13 Dec Ep. 6: Final Landlord Walk Through & Security Deposits, Mold Inspections, & Flipping With Jeff Merkel
Adam answers questions about security deposits & renting out half a duplex while living in the other. He also talks about what it means when an inspector finds mold, not confusing his own preferences for houses with his buyer’s, and shares some of his favorite things from Trey Malicoat’s most recent clinic. Finally, Realtor Jeff Merkel from TMF Homes comes in to talk about going from cop to a full-time flipper and rehabber.
Email questions to Podcast@HermannLondon.com
1:50-Is it a good idea to buy and live in a duplex that you also rent out
5:08-How long can a landlord wait to pay back a security deposit
10:05-Does a landlord have to let you know when the final walk through will happen
13:43-What does it mean when an inspector finds mold
17:45-Adam shares some of his favorite parts of motivational speaker, Trey Malicoat’s most recent clinic (body language/self-defeating behaviors)
22:08-A realtor shouldn’t confuse their own wants and needs for a house with the potential buyer’s wants and needs
24:00-Jeff Merkel joins the show to talk about going from a cop to a full-time flipper and rehabber
Segment 1 Adam-Welcome to podcast number 6. We’re sitting here at the Hermann London Real Estate Group in beautiful downtown Maplewood, Missouri in the Hermann London Studios. Today is December 9th, fifteen days before Christmas. We’ve got some excellent topics for today’s podcast. We are going to talk a little bit about mold problems. I’m going to give an overview of Trey’s class. He put on a clinic/seminar today. I’m going to talk a little bit about how you want your life to look and feel. I’ve got a realtor tip. We’ve got in studio questions from Joey the producer. I’m pretty excited about that. I’m also excited to bring Jeff Merkel into the studio for a real estate investor interview. First I’m just going to start off with Joey. He’s looking at me. He’s excited. He’s got two questions for me. One is kind of a Joey’s listener question and one is a straight up Joey question. Which one are you going to hit me with first? Joey-Hey there, Adam. Big fan of the podcast. I love the levels. I love the way it sounds in my ears. It has nothing to do with your voice. The levels are great. Adam-It’s got the production values of a dream, right? Joey-Of course. It sounds incredible. I of course had my girlfriend get me ready to ask you a question. Adam-Are you going to shout out her name? Joey-Erica! Big fan of the podcast. She listens at work when she should be doing other stuff. She loves your voice. Adam-I’m glad to hear that. Joey-When she was moving out of her last apartment her landlord came up and said, “I have a duplex and you should buy it off me and you should live in one side and rent out the other. Make money and that will pay your rent at the same time.” She was just curious if you had any stories or tips about living in the place that you also rent out. Adam-Was this the place that she lived before and was it a duplex? Joey-No. It was a totally different building. She didn’t even look at what he was talking about but it sounded sweet whatever he was selling. Adam-In general a lot of people do that. That is one of the amazing things about a duplex is you can buy it and live in it. It is basically having a roommate that you are not a roommate with who is sitting there paying a good part of your mortgage if not all depending on all the numbers. They may be helping to pay the utilities or the yard too. You don’t actually have to clean up after them in the kitchen or wait for the bathroom. We do see a lot of people doing that. I was talking about buying a duplex on The Hill with a friend of mine a few weeks ago on the show and we didn’t buy it. It actually turned out to be a weird story. One of our realtors sold it. They helped a client buy it and the person who bought it is going to live in the upstairs unit and rent the downstairs. The person downstairs is going to pay a good chunk of their mortgage. I’m sitting here on the HermannLondon.com mortgage calculator under tools on the website I was ready to kind of go through number but I don’t know if you know the numbers like square feet and how much she was going to pay. Joey-I do not. Adam-What I would tell you is in general this is not a bad idea. That’s what my girlfriend Molly did. When we met she lived in a duplex that she owned and the tenants lived downstairs and paid a very large part of her mortgage. What more could I like than meeting a girl that is also a real estate investor and added two units to the relationship. I would say it is not something to shy away from immediately. Let’s talk about the numbers, condition, and get it inspected. Joey-I’ll be sure to tell her to do that and she will move out of our place and get rid of her. I think that is what we are going for. She can make her own money and pay for us together. Adam-That’s great. Or she could buy it and rent out both sides, stay living with you, and bring extra money to your relationship. She could take you out to dinner more often. Joey-I would love that. Adam-She could buy you some new microphones for your production here. Joey-That’s perfect. I have another question and it is personal to me. Adam-Hold on a second. I’m not done. If she decides not to buy this duplex then I might want to buy it so let me know. Joey-Definitely. I’m going to tell her. Adam-Or Jeff our investor guest might want to buy it. All right, what is your next question? Joey-I’m going to give you all the monies and all the details. This is just for you, boss. For me I just lived in an apartment and I moved out and my landlord loved his place in Hawaii. I feel like I didn’t see that guy for a year. He did have a property manager but when I moved out he had my security deposit for three months and I asked, “What are you going to spend that money on and are you going to give me that money back?” He said, “I’m waiting on the painters to come in and I don’t really know how much it is going to cost.” Eventually I said, “Just give me whatever you think is fair.” So I’m curious if a landlord has to give you a listing of what he is going to spend that security deposit money on and if he has to do a walk through with you legally if that is part of the process of getting that security deposit back. Adam-Okay. 3 question. How long does he have to give you your money back? How detailed does he have to be about what he spent the money on? Does he have to have you at the walk through? The problem with taking your questions live without having time to prepare is that I’m not 100% certain about my answers so we might have a little asterisk to check out HermannLondon.com on the podcast page if I change my answer. Joey-Not a lawyer. Adam-I am not an attorney. What do they call that? An editor’s note? Here’s my general answers to that. He’s got 30 days to give you your money back or an itemized list of the repairs he’s going to do. Second question; does he have to give you an itemized list? Yes. Does it need to have copies of the receipts and pictures of the handymen doing the work? Not necessarily. We do property management here. When we have a tenant that this not going to get their entire deposit back because we have our cleaner go over or we get new carpet, we give them an itemized list within 30 days to show what we spent the money on. And about the walk through thing. It is my understanding that he had to give you the option, right, and ability to be at the walk through. He can’t just go over there when you don’t even know about it and say, “Oh, dang. This place is in terrible condition and I had my contractors come over to fix everything. It cost $1,500. See you later. You get no money back. You can Google the Missouri Tenant Law Handbook and it will cover some of this stuff. My answers are based about what I know about Missouri and it could vary state to state. I just dealt with something like this. I was helping a landlord who had a tenant move out. I’m going to help him sell the property but he is out of the country. The tenant moved out, I didn’t have a key, and he didn’t have a way to get me a key except for me to meet the tenant who moved out at the property and basically do the final walk through for the landlord. I had to take pictures and send them to him. That is my chance to evaluate the property so I can suggest what price to list it at. I talked to the former tenant and we agreed on a time. I went over there and she didn’t show up so I leave. What else am I going to do? She calls me the next day and apologizes. Ultimately she ended up bringing the keys to our office and I did the walk through on my own. She had the opportunity and she didn’t show up so my interpretation of the rule is that I don’t think it is okay for the tenant to agree on a time, not show up, and then hold the landlord accountable for doing the walk though without them. We have to be reasonable here. Joey-He was definitely a great guy so I’m not going to hold anything against him. I’m going to make him take me to Hawaii one of these trips when he goes back and then we can call it even. Adam-If you have any problems you can take him to small claims court in Hawaii, fight over there, and have that be part of your expense. Just as a side note, final walk-throughs have the potential to be super awkward. I’ve had some uncomfortable final walk-throughs. As an example, I have a house on The Hill, these two guys were living there, and they were not necessarily the cleanest guys. One of them moved out and had nothing to do with the property anymore. The other one was really busy so he sent his mom, dad, and grandma over to clean the property. They were over there sweating and cleaning the whole weekend. They call me to say it is ready and I show up on a Sunday night with them covered in sweat and dirt. I walk around and say, “This is still dirty.” It is super uncomfortable to look at someone’s grandma and tell them they didn’t do a good enough job and I’m going to have to pay someone to come clean. Thanks for spending the past weekend cleaning but no one had mowed the lawn in three weeks. It is uncomfortable to have that confrontation, look someone in the eye and say they didn’t do a good enough job, and then say I am going to take this money from you. A little high horse there about final walk-throughs. I don’t blame landlords for not wanting tenants there but for their own protection they do have the right to be there. Joey-That is crazy informational. You just got so detailed and I loved it. I’m going to be quiet for the rest of your talking. Thank you so much for all that. Adam-Yeah. Please do. No more talking. Joey-Let’s turn the volume knob on this down. There we go. Adam-While we are talking about that, I’m going to give one more example that applies to me. When I was tenant in college I lived in an apartment in Columbia and my apartment was very dirty. When I moved out my mom, dad, and aunt came over and we cleaned and cleaned and cleaned and that landlord actually gave us a list of everything they check. It was everything from the little track on the sliding door. The landlord gave us back an itemized list of all the cleaning they needed to do and they were not going to return the deposit and my mom had a problem with that. I’m guessing they were a little bit less honest about it. They were probably used to not giving back deposits and people not fighting about it. We were able to argue that we did in fact clean the track on that sliding door and I believe in that case we were able to get the deposit back. In general it is not always easy and it can be be uncomfortable. In general, the tenants we deal with are really clean and everything is in good condition and sometimes properties are returned in better condition and we appreciate it. You had some great questions. Let me talk a little bit about mold. This weekend we had a client we found a house for and they fell in love with it. It’s one of these things where I always know when someone falls in love with a house they get a little bit giddy. We looked at some others but they wanted to come back to that one with their child to make sure he liked it. The child is 20 months old so I’m not sure how we were going to tell if he liked it but we went back. He was running around. He seemed to like the house so we wrote an offer and got an accepted contract. This morning was their inspections and they found a problem with mold. We will go in some houses where there is really obvious mold. We will go into the basement and see black marks along the floor and walls. Sometimes you will see drywall that’s been cut up 2 or 3 feet from the floor. In this case we didn’t see any when we were over there but the inspector found which is the great thing about inspectors. While she was over there longer for the inspections, and I love it when my clients go to the inspections so they can learn all about the house, and in this case her nose told her something about the house and it was because of the mold. Now I’m going to meet a mold remediation company tomorrow and find out what it is going to cost to remove the mold. We are most likely going to try to get the seller to pay to remove the mold which they will likely do. They are going to have to disclose to any future buyer that there is mold and most buyers will walk away. Mold is an interesting thing in that it has to be disclosed, no one wants to deal with it, but I don’t think we are going to have too big of a problem getting the seller to pay for professional mold remediation. I could go on and on about mold. I don’t know how interesting it is. I’ve seen people use bleach water to get rid of mold. I’m not saying whether that is right or wrong. I’ve seen people show up in hazmat suits with breathing respirators to get rid of mold too. In this case we are going to go closer to the hazmat suit solution because we really really want to make sure the client doesn’t have any more problems. Luckily we know it is the mold that was causing her allergies but the real question is what is causing the mold? Luckily in this case I think it is a leaky water line to the fridge as opposed to a foundation problem that’s allowing water in. We can fix a leaky water line a lot easier than a major foundation problem. Our investor that is sitting here waiting for our interview just slid a napkin over to me that says mold is gold. What I think he is trying to tell me is that a lot of investors don’t mind mold because it scares off a lot of buyers and that is true. I think that most people will be scared off just by the word mold. It is a great property for the investor. In this case I think it is going to play to my buyer’s advantage because his option will either be to fix this mold for us and we buy the house or don’t fix it, drop your price by a ton after disclosing the mold, and then an investor will buy it, pay for the mold remediation, and then he is going to make the money. Mold is gold. Changing the tune a little bit, you guys remember Trey from a few weeks ago. Today Trey put on a clinic. This was one of the first clinic where we invited anyone and everyone. We encouraged our realtors to bring 3 or 4 or 5 of their friends with them to the class and we had a really good turnout. Today Trey talked about a lot of different things. Two of the main topics was reading body language and overcoming self defeating messages and behaviors. You know, you sit in Trey’s classes and you just get excited. Understanding how to read people’s body languages is nice so you can tell if someone is bored, not trusting, uncomfortable, anxious, or lying. It’s nice to have some key information on how to understand and read people’s body language. It was cool to understand what my body language is saying to the person I’m talking to. I think I personally have a habit of being a little bit rude where my feet are turned away from someone when they are talking to me and I want to be running on to do my next thing. That was probably the most technical sales related stuff that Trey talks about with us. Usually it is more along the lines of this next topic which is overcoming self defeating messages and behaviors. You hear people talk about the tapes they play in their head and people make excuses to themselves for why they can’t do something and it was neat to hear his tips on how to get past whatever struggles you’re having and how to think positively, accomplish goals, and reach the success you want. Shout out to Trey for a great class today. I was feeling excited and motivated by it so I wanted to mention it. One of the other things that Trey talks about is he asks how do you want your life to look and feel. At first I didn’t know what he meant. He then gave me homework and I had to spend some time writing down how I want my life to look and feel and what does that mean to me. How do I want to look physically? How do I want to spend my time? Do I want to spend more time with my family and on vacation? Who do I want to be with? Do I want to spend more time with my family, friends, or girlfriend? Basically, how do you want your life to look and feel? I came back to him with this big long written out document and we went through and afterwards he said my homework for this week was that I had to write down how I wanted my life to look and feel. He literally made me go and do it all over again. I think the point of all that is that it’s a really important question. We are going to get into that a little bit with our investor guest. He was a person who had a job previously and he wanted to change his job and become an investor and I’m guessing at some point he asked himself how he wanted his life to look and feel. Take some time. Ask yourself how do you want your life to look and feel. Maybe write it down. Maybe send it to a friend. Maybe keep it to yourself. What Trey also always says is, “What you think about brings about.” What I think that means is whatever you focus on in your life is what you are going to have. If you focus on the negative and look in the mirror and say, “I’m stupid, bad, and ugly.”, you are probably going to play in this world like you are stupid, fat, and ugly and you are not going to make something of your life. You probably won’t reach for the goals that you are capable of accomplishing. I should change that to if you think positively, set goals, and work towards those goals, you are going to accomplish them. I want to grow up to be just like Trey. I keep talking about him. Just a realtor tip. You know this is the St. Louis Realtor Podcast. I was showing properties this weekend and I wanted to share a realtor tip. I have this thing that I do where I think sometimes I think it is hard for me not to apply my own wants and needs to properties that I’m showing. It is interesting for me to take a step back and remember to be open minded. I learned something from a client this weekend. We were looking at house and we pulled up to one and I thought that this will now work. We hadn’t even gone inside yet but I wasn’t impressed by the condition, street, or size. I knew that they were moving from a much larger house in a different city and I expected that they wouldn’t like the house. I even started to say things like, “Let’s look at it anyway just in case.”, and, “I’m still trying to get a feel for what you guys are looking for.” We went into the house and my client was really really positive. I was surprised to the point of being surprised. He was saying, “I think we could make this work. Yes we have two sofas but maybe we can put one in the basement. The kitchen is small but we could make it work.” I was surprised by how open minded he was and I think I could take a lesson. I also wanted to give a lesson to realtors that you should be open minded. It is not necessarily what you want. You’ve got to find what is best for your clients and give it to them. All right, next up we are going to bring in Jeff Merkel and I’m going to get him now. Batten the hatches, prepare yourself, and get out the note paper because I’m sure we are going to talk about some good stuff. SEGMENT 2 Adam-All right, up next we are going to bring in Jeff Merkel. He’s a realtor here at Hermann London but he is also the owner, CEO, president, COO of TMF Homes LLC. Is that right, Jeff? Is that your title? Jeff-Sure. That works. I’ll go with all of the above. Adam-What we wanted to do was bring you in here today to get some more information about being a master rehabber, flipper, and wholesaler. Do you buy and hold at all? Jeff-I do not buy and hold yet but that in my near future. Adam-I’m just going to dive right in. We are excited to have you here. Thanks for coming. I know that you are a guy that likes to buy properties and rehab the heck out of them. I have seen them from beginning to end and you really change a lot and you sell them. Jeff-That is my forte. Adam-Do you ever want to move into these places because you make them so dang nice? Jeff-I’ve actually thought that a couple times. Adam-One of the things I want to get into with you is helping people understand how they can do this. The thing that can help them understand where to start is understanding where the money flows. I hear people say they want to do a rehab or flip some day. What happened with you? Did you win the lottery one day and bought your first property? Jeff-I actually learned one very important word; leverage. Adam-Leverage. I like the sound of that. Jeff-It doesn’t necessarily take a pocket full of money. You don’t have to have a huge bank account full of money as long as you have the right connections and you know the right people that have money available to lend borrowers. You borrow the money from your investor and you use somebody else’s money to rehab your property. Adam-When you got started did you read a book you want to recommend or did you go to a class? Jeff-It’s funny you ask. None of the above actually. I was talking to a friend of a neighbor. We were working in his backyard one weekend installing a new patio. Adam-At this time you were a police officer, right? Jeff-Yes. I told him about my future ideas and he said he was interested in doing the same. I did not take him seriously but within a few weeks we were putting a plan together to do our first rehab. Adam-You had come across something in your life that made you want to do a rehab and you were just talking about it at this point like I’m sure a lot of our listeners do. What happened? Did he have some money sitting around he didn’t know what to do with? Jeff-Correct. He said he’s been wanting to do the same thing and if the two of us went in on this together we could make it happen and we did. Adam-Did you find that you and him had the same set of skills? Jeff-Different set of skills. Adam-Do you deal with the contractors and he writes the checks? Jeff-Correct. He does have some construction background and he utilized some of his own skills through the rehab as well. He has his specialties and I have mine and we used our own skills to forward our project. Adam-Did you guys make an operating agreement together. Jeff-Yes but it was very informal, fun, and relaxed. We did a little bit of research, has some paperwork drawn up, and the two of us went in as two separate entities. Adam-Is he a co-owner of TMF Homes? Jeff-He is not. He is his own separate entity. Adam-Tell me about that first deal you did. If I ever ask anything too personal let me know. On that first house were you guys 50/50 owners? Jeff-Correct. We went on title as joint owners to protect the interest of both parties in case when it came to sale time something went south or there were some issues. Adam-So you have your own LLC and he has his own LLC, and we are not attorneys and I’m asking a little bit of a legal question, but did both of your LLC’s own 50% of this house or did you both own 50% of one LLC? Jeff-We were both owners of our own LLC’s and our respective businesses were joint owners of the property in this deal. Every deal is different. I’ve got deals right now where I’m 100% owner and my investors take a lien position on a property. Adam-Let’s get into that in a second. I want to kind of dive deep into your first house if you don’t mind. Did you guys drive around, look online, or find a realtor? You weren’t licensed at this time were you? Jeff-No I was not. I used a realtor with an agency local to the area. Adam-Tell me a little bit about the first house. Where was it? How much was it? How much work did it need? Jeff-It was in St. Louis County. It was a smaller bungalow. 2 bedroom/1 bath approximately 950 square foot starter home. We purchased it for around $25,000. We put about $17,000 into the rehab. We sold that property at $77,000 if I recall. We each made around $18,000. Adam-This sounds exactly like something we could make a TV show about, right? Two guys buy a property, go through the rehab process, sell it, and make money. I’m picturing at the bottom of the screen total profit $34,000 or whatever the numbers would be. I didn’t know you were going to give me that detailed information about the property. Jeff-I had not planned on it. You may have to edit this out. Adam-Did you take out a loan for the rehab or did your partner have all $40,000 ready to go? Jeff-In this case I funded the rehab. Adam-He purchased the property and you funded the rehab and you guys split it 50/50. Jeff-Correct. Adam-For people listening who don’t have a dime, what would you have done if you didn’t have that money sitting around for that rehab because it sounds like you had $17,000 sitting around to spend. Jeff-I was lucky. Adam-What could someone do if they don’t have $17,000 sitting around. Jeff-They could put a credibility packet together. Adam-What is that? Jeff-It is something they could show an investor what their worth is and they are somebody this investor can place their trust in and work with. It will make the investor want to work with this person because it shows what they are bringing to the table. It can get the investor to fund the rehab or the acquisition of the property and not have any money come out of your own pocket. Adam-Someone who is interested in doing a rehab probably needs to do a little bit more than think about it and just talk to some neighbor’s friend. Maybe read some books and go to a couple classes and even go as far as find a property. You are saying that if they came to an investor like you and said, “I found a property. Here’s what we can buy it for. I’ve met with a couple contractors and here’s what I think we can rehab it for so all in we need $50,000 and I think we can sell it for X amount.” You are saying they should do all that legwork and then an investor will say, “How can I not?”. Jeff-They have to do the legwork and they have to show the investor they know what they are doing. They have to know the numbers and the value of the property or work with someone that helps them know the value of a property, what they can acquire it for, what the rehab costs are, and be solid. You can’t just guess and have some haphazard idea of what it is going to cost. You have to have realistic expectations on what it is going to cost to rehab a property while factoring in incidentals, unknown things you are going to run into, and still be able to leave yourself a profit and pay back your investor. Adam-If someone comes to you and say, “I want to buy this house. Here it is. It is listed on the MLS. It is $50,000. I met these 3 contractors who walked through it and gave me bids. Let’s take the average bid. It is going to be $30,000. I also met with this realtor who gave me information on 6 similar properties that have sold in the area and they are all selling for $140,000. Let’s do this.”? Jeff-Potentially, yes. That is what would go into a credibility packet. Adam-Everyone says the rich get richer and you have to have money to make money but real estate is one of those things that doesn’t exactly take money to make money. Jeff-Not necessarily. Adam-If you have your own money then you may make more money because you don’t have to pay interest on the loans or you don’t have to give half to your partner but it doesn’t take money to make money. It takes a little smarts and ambition. Jeff-Ultimately it does take money but not necessarily your money. Adam-So you did that first one and it was great. Did you quit your job that day? Jeff-I quit my full time job part time into that first rehab realizing I could not do both. Rehabbing and working full time was too much and ultimately I was wanting to get into real estate investing. I took that opportunity with support of family, friends, and several months of planning and talking and I decided to take that leap. I left the work world and the 9-5. Adam-It’s not work anymore, right? I’ve seen you sitting back at your desk not working. Jeff-It is definitely work but it’s a different kind of work. It is enjoyable. There is a lot of flexibility and freedoms. Adam-So the path for you was, “I want to quit my job and pursue this path full time.”. If you wanted to stay a police officer and be in the rehab business would your roll have been different? Jeff-Correct. If I wasn’t looking to do it full time and hurry up and get something done in a short amount of time and had more time to hang on to it like 6 months to a year to slowly work at it while working another job, yes, you could slowly transition into it. Adam-You can tell I like to tell people they can do it too and my personality is to help people grow themselves and get to the next step and it disappoints me when someone says they can’t do it. I love a story like yours where you found a way to do it. Tell me, after you bought and sold that first house and you were loving it and wanted to buy a steak dinner, what has been your journey since then? Jeff-I’ve done some wholesale deals where I acquire properties and sell them to other investors for marginal profits. I’ve also been rehabbing. Adam-What do they call that? Prairie-dogging? Jeff-I know what you are talking about but I can’t think of it. Adam-People say, “Hey! I’ll be your prairie dog.”, but that’s not it. Jeff-No, it’s not prairie dog… Adam-Your hound dog? Whatever. You found a deal, for whatever reason you didn’t want to rehab it. Maybe it was timing or you had plenty of others going on so you sold it to another rehabber. Jeff-Sometimes it has nothing to do with that. I have a buddy of mine who is a real estate investor and all he does is whole sale deals. He was pushing me into getting out of rehabbing and just doing wholesaling. I thought I would try a few to see what the wholesale side of the business is all about. While it is fun and nice there is not the headache and stress of sometimes working with contractors, meeting deadlines, or upsetting investors, it took away part of what I enjoy doing in business. I will still do them from time to time but it is not where my passion lies. Adam-It’s neat that you tried it. There is so many different ways someone can make money in real estate. I can admire the fact you wanted to try a couple different ways. Over the next 30 years you’ll probably try a whole lot more of the different ways. So you did a couple wholesales and couple more flips. Where do you focus on your flips? Jeff-I focus anywhere in the St. Louis area. Anywhere I can drive reasonably within a 45 mile radius. Adam-You did one in Illinois too. What part? Jeff-Granite City. Adam-We were excited about that one because it was our first sale when we opened our Hermann London Illinois office. Jeff-Correct. It was. Adam-One of the interesting things about you, and there are a lot of interesting things about you, Mr. Jeff Merkel, but one of the interesting things to me is you do not drive a pickup truck. Jeff-I do not. Adam-How do you fit all your tools and hammers and saws and wood in your car? Jeff-I keep a few tools I might use in the vehicle but I’ve tried not to be the guy that swings the hammer. I hire folks to work for me and rehab my properties. I started that way in the beginning. My partner and I did the work ourselves and then transitioned into subbing work out to other guys. Adam-Would you suggest a first timer do it the way you are doing it now or the way you did it for your first time? Jeff-This may go against some real estate gurus who teach you how to stop working for your business and work on your business but I would tell anybody it would behoove you to actually work in the rehab at least on your first one or two rehabs. It give you a better understanding on what goes on and you know what to expect from your contractors. When your contractor tells you he ran into this problem or that problem you’ll have a better understanding why it will cost that much and know that this guy isn’t trying to pull on over on me. Adam-It’s kind of like you went to real estate college… Jeff-…via the street. Adam-Right. By doing it. By swinging a hammer. If something doesn’t fit you run to Home Depot, talk to George, find out what piece you need, and find out how something works. Jeff-Exactly. Adam-When a contractor comes to you with a quote, you have a better understanding of whether he is taking advantage of you. Do you have more of a sympathy for their timelines? Jeff-Yes and no. It depends upon the phase that we are in. What trade is being performed at the time. Some are a little more forgiving than others. Adam-I feel like when I’m talking to someone like you I can take this conversation into so many different directions and that is how I learn too. Jeff-I feel like my answers can go in so many directions as well. Adam-Well, give us the best answer and the right one too. From doing that first rehab you probably learned some valuable lessons about the order of operations, right? What is the first thing you do? Jeff-It depends. I prefer to try to work on the exterior first. Getting as much of the demo work done first. Try to get demo in general done and then work on the outside of the structure in, for two reasons. One, to protect the inside from the outside elements. Rain, wind, and water proof. Buttoned up as much as possible to make sure the inside is protected. If it is distressed or worn property that is not really appealing to the eye it makes the neighbors feel better to see a nicer looking house. Adam-So you like it when the neighbors can appreciate what you are doing? Jeff-Correct. Adam-I’ve heard that if you get out there and start improving your property the neighbors will get out there and start improving their property too. Is there any sense to that? Jeff-I would say there is some truth to that. I have noticed that if you start making something look better it will get the neighbors to work on their place and spruce it up. Adam-What is the biggest challenge you have? Jeff-You are putting me on the spot. I don’t know. I’m going to have to think about that for a moment. Adam-I should have given you more of a leading question. Would you say that finding the next property to flip is the biggest challenge? Jeff-It is at times. I feel like there are times where I struggle trying to find the next good deal and then there is other times when you are not expecting them that they seem to be in abundance. Adam-How much of your business comes from doing podcasts like these? Jeff-Zero, but maybe more now. Adam-Let’s see if we can change that. If someone from this podcast was going to call you, what would you want them to say to you? Jeff-Any number of things, actually. I’m always looking to work with new investors, first and foremost. Investors help keep me in business. Adam-Investors meaning people who have money? Jeff-People who have money. People who are looking to make returns on their money. I’m more than happy to show them what I can do to help them bring a return to the money they may have sitting in a CD or savings account that may not be making much money. Adam-Is there a general percentage that you promise people or does it depend on the deal? Jeff-There is a rough range that I like to work in but that is negotiable as well. I usually work in the 8%-14% range. Adam-I guess with the kind of return that you promise them that you do paperwork, right. Jeff-Yes. Paperwork is drawn up and there are rates of return depending on the deal. Adam-If someone were to call you and say they have tons of cash sitting around and don’t know what to do with it that would be great. What else could they call you with? Jeff-If someone has a distressed or worn property in their neighborhood that they would like to see cleaned up that they don’t think anybody is doing anything with… Adam-What did you say? Distressed or worn what? Like deferred maintenance kind of thing. Jeff-Neglected. Something that seems run down or an eyesore. Adam-They can call you and say, “I saw this house. It is ugly. Go there.”? Jeff-If they provide me an address, I can look up information, source ownership, and make contact. If they know someone or already own or have inherited a property, I’m always looking for my next deal. I’m always looking on the MLS or for private individuals. Adam-We’ve all seen those billboards that say Ug buys ugly houses and twelve years ago when I first started seeing those I didn’t understand. I thought it was terrible marketing and didn’t understand who would call and say their house is ugly but what I’m understanding now is the worse the house is the happier you are. Don’t call you with a house in amazing condition that’s been rehabbed. Don’t call you and say, “Hey, Jeff! I heard you buy houses. Do you want to buy my house. It is in amazing condition and I just rehabbed it. Let’s pay top dollar for it.” Jeff-I’ll be honest with you. Just like anybody else in any other business, we do have to make money. I can not purchase a property from somebody at full retail and expect to make a profit. Adam-So you want to buy a property that you can add value to. Jeff-Correct. A property that I can add value to that somebody is able to make money off of as well. Everybody needs to walk away making a little bit of something. Everybody needs to be a winner. Adam-You want someone to call you that has some cash to invest. Is there a minimum? Don’t bother you for under $1,000 or $10,000? Jeff-I prefer to deal with folks have at least $100,000 at least but preferably more like $200,000. Adam-I hope we’ve got a ton of those listening to our podcast today. You want someone to call you if they see an ugly house in their neighborhood or they have an inherited property that they want to sell? Jeff-Inherited property or if they are going through a divorce. Adam-Let me tie a bow on this as Trey would say. Tell me how I can get a hold of you. Jeff-I’m available through email. TMFHomes@yahoo.com . I’m available by phone at 636-359-9410. TMF Homes is on Facebook and also via website at TMFHomesLLC.com . Adam-Can I see any of the work you’ve done there? Jeff-You can see that on Facebook. Adam-Is that WWW.FACEBOOK.COM? Jeff-…and then search TMF Homes. Adam-I’m looking forward to the opportunity to list all of your properties for sale for you in the future. Jeff-… Adam-No answer means yes. Great! Jeff-…or I will list my own and you can bring the buyers. Adam-That’s perfect. Thank you for coming in today. I appreciate it. Talk to you soon. OUTRO That was great. I really enjoyed having Jeff in the studio. It is always cool to talk to different investors, realtors, rehabbers, and people in general to get their perspectives on real estate. Please give Jeff a call for all your real estate, rehabbing, and investment type of needs. Thanks for listening to the show this week. Our next show will be the last one of the year. We are going to try and do it a day or two before Christmas so tune in and please submit your questions at PODCAST@HermannLondon.com or you can email me or check us out on Facebook and submit them there too. Thanks very much. Take care.