, it’s probably our best margin and volume play when you kind of combine the two. The Second best is mailers. So we do outbound mail, which provides an inbound lead, which is also cool, we like the inbound leads a little bit better than the leads, we don’t use any of the bot lead services are kind of lost, you would like being I guess everyone likes to say vertically integrated. That’s the catchphrase everyone uses. Now I just like to think of it as like I like doing my business, which is knowing what the business is. So those are our two big ones. And then we do a piece of volume, I suppose referrals so we’re pretty active in the north Texas area, we get wholesalers and send us stuff, maybe we’ll buy it, maybe we’ll help them move it. On the other side, we’ll you know, sell the same guys once in a while over and over again. So it’s kind of a symbiotic relationship. That’s that’s difficult to quantify. But who doesn’t like a free lead? We make 20k. Right? Of course.
Yeah. That’s a that’s what I like. So that’s very, that’s what I’ve been hearing a lot. I don’t know, have you guys ever heard of the family mastermind? If not, it’s okay. But it’s just
that I’m a couple of times. It’s a good mastermind. Yes, I
was. Just got back. And I was talking to everybody in marketing, because I’m always interested to see what works. And you know, mailers and PPC seem to do well and texting, almost obsolete. Like, I don’t think anyone’s really doing it that much cold calling. Some people do it. But you know, like you guys said the return, there’s better returns, it comes down
to the cold callers themselves, right? That’s the whole thing. Everybody thinks that they can just hire out a couple of days and pay him $4 An hour and get leads and right. That’s not the way it works, right? You actually have to find VAs that are good and credible, and then train them on your own systems and everything right. So for
sure. It’s a lot of work right? In the PPC. Do you run your own PPC you set? Or do you hire it out to like need need to speed or any of these companies we’ve tried
some of the agencies and some of them are better than others, and we don’t use any of them. So take that for what it is. We’re one of the hottest vendors probably in the DFW market. And we we kind of like it that way. Have you
ever been, I guess wanted to go nationwide? Or tried a couple different markets? Have you ever been tempted to go try a bunch of different places?
Yeah, we’re actually in a couple different markets. So right now we have definitely heavy in North Texas, it was the best way to say it. We run our campaigns pretty strong out here. But we’re also playing in a multiple market campaign in Georgia, Arkansas, and a couple of cities in Florida. We’ve never really wanted to do the nationwide nationwide thing I know the guys that do that. And I know their nightmare, bro. Seems like kind of a hassle. I don’t know, we’ve kind of tried it. But we couldn’t get I guess a sale on that as you get a lower lead cost. And we just couldn’t get the lead cost low enough to justify the headache of going after the deal and figuring out like, what’s the strategy and some piece of crap property in the middle of nowhere that I’ve never seen. I think going deeper in several markets that you’re able to understand better is generally the better ROI personally, you’re gonna be doing maybe less volume, but you’re gonna be able to know the markets better and actually juice the juice the deals for more. No,
I agree dispo ends up being the problem, especially for getting stuff in middle of nowhere. And you’re like, I gotta find some guys gonna buy this. And you know, knowing the numbers is tough to look out of this way would
you rather pay so if a cost per click is just well now it’s a cost per lead if your cost per lead is 400 bucks in a metro area, which is maybe high maybe low. It depends on where you’re at whatever. And if your cost per lead is 150 bucks, but it’s rural and it’s out the middle of nowhere and you got to learn everything about it. Which which lead would you fundamentally rather have? I’d rather have the more expensive one in an area that I can understand better.
I agreed. No, I agree with you. A lot of people have suffered through that. Like
I knew them all two and a half years ago and we we played with it some we spent some money on it. We kind of broke even I figured we probably bumped into the issues that we bumped into. And I was like yeah, that That’s kind of my thoughts or we’re gonna stay away from that. Leave that to the volume guys, we’d rather do the margin day
and I dig it. Well, I mean, you guys are doing volume. So that’s awesome. Well, you know, for those that have listened and like, Man, I like these guys. I like I like what they’re doing. What do you do to help people out? Are you mainly just helping people move their deals? You’ve coaching What do you guys provide?
We tucked away? Yeah, right. So we provide as much help as we can. Right? What does that mean? Every month once every third Thursday, we opened up our doors and we have a man like a mastermind impromptu event here, right in our office, people come in, it’s an open. All right, so we have the mastermind rei af.com, where they can find us they can help. We can network and help in any way possible. And then we have the YouTube right now. It’s the Sicilian brothers. We’re still working on changing the name, but there’s that you can find us on anywhere.
Wow. So you got YouTube, you got your doors open and you have a mastermind? Is that correct? Yep. Sounds good. Sounds like all good stuff. So everybody that’s listening if you guys want if you want to work with these guys, whether you’re in Texas or not, I’m sure it doesn’t matter to you. You’re probably willing to help anybody, right? Oh, for sure. Well, any anything you want to leave investors, Dr. nation with, before we sign off, do you have any golden nuggets you want to leave behind?
Man, just don’t stop. Right. Once you’re getting into this, a lot of times people think that they’re gonna get rich on one deal. And that’s not the way it is, every deal, you’re learning something from it. So just keep on going until you get a system that you’re able to replicate it right. Like you’re gonna have your ups you’re gonna have your downs, you’re gonna have your surprises, just keep keep going, keep your head down and keep going.
Even if you’re negative 3 million.
That’s a big number. You got to dig out somehow what’s the best way to dig out it’s probably do a lot more deals to make a lot of money, I guess on that, maybe maybe a pieces don’t worry about failure, because you’re gonna have it like if you’re not having a failure once in a while you’re not doing enough deals or you’re not pushing the envelope enough. So don’t chase failure. Don’t, but don’t be scared of it either. Because it’s gonna happen.
And that’s powerful stuff from coming from some powerful guys. All right, guys. Well, I appreciate your help. And you’ve coming on here and we will see you next time. Right. Thanks for having us, man. Thanks for having
me
