Paul Lizell
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Show NotesI’ve been hearing more and more investors talk about how they buy houses using online auctions like auction.com. I’ve been fascinated by the strategy and was glad to get Paul Lizell on the show.
He’s buying 8 to 15 houses a month that he buys from online real estate auctions….all over the country. How cool is that?
Paul started in Real estate in 1999, became a full time investor in the fall of 2004. He had a background in commercial business loan underwriting and 4 years as a business development officer. He’s been a licensed Realtor since 2006. As a national real estate wholesaler, he does 6-12 fix and flips per year and owner finances 10 properties per year, mostly to investors.
You’d think that the ratio of houses to bid on to the number of deals he gets would be pretty crazy but he actually does pretty well. He’s got online real estate auction thing figured out to where he bids on about 150 properties and ends up with between and 8 to 15 per month. That’s awesome!
His favorite auction websites are:
auction.com
xome.com
hudsonandmarshall.com
realtybid.com
hubzu.com
He mentioned that hubzu is nice because you can get away with small earnest money deposits than the typical $2,500 the other auction sites require.
When looking for properties to bid on, he focuses on the smaller markets and targets in on the houses that have been listed for a long time. The houses that are for sale for over 180 days or more are the ones that he puts bids in on.
During the episode he also gave several reasons why he prefers to close each of the deals at the title company of his choosing rather than the one preferred by the bank that owns the auction property. The main reason was their hidden title company fees and lack of control over what is going on with the deal.
He was also kind enough to share with us his technique to get Realtors to tell us their BPO (which most don’t want to give out). He does this by not asking for a BPO but by asking, “what would you list it at for a 30 day quick sale?”
Brilliant!
Be aware that when buying auction houses online and then trying to wholesale them, you will not be able to assign them. You will need to double-close…yet another reason to have a title company you know that can close the deals.
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Episode TranscriptionWelcome 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.
Danny Johnson: Alright. Today I’ve got Paul Lizell on the show and I’ve been trying for months to get Paul on this show and he’s making so much money. He’s added on a big addition to his house and has been gcing that and was too busy to talk to me. I’m just kidding Paul. But Paul is an awesome guy. I met him at a mastermind group meeting. He shared an awesome strategy and I’ve heard of people buying houses online at auction before, but his strategy was incredible. I mean, he’s just got this whole system nailed and he’s been kind enough to agree to be on the show and talk to everybody about what he’s doing. Basically just to give you a background about Paul, he started real estate in 1999, became a full time investor fall of 2004. He had a background of commercial business and loan underwriting and four years as a business development officer. He is a licensed realtor since 2006 and a national real estate wholesaler doing about 6-12 fix and flips per year and owner finance 10 properties per year mostly to investors. Hey Paul, how are you doing?
Paul Lizell: Good. How are you doing Danny?
Danny Johnson: Doing great. Glad to finally have you on here.
Paul Lizell: Thanks for having me on. I appreciate it. Sorry it took so long to get on here.
Danny Johnson: No problem. I was just giving you a hard time.
Paul Lizell: I appreciate it.
Danny Johnson: So you want to maybe give people that don’t know you a little bit of background of what got you interested in flipping houses and your story.
Paul Lizell: Absolutely. See this goes back to my late teens, middle late teens. I was working for my uncle while I was in high school. My uncle’s a general contractor and he does pretty much everything and he had bought a couple properties, one was duplex and one was a quadruplex that he was fixing up just to rent. He didn’t do fix and flips. He’s never done to fix or flip. Everything he buys he keeps. So I was working for him further in summers, weekends things like that, learning how to do plumbing, electrical, drywall, everything. We were ripping plaster walls down, ___ the metal mesh that comes with it, what a nightmare. You’re just loaded with ___ when you do that, but that got my interest in real estate because he was buying these things pretty inexpensively, fix them up, rent them out and nice cash flow or rentals, so that got me interested in real estate. My end was less with the rentals though I do have a few rentals and more in wanting to do the fix and flips. And so I started in 2002 doing the fix and flips, really kind of end of 2001-2002 timeframe, did about I’d say about three or four year for the 2002-2003 timeframe, then really start ramping it up in 2003-2004 and had four or five going on at the time pretty much at all times. I did that and was doing extremely well with that, went full time, I left my position with the bank in 2004. I became a full time investor. I did great up until around 2007-2008 when everything started happening. It is what a lot of people have. So I’ve done two wholesale deals during that time period. They were good deals. They were deals I could’ve fixed and flip normally would I wanted to do that but I just had too many going on, so I wholesaled a couple, made a quick $10,000 to other investors there and kind of decided maybe the model to go to. So I have less risk, less money out the streets at all times. When you’re doing these rehabs and you got $200-$250,000 per rehab going out, it ends up tying a lot of capital. In 2008-2009, I base partnered with another gentleman who was doing short sales and short sale marketing kind of dried up at that point as well. So we got together we just started to go into the wholesale motto. We did that and we were open about 40-60 wholesales a year from 2009-2011 and we were getting big wholesale fees and these were all bank-owned too, almost all bank-owned. There were a few that we got from regular owners off MLS that were not bank-owned, but for the most part these were bank-owned properties. We had done a couple where we had $40-$50-$55,000 wholesale fees on them. We’re really really liking that. I think the first year we did it we had 3 over 50 wholesale fees and 4 over 40 wholesale fees. They’re great. They’re terrific. So we’re banging up, then the market start to heat up at that time.
Danny Johnson: What market is this again?
Paul Lizell: This was in Pennsylvania and we had done a couple of New Jersey as well. We had also done a couple— we’ve kind of branched out a little bit in Ohio, but this is when I was still more regionalized in my area. Then we started expanding and going into different states. We’re going into Virginia. We start going around the Carolinas, Florida and we just start doing a little bit more and more. Now the direction I want to go and the direction my partner wanted to go at that time were two different directions so we decided to just split up go in those different directions and we’re still good friends. We still do occasional deals together, but we just had two different models that we’re going after and my model was buy all over the country and wholesale. [Inaudible] that’s one of the biggest reasons we had basically wanted to branch off and go into different directions. So he’s still in a similar model that I’m doing, but he’s doing more regionalized. He’s hitting certain places in Florida where I’m buying literally everywhere. I bought in now it’s now I think 36 out of 50 states. ___ unit properties here. I just get my first deal in Colorado, first deal in New Mexico. I had no intention of getting all 50, but we’ll see how many I end up buying because there are states in the Northeast that you just don’t really want. They’re attorney states and there’s the additional taxes when you resell like, Vermont has a land gains tax I believe is around 15% or 12%, out of state taxes and all these things. So really your $22,000 wholesale fee becomes 12-15 before all is said and done. So there are states that I’ll avoid just because of that, but that’s how I work now. It’s all bank-owned stuff for the most part and it should hopefully catch up pretty much to where we are now. Any other questions on that as far as how I got into the bank-owned stuff?
Danny Johnson: Yeah. No, no. So were you buying directly from banks or rebuying from REO agents?
Paul Lizell: Combination. So directly from a lot from HUD, Fannie and Freddie, I try to avoid Fannie Mae as much I can, although I just got four new deals through them here because they have 90 day deed restriction ___ and that’s a bugger. I got to do workarounds to get around those, but I try to avoid them as much possible unless they are a great deal. I buy a lot on auction companies, auction websites whether it’s Auction.com, Xone, Hudson and Marshall, Hubzoo, Williams and Williams, there’s a few others Realtybid, I think Auction Networks is another one that had teamed up with another auction company. That’s where I get the majority of my inventory, directly from asset managers as well on occasion. I do not generally buy in bulk. I usually kind of pick and choose. In other words a bulk tape from a bank I usually don’t do that. I usually kind of cherry pick what I want.
Danny Johnson: Well, yeah because you know why they bulk.
Paul Lizell: Yes. They’re giving you crap and you got a couple of good ones and a bunch of junk.
Danny Johnson: Right.So what are some of the workarounds for the Fannie Mae, the 90 days, what do you do to try to make that not so bad?
Paul Lizell: A couple different ways to do it. Two new ways that I’m going explore. The easiest way traditionally do it is to buy in a shell LLC, just sell the rights that LLC to somebody else. Then you don’t have go through the whole thing. You don’t even need title insurance or anything.
Danny Johnson: Yeah, you’re not selling the property, you’re selling the company.
Paul Lizell: Correct. So that’s one way to do it. A lot of people don’t want to buy your LLC. They didn’t set it up, so I’ve run into issues where I’ve got these shells and people want it in their own LLC so we got to work around another way whether it’s doing it off the HUD or doing it as consultation fee on a HUD. A lot of title companies don’t want to do that though, so there could be issues with that or another way is and this is a new way and I’m doing right now on a deal I have in New Jersey where I’m selling it to one of my other entities and that’ll give it a deed restriction because now there’s a new deal and then that entity will then sell it to the end buyer. Drawback is it is more expense because I’m purchasing again and then reselling. I’ll but it outside of insurance this time and then resell it to them. So there are a couple workarounds that way. The other one is a trust and I really want to look more into the trust. Now I know HUD does not allow you to buy any trust. I don’t know if Fannie does though, but that’s something I’m going to start to look into.
Danny Johnson: Are you talking about land trust?
Paul Lizell: Correct, land trust. Because I know a couple people in another mastermind I belong to hooked on that and that’s something definitely to look into because then you’re reducing your cost and you’re just basically changing the beneficiary there, similar to selling the LLC.
Danny Johnson: Yeah. So it’s a good use of the trust. I know that people a lot in the past were using land trusts to hide— basically just make a little bit tougher to find out who owns the property.
Paul Lizell: Right.
Danny Johnson: And they’re saying well that doesn’t provide you any real benefit other than that. And I guess in a case like this it would be helpful too because you’re not really transferring—you’re not selling a property within 90 days of breaking that rule.
Paul Lizell: Right.
Danny Johnson: Great. So cool. So what were your first auctions? Well first of all I guess you mean you named several auction sites. What are your favorite sites?
Paul Lizell: My favorites are—and the worst, the biggest pain in the butt, but they do have a lot of properties, obviously the big one Auction.com. They are a pain in the butt, total pain in the butt. But you can get a lot of properties from them. Xone is another one, X-O-N-E, Xone.com they’re very good at what they do they regionalize their auctions — so the southwest, northwest, northeast, Midwest. So if you’re looking at a particular part of the country, you can go to an auction that just has those properties in those areas there. That’s a good one. Hudson and Marshalls another good one, although their website is so antiquated. It could be difficult on theirs. RealtyBid is a decent one. They have a lot of HUD properties. Hubzu is another really good one. They can be tricky in some ways, but they’re simple in other ways. So typically just to give your audience an idea, your typical traditional property purchase, you need a $2,500 deposit which is a pretty big one even on a lower end property or 5%. So if it’s over $100,000 you’re $5,000 on $100,000. So you have a bigger chunk that you’re putting down on your deposit. On Hubzu it’s a little bit different. They have smaller deposit amounts so you can have a little less risk out there. They generally want to close within 25 days though. You can’t always do that obviously. The title is not clear in a lot of these and a lot of these bank-owned properties just to warn a lot of people listening to your podcast, there are title issues that need to get resolved and fixed. And sometimes they can take 10-12 days sometimes. I’ve had one that take 7-8 months where their putting is basically through quad title. They’re going through doing stuff and I’ve had that and I don’t mind that because that just gives me more marketing time to sell that property and potentially sell it for more without having the money out there. So it can be a benefit for you too.
Danny Johnson: Right. And so you’re saying it gives you time to sell them so what you’re doing is you’re wholesaling them, you’re selling them out as a wholesale with a contingency that you got clear title or something, right?
Paul Lizell: Correct, yes, a contingency. And occasionally on those deals if they aren’t able to deliver a clear title, so don’t but them.
Danny Johnson: Right. And then you’re out of the assignment too. There’s no problem.
Paul Lizell: Correct.
Danny Johnson: Do you find that people have an issue with that sometimes?
Paul Lizell: Yeah. I had one buyer who I sold a bunch of properties too and this happened and I felt really bad. He was pissed off a little while, but there was nothing I can do. It was completely out of my control and we didn’t know until we went through the title process. So now when I sell to him I make sure that title is good before I even market it in just as I don’t want you I want to bring him another one that goes bad, but it’s a rarity. I mean, that’s the only I’ve had in the last two years where I couldn’t convey it because the title was just so bad.
Danny Johnson: Yeah and we don’t hardly ever have that either. I think typically the only biggest problems that come up is with heirs. Where there’s like 15 or 16 spread across country, three of them are deceased and so there’s even more heirs.
Paul Lizell: Some are in jail.
Danny Johnson: Right. There’s always someone in jail, right?
Paul Lizell: Always, always.
Danny Johnson: Yeah. So all that kind of stuff comes up so it’s not even just the auction properties, it’s any kind of property. You’re going to end up having these kind of things too that could happen. So your process is basically to buy these properties on auction and then to wholesale the properties. So what is your typical—do you mind sharing your typical deal flow of checking online. What kind of thing do you like and then you put your offer in and then the whole kind of process of how you’re doing those deals.
Paul Lizell: Sure. I’ll kind of give you a sample. I have a couple deals that just were, well I want them. They’re not necessarily accepted yet, but most of these probably will be just because of how long they’ve been on the market. So I target the properties that have been on generally 180 days or more on the market because they’re extra motivated to get rid of those. The ones that are on 30, 60, 90 days, there’s not much motivation to sell those. So you’re looking for the ones that are where aged, if I think, anything aged over a year. Well that’s definitely something I’m really going to attack because they’re going to take a low number on that. This is a Fannie Mae property. This is in Millville New Jersey. It’s listed at $112,400 definitely a little bit overpriced, probably should be in the 90s to move it, maybe even 80s. Looks like I’ll be picking this one up for $44,100 that’s it. That will be one where I have let the end buyer know how I have to convey it or I’ll just buy it sell to my other entity and just go through there. There’s no transfer tax in New Jersey per se, so said the cost of doing that aren’t going to be too bad. But New Jersey does have an out of state tax where you’re charged if you don’t reside in New Jersey and you sell a property in New Jersey you do pay a percentage. It’s not huge but it’s something that takes— the government gets some more money. You just sign for that.
Danny Johnson: Well, it’s good to know about those things because if you end up surprised by it and have a slim profit margin.
Paul Lizell: Yes it can definitely really hurt you, so you definitely got to know. And I generally haven’t done a lot new jersey over the last four or five years until this past year. I’ve done about 15 deals in New Jersey and there’s a ton of demand, a lot of investors. I mean there lot of investors in New Jersey. A lot of the New York money flows down there and a lot of Philadelphia area where I am, in Philadelphia area goes over that direction, so south Jersey is mostly filled off, the investors attacking that. Mid to upper Jersey to North Jersey there is a lot of New York money in there and you get some pretty good wholesale fees on that.
Danny Johnson: So this is cool. That’s what I like about it. You’re sort of buying all over the place and even further than that from where you are, over the country.
Paul Lizell: Had one in Alaska.
Danny Johnson: What’s that?
Paul Lizell: I had one in Alaska last year. That was an interesting one. It was a nice little payout too, it’s almost $30,000 so it was a good one, well worthwhile.
Danny Johnson: Where was that?
Paul Lizell: It was way out in the middle of— well past Anchorage. I’m on a blank on the name of the city. I can probably look it up for you, but it was all Eskimos in that area.
Danny Johnson: Did you. Did you find some Eskimo investors that wanted to—I guess you did. You found it and sold it.
Paul Lizell: It was actually an end buyer who bought it to live in it and it was one of those— it was a HUD deal. So one of those that was vastly overpriced for a jump they started at $160. They finally dropped it down to $112. I won it at auction at $40. They originally didn’t accept it until the listing agent read it a BPO and made a comment of $40,000. They would take my number. They contact me back. They took it. I list it sold. I think I sold it for just under $80 on the MLS. I did nothing to it. So it was pretty solid.
Danny Johnson: Yes. So for all of the people that’s like “There’s no deals out there because I went looked and they’re all priced at $112 – $120.” It was like, yeah, it’s priced at that, but they’ll take less over time depending on circumstances.
Paul Lizell: Yeah, absolutely. And sometimes you have to go into the secondary markets like— Millville New Jersey, it’s obviously not a big market. It’s probably about 25-30 minutes to the south and east Philadelphia. So it’s a suburb and outlying market. It’s a decent little area but it’s not a high demand area. A lot of investors want to be whether it’s St. Louis or Phoenix or I mean Philadelphia is a major market. It wouldn’t be in major markets and sometimes you have to go to the second or third markets, a tier two, tier three, tier four markets to really find some good deals, less competition too.
Danny Johnson: That makes sense, yeah. So have you found that in Philadelphia and some of the other cities, it’s pretty tough to find a pretty good deal because there’s a lot of other people bidding up the properties?
Paul Lizell: A lot other people. I just got one in St. Louis that’s a really good deal. I picked up for $12, sold it for $24,900. That’s a rarity. I’ve only gotten about three or four deals at St. Louis in the past year. There’s a lot of competition. Time of the year I got it was in December, less investors out there as a matter of fact that’s when I pick up most of my inventory for the year December and January. I pick up a huge amount during this time of year. It’s usually when I find my best deals too. The banks want to unload them, get them off their books and that’s one way for them to do it and they’ll take lower numbers and that’s generally December January. They’ll start it November, kind of ends in February. They start pumping what they want to again. So a lot of deals I win, I don’t get accepted because they start now— we’re getting into the spring season where they think they can market it. So it’s just an ebb and flow with that just like there is when you’re just mailing out to your general to your general homeowner or to a list. I used to do the mailing to the high equity list, to the inheritance list, to probate and all that I did that and I did that for a while and had some pretty good deals. Generally you are going to get bigger wholesale fees on those deals than you will on the back ones not all the time, but you got marketing costs. So the way they want it now I have no marketing costs which is great. My only marketing costs are when I get a cash buyers list or mail outs or cash buyers list. That’s about it. I’m trying to get new buyers in there.
Danny Johnson: Yes. So do you have you certain markets that you focus on and that you do build because you probably don’t try to build a buyers list from every market right?
Paul Lizell: Correct. We have it’s segmented but since I don’t do a ton of deals in St Louis, I don’t have like 50 or 100 people on that. I have about 10-15 in each of these markets where I do a smaller amount of deals per year. But the markets we focus on, our biggest markets are Pennsylvania just because that’s where I’m from, Ohio and Indiana, both the Carolinas – North and South Carolina, Florida, Texas, Arizona, Tennessee those are the markets I really kind of—that’s where I get a lot of my inventory from and now New Jersey this year.
Danny Johnson: And so when you’re trying to find the buyers for those areas, are you targeting specific people that have bought similar properties?
Paul Lizell: Yeah.
Danny Johnson: To try to add them to your buyers list because you don’t want someone that’s like rehabbing million dollar homes because they’re not going be interested in the cheaper el dumpos.
Paul Lizell: Exactly. There are a million different ways to do it. But one way I recently had done it for—since I’m a licensed realtor too, I can go on the MLS and pull these banks-owned properties, see who purchased them or these real inexpensive properties that were rehabbed, go and find out who the owner was or the agent was, contact that age or that owner, and those are people who want to try to hit as your buyers because they did it once they’re selling, they’re hopefully going to make some money and they hopefully want to repeat it and do it again and it’s good buyer. It’s just sole one reason I’m doing just that.
Danny Johnson: Nice. What’s that?
Paul Lizell: It was the same complex that I had purchased one in Pennsauken New Jersey. He had just finished his fix and flip and now I had another one for him, same price too. That went pretty well.
Danny Johnson: Yeah, that’s great. So what is the process though? You pull up and you look for ones that have been on the market for a while and the different markets and then how are you doing the analysis on so many properties?
Paul Lizell: It’s hard, so we use of a couple of different VAs to do that. So on an upcoming auction, we’ll say there’s a southeast auction we want to focus on Texas and Arizona maybe Colorado, we’ll send that auction list to the VA have the VA do some initial homework, dating on a property, try to get some information. They’ll go through Zillow, Trulia, Redfin, all these different sites to try to pull up the value. The list, each of them has a listed value there, what the listing price is and contact information like the realtor’s email, the realtor’s phone number, all that contact so then when it comes to me, and actually I have a second layer of personnel who gets that and looks at it does a little more digging for me, contacts the agent, they try to find out what the BPO is, the broker’s price opinion of the property, they don’t usually like to give that. But there’s another way you can ask for that same number without calling out a BPO, just ask them what they think and their opinion the value of the property is, what would you list it at for 30-day quick sale and then you’re going to get an idea what they think the value of the property is. So if a property is listed to $80— for example I just picked up one that was listed for $82 in Jamestown Ohio, she recommend listing it at $59,900 to sell it quick, so that’s kind of how you gauge, so you’re going to be in the 50s. I’m picking that one up at $31 so I’m trying to get near $20 if I can or not, but I’ll take $10 or $15 obviously so.
Danny Johnson: You still got plenty of room because then you can still list it for what they suggested and sell it fast.
Paul Lizell: Yes. And even if you sell it in the 40s, you’re doing well. You’re kind of almost going backwards trying to figure out what the number is and then when you go into the auction knowing what your maximum allowable offer is, the MAO, you put in there so I can’t go above this. This is the only number I can go here and if you go higher obviously you’re going to just diminish your wholesale thing and if you aren’t dying for deals it’s not smart— if you’re dying for deals you might want to do it, but if you’re not dying for deals just push them off and move on and go to the next one.
Danny Johnson: Right. So what are the requirements then? For people that are looking for great deals, what are the requirements? I’m sure they’re probably different for the different sites, but basically you’re going to have to pay for the property, so are people able to use hard money lenders?
Paul Lizell: They can. What they’ll look for at the auction company obviously they do want proof of funds which if purchasing it through a hard money lender or what these other guys called transactional of funders, they can give you proof of funds. A lot of times those work, some of them want a little bit deeper, one a little bit more information. So let’s say you had a friend of you’re or an uncle that has a line of credit, you can actually just have them write a blotter saying that they’re your pre-approved blah blah blah such and such amount. You can do that. They aren’t real picky.
Danny Johnson: So they don’t want actually a bank statement showing you have that much.
Paul Lizell: Right. I use my bank statement for the most part with them. But if you have enough in your bank statement then find other methods. There are other methods to do it.
Danny Johnson: Yeah. It’s good to know that they’ll accept those letters like that. There are a lot of them like you said because even private lenders usually typically give out a thing that you’re pre-approved for up to $200,000 to $300,000 or whatever and send them that letter and they’re okay with that.
Paul Lizell: Absolutely. It works pretty well. Transaction of funders can even give you some of these, although it does say transactional funding and I did see somebody who had an issue with transactional funding pre-approval before but that’s rarity. Usually they just take those.
Danny Johnson: If you win the auction, what happens?
Paul Lizell: Okay. So you get an e-mail from them saying you’re the high bidder at the auction, please fill out the agreement of sale. They usually send it to you through you docusign unless it’s Wells Fargo who wants actual signed documents still. They want it in blue ink and they want the original. And HUD, same way, both of those want those. All the rest of them would let you do a docusign, then you send that back to them along with a deposit, the $2500 dollar deposit. That goes out to whether it’s your title company or to the auction company, each of them are different. Some auction companies want to go directly to them, some of them want to go directly to the title company. You send that in, they accept it, then you’re set up to go to closing in 30 days. If they decline it, then you get your deposit back or they may counter you and then you kind of decide where to go from there.
Danny Johnson: Let’s say that something happened and somebody screwed up somewhere, you got it accepted, you went and looked and said, “Oh man, our value was way off” or something and this is not good. I’m not going to sign this contract. What happens?
Paul Lizell: Then you can cancel that. You just want to make a habit of it. A lot of times what I’ll end up doing is writing up a basic letter form or getting a contractor to write me a quote saying this repairs this and this came out higher than I thought. So I need to cancel because this is no longer a deal to me, send it back to them. I buy a lot from all these places and they just take that, they really do. But somebody who is newer, they should still take that, but I know sometimes they might be difficult. They might give you a little bit of a fight. I would say fight back, fight back on them, push back on them.
Danny Johnson: Yeah. Because they don’t want to make it easy to do that because then it’s everybody’s just like shooting out stuff not caring whether they get it or not just to lock everything up.
Paul Lizell: If you give good rational reason like you found that, hey, there’s a crack in the foundation or the roof was leaking or something like that, then they’ll let you get out of that especially when you haven’t sent a contract back, you can always just cancel it. If you sent the deposit and everything back and found something pretty big, they may or may not. Auction.com is a bear. A student I have, I don’t have many students but one of the students I had, he ran into this issue and he decided to bite the bullet, just take the $2500 loss on a property and move forward. It was a little more difficult the move, might have taken up a lot of time and a lot of his funds for longer getting what it. If it was me they may have accepted that, I don’t know. Auction.com is a bear. They’re changing everything right now. They’ve completely reformatted everything at Auction.com and they’re typically a pain in the butt to deal with. They may even tell me “Hey, forget it. Now you lost your deposit now.”
Danny Johnson: Wow.
Paul Lizell: And they’re think they’re the biggest, I mean, they are the biggest company out there doing this but they’re acting like it too and even your VIP rep doesn’t feel like a VIP rep sometimes.
Danny Johnson: That’s cool. I can imagine that. They have to tighten it up a little bit too. I mean, if they end up having too many problems with too many of these that don’t end up going through so.
Paul Lizell: Makes sense.
Danny Johnson: How many would you say that you’re doing per month? I know you said it depends on the time of year and all that kind of stuff.
Paul Lizell: Typically 8-15 per month, 8-12 being the more norm, that kind of flow. I think I have 15 or 16 going this month and probably 8-10 next month right now as the deal flow goes. And really, a lot of it varies as to when they can close because some of these have title issues, so it’s not 30 day close it’s almost a 45 day close so instead of closing in February, now I’m closing in March so that things get pushed back a little bit. Typically I get between 8 and 15 deals locked up per month though.
Danny Johnson: Now how many do you feel like you’re bidding on to get 8-15?
Paul Lizell: Probably about 150 that I’m active actively heavily bidding on, about 150.
Danny Johnson: That’s not bad.
Paul Lizell: Now the numbers are pretty good. It didn’t use to be. I used to have to throw a lot more, but then I started to get pretty good understand certain areas and markets where I can be a little more productive than other markets, so instead of spinning my wheels wasting time, I start targeting certain areas.
Danny Johnson: You kind of know what to target, which properties are more likely to become deals after a while.
Paul Lizell: Yes. There are ones I look at and no chance on this one, does not enough days in the market, just not worth it so just let it go. You’ll see it come on auction two or three or four more times and then maybe it’s time to start bidding on it then. There are some in bad spots that you not want, say on a main street or right on a river where they’re going to need flood insurance, so there’s all kinds of different issues you can run into.
Danny Johnson: Yes, you’ve got to be real careful about that stuff I didn’t think about that first especially if it’s— there’s kind of a reason, right? You’re bidding on ones that have been on for a long time and there’s a reason for it, maybe that’s not always super obvious.
Paul Lizell: Yes absolutely. There’s underlying stuff. One of them, we just we just closed on today in Oxford North Carolina. This was a property that had title issues. So typically in the Carolinas there’s just a lot of doublewides, a lot of doublewides on the properties. A lot of people don’t realize this, but that doublewides are separate. They have a VIN number. It’s a vehicle right, so it’s registered apartment motor vehicles there and if that has a loan, it’s separate away from the property. It’s actually a loan just on that not on the land. So this one had an issue, there was no loan. This was paid off but the person still lost the property. So what we ended up having to do is kind of a basic quiet a title. The Department of Motor Vehicles got rid of that VIN number, got rid of that and just and just put it to the properties. Now it’s officially a part of that property so now there are no title defects or title issues with it. We just closed on it finally today, but I had gotten under contract in July so it took a while. But it’s a good it’s $17,000 payoff so I don’t mind. It was not much money in, it was only a $21,500 property.
Danny Johnson: And you didn’t have to do any fix up, right?
Paul Lizell: Ni fix up.
Danny Johnson: That’s the big thing.
Paul Lizell: Very good thing. And I don’t mind targeting those. I spoke to the realtor, find out what the title issue was, spoke to an attorney, had the realtor attorney talk to each other a little bit to find out exactly how they can resolve it. He said we can resolve it, so I moved forward with the purchase. This was a property that was under contract for $50,000 twice so I knew the value was there. It was just a matter of getting rid of this so then we could turn around and sell it. I think we ended up selling for $43, I was hoping for $50 but $43 was great, doubled the money pretty much.
Danny Johnson: Yeah. I’m just reminded of just the power of having a mentor like yourself or somebody that has kind of been through these things because of these things that come up like you said. For a new person, if that would have happened, what would they do? And so you’ve been there and you’ve done those things. So that’s really cool and just a reminder for everybody, it’s always good to find people like Paul that can help you with that kind of stuff because there’s thousands of things can come up and you’re going to be able to work with somebody that you can call and say, “Hey, what should I do?” And get some sort of educated answer on how to go about it.
Paul Lizell: Yes. It definitely helps, a little hand ___.
Danny Johnson: Alright. Another thing was being that you’re wholesaling these properties, are you doing assignments? Are you able to do assignments or are you double closing? How are you handling that?
Paul Lizell: Unfortunately with the bank-owned, they don’t allow assignments so everything is a double close, so you’re doing back to back closing if you can. Sometimes I’m holding these properties for 30, 60, 90 days, sometimes longer if there are title issues to get everything resolved. So there are no assignments, all are back to back closing, see what to come with your mommy, turn around and resell. That’s the drawback to this business as compared to when you’re marketing a regular homeowner where you can assign that contract, which is nice because they knew how to put anything down other than, say, the deposit.
Danny Johnson: Okay. And so they’re okay with you getting even like hard money loans?
Paul Lizell: Yes.
Danny Johnson: It’s not something where you say cash and then they get pissed because all of a sudden you’re trying to get a loan on the property.
Paul Lizell: You see there are two different options. You could put on there for financing or you could put on there for cash. I’ll do cash because usually I’ll get private money I need private financing and it’s treated the same way because it’s coming as the cash. There’s no loan documentation or anything like that with it. However I have gotten— Tempo Funding is a company I use that’s up there in Brooklyn New York to do some of mine and they do have a mortgage and do all that kind of stuff. As long as they get paid, they don’t care how it is as long. As long as it closes on time, they’re good with it. As long as funds come to them they’re okay. It’s pretty much what it comes down to.
Danny Johnson: Cool. And so where do most of these closings take place? They dictate based on who is auctioning the property or what—
Paul Lizell: It’s actually a really good question. A lot of the banks will offer title insurance to you for free, they have a self-pay title insurance if you use their closing company. I have found that this is not the best way to go. There’s a couple of reasons. They want to push it. They want to get it done quick and then sometimes there are things they miss with that. The title insurance does cover you, however they hit you with so many junk fees compared to what my title company charges me that it ends up being more expensive to go through theirs than it does through mine and there’s another reason, almost all their title companies do not allow you do back the back closings. Thirdly the other biggest reason is they are slow about recording the deed. Say you closed on January 5th, they may not record that deed until January 24th or even February. They’re so slow with that these companies because they’re so backlogged. They’re doing so much inventory for these banks. That’s why you’re better off using your own title company paying for your own title insurance. You control the time frame more if there are issues that come up in a title. The title company pushes back, they’re your bad guy, so you don’t have to play the bad guy there. You want somebody in your corner so it is better using your title company then you could do back to back closing.
Danny Johnson: Yeah. And you just controlled the deal a lot more. You’re not in the dark about something trying to find out what’s going on. And so they don’t have any trouble with you dictating where it’s going to close?
Paul Lizell: No. They’re good with that.
Danny Johnson: That’s nice.
Paul Lizell: That really helps.
Danny Johnson: But then you got to pay for title policy.
Paul Lizell: Right. We got to pay for the title policy. Now I have a title company that will allow me to purchase it, not pay for the title insurance on my buy side and just let the end buyer pay title insurance. That’s one of the title companies I use and I like that because that saves $500-$700. However a couple other title companies I use because the one title company isn’t licensed in all 50 states. There are states that I buy that they don’t have access to. Someone force me to buy title insurance which drives me crazy because I don’t want it. I’m selling directly to this guy. It doesn’t do anything for me. It is what it is. That’s just what they require. They don’t hit me on any other costs. They don’t hit you with junk fees, so it’s not too bad. It’s just an extra cost there.
Danny Johnson: Yeah. And those junk fees can add up too even more than the title policy.
Paul Lizell: Usually they do. Usually they do like Service Link is notorious for putting $400-$600 closing fees on there. It’s just crazy.
Danny Johnson: I’ve seen the same thing. I’ve seen like $500 escrow fees per side.
Paul Lizell: Yes.
Danny Johnson: This is insane. I think our title company now since we do so much business we don’t pay an escrow fee at all.
Paul Lizell: We don’t either, yeah.
Danny Johnson: And then the other side they were only paying $75, I mean, it’s like giving us deals because of the the amount that we’re doing. So that’s how the benefit of controlling, using your title company as you start to get these benefits as well.
Paul Lizell: It’s huge and I tell you what, that’s can’t be understated because just because the time it saves. I lot of these people want to use their own title company, I try to pull them towards mine as much as I can just because the other title companies now are going to want all this information from about my entity then ___ that my title company already have — certificate of good standing I got to get for them or they got to order it and that could take a week to get from Pennsylvania. So there’s a process and there’s little things like that that you don’t really think about that come into effect where if you’re using your own title company it may come to a point where I offer no cost for them to use my title company or I’ll pay half the closing cost just to get them use mine because I don’t feel like dealing with the aggravation I already had for everything. It’s simple. I might start doing that.
Danny Johnson: That’s a good idea because time is money and so use the transaction, it’s worth it maybe to spend a little bit more. Do you have problems because you’re buying these houses at auction all over the country, you’re finding buyers in these different markets, a lot of times maybe buyers are you’ve never worked with before, how are you trying to limit problems with the people that are agreeing to buy these properties from you? Do you have many problems with that?
Paul Lizell: We get people that are nervous. They don’t want to send us a deposit. I get it. They found it either on our ad on Craigslist or whatever. They don’t know who we are. So I just tell them “Fine, send it to the title company.” We don’t need to have it in our hands. Send it to the title company or if we end up using your title company, send it to your title company then you don’t have any issues.
Danny Johnson: So you don’t make a non-refundable or do you?
Paul Lizell: I make it non-refundable. However if somebody needs to get out, I’ve let people get out before. I just want them to commit.
Danny Johnson: Well hopefully they don’t listen to this now because they’ll just be like, “Yeah, we can just get it back now.” I mean, if there’s a legitimate reason, we’re not going to be bad people.
Paul Lizell: Yeah.
Danny Johnson: You want them to commit if they’re not willing to commit, then you can’t be sure that they’re going to close on the property and it’s going to cause a big problem for you.
Paul Lizell: Yes. And we have to remarket it – more time, more cost. It’s another month we have to hold the property, another month’s worth of homeowner’s insurance and yard maintenance if we have to do that depending on the time of year where the property is located. I’d rather not deal with that. And we had one where we had two buyers fall off, both first time investors. There were just things they ran into and made them nervous. Let them both go and I’m glad we did because we’re going to be selling it for $14,500 and we ended up finding another buyer coming in $18,500 so it ended up coming back to be a benefit for us.
Danny Johnson: And the properties that we flip and retail in the past when we’ve had something happen where were the closing didn’t happen, it’s always like that especially when it’s like the day of you find out that there is some problem and they can’t close and you’re like, “Man!” But it seems like a lot of times we end up with better buyers for more money or like a cash sale or something. It’s always like hope for that. So if you had that negative thing happen, it’s like, “Well, you know what, this is happening because I’m going to get a better buyer.”
Paul Lizell: It happens a lot.
Danny Johnson: It does happen.
Paul Lizell: That happens more often than not.
Danny Johnson: So maybe we should be trying to have our closings not happen.
Paul Lizell: Yes. Increase our profit margins right?
Danny Johnson: And so that discussion there brought up another question for me too, what are you doing about insurance on all the properties all over the place? Do you have a nationwide company that’ll insure—
Paul Lizell: Yeah. REI Guard is one. Affinity is another. Affinity is one I have used. But REI Guard is better, half the price, same insurance. I believe they both use Lloyds of London. So REI Guard would be the one to go with right here because that adds up, I have a ton of properties always under contract to being held so your insurance could end up being $1,000-$1,500 a month coming out of your account for all these different properties even though $20, $30, $40, $50 dollars a month depending on them. Some of them are vague on policies and a little bit more maybe $100-$110 a month. When you have enough properties going out there, that adds up.
Danny Johnson: Do you handle it like a billers risk sort of thing where you have like a rolling list of properties, you just add them and take them off?
Paul Lizell: Correct. Yes I get a statement each month from them and when I close today, now I get to contact the insurance company say closing happened today, no longer need the insurance. There’s a little checklist things that you need to do remember too.
Danny Johnson: I don’t know how many times we’ve looked and said, “How long have we been paying for insurance and properly we sold a year ago?”
Paul Lizell: I’ve been there, done eight months for it and it’s a pain in the butt.
Danny Johnson: It’s like the investor nightmares. You have woken up before thinking about a property—it’s like you have these nightmares where it’s like you forget that you bought a property and it has been since sitting there for years and you just— you know what I mean? It was just that weird—
Paul Lizell: Yeah, I get those dreams all the time. It’s kind of like that when you’re done in school or in college and you have dreams you’re back in college and you got these exams. You’re taking an exam you haven’t studied for. It’s the same thing, but investor. I got to do this. We’re going to closing. We got nothing done. I have these nightmares routinely.
Danny Johnson: Yeah. That’s how you know you’re doing stuff right?
Paul Lizell: Yeah, exactly.
Danny Johnson: I’m going to check out REI Guard. We APIA which—I think it’s called APIA Protect is what their new website is. It used to REO INS, like REO Insurance, but I think now it’s API protect and they’re just out here outside of San Antonio where we are in Castroville which is a small town outside of San Antonio.
Paul Lizell: Affinity who I had used before that was in Kansas and they were pretty good and they were relatively inexpensive. But this company is half that price, so I’m switching to them. Hopefully they’re cheaper for you too, save you a few bucks and your listeners.
Danny Johnson: Yeah. We’ll check it out and see. Well I appreciate it man. I got a lot of stuff out of this Paul.
Paul Lizell: I appreciate it too. Thanks for having me. I really appreciate it Danny. It was awesome.
Danny Johnson: Yeah great. And I’ll have to have you on the show again share some other stuff and some stories. Well, we’re going to see each other in February, right? So is there a place for anybody listening who wants to get a hold of you and ask you questions or anything? Where should they go?
Paul Lizell: Sure, I’ll give you a couple different things here. I’m going to give you my e-mail which is nice and simple, so if anybody want to contact me it’s [email protected] and if they want to take a look at the website, a lot of the properties we have it’s housedealsamerica.com and I think my e-mail might be on there as well.
Danny Johnson: Alright, so House Deals America.com and we’ll put those on the show notes page. The show notes will be at flippingjunkie.com/62. I’m also going to include links to all those auction sites that Paul talked about on along with his website on flippingjunkie.com/62. Alright Paul.
Paul Lizell: Alright. Thank you Danny. I really appreciate it.
Danny Johnson: Yeah. Have a good one. Have a great day and I’ll talk to you soon.
Paul Lizell: You got it. Talk to you soon. Have a good one. Take care.
