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Flipping Houses and Creating Unlimited Wealth with Joe Arias
Episode 30313th January 2022 • Real Estate Investing with the REI Mastermind Network • REI Mastermind Network | Real Estate Investing
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Joe Arias and his partners have flipped hundreds of properties in the Southern California Region. He has developed cutting-edge systems to simplify and scale the entire remodel process that can easily be applied to flipping, rentals, wholesaling, and other passive income strategies. More recently, Joe founded a real estate investing education company called… Real Success

RealSuccess is one of the biggest educational platforms in the market focused to teach people on flipping, rentals, passive income, and wholesaling.

Joe is also a best-selling author. He has written 4 books (Finding your RealSuccess, Flipping with RealSuccess, and Rentals with RealSuccess, and Success Plan) and currently finishing writing a book about wholesaling.

From a young immigrant with no financial literacy to a celebrated real estate investor, Joe is a true testament to hard work and discipline. As an investor, he has made it his mission to help others achieve financial freedom while enjoying living a life of passion, fulfillment, and empowerment.

Connect with Joe!

  • Seminar: https://2dayseminar.com/
  • Website: https://ourrealsuccess.com/
  • Website: https://realsuccessconnect.com/

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"You can invest 10,000 hours and become an expert or learn from those who have already made that investment." - JD

Transcripts

Announcer 0:00

Welcome to the REI Mastermind Network, where host Jack hos gathers amazing stories from leaders in real estate investing. In each episode, our guests will tell you what they're doing that works, what they've tried that failed. And best of all, you'll learn actionable steps to take your real estate investing to the next level. Now, here's Jack with another value packed episode.

Jack Hoss 0:27

Well, we got a treat here tonight, Joe Arias. Joe, I really appreciate your time. And if you haven't seen a lot of what Joe does, you got to check out his Instagram. I mean, he's got quite a few followers there. And there's a lot of activity and, and but I want to send everybody right off the bat, because you have a seminar coming up a two day event in two day seminar.com Take a look at this. The Price Is Right. I mean, you can't there's gonna be a ton of value for two days for what was it a couple $100 I mean, that's, that's right, Jack.

Joe Arias 1:00

Absolutely. But let's, let's give them value in the in the show. And then if they, if they choose to, to go, you know, to to go to the length, you know, I want to make sure that we can, like you know, when we started this your your commitment was to bring as much value to your audience. So I'm, lets you know, I'm here for you guys. Thank you so much, Jack, for having me. I'm honored. I appreciate you. You know, just thank you for you know, just putting me in front of everyone. I really appreciate that.

Jack Hoss 1:29

No, I appreciate your time. So let's let's dive right into some of that value. You have done over 100 flips now. Right. And you've systemized it for a lot of people. So that's kind of one of the reasons why we're talking here today, because Systemising this process is huge, especially if you want to scale. I'm always curious, I know you've been doing this for a long time, you've probably told the story a million times. How did you get into flipping? Oh,

Joe Arias 2:00

you know, maybe when I'm like:

Jack Hoss 6:49

Well, your kind of unique situation you've you've talked to a ton of people at this point, getting into flipping for the first time to people that are likely been flipping and they need the those nudges and in the right way. What is the couple of the top things that misconceptions that people have before they get into flipping houses? Okay,

Joe Arias 7:14

ortgage throughout, you know,:

Jack Hoss 8:59

think you answered it. You know what I was the I've talked to quite a few people too and it's amazing you know a lot of a lot of people even locally they come and go and they get these dreams and thoughts because of HGTV they can they see these flips in 30 minutes and there's just a lot of misconceptions there that it's it doesn't it seems easier than it is sometimes.

Joe Arias 9:24

not if you want to retire in:

Jack Hoss:

right, you know, in fact, I've only run into a couple people that have successfully done rentals in California, some interesting strategies, but you're in a situation where you're renting it out, essentially out by the room. And

Joe Arias:

if you think about it, um, you can make a lot of money in rentals in California, but, uh, you know, to leverage a commercial loan, you need 3540 45% down. And if you're going to buy rentals in California, you're not going to get anything like, under a million bucks. So not everyone has $400,000 Put down. So you will be six if you if you're a millionaire, you will be successful. Right? But that's the trick, right? Everyone with money, you can make money. But the question is, when you don't have money, how you can leverage it, we're in a really good times right now. Unfortunate, unfortunate, because that the Fed injected in the last two years, over $53 billion in cash in the economy. Go and figure that one out. $53 billion. So there's a lot of cash. So you can leverage um, you know, I'm writing a I'm going to do a seminar on this, I was reading it this morning, but you know, you have you have a, you have a house, you can do a HELOC and you know, a loan against your property, a home equity line of credit, and you can actually take a credit, you, you, you have a 401k you can diversify and strategizing. So you can actually invest in real estate. If you have, you know, if you don't have any money, you can leverage hard money and private money. So no matter where you are, there's opportunities for people to get in. And I think that that's, that's beautiful. But that's why California may not be good for rentals, because not everyone has three, four or 500,000 are sitting right?

Jack Hoss:

Well, you know, you we were talking that you've done over 100 flips at this point, at a certain point, you were probably trying to decide on how to scale and that's where the systems and systems systematizing things come into place. What was the first thing you you realized? Or what happened to make you realize that you needed to apply some sort of systems in order to scale like this,

Joe Arias:

you know, I think is your this is something that I would like everyone to I'm just gonna plant the seed in everyone's like, subconscious mind. Which is, and this is something that I work every day on it, you know, I still struggle with this, you know, but what are the plant that I want to see, the seed that I want to plant is any decisions that we all take, we always have to think about, can I scale this, right? From the food that you eat? To the job that you have? Right? If you're like, you know, if you just graduate from school, and you're like, figure out what the hell I want to do in my life, don't just take a job because the pays well, right? Take a job because Can I scale this in my life? This is something that I want to do more for the next 510 20 years. Right? There's there's plenty of multimillionaires, very unhappy and unfulfilled, right? Everything like even like the choice of your sport, like, if you're gonna choose a sport that you want to play in, obviously, you can do sports that have like, very large, short longevity, but also think about what happens after those 510 years, right when you're 3035 40. Right. Like, you can also start playing it and maybe tennis or golf or something that will have longevity. Same with the business right with real estate, flipping houses. Um, do you want to do one flip every year? My average on my profits are $50,000 per flip, right? So if you want to do one flip, it really depends on your goals. If you just have a job, you love your job, you want to make one flip make an extra 50k a year. You don't need systems. You can just keep it the way it is as long as it's contained. As long as you have a right team, the right asset protection strategy you might have Have an LLC or a trust, um, you know, attorneys, you know, ages, you know, but if you're thinking about maybe like, I'm making $100,000, I'm making $50,000 a year, and I'm not really fulfilling my job, well, then you can start thinking about what if I make three flips? Right? In California, our profits are about 50,000 conservative, I don't like to go over 60 $70,000 Because then there's more risk, you might have to like expand your kitchen, do a different addition, that's more permits, I like to do like very small lipstick in a pig, as they said, um, and I do over the counter permits, blah, blah, blah, right. So so my suggestion is, can you scale this? And if you if the answer is I do want to scale this, you definitely IT systems. And you can you can take what he took me 567 years to scale that, or you can just hire someone that has the best your best interests in mind. And, you know, get a coach based on 110 20 $50,000. I know, it sounds like maybe a lot of money to go and pay someone because if you pay one flip back, if you make one flip or two flips, spend your local market, you'll pay that back. And you literally don't have to like reinvent the wheel, it will take you seven years, five years to reinvent the wheel, just start go from one flip in one year to like three or four secure flips, and then second year. And that's kind of like my mindset, everything I do has to have like a like a y and a mindset within on can I scale this?

Jack Hoss:

Well, you're you kind of went right into the tagline of the show. One of my taglines is, you can either put in the 10,000 hours or become an expert, or you can learn from somebody who's already made that investment. And that's where you come in.

Joe Arias:

Yeah, me you. I mean, I, you know, all everyone has people's best interests in mind for sure.

Jack Hoss:

Right. So, you know, one of the things that I've run into that when some flippers going to get into trouble is when they bought the house at the wrong price, how do you help individuals determine the price that's going to be right for them. When it comes to flipping?

Joe Arias:

You know, there's, there's the, there's the there's the the macro coach, that I will be me. And then there's the micro coach, which my suggestion when I'm coaching, you know, we have a coaching call two days ago, we literally did a live training on how to enroll agents to send you off market deals. And I literally, like go to Google and I pick a few agents and I go through my script with my students and we, we work through everyone gets value, right? This, the transfer of information is very juicy and fresh. It's not like go and do this, but I'm doing it and you're going to learn it through osmosis, and then you're going to do it. And I hope you fail, because it's the only way to learn. Right. Um, and I went out on a tangent, can you remind me the question, sorry,

Jack Hoss:

it was regarding making sure you find the house at the right price. That's right,

Joe Arias:

so thank you. So the micro is I always you can use the deal analyzer, I'll be able to coach you and how to use the deal analyzer, the repair estimator, all the documents that I use to to assess and on top of that you want to call local agent that is within five miles on that property. And what I what I do is because no one better knows the market, some some properties, you might be a block away and your price went down 10% You might be in a commercial zone, and you don't know this, but the property just went down because no family is gonna want to move to a commercial zone, they might build that 20 unit apartment behind it and lose all the you know, the the exposure or the you know, you know, having like 2040 is looking at you, you know, in a year from now. So, I my suggestion is I get I call three agents on the local area. And I asked them for an ARV after repair value to give me projections, give me comps and then average those three HRVs into one and that's my number. Sure.

Jack Hoss:

Okay. And then you said you typically focus on kitchens and bathrooms. Is that where you and you said lipstick rehabs? Is that particularly what you you suggest people at least start with when they're getting into flipping?

Joe Arias:

Yeah, I maybe I miscommunicated on what I meant to say or what I attempted to say is when you're flipping a house, the most important part where you want to put your money is in the kitchen and in the master bathroom. So think about it that you know, guys might not like this and I don't want to get political but usually the woman is the one that has the pants in the relationship and I'm sorry for all the guys out there that might have liked to hear that. I knew I'd be right might not be like that with you. But I feel like, at least in my household, I, you know, I'm not the one, you know, controlling the choices here. So, you know, that, you know, you got to think about making, you know, the wife happy and the family happy, right? I like to say that the wife is the heart of the family. And that's why the kitchen is great, because not saying the kitchen and the wife are together, I don't want to send the message. But the kitchen is where the family spends the most time as a family. Right. So we want to make sure that we make, you know, in the master bathroom, like these days, people take quick showers like I don't remember the last time I went into the bath, some people love the bath and take those very, maybe put some classical music and relax there. So master bath in the kitchen, are the places where you want to put the money because that's where the fun really lives. Right. So that would be my suggestion on on a flip? And then what was the other question? There was two things you touched upon?

Jack Hoss:

Yeah, no, I was just kind of wondering, you know, when it comes to flipping, I'm just kind of were curious as to especially when people are first starting out? To what level do you think that they should consider, you know, try to do a very light rental,

Joe Arias:

and kind of lipstick interface, that's what you said, Thank you, you know, I have to be careful and saying lift isn't a big because as investors, we all we also have to work with integrity. Lipstick, and if pay is not, you know, patch the issues for anyone to figure it out that there's a problem. But if if the foundation of the house is good, if the bones of the property are good, then you want to like do a quick remodel, you do not want to like, you know, there's a lot of plumbing and electrical, I'm not, you know, if I have to do a lot of work, I don't flip, I don't buy the house. So you want to you know, just just with integrity, don't spend a lot of time and money and energy doing a remodel, we want to I like to buy the buy, you make the money in the buy, you save the money on the remodel, and and you know, whatever it's left on sale. That's what you know, you make, right. But I think that, you know, a lot of the most of the errors that I see that I've done in the past, and people do see the remodel. Now. The beauty about the sale is you have full control of the sale. Why because if you don't like it, if the numbers don't add up, you just don't buy it. You might spend $500 to get, you know, to get someone to give you a report, you know, you know, but that's all you're gonna spend, right? You may get an escrow and title, people may be pissed off that you disclose like, you know, before releasing all the content, the contingencies, but there's no really a big loss, the loss happens if it happens in the remodel. So you want to have the right documents, you want to have scopes of work, you want to have detail, um, you know, so tying the lipstick in a pig is do your your flip with integrity, but also have all your legal documents in place, even if it's like a 30 day remodel, very like light remodel. I don't go over two months of might remodels. But you want to have certain things, legal documents that will help you to do that.

Jack Hoss:

So when you do your rehab models there, it's very brief, like you try to do it in 30 days and get it

Joe Arias:

60 days for the remodel 60 days. Anything else over 60 Well think about it. Anything else that will take you over 60 to 90 days remodeling. There's no reason why you should like do your rough electrical, rough plumbing. You know, dry Walling, mud, painting appliances finishes, there's no you could literally do that in three weeks. Yeah, if you got all the materials, I order all my materials before I start. So I have documents that I have kitchens that I already know that they're tough sellers. You know I have like 15 features on templates. I download them I send them to Home Depot and I work with Home Depot because they're nationwide. And and I get my kitchens delivered two weeks on site. And then I bring my contractors not to beat on labor material they come and beat on labor because I already bought the materials. Right so that brings my cost down. I get a discount in Home Depot. You know a little like Ninja tip when you do Home Depot if you do Home Depot. You might do other companies go to the bid room. Apply for the bid room. Big Room. Have you been Have you heard about the bedroom Jack?

Jack Hoss:

No, I've heard of the professional you know, we're a member of that. But

Joe Arias:

yeah, go to the bedroom you'll get between two and 10% discount if you're a veteran. And if you go in person on top of You're gonna get another 10% Don't order if you're a veteran over the phone, because they won't allow that discount, but if you go in person, and and you show your credentials, you will get an extra 10% On top of that, two to 10% of the bid room. So these are like all major tips that you just like other along the time, you know, as you do it.

Jack Hoss:

I just wanted to remind everybody again, two day seminar.com For some more information of Joe's upcoming event,

Joe Arias:

thank you, Jack, if you want to learn that's the place come for today's with me, I'm going to lead I don't believe all of them. But February 25 and 26 I'm leading, it's $195 for two people, you plus one, we're doing it at the Sheraton. So I get some discounts if you want to fly. I mean, if you want to make a difference and really cost a transformation in the direction and the trajectory of your life and your career mainly, you know, I would love to be that person and we just gather a bunch of investors from different parts of the of the US and we just you know, I share with you some protection strategies multifamily single formula, rental strength, best markets to flippers, best markets to do rentals, syndication, equity partnership, we go through, like, you know, I am someone that like you learn little beats and YouTube and you listen to this amazing podcast, and you know, and but like you want to learn, you get to sit down, make notes, you know, I'm say, we want to do them three days, but this is going to be a Saturday, Sunday, February 26 and 27th.

Jack Hoss:

So, earlier you mentioned a house with good bones, is there a process that you go through to assess the property, like, you instantly know it's a showstopper, you're just not gonna touch it,

Joe Arias:

you know, you get an inspector, you know, I'm not a licensed inspector, right? Um, you want to learn you want to like Ninja your career, get your licenses and inspector even though if you don't show if you do it, by the way, there's good money you can make, you know, 1000s of dollars a day, as an inspector, you do two or three inspections. Um, but you know, um, you know, I say that get an inspector, look at look at the report, you'll get a 30 to 100 Pages Report. Go through your with your contractor. For me, the most important thing is the foundation. I just go down and look at the foundation. Some cracks are okay. Usually if the cracks are horizontal, they're okay. If they're vertical, we got some major issues issues. So this one like little ninja tricks that you know, when you get an escrow you can negotiate, you know, 95% of people see see like a crack some on foundation, they just run through the run, run through the woods. Is that that is that that analogy that hills, yeah. Sorry, it's the run for the hills, so, but you can actually leverage it as an investor. You know, millionaires do not spend their money even though they have it. They invest their money in long term strategies, it's rentals and syndication and commercial. So if you're if you want to flip, even if you have the money, don't use the money go and buy as many rentals as you can. But as you as you flip, you can leverage and in escrow, you know, you have a contingency where you can like literally like go and negotiate the repairs, and depending the foundation you can get 20 $30,000 bonuses not sure.

Jack Hoss:

So earlier you mentioned that you you target at least $50,000 as a profit for each of your properties. When you're running your numbers is that a quick tip when it comes to running those numbers you would you start with your profit and then back up from there to make sure that you're buying the house at the right price.

Joe Arias:

Yeah, um, ARV after repair value. Now the deal analyzer. Deal Analyzer has mainly like four parts, you got your ARV, which is the after repair value, which is how much money after you put some money on repairs you can get and you do that through comps, you're gonna get that ARV through an agent for free. We'll do it for free because they want your business. You have you have the bid, you have the construction bid, right? So you put the numbers. Um, and and you know, the great thing if you're wholesaling. There's different strategies, right if you're wholesaling is different. But basically you want to, you want to look at the end, the exit strategy, the end game, that sale price, minus the repair, right minus your profit, right? So you want to put the profit there, add your profit, and then that's your offer. Whatever that number comes in, I usually do a 10% contingency and, you know, most times You get surprises? And that 50 turns to 70 $80,000? If you are, if you're traditional about it, if you are, what's the word? You know, if you can, what, you know, if you don't want to take those risks, what's the word when you're traditional about assessing something, you're not being risky, the opposite of being risky. I just blanked on the word conservative, conservative, conservative. So you always want to be conservative, thank you. So when you're, when you're flipping after you get your money, you know, I always when I run my numbers, I do like six months, even though it's, it's, you know, two months for remodel one month for, let's say, escrow, and then one or two months for sale, even though you from beginning to end, you might sell it in five months, you want to maybe add another month or two, your numbers, you know,