03 Dec Ep. 5: Lake Privileges, Technology, CRM, & Flipping With Darren Hoefgen of Hitch

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Adam interviews flipper extraordinaire, Darren Hoefgen from Hitch Asset Management. Adam answers questions about about why living in Lake St.Louis doesn’t guarantee lake privileges, whether older realtors need to be tech savvy, & what customer relationship management (CRM) software he uses. 

Email questions to Podcast@HermannLondon.com 

WHAT’S INSIDE

0:30-Introducing Darren Hoefgen

1:42-When did Darren leave his day job as an I.T. consultant

4:15-Why did Darren immediately decide to do rehabs instead of buying new

5:50-What is a prehab and how to make money cleaning junk out of a home

8:39-What is hard-money lending

12:13-What does Darren do with his rental income

14:27-Starting a reserve account to fix problems that come up

17:50-What is Darren’s hard and fast rule for cashflow

19:00-How does Darren calculate how much it will cost to rehab a house

20:53-How does Darren teach his real estate classes

25:30-What can someone bring to the table in order to partner with Darren

27:40-How to get a hold of Darren Hoefgen of Hitch Asset Management

28:49-Who is involved in the Hitch Asset Management team

36:23-What is Darren’s primary source of finding homes

36:32-Are those yellow handwritten signs by the side of the road ugly on purpose

40:46-What does Darren do for fun and what is Done Is Better Than Perfect

43:32-Why does someone who lives in Lake St. Louis doesn’t have access to the lake

45:52-Do older realtors have to be tech savvy

47:40-What customer relationship software does Hermann London use

48:39-Adam was appointed to the board of The St. Louis Association of Realtors

TRANSCRIPTION

Segment 1 Adam-All right, all right, welcome everyone. This week’s podcast, podcast number 5, starts now. Today’s date is November 25th. I think we’re 2 days before Thanksgiving. One day before the largest party night of the year and I’m partying here in our Hermann London studio because I’ve got our international public speaker and educator, Darren Hoefgen from Hitch Asset Management sitting here in the studio with us along with, of course, our producer, Joey Vosevich. We are really going to dig into things tonight, Darren. I’ve got a lot of detailed questions for you but why don’t you say hello to the group. Darren-Hello hello hello. Glad to be here. Excited to be here. Excited to see the show. I’ve heard a lot about it so I’m excited to see that I’m welcome to be apart of it. Adam-Absolutely. Darren’s been a realtor with our company now for at least a few years, right? You were on our first… Darren-I think we are going on four and a half years now. Adam-Four and half years now? Great! You have probably bought and sold more properties than anyone I know. Is that possible? Darren-Well I don’t know who else you know but I’ve bought and sold a lot of properties in the last couple of years. Flipping and buying rentals and holding on to things. We do a lot of different type of deals, both wholesale, retail, and otherwise. Adam-I don’t know if you wanted me to bring this up but I know when I met you you still had a day job and you were wanting to work you way out of that. You were a very analytical person and you had your spreadsheets, I’m sure. When did you quit that job? Darren-Yep. I have a previous life. 12 years working in I.T.. I did I.T. consulting for 12 years. Kind of like most people, I suspect, I went to school, got my degree, started working in corporate America, tried to climb the ladder, got my masters degree because that’s what I thought I had to do, and ended up with a whole bunch of student loan debt. I sat in a cube doing the same job I was doing before I got my masters. I realized that wasn’t a good fit for me so I was using real estate as a way to work my way out and I worked on building my rental portfolio and created rental properties. I then stated buying and flipping houses and that was really my gateway to get out of that mess. I am just over 2 years now working full time for myself and paying my bills 100% in real estate. Adam-Let me back up a little bit. Believe it or not I have a lot people that come to me who have a day job and are looking at real estate as their out. A person we met with the other day is going to join our company but is a designer who wants to get out of that and become a flipper, rehabber, or investor. I don’t think she necessarily knows what it means. Slow down a little bit for me. You said you started with buying a portfolio of buy and holds or rentals? Darren-Exactly. I started building my rental portfolios. I had an I.T. job with a pretty solid income and the band would lend me money so I was able to buy property. Typically I would rehab them and put tenants in there and the reason I did that is I wanted a solid cash flow every month. In an ideal world I was looking for a way to cover my known expenses like my house payment, car payment, and put food on the table. Adam-Get out of the rat race type of thing. Darren-Exactly. If I could do that then it gave me a comfort level that I could leave the 9-5 and the steady paycheck so I wouldn’t have to worry about putting food on the table or pay my bills this month. My rental checks would help pay those bills and every time I would flip a property or rehabbed a property or wholesaled something I could decide what I was going to do with that money. Am I going to pay down debt, student loan debt primarily? Am I going to buy another rental property or what am I going to do with it? Adam-You bought houses and rehabbed them straight up? You didn’t just buy houses that were in decent condition already and just rent those out? You did have to do rehabs upfront? Darren-Yeah. I’ve always kind of had a proclivity to find those things that needs the work. Part of that is probably because my dad is a CPA and he’s beat into my head to get things cheap and save money, so I knew that I knew that if I bought things that needed work I could get them at a significant discount. The more I rehab the more I can manage my costs and lower the costs to do it. Instead of bringing a check to closing for my equity I’m creating the equity myself by rehabbing the house and building equity into the deal. Adam-By the way, the only way I was able to get Darren here tonight is because I owed him a check so he had to come and pick up a check so while he was here–I’m just kidding. Let me keep asking you questions if you don’t mind. It sounds like there are 3 things that you do. I heard wholesaling, flipping, and buy and hold. Is that right? Darren-Yeah. I think that most mature real estate investment companies should have at least 3 streams of income coming in. On the active side it is wholesaling and flipping houses. It is buying property, selling that property to other investors, typically. Adam-Wholesaling means you buy it and you literally do nothing to it. You came up with your own term didn’t you? Darren-You can do a prehab. Adam-That’s a Darren Hoefgen original as far as I know. Darren-I will neither confirm nor deny that. Adam-So you buy it junky and clean it up a little bit. Darren-If I found a house that a hoarder was living in who bought all sorts of stuff and crammed it into their house and that person dies and the kids get stuck with this house full of junk, what we could do is buy that house, put a dumpster out front, clean out the junk, and then there is a lot of added value to that house. A rehabber that wants to buy that house can now see what they are dealing with. That’s kind of in between rehabbing and wholesaling. In a pure wholesale sense I don’t even buy the house, I just sell the contract. Adam-A to C. Is that what they call it? Darren-If I do an assignment I could put the property under contract, find you that wants to buy this house, and in essence sell you the contract so I never own the house. I’ll just sell you the interest I have in the house. Adam-Do you do a lot of those? Darren-I don’t do too many of those because I would prefer to own the house and make a bigger check. Adam-Make the bigger check. That’s kind of your quick money? Darren-Yeah. Adam-Is that something somebody could do if they want to get into real estate and they have literally zero money? Darren-Absolutely. That’s the primary way you are going to get into the real estate business and make money without any money at risk. Adam-Find someone who wants to sell their house for very very cheap… Darren-And then call me. Adam-And then call Darren and he’ll pay you…what’s normal? A couple grand more? A hundred thousand more? Darren-It depends on the size of the deal. Really what it turns into is if I the rehabber am happy with the numbers then I don’t care how much money you are making. Adam-It doesn’t matter if the person found the house for free or a dollar and wants to sell it… Darren-You could sell it to me for $20,000 if I am going to make $30,000 or $40,000 on the rehab and then I’m happy. Adam-You won’t necessarily every know what they bought it for depending on how they get it. Darren-Correct. Adam-That’s a good little tip there. If you want to get into the real estate business find a great deal and then call Darren and he’ll give you a couple grand extra. Do a few of those and then you can do a what? A rehab? Darren-Yeah. Then you get into the rehab space. You don’t even need tons of money to get into rehab. You just need a hard money lender. Here in St. Louis there’s tons of hard money lenders that will lend locally. You may need a little bit of money. Your skin in the game, kind of like your down payment. A few wholesale deals to generate that. Otherwise, you can use that hard money lender and do the rehab yourself. Adam-Do you have a hard money lender that you want to mention. Darren-Nobody I’ve cleared yet or made aware yet that I may be publicizing. Adam-Is the hard money lending game where it is kind of like back room stuff or can you Google it and it will come up? Darren-Yep. Google hard money lenders and your zip code. You will get all kinds. Some lend local. Some lend nationwide. There are some guys that lend very local to St. Louis that when you are in the real estate circle in St. Louis you learn about who those players are. They all have their own rules about what part of town, how much money they lend, and if you can get in on that they will absolutely provide you the funding to flip a house. Adam-Do I have to be worried about anything? Do I need a special contract? Should it be them that is worried since they are giving me all the money? Darren-They are going to vet the deal. They’ve got risk as well. It is hard money and you are going to pay more than what you are thinking for a traditional bank. To set your expectations, think about credit card interest rates. That is what you are going to pay for that kind of money. Adam-You don’t want to keep their money for very long. Darren-The goal when you are using hard money is to get in and get out quick. Adam-Quick meaning a month or two. Darren-As quickly as possible. Most rehabs you are going to spend 4-6 weeks at least on the work and then you’ve got to get it listed. It depends on how hot the area is and what the market is to determine how long it will take you to sell the house. You really want to plan on being out of that hard money in 4-5 months. Adam-Now we are just kind of doing a 10,000 foot view of your three different types. We talked a little bit about your wholesaling and rehabbing. What is your third thing you do? Darren-Rentals. Rentals is the slow and steady. You are not going to get rich on rentals. I think of rentals as wealth building, not get rich. Wholesales are small quick checks. Rehab is a little bit at a time in between. They are not fast but they are typically much bigger checks. Rentals are a few hundred dollars a month. We’re not getting rich however the thing that I love about rentals right now is that I’m of the opinion that interest rates are about as low as they are going to be for the next 20-30 years which means you are borrowing money and locking that interest rate in at a very low rate and so if interest rates sky rocket up 12$-15% a mortgage you are still locked in at 4%-5%. You can lock that money in and you can lock it in long term for the next 20-30 years. At the same time if interest rates are going up and appreciation continues to go on and I believe as the U.S. government continues to print money, things are going to appreciate faster and faster, especially in the St. Louis market. The real estate market here doesn’t see the big bubbles, booms, and the bursts that California, Las Vegas, and Florida type markets see. I think we have a higher likelihood or stable appreciation so over the next 20-30 years I have a tenant in this house whose rent continues to go up to match the market. I have appreciation continuing to go up which increases the value or equity in my property and I have a monthly payment locked in for the next 20-30 years at today’s dollars so I have a steady payment locked in, a steady expense locked in, and an increase in cash flowing coming in. Adam-Do you save all this money that comes in from your rental properties for a rainy day? Do you save it for reserves? Do you have a garage somewhere filled with water heaters? Get into that with me a little bit as much as you are comfortable. Darren-It depends on your strategy and what you are doing. When I first started doing this that rental income was my expenses and bills and food. Every time you made me buy drinks that is where it came from. Here is what we are doing and how we plan for it. There are known expenses with rentals like the mortgage, taxes, and insurance costs but then there is also the unknown. You don’t know what kind of repairs you will have to do or what vacancies you will have to deal with. If you don’t receive a rent check the mortgage still expects their payment. You’ve got to build all that in. The way we typically do that is we take our known expenses and then we account for about 10% the monthly payments towards expenses and another 10% for management so I don’t have to deal with it. Adam-Let’s say your known expenses are $1,000 a month, you are saving $100… Darren-10% of the rent collected. Adam-Oh, 10% of the rent collected. Darren-If I’m renting the house out for $1,200 a month then I have another $120 a month worth of maintenance and another $120 a month on top of that worth of property management. Adam-Do you use a reserve account that you put that extra $120 in? Darren-I think it is a great strategy when you don’t have a large portfolio that throws a lot of cash off. When you are working on your first 1-5 house and you are only talking about $1,000-$2,000 worth of cash flow coming off of it, I think that’s a great strategy because it would be a bummer to buy a house, get a new tenant in there, and then find out you’ve got to replace the roof. Well there’s anywhere from $3,000-$7,000 that you’ve got to come up with. Once you have a big enough portfolio that it generates enough cash or you have other arms of your business that generate enough cash to cover some of those oh crap moments…you know, I don’t typically do that. I’m going to use that cash and keep it working. If that cash is just sitting in my account it’s not doing anything for me. As long as I can see in my pipeline that I have plenty of cash in or I have the ability to increase my borrowing to cover those expenses I don’t like to have cash just sitting in my account. I want to go and find something for it to do. Adam-For all the properties that we manage here at Hermann London I think there is one of our clients that has us hold back an extra $100 a month and have us keep it in our maintenance reserve account. When I heard that he does that I said I want that for my properties too so now I’ve got Tom holding that back too. I think once it gets to around $3,000-$5,000 per property I’ll probably say let’s start getting that cash over here again. Darren-It’s the same concept as having your mortgage hold onto your escrow, insurance, and taxes and we do that because that is a known and big expense every year. I would much rather have that known expense pulled out every month and stuck somewhere I can’t touch it. An unknown expense in the future? As long as I’ve got the cash flow to deal with those sorts of things then I am less concerned. Adam-What type of rental properties do you buy? Darren-It is really a numbers game. When I first started, and I don’t know if I advocate this, I was looking at lower end rental properties because the cash flow numbers were really good and I could buy them cheap enough, in some cases with cash. The downside to that strategy is that those lower end rental properties typically have lower end tenants. Lower end tenants in general are going to be much higher maintenance, repair, and turnover costs and when those properties do turnover they are in much poorer shape. It takes more money to get them rented again. Through the school of hard knocks I’ve stopped doing that. We now like to be in that middle income solid blue collar area. I’m looking at 2 and 3 bedroom houses. The same thing as a retail client. I want a 3 bedroom/2 bathroom house. If it’s a house somebody would buy then it is a house somebody would rent and I’m really looking at what are my cash flow numbers. Adam-If it is a house somebody would buy it is a house somebody would rent. Do you have a certain percentage of what you want to make on cash flow? Darren-Right now it is dollars. My hard and fast rule dollars and if I can’t walk away with about $250 a month then I’m going to look long and hard at why I am doing it. However that number will go down if I like the area a lot. If it is an area that I know I can rent quickly or values are stable or will increase then I will accept a little bit less cash flow because I expect a better long term payoff. Adam-You are willing to buy a property for $150,000 even if you know you are only going to make $250 a month on it? Darren-Absolutely. That is $250 a month I didn’t have before. I have banking partners that will help me finance those things because I have history and relationships. I’m not really out $150,000. I’m leveraging other people’s money to do that. Adam-Let me jump into the rehab stuff with you a little bit. Whenever I’ve brought you a potential deal to buy you would always show up with you iPad to make calculations. What were you using and why don’t you do it anymore? Darren-I know what it costs me to do things. Adam-When you say that you mean you know how much it is going to cost you per square foot for carpet, paint, and those kind of things. Darren-Exactly. I know but at a much higher level. When I meet with you to walk through a house for the the first time, I know things like this house needs a new kitchen and it is going to cost me $10,000. Adam-You don’t need to count how many cabinets.j Darren-The only thing I typically count are windows because it is easy and it is a fixed number per window roughly. All I’m looking for is to get into the ball game. Every time we’ve looked at property together I’ve said I need to be around this number. If I can be around here then let’s talk and see if we can tighten it up and then I’ll bring my crew in if there is anything questionable that I’m not comfortable with. Adam-Or if it is a close negotiation or something like that. Darren-Exactly. I’ve got tools that help me calculate how much I’m going to make based on how much I buy, spend on rehab, how long I hold it, and how much we will sell it for. I can then decide. If the seller is not willing to come down another $5,000 am I going to be okay with those numbers. Adam-Are those tools that you’ve created or does your speaking company sell them or can I download them off Google Play? Darren-Most of those are tools that I have taken from the company I work with that I learned how to do this from and I speak for now. Most of the tools are from there and I’ve customized them to work for our business. Adam-Can I ask you a little bit about your speaking? Where do you speak? Darren-I travel all over North America. It’s kind of my side gig and it’s turned into a passion. It is a blast. I love doing it. I will travel out on a Friday and teach a 2 day seminar on the weekend. A seminar is a classroom full of people anywhere from 6-8 people to 70 people at a time. It will be the high level overview on how to set up and run your rehabbing business. We will talk about wholesaling, rental, rehabbing, and we will go look at property. Every weekend I go wander 3 or 4 properties in whatever city I’m in. We will walk through what to do, how to repair it, and the pieces you need to pay attention to, and how to submit the offer. Adam-That’s kind of neat. So these are usually new investors or people wanting to learn a little bit more? Darren-It’s usually a pretty mix. Very frequently they are what I call green. They don’t have a whole lot of experience in real estate. Most of their only real estate experience is buying the house that they’re living in. Pretty regularly there will be some contractors in there that have been making other people money and they want to get into the business themselves. Ten percent of the time there will be people who are currently flipping houses but they are swinging the hammer themselves and they are not able to scale. They are not able to do more than a couple projects a year because they are doing all the labor. I don’t do that. My idea of rehabbing is writing checks. Adam-Yeah. Exactly. I know you don’t drive a truck. Is a big part of that just giving people the confidence to just do it? Darren-Yeah. I think a lot of it is people getting out of their own way. There’s two sides to that. The kind of people that will jump in, give it a try, and realize it is hard. And it is. This is a tough business. It doesn’t matter where you play in real estate. If you’re on the retail/realtor side or if you’re trying to wholesale or if you’re a landlord or if you’re flipping houses this is a tough business. Adam-There’s going to be problems. Darren-There’s going to be problems and no deal has ever worked exactly how it should’ve or as easy as it should’ve or could’ve. Adam-Which is really what keeps it interesting. Darren-Exactly. It is a blast. You’ve got to be tough and you can’t be somebody that when the first time things don’t work right you can’t just run around and hide, especially when you’ve got a couple hundred thousand dollars of yours or somebody else’s money tied up in the project. You’ve got no choice but to plow through and figure this thing out. I think there’s two types of people who try to get into rehab and it’s the people who watch HGTV and think it makes it look easy. Let’s buy a house, flip it, and make $250,000, and any idiot can do it. That doesn’t happen. There are very few people that can flip houses, especially in St. Louis and make $250,000 on the deal. It never happens in 30 minutes either. Adam-What’s the second type of person? Darren-The second type of person is somebody who logically knows it takes a lot more work but they are the analytical type person and they want to know all the gotchas before they take that first step and that is impossible. There is no way to understand every possible outcome that could occur before you take that first step. Adam-In theory that is why you add that extra 10% on there for the maybes or you have the conservative we don’t know what this is going to cost but let’s just add an extra $5,000 onto the rehab cost just in case. Darren-Or when you tell me that I’m going to sell it for $150,000-$160,000 I’m always going to use the $150,000. Adam-At least probably. Darren-It depends on how excited you are about that deal. Maybe I use $140,000. Adam-You travel around and speak to investors. Do you ever partner with them? Darren- I have in the past. I’m happy to partner. I’m happy to look at any opportunity to put something together. It’s a matter of you have got to bring something to the deal. I can’t bring all the money, expertise, and teach you how to do this. If I’m trying to flip a house flipping the house is the priority. If I’m in education mode then that’s the priority, but you’ve got to bring something to the deal. Adam-And a lot of time what the new person can bring to the table is a hot deal. At your level you are not that excited when someone brings $10,000 and says let’s partner or $50,000. You are like, “I can get money. Thanks.” Darren-Yeah. At this point I’m not going to turn down money. Money is a matter of how much scale we can do. We’ve been pretty fortunate that we have a pretty good track record that money is not really our driving force or bottleneck right now. Finding me the deals and finding me deals that we can do quickly and easily. Lately what I’ve found is it’s easy to find properties if you’re willing to put $150,000 worth of rehab work into them. I walked through another one this week that is $100,000 plus worth of rehab. We can do those deals but it takes a long time, a lot of money, the contractors time, and it puts a lot of money into one project. Adam-So not only does it tie up a lot of money, it ties up a lot of money for a long time and it ties up your contractors for a long time. Darren-Which means I’ve got a lot of everything tied up into one thing of risk whereas I can spread that risk out over 4 or 5 different projects. Even if the total amount of time is less, if I have the same amount of money spread out over all those projects and one doesn’t work right, I have 4 other projects that will help balance things out and be good. Adam-The best thing someone can bring you is a slam dunk deal. Darren-Absolutely. Bring me a house. I walk through it. Here is what it is going to cost me. Here is where I need to be at to make the money I need to make on it. I have pretty set criteria on how I define that. I’m a pretty straight shooter and I pride myself on that. I’m not going to play games. I need to make a fair profit on things. If I can’t make a fair profit on things then it is not a good deal for either one of us. Adam-I’m going to ask you this a couple times during the show but tell me, and this will also be on HermannLondon.com under this podcast, but how can they get a hold of you? Darren-If you go to my website, HitchAsset.com, that’s the best place to go. You can fill out the form and tell us about a deal or a property and that will go right to my team who will evaluate it. You will get an email back almost immediately. There is a phone number on there that you can dial and follow the prompts. Adam-What is hitch? Darren-Hitch is a nickname that I had. Have I told you this story before? I think I have. Hitch is a nickname that I had. I had some very dear friends of mine that are no longer with us and they gave me that nickname after a long night of drinking and doing some embarrassing things so it is kind of in homage to a good memory of my friends that are no longer with us. Adam-You mentioned your team. Who is this team? Darren-I have business partner named John and he manages all of the construction side of the house. Adam-So he’s over there meeting with your contractors. Darren-Yep. He spends just about all day working with the contractors, project managers, & vendors making sure everything is going right. Adam-Is he the GC? Is he managing a GC who is managing a plumber or is he managing a plumber? Darren-It depends on the situation. Sometimes we hire GCs. Sometimes we use our regular guys. Adam-If it is one of these smaller deals that you like then you don’t necessarily need a general contractor. Darren-Actually we tend to do it the other way. Typically the level finish required in a $100,000 rental house is much different than the level of finish needed in a $400,000 house. We will hire a general contractor and very quickly get the rental done, clean, and functioning. Adam-Less extreme detail necessary. Darren-Exactly. When the property requires a higher level of detail then John is in there. He is very meticulous. We have an assistant in our office who does most of our administrative type work. That is Laurie or LC. She does most of our administrative work. I have an acquisitions person. A marketing person that is full time. She normally works Tuesdays through Saturdays. If you call us at that time you typically would be talking to Ann. Adam-She’s an acquisitions person meaning that if someone fills out on your website that they have a house to sell, she’s the one who is evaluating the deal? Darren-Exactly. Any of the marketing that we send out, she gets the phone calls. She gets the emails. She does all that. She is the first touch because I’m traveling all the time. I don’t have the luxury to do that directly. Ann is kind of the gatekeeper and when things meet our criteria and Ann does all the work and figures out it is a deal that we want, she helps us decide whether it is a wholesale, rental, or rehab deal. Adam-So she’s personable but she’s also analytical, I guess? Darren-Oh she’s extremely analytical. Adam-Who else is on the team? Darren-That about covers it. That’s our team of regular people. I bring in people to fix problems and do one off things. I work with my partner to do some of the design work on the deals. We work with John’s daughter with staging work on rehab properties. There are other individuals that we work with. For the core team it is really just the four of us. Adam-You sort of mentioned the staging and that type of thing. One of the first rehabs I ever went to that you did, and I think you’ve kept this since, it’s always the same counter tops, tile floors, and paint colors on the wall. Darren-Yeah. The goal is to keep things as cookie cutter as possible because it’s going to allow us to do things quickly. Adam-Cookie cutter for you. Not necessarily cookie cutter for the owner. Darren-Exactly. If I buy a house in one particular neighborhood, the buyers looking in that neighborhood are going to be different buyers that are looking in a different neighborhood so I can put the exact same house together and as long as they are not two houses sitting right next to each other that will be on the market at the exact same time those buyers are not going to see it and not know the difference. It is just like a builder does it. When a builder builds an entire neighborhood every house in the neighborhood gets the same thing unless the buyer picked options to make adjustments. Adam-Time is valuable and you don’t want to be going to every house and wondering what color to paint the kitchen. Darren-Exactly. We have standards for the different price points in the different neighborhoods we work in. Obviously if we are working a half million dollar house in St. Louis it is a much different finished product than a first time home buyer $90,000 house. Adam-Talking to you can make me go both ways. Does this excite me? Does this make me want to do it? Does it make me feel like this guy has it all figured out? I’ll never have it all figured out like Darren does. Darren-It takes a long time to get it figured out. When I’m talking with new students that is a pretty common thing. They ask me questions about my team and they think, “Oh crap. It is just me and I got a job. How am I going to put all this stuff together?” It takes a long time. It’s like any business. It doesn’t just happen over night. We’re fortunate that we’ve had some success and we had some good mentors to help us get going which is why I like to mentor and help people build their business. We’ve put things in place to continue to allow us to grow and scale the business. Adam-For that first timer it is just one step at a time. Darren-How do you eat an elephant? Just one bite at a time. Focus on the one big thing you need to get done. With what we have in place we routinely are working on 4 or 5 projects at a time. We’re trying to buy 2 rentals a month consistently for the foreseeable future and I’d like to be able to make it 3 or 4 a month. It took some time to put all those pieces into place to be able to run at that level. When I first started it was one deal. Do one deal. Get that one deal done and when that deal got done I started over. Adam-How many rehabs do you have going on now? Darren-Right now we have 3 rentals… Adam-This is great. This is how your business should be. You don’t even have to know the exact amount. Darren-No. I bought 2 rentals last week. I think we have 4 rentals going on right now. 1 rental that is just getting finished so technically 5 rentals. 1 rehab that should’ve been done today and another rehab under way that has 4 or 5 weeks left. Adam-You basically have 2 rehabs going on. 4 other rehabs you are not going to sell. You have 6 or 5 going on at once. What do you think your capacity is? Unlimited. Darren-At some point you get down to money. Right now we have the ability, especially on the rental side where we are talking about $100,000 houses, we have the ability to consistently keep 5 or 6 of those things going on at a time and keep 1 or 2 solid retail flips going on at a time. Adam-Ultimately I guess if you kept growing John could get some people working for him. Darren-That’s what were in the process of right now. We’re bringing on a project manager that would work for John so that John can spend less time on the projects and more time working on the acquisition side and helping us find deals that make sense. Adam-What is your primary source of finding homes now? Darren-A few things. We do marketing. Anywhere to Craigslist Ads, bandit signs, and mailers. Adam-I see those big yellow we buy houses signs. Some of those might be yours. Darren-Some of those might be ours. Adam-I pointed one of those out to my girlfriend one time and asked what she thought about that sign. You try to make those look ugly and crappy on purpose, right? Darren-Yeah. Bandit signs absolutely make the phones ring. You have very little control over who calls but they make the phone ring. It is a numbers game. Adam-But you could afford to get a nice sign printed with screen printing, your company name, and phone number. Why do you buy the yellow ones and hand write them with a marker? Darren-You have to think about what kind of buyers we are trying to help and we really truly believe that. I make jokes when I train that I’m stealing grandma’s house. I’m not really trying to steal grandma’s house. The people who contact us are not going to get top retail value for their house for one of two reasons. Either their house is in really bad shape because there is something majorly wrong and they can’t get retail or they can’t wait long enough for a traditional retail sale, a bank funding that may take 30-45 days after they get an accepted offer. They can’t wait for that and maybe it’s a bankruptcy. Maybe they need the money because they had to put mom into the nursing home. The people who call us who need our help are frequently calling us because of things like foreclosure or bankruptcy or things where the perception is that a big organization or company has done something wrong to them and they would rather work with a little guy who can meet with them as human beings. Adam-So they want someone who is a smaller guy. Darren-That’s what we try to portray on that phone call. Adam-Someone who can’t afford a real sign. Darren-Yes. Someone who can afford a Sharpie marker and a piece of plastic. Adam-I only say that because I know you do that on purpose and it’s not like you can’t afford real signs. Darren-We do both. Adam-What else do you want to tell us about? I’m going to try and wrap this up. I could literally talk to you for another 5 hours. Darren-Because I’m that damn interesting. Adam-Because you are that damn interesting. I’ve got a lot more questions for you really. Darren-We’ll have a part two. Adam-We’ll have a part two. Give us some more information about how we can get a hold of you. Darren-I’m always interested in working with anybody who has a deal. If you’re interested in getting into the business I can talk to you a little about that and point you in the right direction. I don’t have the time to do any personal one on one coaching but I can definitely point you to where I got my training and who I work with today to get you on board if that’s what you want to do and if you’re serious about building a business and turning it into something. My website is the best place to come find me. That is HitchAsset.com and there is all kinds of things on our website. One of the coolest part about our website that I’m excited about is a map with pin drops of every location of a property we have done in the past year. You can go to our website. It’s got our phone number. Give us a call. You will probably talk to Ann. Also if you have a deal that you want us to look at, if you bring us a deal, and we end up closing on it, we will pay you a marketing or birddog fee for that. We will make that worth your while. We’ve got a section on our website to send us that referral. Send us that referral and we’ll try to track down that owner and see if we can buy that house. Adam-One last question for you. I want to try and humanize you a little bit. You are not just this huge rich real estate conglomerate that we might think. You mentioned earlier about kind of just doing it. I have this saying I always say about my personality that is ready, fire, aim. Can I ask you, what you do for fun and leading into what is this little side project you have going on? Darren-When I started teaching new real estate investors, it turned a spark or something that I really enjoyed the education piece. When you are an entrepreneur there isn’t a lot of free time when you really love what you do. You spend all your free time doing what you love which is the same as your business. One of the things that I’ve evolved into is this side project I’m doing with a buddy of mine. It’s really about entrepreneurs and helping them grow their business but it isn’t specific to real estate at all. The name of the website is DoneBP.com and it stands for done is better than perfect. Get something done, get it off the books, and take that first step even if it is not perfect. I’d rather make some mistakes and learn from those mistakes and move forward and correct those mistakes and get better next time. It is a project we are working on. It is really education, helping new entrepreneurs across whatever industry get passed that mindset of working for somebody else and having somebody else tell you what’s right or wrong and not having the guts or not being brave enough to not take that first step or two for fear of what could happen. Adam-I love it. There you go. We just humanized you. I think we’re going to cause people to have a lot of questions, and I want that for our podcast, so I’m going to encourage people to email me at Podcast@HermannLondon.com. Ask me some questions and then I’ll hit you up. Maybe I’ll owe you a check again here sometime soon. I’m just kidding. We’ll get you back here and we will ask you a bunch more questions. Maybe we’ll get in depth about a deal. Does that sound good? Darren-Perfect. I’d be happy to do it. Adam-Perfect. Thanks again. Appreciate you. Take care. Darren-Absolutely, sir. Thank you. Segment 2 That was fantastic. I could ask Darren questions all day long. We just got our picture of Darren so check out HermannLondon.com, click on the blog for episode 5, and you can see Darren here in our studios. I’m just going to go through a couple of the questions we had this week. I’m going to really encourage you to ask some more questions. Keep them coming at Podcast@HermannLondon.com . Check out the website if you want to see some of the pictures. I had a question about Lake St. Louis. There is someone who owns a home in Lake St. Louis but they don’t have access to the lake. They can’t put their boat on the lake and they are wondering why and what they have to do to get access to that lake. I know this is a very specific question but this is what I love. In Lake St. Louis they have a community association. If you live in certain areas around the lake you can basically have the option to join the association which then gives you access to the lake. Most of the homes that are on the lake have that. For example, my parents live in Lake St. Louis but they live on the other side of highway 40 and they don’t have a community association membership that gives them access to the lake. If you live in Lake St. Louis and you are in the the community association you can also upgrade and pay another fee. I think it’s about $500 a year to get unlimited access to golf and tennis courts. If you are interested in moving to Lake St. Louis and you have a specific question about a specific house, please contact me. I’m really familiar with the Lake St. Louis Community Association, mainly because of my dad who is also a realtor. Larry Kruse is also extremely interested in the community association and he is a very detailed person so I have learned a lot about it. You can’t necessarily look at the listing and see. A lot of realtors who list homes out there don’t know a lot about Lake St. Louis necessarily. I’m not trying to talk bad about realtors but if you haven’t done a deal in Lake St. Louis and you are not aware of this community association, you might now know. Call myself or call my office or call my dad and ask us if the property is in the community association or not. Our office number is 314-802-0797. My dads’s name and number is Larry Kruse at 314-614-9108. He is truly our Lake St. Louis expert so if you have specific questions about it just call him directly. We met today with a realtor who is older than a millennial or generation X. I don’t know the nice way to say it. They are just a little bit older. They are probably over 45. I have met with these kind of people a lot and there is this big thing about technology and I feel like some of the older people don’t quite get technology or didn’t grow up around it or are nervous and they think they can’t be a successful realtor without having a Twitter account. I’ve seen some young realtor where all they do is count on their Facebook or Twitter account and that doesn’t necessarily get them the kind of business that they want. The question is do I have to be a web guru to be successful as a realtor and I would say absolutely not. We talk about and feel that The Hermann London Group is a high tech high touch company meaning that we leverage technology to give us the opportunity to have better communication with our clientele. For example on our Facebook you don’t see us begging people to please please buy a house from us. We like to keep people informed through our social media, especially me. A lot of you probably get my monthly newsletter. If you want to be a realtor you don’t necessarily have to be extremely high tech. We just had a realtor join our company today. She asked what Docusign is. It is electronic signatures. Does she have to use it? No. I make sure that she is aware of it and knows how to use it. She definitely doesn’t have to use it. We had another question about what CRM do we use. I think that question came from someone who got our monthly newsletter and had a question about that. The CRM that I use, the software I use to keep track of my database, past clients, friends, that type of thing, we use a system called Realty Juggler. You can go to RealtyJuggler.com. I always describe that software as extremely ugly but as ugly as it is it’s double as effective. It’s really a great software. We use it to keep track of tasks on deals that we have so we always know where we are. In theory we’ll never miss something because there is a task assigned to it and that is what we use Realty Juggler for. For the monthly newsletters we use Mail Chimp. Lastly and we’re going to wrap this up because we had a really long interview with Darren, which is fantastic, but I wanted to put a call out to the realtors. I just got appointed to be on the board of The St. Louis Association of Realtors. We just had the big gala for the new president to be appointed. I’m now on the real estate board. I’ll be on it for a year. Basically I want to know how can I serve you. If you are a realtor listening to this podcast and you have questions, feedback, or want something else from The Association of Realtors, I would love it if you would reach out to me. I don’t care what company you work for. I’ve been on a lot of different committees so I’m pretty familiar at how it all works but I’d love to serve you, any realtor in general, but especially if you are another small real estate broker or boutique company or that type of thing. I’d like to make sure we’re all represented and really that you’re informed. One of the reasons I love being involved and on the board is I love knowing what’s going on able to inform our agents about what’s going on and I like to be able to plan for how we can interact with these things for the future. That’s it for this week’s podcast. Check it out at HermannLondon.com . Click on the blog. We will have the podcast posted. Check out the photos from this week. See what Darren looks like. Give us an email at Podcast@HermannLondon.com . We’d really like your questions and your input. Take care. See you next week. Bye Bye.