1: How To Get Started Flipping Houses

Frank Johnson

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Show Notes

Key Points

• How my father inspired me to start flipping houses, which led to my wife and I flipping over 200 houses and changing our lives forever
• You’re going to learn the simple house buying rule that will make sure every deal you do will make you money
• Find out what major problem arouse when trying to buy 30 houses within 30 days…and it wasn’t buying bad deals
• He also shares his thoughts on what separates the people that make it in this business from the ones that don’t

Who is Frank Johnson?

Frank Johnson has been flipping houses in south central Texas for over 18 years. He also happens to be my father.

He was my first mentor in this business and still helps me through tough situations and reminds me of things that I’ve forgotten…like always making an offer no matter what. If you go and see a house, even if it’s the last house you would ever want to buy…you should make an offer.

If it’s the last house you’d ever want to buy, you just need to make sure you offer low enough to make it a no brainer.

This is very powerful because, if you think about it, you are in the best possible position for negotiation because you don’t even want the darn thing!

You can offer super low and just assign the contract to someone else and pocket several thousand dollars. I’ll take that any day!

In this episode, Frank talks about how he himself got started as a contractor that did rehab work for successful house flippers. After many years he ended up asking one of them to teach him how to get started and the rest was history. He took off and was very successful.

He shares how he became so successful so quickly. Definitely need to listen to the episode for this.

Frank found and still finds a lot of deals by driving for dollars. He shares an awesome tip to stop and ask the neighbors of vacant houses if they have contact information for the owners of the vacant house.

We also talk about how he knows his market so well that he rarely needs to look up comps. He’s always surprising me with how close his numbers are if I ask him and then look up comps to verify. It’s crazy!

[tweetthis]Don’t ever buy something that you can’t turn around and flip to someone else[/tweetthis]

That’s builds in a safety net to any deal you do.

My father has passed on his determination to me. When he got started, he never doubted that he would ever make it in the business. This helped me tremendously when I got started myself. It was just a matter of doing more work and focusing more to make things happen faster.

Frank buys mostly in smaller towns outside of San Antonio and I invest in the city of San Antonio. We talked a bit about the differences in flipping in those different markets. This is a must listen if you have avoided buying in small towns before.

We talked about how we feel people get caught up in doing more work trying to do a lot of deals that have small margins. Being conservative with your offers, buying cheaper and not as many deals is much more preferable.

[tweetthis]When I started flipping houses, I owned my job. My job no longer owned me.[/tweetthis]

He talks about how his goal for the year was met by the second month. That is how active he became in making sure he would succeed.

Analysis paralysis. Maybe you’ve heard of it. It’s the reason people that over analysis everything don’t succeed in this business. Have a mentor to ask questions as you come to points where you need answers and take action. That’s how to succeed.

Frank also shares 2 mistakes that he made that we all should avoid.

Mistake 1: Buying a house with assumptions that were not true. He had only saw the outside of this house and trusted the word of the seller that he knew. The house was TRASHED!

Mistake 2: Trying to buy 30 houses in 30 days. The mistake was trying to do this AND rehab each of them. There was a logistics problem. It seems obvious, but he hadn’t thought about how hard it would be to rehab that many houses at once. Crazy!

His main philosophy is to buy cheap deals. It’s as simple as that. Flip, buy cheap. Wholesale, buy cheap. Rental, buy cheap.

The Trait Successful Newbies Have

One trait that people that make it have is that they are so excited about it that they are are go-getters. They don’t wait for help they go out and figure out what to do.

Recommended Books

Rich Dad, Poor Dad

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Episode Transcription

Danny Johnson: Welcome to the Flipping Junkie podcast. My name is Danny Johnson, former software developer turned house flipper, flipping thousands of houses. Each week we bring you interviews, strategies, stories, and motivation 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.

Danny Johnson: Who is Frank Johnson? Frank Johnson’s been flipping houses in south central Texas for over 18 years. He also happens to be my dad. He was my first mentor in this business and still helps me through tough situations. He reminds me of things that I’ve forgotten. And I really feel that a lot of you out there that have been following the Flipping Junkie blog are going to find this episode extremely fascinating. Not only do we discuss how my father inspired me to start flipping houses, which led to my wife and I flipping over 200 houses and changing our lives forever.
But you’re also going to learn the simple house buying rule that’s going to make sure the every deal that you do make you money. And find out what major problem arose when you’re trying to buy 30 houses within 30 days. And it wasn’t buying bad deals.
He also shares in this episode his thoughts on what separates the people that make it in this business from the ones that don’t. I hope you enjoy this episode as much I enjoyed interviewing my dad. Be sure to visit the show notes page at flippingjunkie.com/podcast/frankjohnson for more about today’s show. Enjoy.
Today I’ve got Frank Johnson on the show. That’s actually my dad, for those of you that don’t know. He actually taught me a lot about this business, helped me get started. So we’re going to get a lot of information out of this. And for those you starting out it’s going to be great to hear how I got started and how he helped me with it. Dad, are you there?

Frank Johnson: I’m here. Thank you for inviting me to be on.

Danny Johnson: Thank you for being on the show. I really appreciate it. I know the audience really appreciates it. We’ll just go ahead and get started. How long have you been flipping houses and investing in real estate?

Frank Johnson: About 18 years now.

Danny Johnson: Time flies. I guess it’s been 12 for me now. You had been flipping for about six years before I got into it. Do you want to share how you got started flipping houses yourself?

Frank Johnson: In the beginning years ago I used to work rehabbing houses for other investors. I quit doing that for a little while. Then I had a conversation with him became my mentor, another investor that I used to do rehabs for and decided to quit my job and start investing in houses.

Danny Johnson: Alright. You are a contractor for a house flipper or for a real estate investor then?

Frank Johnson: Yes, for quite a while.

Danny Johnson: Yeah, for several investors? What did you do? You just went to one of them and said, “Hey, I want to get into this business. Can you teach me how to do it?”

Frank Johnson: No, I actually if you go all the way back to the beginning he ended up being my mentor, a gentleman who become very, very financially successful flipping houses for many years. We’ve stayed through the years even though I’ve been worked for him for five or six years that we talked off and on.
When I was doing the rehabs I used to enjoy it. It wasn’t just doing the rehab part, I enjoyed the part of fixing something up and having the neighbors all stop by, look and say, “Oh wow, it’s really need. This is good for the neighborhood.” Then other people stopped, want to know how much they’re selling the house for. And that I enjoyed that part, selling the house and showing all the work we were doing.
A lot of the houses that I rehabbed, they felt like they sold real quick, houses I’ve done. So I didn’t want to just be a contractor my whole life. I did eventually want to start maybe flipping houses. But I never got serious about it until after having a conversation with my mentor. That’s when I decided to go ahead and quit the job that I was working and give it all I had.

Danny Johnson: All right. Whenever you started what did you start with? What were some of the first things that you did to get started? Obviously you had the construction background, and so you had a good idea of what repair cost would be. But I’m sure there was a lot that you didn’t know regarding the other side of the business, the flipping, the buying the houses and finding them. What were some of the things that you started with when you did get started?

Frank Johnson: Well, driving for dollars was definitely in the beginning one of the ways of trying to find houses. By the way it was from [Unintelligible 00:04:59] which I’m in a small town and that really quickly had the slow down. My mentor pretty much just told me to go out there and do it. Since I’d worked with other investors, and I used to drive around years ago, looking for houses, streets in neighborhoods that we have houses on. [Unintelligible 00:05:19] idea what to be looking for…

Danny Johnson: And some of the people listening don’t really have a good idea of what really know what driving for dollars means. Can you explain what driving for dollars is?

Frank Johnson: Driving for dollars essentially is looking for abandoned houses or houses that haven’t been take care of. The grass is tall, a lot of newspapers in the front yard. Probably just looked for the worst houses in the neighborhood, get their address, and then [Unintelligible 00:05:50] people in the property and see if they have an interest in selling. We had ads in the paper back then to. We buy houses and we used to get quite a bit of calls, doing it that way too, and just painting every day.

Danny Johnson: And when you were starting doing that and you would find some houses you would get a hold of, so you drive around and find the vacant houses, rundown houses, find the owners probably through the county assessor’s website as far as the tax bill is being sent. And you’d send them a letter, right?

Frank Johnson: We also talk with the neighbors a lot of times too. Because sometimes they know whether people might have moved or… Sometimes that was actually a quick word in trying to send letters and stuff like that.

Danny Johnson: Right, and that’s an awesome point because a lot of people don’t take the time to actually stop the car, get out, and go knock on the neighbor’s doors.

Frank Johnson: And if you’re going to get out you might as well leave a card or something there and just saying that you buy houses also.

Danny Johnson: On a vacant house, right?

Frank Johnson: Exactly right.

Danny Johnson: That’s great. That’s the thing that I’m lazy about a lot of times too. I’ll just write down the address and drive on. You should stop, get out, especially if it’s obviously been vacant for a long time, it’s worth the effort.

Frank Johnson: It’s also worth the effort to go ahead and take a few pictures of the outside of the house with the picture of the address of the house so that later on when you’re back doing your notes or you’re researching what you need to research you actually remember what the house is. And also if they call you, you also have a picture of that house on your phone, and you have to remember what you’re talking about too.

Danny Johnson: Yeah, keep all that information together. And that’s one of the reasons why I developed REM mobile. That’s our CRM software. You found some houses. How were you determining in the beginning how much to offer for the properties? Was that something that your mentor helped you decide on what to offer?

Frank Johnson: If you’re rehabbing as many houses I had rehabbed in the past it was almost like second nature of knowing approximate how much it would take to fix something up or at least be pretty close to it. And you have your profit margin that you want to make so I used to just figure out what I thought the house would retail for and minus what I haven’t spent on it. And that pretty much kind of tell me what I wanted to pay for.

Danny Johnson: Alright. And you have an ability to determine retail values, just sort of an innate ability. But you also know your market very well and the different houses and what they sell for. And that might be a little bit different smaller towns where you do have a good idea of what types of house will sell for what amount. And I’ve always been blown away by you don’t often ask for comps or determine value from realtors or anything like that. You sort of just know the market. And I’ve always been kind of blown away by that.
I’ll run comps and figure out what I think it would sell for based exactly on comps and everything, and then ask you your opinion. And usually it’s really close. It’s amazing. I don’t know how you do it. But knowing your market, that’s how that helps you.
You know what the houses would sell for, had a good idea of what they would sell for, and you had a good idea of what the repair cost would be, and your profit margins. Were you always using something like the 70% of ARV less the cost of repairs to determine what you would offer?

Frank Johnson: That would be the highest amount. I really try to have a little bit better profit margin. I guess one of the rules of thumbs that I was taught in the very beginning too is don’t ever buy something that you can’t turn around and flip to somebody else.
And so in saying that I always try to go on the lower end of what I’m offering, and a worst case scenario that you never really would adopt to that. But my worst case scenario is I would just flip it to somebody else, make a couple of thousand dollars and move on, but I’ve never had to do that.

Danny Johnson: Unless people go through a long period of doubting whether they’re going to be able to flip houses, or that they hear about other people flipping houses, the things that they do, buying the houses really cheap and fix them up and selling them for a big profit.
They kind of have that period of doubt where they don’t know if that’s really something that they can do in their market, or if that many people really do it. And so there’s that doubt. It could be difficult to get the ball rolling in this business, so you sort of deal with that. Almost everybody will deal with that in the beginning.
And so when you first got started what moment did you realize that you’re actually going to be able to succeed at this business? What was that aha moment for you?

Frank Johnson: Well, [Unintelligible 00:10:52] go back when I decided to quit my job I had this thing that I told myself, this failure is not an option. I know what point A is and I know point C is, but for a while there I didn’t know what point B was. Meaning I knew that I had to quit my job and start doing it, and point C would be successful at it. Failure wasn’t an option. There was no question that I wouldn’t be successful at it. I just had to work, and work harder, and even harder at it to make it work. I guess thinking about not making it wasn’t there. I didn’t allow myself to even think about not doing it.
And I also learned earlier on that finding houses is like looking for needles in a haystack. If there’s one thing I know, I knew then and I know even today is there always needles in a haystack, so you just have to keep moving ahead after you finally find them. That’s what I learned.

Danny Johnson: And so I’m sure that helped you, and that probably helped me too. I know I still had a little bit of doubt that I would be able to find them because we’re in different markets. We don’t invest in the same market. You’re a mentor and you knew other investors that you had done work for is rehabbing the houses for them. So you had seen firsthand and knew that they were finding these deals. So you already had that faith that you’d be able to find them as well because you saw them finding them, and knew that you would be able to also, right?

Frank Johnson: Correct. That was the other side of the tube. When I first started rehabbing houses, when the crash was years ago. And so I’ve seen people there becoming very successful. When other people were losing money these people [Unintelligible 00:12:39] picking up what these people were losing. That had showed me too that it just depends on how you looked at it all. I guess if you just keep hunting enough times you’re going to find it. And you have to believe in yourself knowing that you’re going to make it.

Danny Johnson: And I think hearing about people, even when you hear firsthand you talk to people in your local market about them finding great deals. And you’ve never really actually found one yourself. You sort of still wonder if you’d be able to or that there’s any good deals left, all that kind of thing. And it takes a while to get that first deal. But I know, as a matter of fact like you, as soon as you get that first deal it doesn’t take long after getting the first one to get the second one. And the third one’s usually even faster.
It’s really, those people quit before they’d ever get that first one. It’s just a matter of getting that first deal, and most people give up before then. So they don’t know that getting the first one then getting the second usually comes quicker. And then you just…

Frank Johnson: Oh yes. Once you get the ball rolling, you just have to keep it rolling. But once you actually do get it to roll, which is your very first deal, that’s the first part of it all, it moves quicker, and quicker, and quicker. It’s just lie everything else, you just become more comfortable in it. And also you learn from all your mistakes. You’re learning from your mistakes, trying to find things like, I’m wasting my time doing this. Or I’m actually wasting my time doing something else and I’m not getting any results done.
As the months and the years go by you keep learning better ways to do what you’re doing. And also the markets are constantly changing. It’s never the same, with new rules, new regulations. So you always have to be constantly changing with the times to and keeping yourself up with what’s going on and which way the market’s going. You can’t be lazy about that if you like to stay on top of that. Once you get the first one down then after that it gets easier.

Danny Johnson: Oh yeah, I agree. Do you have a single piece of advice that you would give others just starting out in the business to help them succeed, sort of like one piece of inspirational knowledge or something that would help people to succeed in flipping houses?

Frank Johnson: Like I said a little bit earlier, just really believe in yourself and believe that you could do it. If you stay diligent enough there’s no question that you’d be able to find a house to buy and sell. The other thing is remember that finding houses is like finding a needle in a haystack. I can’t say that enough. It’s just there. You just have to look hard enough to find it.

Danny Johnson: And so the point is having faith that you can do it. Because I think so many people, they hear that and they say, sure, whatever. But they don’t really take it to heart because you really have to believe other people have done it and you can do it. And just know that you can do it and don’t give up until you do. And that’s what you were saying before whenever you sink or swim, like you were just going to make it happen no matter what. You’re going to have just track here and there, and look at what you’re doing, see what was working, see what wasn’t. But you never doubted that you were going to do it, and that’s huge.
A lot of people have so much doubt, and it’s hard to not have doubt when you haven’t experienced it yourself. But to have the faith and work through to get that first deal that we talked about. And then you’ll understand the power of faith once you have that. And I think that’s a lot of the reason why people get their second or third deals so much quicker than the first one is because then they have the faith, or they don’t need as much faith because they’ve experienced and knew that they could do it.
You flip houses in smaller towns. We were just talking about how we’re sort of in different markets. And I flip houses in San Antonio which is a pretty big city. And you’ve flipped in smaller towns outside of San Antonio. Do you feel that there’s a big difference between investing in the smaller towns versus investing in a big city?

Frank Johnson: I don’t think there was, but the market is ever changing. And starting where I started at 18 years ago in that little town that I started in they changed a lot. And so I think that our marketing now in the smaller towns are starting to come up to that probably or close to what you’ve always done in bigger cities.
But in the very beginning in smaller towns you usually have less competition from other investors. I think that kind of helped out too. I think a lot of people used to be scared of small towns and there’s a lot to think about in investing in small towns. I have some towns that only have… I had one, the school district was the biggest employer.
I had another one that had a chicken plant in it and it was closed down for a while. And that’s at the first year I went into that town I said, I probably never buy in this town. Then they opened the chicken plant up. And so when they opened the chicken plant up. And so when they opened the chicken plant up we decided, “Hey, let’s just go ahead and start buying a few of them, see what happens.” And we’ve ended up with a decent amount of houses in that town at one time. But usually you can get better deals and your profit margins are a lot bigger if you’re taking a little bit more of a risk like that smaller town.
The bigger towns though you have a lot more opportunity to sell houses. You’re dealing with a lot more investors, and the deals might be a little bit harder to find because there’s a lot more competition finding them. But it’s a whole lot easier to sell because you have more people in that area wanting to buy.

Danny Johnson: So it’s that constant trade-off, right?

Frank Johnson: Yes. One good thing here is trade-off’s another good thing there. But like I said markets are constantly changing and we had a lot of growth now in the last seven or eight years where I’m at. We move a lot. And I have a lot more competition with people buying properties now. Before we use to wholesale a house to, there wasn’t another investor. So if I bought one and wholesale it to another investor I didn’t have other investors.
Like in San Antonio there’s a lot of investors that have wholesale deals and I didn’t have that option. Actually even when I was starting it was me and two other people that I know of during that time. That was the only that we started that were actually doing it. And then we had the flood of ’99 which kind of changed things up a little bit too.

Danny Johnson: So you had more investors popped up back when the floods were happening when there were deals to be had?

Frank Johnson: Yeah, a lot of investors came in. But there again I had already been working in the market a little bit here and I probably understood the market a little more than others back then. I know I was the first one to buy home that had been flooded, rehabbed it, put it on the market, and actually sell it. I think I pretty much had that done before anybody else.
It was a proven point to me and don’t need to go and invest and buy other houses that had been flooded because they’re not realizing that even though there’s been a flood here people are still willing to buy houses that have been rehabbed, and then buy flood insurance, and try it again. That was awful.

Danny Johnson: The whole small town investing, do you feel like it made it easier for you to be a lot more conservative whenever you bought because of the differences in the markets and how they can change, like you were saying, if you have one major employer that really supports the town. And then something happens with that employer then you’ve got trouble because the town basically dies. Do you think that’s how you do to always be conservative with your numbers?

Frank Johnson: Correct. Be very conservative. And then if everything is good then I think a lot of people won’t take a lot more risk. But you always have to think about the day when it’s not going to be where are you going to be at in that property at that time. And of course there’s a lot of difference between buying a house and flipping it, or buying a house to keep it around.
And if you’re doing any owner financing you’re married to the paper and what happens 10 years from now if something were to happen if the chicken plant closed, and [Unintelligible 00:21:36] because I don’t have a job and there’s nobody else to sell that house to and we take it back. Those are some of the risks that you have to take. So if you’re not into the house very much in the beginning after 10 years you should own or have nothing of your own money left in it so the rest would be dropped no matter what.

Danny Johnson: I think you’re being conservative with the numbers, and it helped me to become conservative with the numbers. And even with high competition I feel like I’m still a lot of times being really pretty conservative. The take away with that is I might lose some deals because I’m being conservative, but of the ones that I get my profits are usually much better than other people’s.
Sometimes people are kind of blown away whenever I’m able to wholesale a deal even and make a pretty good amount on them, 15,000-20,000. And I would’ve never made that had I not been so conservative. There’s a trade-off of being conservative and maybe losing some deals. But on the other side you’d never have the home runs if you don’t make really low offers.

Frank Johnson: Here’s the other side of it too, there’s only so many errors in a day. If you’re going to keep spending all your time making deals that you’re making little profit and you’re working really hard and trying to accomplish what you might accomplish out of just buying that one house that makes the profit that three or four other houses would’ve made, you’re going to invest I think in the long run farther ahead because you had more time applying the better deals.

Danny Johnson: Right. It’s a good way to look at it. And then to know that there’s an art to making the deals. Whenever you do marketing the motivated sellers or dealing directly with sellers when you’re buying these deals a lot of times it doesn’t even just boil down to the price that you’re offering. Even if you have competition sometimes people will like you more and just want to sell to you even if somebody else offered more money but they just didn’t like that person. There’s an art to it and I think people develop their style and ability to make those deals happen over time.

Frank Johnson: Can I go back to something there?

Danny Johnson: Sure.

Frank Johnson: The difference between a small town and a big down too is we have one ATB and we have one Wal-Mart. And I go shopping in Wal-Mart and ATB and I see a lot of people that I’ve done business with that know me on my first name basis. So I’ve always have been a man of word when it comes to, if I say I’m going to do it I do it. Once you get that kind of a reputation in small towns or big towns, because big towns there’s a whole bunch of people there. And it’s not like you all do a little shopping in the same place and see everybody with soccer team games with the kids and all that other stuff.
That’s the big difference here too is you get back into how… I had a lot of realtors call me at the last minute. They had a deal that fell through and the bank just wants to get rid of the property after all, and they knew that if I said I would do something I would do it. So I got the phone call which I guess it could still be that big town too. But I’ve made a lot of deals just because of that alone. If I said I did it I did it.

Danny Johnson: That is huge. Even in a big town, a lot of times with wholesalers I think if wholesalers put a house under contract and then fail to close on it. It doesn’t take a whole lot of those for word to get around about that, so maybe not so much in the entire community but a far as among other investors in town. You’ve got to always make sure you’re limiting your risks so that you’re getting a deal at a good enough price that you’re going to be able to do something with it and be able to do exactly what you said you were going to.
And you’ve always told me as well, it’s like if you ever agreed to buy a house and you’ve made the decision, made the offer, and then later you thought, “Maybe I’m paying a little bit too much.” You still have to close on that house and you still do the deal because you gave your word that you were going to. And if you lose a little bit of money that’s your lesson. You know what these deals do a lot of times. Usually it’s more of a matter of not making as much profit as you hoped than it is of losing money. But that’s when you know the numbers pretty well.

Frank Johnson: Yeah, you’re right. Some you don’t like as much as you thought you’re make, but if you did the right thing that’s all that really matters in the end anyway.

Danny Johnson: Right. I wanted to talk a little bit about whenever I got started. I know a lot of people that are following Flipping Junkies for a long time are interested in finding out how I got started in our relationship with learning how to flip houses. And I’ve always been on under the assumption that people would think if your dad was flipping houses it was easy for you because he just told you to do this, this, and this, and then do this. And basically hold my hand through everything. That wasn’t necessarily the case but just start with, do you remember what you thought when I told you I wanted to start flipping houses? How did you feel about that?

Frank Johnson: Yeah, it was sweet and sour.

Danny Johnson: You hate that I was going to take all the good deals from you, right?

Frank Johnson: No, not at all. They’re, again, two different markets. But now I’m really happy and glad that you did because I know that I’ve had a great life doing it. I was really happy. I travelled a lot. My job didn’t own me. I owned my job, if that made it any sense. I could turn it off or turn it on whenever I wanted to. But I guess I had another side of me that says, you went through school and everything else, maybe you should stick that out for a while because now you are good at you were doing for what you went to school for.
I guess really and truly I was actually glad that you did do it. And I guess you probably excel at things like… I know you’re successful before you went to school and I hope you can do the same for flipping houses. You worked with my mentor for a little while in the beginning. He was an awesome mentor. And I already knew just grab enough common sense. I don’t know. I guess just for a [Unintelligible 00:28:03] that a day or two thought or here or there. But after that I didn’t anymore doubt that you couldn’t make it.

Danny Johnson: And so what you’re referring to is I had gone to school, received a degree in computer science, and I was doing software development work, and making really good money doing it. So I guess your concern was more of that I would leave that security, go out there and try to make a go of that, flipping houses, where there’s some risk in things instead of the secure job that I had. Is that what you’re referring to?

Frank Johnson: I knew the risk but I also knew what my conviction was. When I started that day I knew that I started doing this was the day I knew I was going to be successful at it. I can even go a little bit farther. This is what I was supposed to do in life. It didn’t take really long at all in the first year to realize that it was a lot more than just me doing this job. I’ve been blessed by god in this change of like that I made when I started flipping houses and I still believe that today.
I bought a lot of houses real quick in the beginning. It was just amazing. Actually my goal at the half of the year was met by the second one. The first year I ever wrote and you go back [Unintelligible 00:29:34] contact my experience had me convinced that if I did anything wrong I’d end up in prison. And of course the last thing I ever want to do is do something wrong and end up in prison.
I also was told to… I was given a helping hand a lot but I was also pretty much told to figure it all out too. Just like I taught to you in a way, I didn’t hold your hand and walk you through every little thing. I just had you go out there and I was just available to answer all your questions. If you had questions I’d be happy to answer them. So you were self-learning too.

Danny Johnson: That’s what I remember. I remember you telling me to learn the ropes. I went out and I did the research just like most people do. I got online and I started visiting website creative real estate online and things like that and would just study people.
Steve Cook was on there and I remember reading a lot of his posts. He ended up starting flippinghomes.com several years back whenever I was getting started. I would read his post on creative real estate and investing online. And I would even search his name and just search for all the things. Because you can see there’s a post, when he was asking beginner questions and then getting experience and going through the whole thing. So it was really neat to see that.
But I learned a lot that I could learn online and through courses, buying a couple of courses and studying all of that. And then the real learning begins, and it began for me whenever I started taking action. So when I did the marketing and getting calls, and even though I’m studying and got the basics from courses and reading online and things like that a lot of it I didn’t remember. And I don’t think a lot of people do remember until they experience it, taking action, and actually having a case where something came up and they needed to know the answer or what to do.
I did do some studying and everything. But really once I started putting the marketing out there to get the phone calls is when my real education began. And that’s where it’s really helpful. Because if I had a question I didn’t know the answer to I would just say, “I don’t know the answer. Let me figure it out. I’ll call you back.” And then I would call you and ask you and then you would help me with the proper answer. That was the biggest help.
I still remember… Do you remember whenever I got that first contract on the first house? What had happened was we got the contract on the house, and I remember knowing, I’ve got to get this to the title company. My wife and I were super excited and super nervous, like more nervous and excited I think. And once the title company…
And we were in the parking lot of the title company and I called you and I said, “I just realized I have no idea what I’m supposed to say when I go into this title company with this signed contract.” Do you remember that? I remember calling and I’m sitting here. I don’t know what I’m supposed to say when I go in there with this.

Frank Johnson: I probably told you, you need to go in there and find out which one of the closers do the most amount of closings, and that closure that you wanted to use.

Danny Johnson: That’s absolutely true because there’s a lot of closers that haven’t dealt with greater real estate, and this was just a normal deal. But even so you want to get the really experienced closer especially the one that does work with other investors and make sure life’s so much easier.
But what I was calling you and asking you about was the exact wording. What was I supposed to say whenever I go up into the title company. Even just the matter of saying, I need to have this contract receded, you’d have to have the closers name and figure out who’s going to handle the closing. And then give them the earnest money check.
But I just that was funny that a lot of people try to prepare for everything that might happen, every possible scenario, and you’re never going to. And the fact that I even went out and got a contract before I even knew what to say when I took it to the [Unintelligible 00:33:51] speaks to the fact that… Obviously you don’t want to go out there and make offers when you’re not sure of what the values are and things like that. But whenever it comes to understanding every possible scenario from rehabbing the house and selling it, and all that kind of stuff, you concern yourself so much with that.

Frank Johnson: Yeah. What’s interesting in seeing this is from the beginning I guess I had somebody to call and you had somebody to call. If somebody’s worth starting investing they really do need like a group of people that they could be a part of and they can ask questions. Some senior investors, how they handle certain things. In other words when you’re in the moment you need to have somebody to be able to call… A few investors that I’ve known in the past that overanalyzed everything aren’t in business anymore. And they didn’t stay in business very long because they tried to figure everything out they never got anything done.

Danny Johnson: They’re trying to figure out how much baseboard they’re going to need for the third bedroom. The other investors already got it under contract, taken it over to the title company.

Frank Johnson: Yes. And then if you remember me telling you about how many deals I got when the phone rang and I decided not to eat dinner at that moment and go check the house out I’d be walking out with the contract and the other investors were showing up. If you get the high bill you’d better go after it right then.

Danny Johnson: Hell yeah, absolutely. You spent so much time, so much energy trying to find the needle in the haystack like you were saying, that whenever you get that call you better go and take care of it, schedule and get right over there.

Frank Johnson: Exactly right because if you don’t do it somebody else is going to do it. And usually when your seller’s calling you they’re nervous too. And usually your sellers are looking to help really. They usually have a problem. They need somebody to help them solve that problem. The sooner you can help them solve that problem the more leads there going to be. And the whole deal is going to end up being a better deal for everybody, because you just solved their problem and they solved your problem because you now have another house.

Danny Johnson: The takeaway with all of this is basically that you’ve got to surround yourself, you’ve got to be getting out there. And I know I’m pretty much an introvert, I’ll say that first. And I think that you’re probably a little bit more of an introvert than an extrovert.
It’s funny that we are both that way. I don’t know if you view yourself as an introvert or an extrovert. But whenever it came time to meet with sellers, of course I was always nervous at first. But after a while it just felt so comfortable like it was something that wasn’t that difficult. And you find out more about yourself I think.

Frank Johnson: Once you get on top of your deals only about then yeah, that then it becomes exciting actually. I love my job and I love meeting people to buy houses from. It’s just exciting and out of this world. I guess every day waking up I can’t wait to get out of the building because I’m excited for the next day and finding the next deal. But you do have to get the first couple of them under your belt before you start feeling at ease. And the more you feel at ease the more you’re going to help your seller’s facilities too.

Danny Johnson: That’s huge. That absolutely plays a big part of it. Because if you think about what you’re doing you’re going over there and say, “I’m going to pay cash and buy your house.” But if you don’t seem confident and you’re not able to convince them that you’re confident of that… if it’s not a subconscious decision to worry about going with your offer.
And then also being introvert, extrovert kind of thing. Some people think, “I don’t know if I could do that business because of going out there and talking to people. It’s just not my kind of thing. But whenever it comes to something that you’re passionate about you have so much fun doing it. Like you’re talking about flipping houses, you can’t even shut us up when it comes to talking about flipping houses. We’re just so excited about all the time.
And you know how I always told you my kids would always tell me that I was obsessed with houses. And it’s true. We’re all obsessed with houses because it’s an awesome and fun business. But to move on a little bit, what do you think the biggest mistake that you’ve made in this business and how can others avoid it? Do you have something like that that you could share?

Frank Johnson: I have two… and they come from two different [Unintelligible 00:38:42] of this business. One of them is I knew somebody from buying and selling houses, and I did business for this person on a daily basis. They needed to sell that house because they didn’t want to create any problems with the country realtors in town. They asked me if I have an interest in buying it. And I said sure.
I went over and I’ve seen the outside of it, but I didn’t see the inside. I was facing my… when I was basing my… I had faith in this house on the way this person did business. I felt that… To make a long story short, we seen the house today. We closed on it. After we closed on it and I walked into it I was like, “Oh my god, what did I just do?” In other words I bought a house that needed a whole lot of repair. I had never looked at the inside of it. I just assumed it was a certain way. So my biggest mistake was buying a house [Unintelligible 00:39:43]

Danny Johnson: So you saw the outside of the house before you agreed to buy it but didn’t see the inside?

Frank Johnson: I didn’t see the inside. I could probably get away with that now after doing it for so many years and doing so many houses. But in the beginning I highly do not recommend ever doing that because there’s so many things that could be wrong you don’t know about. Bad foundation is one of the biggest ones.
The other mistake that I make for me was at one point I said, “I wonder if I could buy 30 houses in 30 days.” And I got to my 16th or 17th one on my 16th or 17th day, and I had realized at that point because my daughter had brought it to my attention that you could buy all these houses you want but you can’t manage them all, because all of these houses need to be rehabbed and I wasn’t wholesaling I was rehabbing.
It was probably my biggest mistake, but it couldn’t have been had I not stopped and paid attention to what my daughter had to say because it was right, 16 houses in 16 days was a lot of rehab that were going to have to happen. And there’s a lot of paper work. There’s a lot of everything going on. It’s alright to have big goals but be careful. And when you realize that your goal might be too big, just back off a bit and say it’s probably not better to do it.

Danny Johnson: And I think the other thing with goals like that is whenever you’re making it a goal of a number of houses versus amount of profit, I think maybe some people will pay more for houses than they should just to try to meet their goal, where you pay a little bit more just because you need that deal. You did 16 in 16 days or something, so 17 in 17 days, you might pay more next time to try to keep it going, right?

Frank Johnson: Yeah. If it’s all into that, but I’ve always warned against that, and I still warn against that. And I even keep the check on myself about that because it gets back into the same thing. My worst case [Unintelligible 00:41:43] to somebody else. So it has to be a good [Unintelligible 00:41:47] to be able to [Unintelligible 00:41:48]

Danny Johnson: That’s an awesome way to limit your risk. Because if you’re looking at it like, if I offer this amount could I close on this, turn around and call somebody, or even before you close on it can I call somebody another investor, and would they pay more and buy it from me so that you always have an out. If you have too many rehabs going or you get a better deal that you’d rather rehab then you could sell that one to another investor and make a profit.

Frank Johnson: Right. And also in buying houses, if you stick to your same philosophy about buying [Unintelligible 00:42:21] you’ll end up making a lot more profits too because you’re buying rental properties at a cheaper price instead of not basing on how much I make over 30 years or anything else. I don’t figure that way. I figured mine if we’d pay off a lot sooner than that.
And so it’s pretty neat to get into a house knowing that five or seven years later it’s paid for the rest of your life. It’s your profit. At that point if you’re tired of it you just turn around and sell it to somebody else. And now we’ve made all this profit by just going… It gets back into just paying cheap price for stuff.

Danny Johnson: Are there any unusual deals that standout in your mind that you could tell us about?

Frank Johnson: Unusual deals?

Danny Johnson: Yeah, maybe a deal that was really out of the ordinary.

Frank Johnson: Yes, I bought the hospital that my wife was born in.

Danny Johnson: Really?

Frank Johnson: It’s an apartment now. That’s probable one of the most unusual deals I have done. I moved houses, bought [Unintelligible 00:43:22] houses on it.

Danny Johnson: The apartments or the hospitals, how did you find that deal? Do you still remember?

Frank Johnson: It’s in a small town and people know that this is where I used to go to just relax for the weekend. They knew that I bought several houses. Somebody who had some rental houses and stuff called me up and asked if I’m interested to be a landlord.
And part of the units that he had this hospital was part of it. And knowing my market this is a small town and there was no other investors in that town, or even [Unintelligible 00:44:08] that town. I knew that I can make a really low ball offer and probably get it if the guy was serious about getting out of it. And I think to the point where he was serious about it, he was going to retire. So I made a super lowball offer and actually got it. And I got all of those properties. That’s probably my most unusual deal that I ever made.

Danny Johnson: Also, you’ve helped quite a few people, a lot of people in our family. And also in just other people, friends and acquaintances, get started in the business by giving them advice and mentoring them. Have you noticed the common trait or something that the people that became successful at flipping houses had that the others that didn’t become successful or didn’t ever make a go of it. Was there a difference that you noticed?

Frank Johnson: Yes, there is. It’s just like me in the beginning when I was mentored just like you, if you would’ve required me to hold your hand I would’ve never held your hand. Which means you would’ve never been successful. There’s one trait, the people who are making it or going to make it are the ones who are willing to… Actually you just become excited about it. The go-getters, they actually get out there and figure it out. They don’t kid around and wait. It’s true.
I even make it a point now to where when people ask me to help them, if I decide [Unintelligible 00:45:42] but I’m not going to hold your hand in this deal. I make it a point when they call me the first sign after that first meeting I don’t even answer their call. I purposely don’t do that if they’re actually going to turn around and call me back.
And if they call me back again the next day or the next hour then I know that they’re probably going to be serious now. If they don’t call me back, and a lot of them didn’t call me back the second time. I had to tell people all the time, “Hey, I’m really busy. If I don’t get back to you, even if I don’t answer it please leave me a message and I’ll get back to you later on. Don’t be offended if I cut you off really short.
Which you know in this business sometimes you can get really busy. And people who can handle that, they don’t have to be… I call it baby fat. I don’t have to worry about hurting your feelings. I know that you know more about me being hurt when you said, “Hey dad, I got to go. I got to be working.” Those are the people who are, to me successful in this business or people who show themselves and aren’t scared of the job.

Danny Johnson: I’ve experienced the same thing. You’re absolutely right. It’s amazing how many people will beg you to help them out and then expect you to be contacting them and telling them what to do and when to do it. And then you never hear from them. It’s absolutely insane. It’s cool that you’ve developed the filter on that to people have to prove that they want it so bad that they’re going to work really hard.
And like you said, the ones that will come up with things, and I have to wait for… It’s like, I’m going to try this. That’s that type of person I think that makes it more in the business than the one that can’t come up with something to try on their own.

Frank Johnson: Kind of like finding contractors. In the very beginning when you’re new at investment property they’ll get a contract where it says it wants $20,000 to rehab something. You call your mentor up and say, “What do you think? The guys want to charge me $20,000.” And then that person says, “That’s way too much.”
Your mentor says, “You should only be paying $10,000.” If you’re having to call 10 contractors before you finally find one contractor [Unintelligible 00:47:58] he’s willing to do the work for $10,000. A lot of people get tired. They just give up and don’t even try anymore. The person who becomes successful is the one who keeps doing it.

Danny Johnson: Right. That’s really important. Especially with the contractors, people feel that after talking to so many of them that maybe the type of contractor they need just doesn’t exist where they are, and they end up hiring the wrong one. And that’s a quick way out of this business because a lot of times if you’re not managing contractors or having the right contractor it can make your life miserable. Do you find the same to be true that when you’re doing really one of this business because you’ve got good contractors working with you.
Alright, dad, thanks so much for taking the time to be on the call with me and to share information with the audience, all the Flipping Junkie listeners. I think it’s an awesome episode and I think people can get a lot out of it especially the ones that are starting out. And that might have that doubt about whether they’re actually able to do in this business. Thanks for taking the time.

Frank Johnson: No problem. Have a great day.

Danny Johnson: Alright, you too. Thank you so much for listening to the Flipping Junkie podcast. I’ve got a lot of awesome interviews with some amazing guests lined up and I can’t wait for you to hear them. Be sure to subscribe to the podcast right now and visit the blog at flippingjunkie.com for more awesome house flipping education.
It’s time to get out there and flip some houses. I’ll see you next time.