Episode 36: [Funding] Joint Venturing to Fund Your Flips w/Don Costa

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Show Notes

Don Costa, is a married father of 3 incredible kids.  He has been in the real estate business for over 10 years.  He started Knocking on doors and wholesaling properties, and then quickly moved to flipping houses.   He took some time off during the crash and jumped back in 2012.  Currently our office is on track to do a 100 flips this year.  He loves what he does and he loves helping others get into the business. 

Don started flipping houses when he was unemployed. The unemployment check only covered his living expenses and so he had to find a way to find deals, get funding for them and to fix them so that he could sell them and profit.

He got a notice of default list and began going door to door to try to buy houses from the people about to face foreclosure.

To buy and fix up the houses, he worked out a deal with a money partner to joint venture. The money partner would put up the funds. He would find the deals and manage the fix up and they would split the profits 50/50.

Not all deals are 50/50, we discuss some of the other terms investors use and how those are determined. Basically, the more value you bring to the table for the joint venture, the more you should make out of the deal. If you are finding incredible deals, managing the rehabs and getting them sold, shouldn’t you be asking for a 60/40 split. Heck yes.

Don didn’t have money to make monthly payments to hard money and private money lenders. He didn’t have money to spend on rehabs before getting draws from lenders. He had to joint venture.

He still joint ventures to this day. The reason is that he always wants to do as many deals as he can. Joint venturing allows him to be able to do that.

Finding joint venture partners can be had by networking. You hear it all the time, but do you do it? That’s the real question.

Don recommends using a written agreement to make sure everybody is on the same page and understands the deal.

You can click here to download the agreement he uses:

Click Here to Download the House Flipping Joint Venture Agreement
(Please be sure to have an attorney review this before using it – the agreement is only provided for educational purposes)

He talks about some of the situations he’s encountered with different JVs. One wanted to know if paint from one job was going to another job if it wasn’t all used. You probably don’t want to have someone partnering with you that is concerned with such minute details.

Another thing to be careful of is partnering with someone that wants to give too much input on rehabs. You do not want to have too many chiefs trying to run things. Contractors won’t know who to listen to or to check in with about change orders, etc. You should control as much as you can.

Download The Guide

Disclosure: Have an attorney check agreement before using.

Links

The5MinuteFlip.com

REImobile.com
LeadPropeller.com

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Episode Transcription

Welcome to The Flipping Junkie Podcast. My name is Danny Johnson former software developer turned house flipper, flipping hundreds of houses. Each week we bring you interview, strategies, stories and motivations to help you get started flipping houses and on your way to becoming your own boss and achieving financial freedom. Thanks for spending time with me today. Now let’s get to it.

Hey guys welcome back to The Flipping Junkie Podcast this week. I’ve got Don Costa on the show. We’re going to talk about joint venturing to fund our flips and if you don’t know joint venturing, it’s basically when you partner up with somebody that’s got the funds to do the deals and then splitting the profits on the back end and we’ll get into all the while some details and discuss all that with Don. Dion is a married father of three incredible kids. He’s been in the real estate business for over 10 years. He started knocking on doors and wholesaling properties very quickly moved over to flipping houses, so fix and flips. He took some time during the crash in 2008, jumped back in 2012 and currently he is on track to do 100 flips this year, so he absolutely loves what he does and he loves helping other people get into the business. And so that’s why we got him on the show today to discuss joint venturing and to fund our flips and thanks again. I want to just mention real quick thank you for listening to Flipping Junkie podcast. I know there’s a lot of podcasts to listen to. Thank you very much for tuning into this one. Really do appreciate it. If you haven’t subscribed on iTunes, please do. That way you can get each new episode each week that we release on Mondays and we’re doing that series right now.

If you’re not aware, we started several episodes back, probably 12 or 15 episodes back we started with the foundation and mindset of getting into flipping houses and real estate investing and it’s really helpful for a lot of people to provide motivation to keep them going in the beginning as I’m sure even the experienced of us are aware that it can seem like a big uphill battle at the beginning before you get the momentum built so that’s what that part of the series was for. Then we went into building our team so that everybody would start with an idea of who you need to have on your team to help you along this path of success in real estate investing on your way to achieving financial freedom. Now we’re into the phase of funding. So obviously if you’re going to be doing any fix and flips and things like that, you’re going to need to have, unless you’ve got a ton of money you’re going to need to have funding to be able to buy these houses and pay for these rehabs so that you don’t get into a bind and end up not being able to finish a rehab. We’re discussing all that right now. Last episode we did was last week we talked about private money with Jason Bible. Awesome episode if you didn’t listen to it at flippingjunkie.com/35 and if you go to the show notes page there for that episode, I also have a download guide for finding and working with private lenders where I show you how we found some of our first private lenders that we use and today we still mainly just use private funding because we get better rates and terms for those loans, but we did start with a joint venturing actually in the very beginning with one of our first mentors had put up the funds and we split the profits and that’s how we actually got our very initial start in this business so listen up in this episode. It’s absolutely something that you can plan towards and find people to work with to get you started if you’re having trouble finding funding and it’s a great way to also learn from other people if you joint venture with some He’s got a lot more experience than you. So enjoy the episode. Have a great week. Well, listen to the episode first than have a great week.

Danny Johnson: Alright. Don are you on the call?

Don Costa: I am definitely.

Danny Johnson: Alright. Well, thank you very much for taking the time to talk with everybody – all the listeners for the Flipping Junkie podcast joint venturing. De you want to start with how you got into the business and a little bit of background?

Don Costa: Absolutely. Absolutely. So I had gotten into the business in 2003. I had wanted to get into the business for a number of years before that. My brother and I would go and watch auctions and following Carleton Sheets and different trainers, but just kind of never really pulled the trigger, I guess analysis paralysis. In 2003 I got married and my wife basically was just like “you need to go out and get a job” and I wasn’t about to do that. But I knew that – because it wasn’t in me at the time – but I knew that I had only one opportunity to make my dream happen before I had kids. Once I had kids, that was it. So it was kind of with a seize-the-moment situations and so I went out a short interview with mortgage companies because I felt that was an avenue to learn the finance to get into real estate investing. In one of the interviews one of the guys asked me, “Why do you want to be a loan officer?” And I was like, “Honestly, I don’t. I want to be a flipper. I want to be a real estate investor and I want to learn the business side of it and the financing side of it.” And it was the weirdest thing because he kind of sat up at his desk and leaned forward and he’s like, “Alright, you go find some properties and I’ll put up the money and let’s see what happens.” I was kind of in awe at the moment and I was like, “Okay, we’ll see if this guy’s real.” And I went out and I got a notice and default list and I got in my car and I started knocking on doors and just building rapport, making friends and started getting deals. I had a knack for locking people up in a contract and the guy actually started buying the houses.

Danny Johnson: So what did you do whenever he said you find the deals and I’ll put up the money? Was there any discussion of how it would look if that did happen? What was the was the discussion at that point?

Don Costa: You know that discussion kind of evolved over the next couple of weeks. At the end the moment I think I was more in awe, let’s see if this thing gets real. He just basically said, “Go get them and I’ll put the money up.” And I think when I walked out the door at that time, I was definitely naïve. I don’t know that I really knew the questions asked and then as I started to bring in some potential deals and we started kind of discussing it, it turned into a situation where I’d go find the projects and he’d put up the money and we kind of worked together to get them done, rehabbed, and sold and then we split the profit and that’s what it morphed into at that time.

Danny Johnson: Nice, nice. So there’s no interest or anything like that. There are no points, no interest. Basically he put up all the money. I’m sure he’s probably – when you guys were buying them, whose name was on the deed kind of thing?

Don Costa: In that particular situation with this gentleman his name was on the deed and he bought them and basically I went in and did whatever I needed to do as far as helping manage to rehab. And then basically when they sold, we’d sit down and figure out what the profit was and he’d give me my check so there was no interest, there were no points and then I kind of progressed from that. I started kind of branching out and contacting competitors. I go to the door and I’d beat somebody out of a contract on a property and I’d look back at them and go, “Okay, I got the deal but you have the money. I’ll do all the work on this project. You put up the money and we’ll do a profit split.” And I started progress and got more savvy in it I started to realize that I can control the deals better if that makes sense as far as we start closing them at my company name. I’d take on more management role in the projects because at that point I was learning more and they just put up the money. And so, it basically progressed into a situation where he had no involvement in the project other than write the check to buy the property and write the check to cover the rehab and I handled everything from point A to point Z.

Danny Johnson: Wow, nice. So in the beginning, the deal was a little bit more secure for the guy putting up the money – the partner that was put up the money because obviously he had all the risk.

Don Costa: Right and I had the experience.

Danny Johnson: Right. And so as time went on, then you had that experience and so people could trust you to manage it right and be trustworthy because you’ve dealt with them before and were able to allow you to put the properties in your name or your company name, right?

Don Costa: Absolutely, absolutely.

Danny Johnson: And then have a first lien position or something on it.

Don Costa: Generally they would have put your trust in the property for the money they’re going to invest and that’s the way we do it today. I basically built my business on the joint venture because when I started, I started with nothing. When I say nothing, I literally had just an unemployment check. I had zero credit and my unemployment check cover my rent and my car payment, a little bit of food and barely that. And so, there was no getting into the real estate business without the opportunity of a JV partner because they handled everything. I didn’t have a monthly payment. I didn’t have to put a down payment down. They covered it and all I had to do is get in there and get the work done and yeah it was just great for me getting started. It was a great way to build the foundation of my business. I could do multiple projects. If I was able to get them in contract without having to worry about where the money going to come from and so yeah it was great, and then as we progressed and got more sophisticated and started putting the projects in our name, what we would do is give them a deed of trust for their interest to make sure they’re secure and basically we moved on that way.

Danny Johnson: Wow, nice. Well nice. Yeah. So you brought up several good points that I wanted to touch on again because there’s a lot of people who say, “Well you can’t make money without money” and you can’t really do this business without having money – at least some money to spend on marketing and things like that. And it’s really a matter of how the way you look at it, so you started without money, literally no money, and that’s why you went out and you didn’t set up a website and try to do SEO for a long time and do it that way. You went and did the thing that you had to do because you didn’t have the money which was beat the streets and knock on doors and so you were willing to do, like you just said, figure out what you had to do based on your circumstances and then ended up having this work out that way and that’s really incredible the way it was like it was meant to be when you ran into the guy who was willing to work with you.

Don Costa: I describe it as opportunity and hard work – hard work and preparation meets opportunity. It’s kind of how it came down. It had been my dream. I had studied it and then all of a sudden the opportunity was handed to me and there was just no way that I was going to let it go. With that, I had done – trust me, I had done door-to-door before with vacuum sales and alarm sales and I sucked. I mean I didn’t last three days in any of those shops, so it wasn’t like I had a knack for door-to-door experience. It was just like I had been handed something and there was no way I was going let it go. I was going to find these properties. I was going to find these sellers and get this thing done because I had the money, right? So I had to do it. So I just went door to door and made it happen and built it that way.

Danny Johnson: Wow, nice. So you were doing that – for how many years were you doing the joint ventures and I guess you said you still do that to this day, you still partner that way, right?

Don Costa: I still do joint ventures. I did joint ventures from 2003 to 2008 till around the time the market slowed and crashed and that was basically all I did was joint ventures. It’s interesting the way I bought because most of what I bought about notice to default and I bought subject to purchasing and then I would JV partner for the money to pay the homeowner and do the rehab. And so, it allowed us to maximize our return on investment that way. It’s a little more complicated I’m sure for a totally different show. So I did all JV through that situation through that time frame. And then I took the time off and when I came back in 2012 to do it again, I reached out to investors of JV again because I was limited on my accessible capital and I knew I wanted to build a company that focused on volume flipping. So I reached out to JV partners and for the first couple of years that’s all we did and again the way we structured this time was we’re the manager, we come in, we find the project, we manage the rehab, we sell it and we split the profit and in return for the 50/50 profit and you put your money up we’ll give you a deed of trust to cover you and secure you. We did that for a number of years before we branched out to rate and term investors, which we do work with a lot of rate and term investors now, but we still do JV to manage cash flow because you know as well as I did Danny that in this business you can only do so many projects before you can tie your hands on your capital. From a business perspective, that’s the last thing I want to do. We still to this day have great relationships with joint venture partners.

Danny Johnson: Yeah. You always have to have a source even if it’s more expensive or you’re giving up a little bit more. I mean why give up on a deal because you’re going to pay more for it, so you miss out on making $25,000 or $30,000 just because you don’t want to pay an extra $2,000 in a holding cost.

Don Costa: Right.

Danny Johnson: Yeah. So that’s great. What I want to do is maybe take this from a perspective of somebody that starting in this business has the drive, the desire to make it happen just like you did and give them the benefit of the years of experience of setting these kind of deals up and showing them how to approach it. If you wanted again to – where would you start? Would you start looking for deals? Would you start approaching people at the REIA meetings? Could you walk us through that in detail?

Don Costa: Absolutely. Back in 2012, I posted an ad on Craigslist in all honesty, “Hey, I’m an investor. I’m a go-getter. I can get the deal done. I’m looking for capital.” And one of the JV partners that I ended up working with came from Craigslist believe it or not. It’s probably not the most ideal way of doing it, but it was successful for me. REIAs, I’ve reached out in REIAs in conversations and talking to people finding out if they have capital, maybe they have capital and want to get into the real estate investing business, but they don’t have a lot of experience or they’re not comfortable managing their rehab and they want somebody to do for them. Just have conversations going, you let them know what you’re doing. I think that’s the biggest thing. This is what we’re doing. This is what we’re successful at or when you’re new you just let them know, “Hey, I’m willing to do all the work. I’m just looking for the money side of it. Let’s partner.” You’d be amazed how people are open to it. I think the hardest part is once you get doing JVs for a pretty a long time successfully converting them over to cheaper money is harder, but get started, it’s a fantastic way to start.

Danny Johnson: Yeah and a point you just made was I would think from somebody new in the business perspective approaching people about putting up the money and splitting the deal, you’ll do the legwork and you might feel “well, I don’t have the experience so how are they going to take me seriously” or “why would they be willing to do that with me if I’ve never done a deal before” and it’s all about you selling them on them making the easy return – the big return on the investment and the money secured by the property and everything. And so, you tell them you can even put it in their name if you trust them or feel like you could trust them right to not just kick you out of the whole thing after you found the deal and everything. But basically, they don’t have to accept until they see what kind of deal it is, so obviously if you said you just wanted to start the conversation and kind of get a soft commitment to it, you go out and find the deal and then you guys can talk further and basically once you show an awesome deal, who’s going to want to not be a part of it.

Don Costa: Right. And the money is always available, it’s a good deal. Another way to – basically my first handful of deals with JV partners as I was learning the business was a situation like you said where the properties went into their name or their company name, but they did the majority work. I remember the second JV investor I worked with, it was I went out and found that deal and basically he bought it, rehabbed it and still split the profit with me.

Danny Johnson: Oh, nice.

Don Costa: Instead of just wholesaling to him, I managed to talk him into a partnership situation where he was willing to do a split.

Danny Johnson: Yeah, that’s nice.

Don Costa: There are all kinds of opportunities out there. You just got to have conversations with people. You got to let them know what you’re doing and what you want to be doing and then how you’re going to be doing it and what experience you bring to the table that’s going to allow you to accomplish that goal. Who else have you met in your conversations and networking that you can go to as an adviser. If you can show people that you have the right team in place, the right people to go to for the information, sometimes that helps. So you can’t sell yourself short. You just got to get out there and talk to people and there’s going to be the opportunity.

Danny Johnson: Right. Are there any agreements that you signed like legal documents or anything for setting up any of these? Have you ever done that or recommend doing that?

Don Costa: I do. I definitely do recommend that. I will say that when I was new in the business that was the first thing in my mind, my thing was just go out and ___, but we do. For instance, we’ve put together a joint venture agreement that kind of spells out how everything works basically – when they’re supposed to put the money up for the purchase, when they’re supposed to put the money up for the rehab, that we’re managing the project, how the funds will be dispersed when we sell and we have a pretty decent agreement put together. We also do that deed of trust on the property. When we close, yes we’re going to give the deed of trust on the property so that their investment is secured. So those are the two documents we typically use now at JV partners.

Danny Johnson: Okay. And how did you have that document made and know what to put in the document?

Don Costa: It was something that I had put together through kind of marrying several documents and then am very fortunate to have some phenomenal friends that are attorneys to review them and make any tweaks and changes we needed to make on them. I can probably forward the document to you honestly and it’s something that people can know that it was not written by an attorney. It was reviewed by an attorney and they need to take it to their attorney, but it’s something they can use as a foundation.

Danny Johnson: Yeah absolutely. If you provide it, we can put it on the show notes page it flippingjunkie.com/36. And so, if I get that from Don, that’ll be there for you to download. That’s awesome. I really appreciate that. That’s something that stops a lot of people when they hear someone say, well I have the document or the agreement signed in that kind of set everything in writing to be the way it should be, but that leaves so many unknowns like what should that say exactly and like you said for sure have that checked out by a local qualified attorney to make sure that it’s valid for where you were and it makes sense.

Don Costa: Absolutely. So there’s an another one document we use with a group. We have, I want to say, it’s an accounting firm that we work with. They have a fund that they fund our projects off of and it’s a JV situation that we do a memorandum of understanding with them basically that covers kind of the understanding how funds are going to be dispersed again. But it’s kind of a blanket for all projects we do together. That’s something quite a little more complicated, but if you’re going to get into business with somebody that you’re going to be doing business with going for period of time, it might be good to a draft kind of an umbrella document that just says that “We manage it, you fund it, this is how we disperse the profits…” and so on and so forth.

Danny Johnson: Alright. Do ever work out any joint venture agreements and partner with people to do anything other than 50/50?

Don Costa: We do. Part of it is obviously as you grow and you get more experience and you’re able to bring more to the table, you can always negotiate for more favorable terms and we have 60/40s and 70/30s now that we’ve worked out with individuals. We don’t ever give up more than 50%. I know that there are some investors that what the flipside to be 60% or 70% to them. The one thing that I want to make sure everybody knows because it was hard for me and I struggle with it was you got to know your value when you go into the transaction, what you’re bringing to the table and the work you’re doing, and you got to hold your ground. If the only money you can get to get that deal done and you have a hot deal is not a 50/50 split, it’s better for the investor, I mean I’m not going to say don’t take that deal but I always try to negotiate at least a 50/50 split on your end because you will do you’re definitely bring your share to that partnership.

Danny Johnson: Right. And sometimes also when you start out, you’re setting the – I don’t know what the term for it—

Don Costa: Setting the standard.

Danny Johnson: Yeah, setting standard there. So that’s what’s going to be expected from then on and so sometimes it does take a little bit of standing around to get a better rate. I think people appreciate that. With private lenders and partnering when you show that you got enough a business sense to negotiate, I think people. Little bit more comfortable to knowing that they’re dealing with somebody that’s not just a pushover and that doesn’t try to get better terms for themselves.

Don Costa: Absolutely, absolutely.

Danny Johnson: I brought up the non 50/50 because everybody thinks JV 50/50, but it doesn’t have to be that when and like you said, you have structured them differently based on what you are bringing to the table and what the other side is bringing to the table at your different experience levels. I’ve also heard of people getting deals from wholesalers and other people by saying that after they sell it, if they can sell it for this amount that they’ll give them an extra 5K or something and so they get deals where they’re not paying as much for the house as a competitor would because they structured it like a small deal to give a sort of kickback at the end. Have you heard of doing that or did you do anything like that?

Don Costa: You know, yes I have it and I can say that I haven’t. I have in the sense that I’ve had wholesalers come to me and say, “Hey I want 10,000” or whatever their fee is or $5,000 or whatever and I’ve looked at it, I looked at their fee and the purchase price and the numbers for things to get done and what we think we can sell it for and I go back to them and I go, “I don’t think that I’m on a profit what you’re saying I’m going to profit. In my experience, which is greater than yours, I don’t think I’m going to be there. But if by chance I’m wrong and you’re right, I’ll give you more in the back end.” I’ve done that type of situation because I want to be as fair as possible. So I’ve definitely done that on a few occasions to try to be fair and especially when you’re working with newer wholesalers or the book says ask for 10 and the numbers say you should only get five, I’ve definitely done that. And there’s been one or two times I’ve come back and I said, “Alright you get a little bit more.” I love to be wrong and make more money, so this definitely happened for sure.

Danny Johnson: Yeah and I think that’s an underutilized thing, I bring it back and it’s like okay I want to make a note make sure that I do that too because I think sometimes we’re all in a hurry and it’s either the price is good that you make your offer or you forget it and you move on the next one. But sometimes you can work deals that to where you’re still going to make a great deal on it and you’re kind of making sure of that by saying “You’ll get an extra bit at the end if I can sell it for this amount.”

Don Costa: Absolutely. I’ve said 10% of my profit at the back end, I’ve done a certain percentage of the extra money we make. I’ve structured it so many different ways you just got to work that out with the individual you’re working it with. That’s one of the ways we just don’t say no because we try to make every deal work if we can for sure if we can make money on them.

Danny Johnson: Okay. Awesome. I think that percentage, that’s a great idea, percentage instead of saying I have to sell it for this much. So we talked about all the good times you’ve had and the good deals that you’ve done with joint venturing. So have you had any problems?

Don Costa: You know, with joint venturing, so the very first investor I worked with worked out great for a while and that’s one of the reasons it’s the greatest thing that ever happened to me was that the guy turned out to be, I don’t want to say a crook because he I don’t think he’s a crook but a little greedy. It got to a point where he realized that I was so good at bringing in deals and how much money he’d make if he didn’t pay me that he decided that he was going to take his time rehabbing property to try to string me out. So yeah that’s where I learned to kind of put projects in my name, make sure things are documented, do contracts and that kind of thing. But what that did is it forced me to branch out to other investors, branch out to other opportunities. I started wholesaling contracts. My first wholesale, I made I think $10 grand. My next project I did was a double escrow where we made $20 grand. So it forced me to kind of jump out and look for alternative ways of doing it. Like I said, I started knocking on doors and beating out my competitors, I reached out to my competitors and said, “Hey I’m better at closing than you, but you got money, so let’s partner.” And I have some great relationships that I still have this day. I have some investors that are friends now that were investors then and investors now that I consider family. They were competitors at the doorstep.

Danny Johnson: Well, that’s pretty amazing. So they were literally at the house and you were able to close the sellers and they weren’t.

Don Costa: Absolutely, yeah. In California for a notice of defaults, s we have a five day right of rescission and so you put somebody in a contract you can’t have them sign a deed or give them any money for five days. So I got good at coming in behind somebody in that Friday at rescission and kind of unwinding their deal and getting the transaction for myself or just being a better negotiator before that point. They do it to me and I do it to them, but I just got better at it, so hands up.

Danny Johnson: That’s pretty awesome because you turned around and made deals with them.

Don Costa: I turn around and said I’m going to get this contract that you’re not and I don’t want it to just steal it from you. You got money and I’ll do the work and let’s be partners. Let’s make money together. One particular individual literally had the house. I walked up, she was sitting in the car and I walked up to the window and then gave her that pitch and she’s like, “Alright. Let me think about it” and called me the next day and has been a friend ever since.

Danny Johnson: Yeah, that’s awesome. I love that. So any other any other things come up where somebody has fought you what the numbers were or anything else ever come up that was sort of a hassle that you would have rather not dealt with?

Don Costa: As far as JVs?

Danny Johnson: Yeah.

Don Costa: Yeah. You know, for the most part I want to say no just because I’ve been very good at keeping either documentation and records and that kind of thing. I think investors as a whole, I call it managing personalities they’re all different. We have our rate and terms, our jVs are all different. I had one JV partner I worked with that – basically how we work is our contractor goes out and bids the whole job. They bid the job, materials, labor and everything. So whatever he pays for paint, he pays for paint, I don’t care. If he gives me a dollar a square foot to paint a house and he buys a paint, if he’s got paint left over, he gets to keep it. But this one particular investor would always be like, “Well, are you buying paint for this house and then using it in on a different house?” She never she never really got the – I’m paying him this to paint. It doesn’t matter what he’s doing with the materials. She never really got that. She was thinking, “Okay, well if you have left over paint from this job and you’re using that on another job…” and we should get the benefit of the doubt. I’ve had stuff like that come up and you learn any relationship which ones are going to be beneficial to your business for long term and which ones aren’t. So I’ve also had some incredibly wonderful people through the years that I’ve worked with that are just phenomenal and great and so I think with everything you got to know your value, stand your ground, stick to your principles and you’d always be respectful, always be honest and you just do your best.

Danny Johnson: Yes. Whenever you’re talking to new potential JVs, do you do anything to verify that they are legitimate as far as having the money to close on a property or do you just trust them on that if you agree to do a deal if they’re going to be able to close on it?

Don Costa: You know, the answer would be the same as before. In the beginning, I was naïve and I didn’t do any of that. I just was like, “Okay, I have a deal. Do you have the money to do it?” And so, in that particular sense no and I guess I always lucked out because they always were able to come through. Usually the people we work with now are people that are referred to us through somebody or we have some kind of understanding of who they are because again we’re at a different level. So we have different – not necessarily we don’t ask them always for proof of funds I guess, but we have an understanding of their capabilities through various sources in the business. So most investors you work with now have been investors with competitors or friends of ours. And so, we know that they’re able to pull the trigger. If we get somebody that’s brand spanking new, which we haven’t done in a while. I guess we probably would go through an extra step just to make sure, but even then I guess the honest answer is we have other money. So if we call them up and they say they can’t do it, it’s not our deals are not going to get funded. So for somebody starting out new it’s always good to have a heart-to-heart conversation I guess about what your abilities are and what their abilities are, make sure you’re covered in that particular situation, but for us if somebody can’t perform, we have somebody else.

Danny Johnson: Right. How many would you say would be the most that you’ve ever had at one time working on deals with you?

Don Costa: Investors?

Danny Johnson: Yeah.

Don Costa: So I do one deal, one investor period. But I would say probably at the most at any given time we’ve probably been working with six women joint venture partners.

Danny Johnson: And how do you structure usually the draws for the rehabs?

Don Costa: For our particular business, we’re probably a little unique in the sense. Basically we have a system with our with our vendors, invoices in a certain day, checks out by a certain day and so basically we turn the invoices in, they cut their checks and then we submit that information to our investors reimbursement. And so whenever we buy a property, the investor holds back to rehab funds and we just submit each week for whatever that reimbursement is and that where there’s clear documentation, all the receipts are submitted, and when we go to close out the file especially with our JV partners, we go to close out the file there’s no question as to what the expenses were on an ongoing basis.

Danny Johnson: Nice. I went blank there for a second – it is early afternoon. We’re recording this in early afternoon so I end up with a cup of coffee and sometimes my brain just kind of blanks out, so I apologize for that to everybody. But so you mentioned the one time about the paint, do you find that you have to deal with sort of micromanaging investors that are wanting to know exactly what’s going on with everything every step of the way?

Don Costa: Again, like I said before, I can imagine personalities. I mean I’ve had, I’ve had through the years I’ve had investors that have wanted to try to dictate what paint color the walls are going to be or different things. They come and say, “You should do this all white” or “You should this all this.” And so I’ve kind of – one of the reason why in our JV agreement says we manage the project. We manage it. That’s it. There’s no not a whole bunch of chiefs. There’s one chief and it’s us and so just because of stuff like that. But I think if you set the expectation up ahead of time right from the beginning, you set that standard, the expectation on both ends, there isn’t an issue. I still have one guy and it’s a rate and term investor to this day that will go, every week before he submits the reimbursement, to check the property to make sure they are. And that’s fine I don’t care, that’s fine. If you want to check to make sure we’re doing what we’re saying we’re doing, we are doing what we’re saying we’re doing so more power to you. It’s the ones that want to get in it and try to insert I guess their opinion. It’s like we’re the ones who are doing this. We know what sells and that’s not ego it’s just at the end I want to make sure that’s the best result for all of us and if our project is being held up because we can’t make a decision or the design comes together funky because there’s too many opinions that doesn’t help anybody.

Danny Johnson: Yeah. The last thing you want to somebody that doesn’t know about rehabbing and goes in and makes the rookie mistake of over rehabbing a house because they’re thinking they’ve got to make it nice enough for them to want to live in it and it’s not the way it should be.

Don Costa: Right. There are color palettes. I mean, you got to have some design but it’s got to be natural enough to appeal to buyers. You don’t want to have a black bathroom with an orange toilet. You know what I’m saying?

Danny Johnson: Or murals, right?

Don Costa: Right. Exactly. And some people, like you said, they want it they want to rehab it to the house that they want to live at and your taste may not be my taste and you got to find that balance in a rehab.

Danny Johnson: Excellent. And I think we pretty much covered everything that I wanted to touch on is basically how you got into it, how you’ve been approaching them and using them, and I think a lot of questions about how to structure those with the agreement will be answered by you graciously providing that agreement for the listeners to be able to download for flippingjunkie.com/36 on the show notes page will answer a lot of those things and a lot of good points about standing your ground on knowing how much value you bring to the table and getting at least the 50% split at the back end of it and the fact that partnerships aren’t always cut and dry 50/50. You do all the finding of the deal, fixing it up and selling it, and they just provide the money. Sometimes it’s the other side where the person providing money is also handling the rehab. So that’s interesting to hear the different ways that that goes down.

Don Costa: Absolutely, absolutely. There are so many ways to do it.

Danny Johnson: Yeah. Well, I really appreciate it Don and is there a way that anybody can, if they want to reach out to you and talk to you about anything, is there a way for them to find you?

Don Costa: Absolutely. You can always email me at don@strategicrei.net. I do reply to my emails if anybody wants to e-mail me with any questions. We’re setting up a video site to kind of do video documentation of some of the problems we run into when we’re flipping or with title companies or contractor issues called The Five Minute Flip.com where they can go and register there for the launch. And then of course as you mentioned before the podcast, I’m getting ready to launch a podcast and if they register at Five Minute Flipper, email me and I’ll notify them when we get that off the ground.

Danny Johnson: Oh nice. And so is that The Five Minute Flip or just Five Minute Flip?

Don Costa: They can use either one, thefiveminuteflip.com or they do fiveminuteflip.com either way it’s fine.

Don Costa: And the number five?

Don Costa: The number five or spelled I got them all.

Danny Johnson: Oh nice. Everything’s covered.

Don Costa: I cover my bases.

Danny Johnson: You know it’s funny because when I was setting up Lead Propeller, the real estate investor websites that we provide, when I was setting up the name I spent so long trying to figure out a name for it and I didn’t want to just the standard sort of real estate investing thing, so I wanted something different and I’m into aviation so that’s where the propeller thing comes from. But so, I got Lead Propeller and I was so excited about it that it was available and I got it and I called my wife and she was driving somewhere with the kids. I said, “Hey, Lead Propeller is available I really love the name.” And she immediately asked me, “How did you spell it?” And I thought, “Oh, no.” I didn’t even know how to spell this. I think spelled it with an “OR” at the end and she’s like, “No. That’s not right.” So then of course my heart sank and I went to check and of course it was taken, the correct spelling mistake. Somebody actually already had Lead Propeller.com but they sold it to me for a cheap price, so it’s all worked out.

Don Costa: Yeah I’ve done that before, I misspelled. When we did our real estate company, I misspelled it and registered it for 10 years.

Danny Johnson: Oh nice. And for people who don’t know, sometimes it is better to register for a long term. It’s better for SEO because they can see that you’re committed to really having a quality site by registering it for more than one year.

Don Costa: Right.

Danny Johnson: Awesome. So Five Minute Flip.com or The Five Minute Flip.com or any other way that you can think to possibly say that, I’m sure you’ll find him because he’s got all the domain names for it.

Don Costa: Absolutely.

Danny Johnson: Really awesome to hear. Thank you very much Don and we’ll put the links to that and then also for people to be able to see your agreement on the show notes page at flippingjunkie.com/36. Alright Don. Thank you very much for spending time with us.

Don Costa: Alright Danny. Thank you.

Danny Johnson: Have a good day.

Don Costa: You too.

Alright everybody, another great episode at Flipping Junkie Podcast talked about joint venturing to fund flips. Awesome way to do it if you’re just getting started and don’t have any money like Don did. He didn’t have enough money to spend on a bunch of marketing things like that, but he still made it happen, made it work and you could do the same thing. He had talked about some of the deals. He does different deals. There’s a lot of joint venturing but have done some wholesale deals and things like that too and we just wholesale to put under a contract to sell two wholesale deals this last week. We’re going to make about $20,000 apiece on those. It was pretty awesome and as we were putting them out there to our people, setting up our wholesale website’s listings that we put those deals out there, I was thinking, “Wow. I take a lot of this technology that we have for granted.” Basically I was able to set up those listings just within a matter of seconds – about a minute because the information is already in REIMobile that I have and it’s linked up to my Lead Propeller, so I can just submit to use all that same info and do a little bit of worded changes to create a listing right onto my wholesaling website.
If you want to see my wholesaling website, you can feel free to go to Cheap San Antonio Houses.com and you can check out my wholesaling site, so that’s where the listings go. And then from REIMobile, I can quickly just set up an email that goes out to all my investors that are in there, so when they submit information to join my cash buyers list from my Cheap San Antonio Houses.com, that goes into REIMobile into my investor list. And so I when I have a deal, all I have to do is from that lead record, create an email using a wholesale deal template and it pulls in a lot of the data and all I’ve got to do is change the price and stuff that I am asking as a wholesale sell for that deal. So it makes it very quick and very simple. It’s pretty awesome to see that work and to be able to get these houses sold so quickly without having to redo a bunch of stuff and re-enter a bunch of the same details for properties. So if you’re using separate systems MailChimp and stuff like that, you’ve got to always type up all those emails and do all that kind of stuff. This saves you a ton of time and gets you a lot more exposure. But anyway, you can check out all that stuff that we have. Like I said, sometimes I feel like I’m taking for granted that we’ve got all this ease because of the fact that we built all this stuff for ourselves to use to make our lives easier as investors and you have access to it too.
Now if you want to sign up for those, it’s leadpropeller.com is the website. You can get wholesaling websites there and then reimobile.com is the CRM system – R-E-I-mobile dot com. Check them out. Thanks again for listening to the podcast. I hope you guys have a great week. We’ll be on next week with Chris Jameson talking about hard money and lending, so tune in for that and have a good one.

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