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Melissa Johnson has been flipping houses for 14 years, and man have they come a long way. Knowing how to rehab a house has definitely taken some trial and error.
From brown (and one time green) carpet to sleek new tile, Melissa has been transforming the way she rehabs properties. Knowing how to rehab a house has been a learning process for both Melissa and Danny. But before you can make the houses look nicer, you have to have your team together.
Start with a contractor you can trust. Melissa has been working with her contractor for a long time now, to the point where they have an amazing working relationship. One of the key point of making sure you and your contractor are on the same page is to set the ground rules from the beginning.
Making sure you and your contractor have the same payment schedule agreed on will keep everyone involved happy. Melissa talks about going through the property with the contractors before hand and looking at every single detail of the house. That way, everyone is on the same page for what needs to be fixed.
There’s much more to your team than just you and the contractor, though. Melissa has been working with a realtor she trusts, and has become great friends with. It’s so important to work with people who are great at their jobs, and who are there for you.
For example, there was an issue with some buyers not being able to qualify for the property they wanted to buy and, instead of just closing out the deal, Melissa’s realtor fought and negotiated until all parties were happy. Having a realtor who will work with you, and also your buyers, is great for having your properties sold quickly.
All in all, Melissa has done a great job and is more confident with how to rehab a house. She’s also been working hard at showing what an amazing Flip Pilot she is. If you want to network with other Flip Pilots, join our closed FaceBook group by going to FlipPilot.com here: https://flippilot.com
Stay tuned and be sure to subscribe to the FlippingJunkie Youtube channel: http://youtube.com/flippingjunkie
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Welcome to The Flipping Junkie Podcast. My name is Danny Johnson former software developer turned house flipper, flipping hundreds of houses. Each week we bring you interview, strategies, stories and motivations to help you get started flipping houses and on your way to becoming your own boss and achieving financial freedom. Thanks for spending time with me today. Now let’s get to it.
Welcome back to The Flipping Junkie podcast. Thanks for listening. I’ve got a very special guest today. This is the most beautiful guest that I’ve had on the show. It is kind of funny because we’ve been talking about it. I’ve never had Melissa, my wife, on the show and she basically runs the flipping business and has been for essence October.
Melissa Johnson: Yeah, October. Not officially.
Danny Johnson: We’ve been doing this together since the beginning. She’s been really flipping for 14 years just like I have and she was awesome enough to be completely onboard with getting started doing it and getting into real estate investing so that was really a blessing. I wouldn’t be able to have gotten where I am without her behind me and helping me through it because a lot of times her advices what’s kind of saved us from making mistakes a lot of times and we joke all the time because I’ll ask her advice on situations and she’ll tell me what she thinks we ought to do and then I’ll call my father who also flips houses and get his advice and he’ll tell me exactly what she said and I’ll tell her, like, “He said this” and “She’s like that’s what I told you.” So that’s the way it constantly goes. But you want to maybe start with a little bit about yourself and basically what you were thinking when we got into this business.
Melissa Johnson: I’m sorry. I’m way out of my comfort zone right now. It’s been fun. All the stories that you tell are truly true about throwing the phone at me was the first phone call. That’s a true story. It’s really changed a lot too I think for us over the years. Before it was you doing all the buying, I was doing all selling, you were doing a lot of rehab and I was kind of checking on things and stuff here and there but not to the point where we are now. But I think I’ve learned a lot from you and I think it’s going really well. I think we have our systems all in place now. We are a good team and I feel like the business has come a really long way in the past year adding everybody and changing the way we do things and stuff, so it’s good.
Danny Johnson: Do you want to share with what kind of aspects of business you are running right now?
Melissa Johnson: So right now I am basically managing all the rehabs, so planning all the jobs out, designing everything, dealing with the contractors and mostly doing all of that and then dealing selling all properties, managing the team, managing you.
Danny Johnson: Yeah. So we’ve had some ups and downs and gotten through all of it. But things have been going really well with growing the business and for the last two and a half years or so we’ve been growing it beyond just us and this is kind of weird too because she’s in her office down the hall from me and we’re skyping each other because I didn’t know how to set this up to do it together in the same room. So anyway, if you’re watching the video, you’re seeing a split screen in different rooms from us, but because I didn’t know any other way to do it and I still had to fiddle with the audio for like 30 minutes just to be able to get this going. But anyway, what I wanted to talk about because we did the last one was with our friend Jeremy Heath, we covered contract closing and being that most – what you enjoy doing the most I think is managing the rehab and doing the design of the rehab of the properties, the fix up and managing the contractors and then selling the properties. So I wanted to spend today talking talking about the point where we’ve closed on the house and then what are your procedures, what’s your process for getting that house looking super awesome and we can start with how you determine how you’re going to rehab the house.
Melissa Johnson: Okay. So basically once we close on the house, we make sure we go through the utilities, everything on and then I make it out to the property and I take my little notepad and just start walking through. I try to go to pretty slow through it because I don’t want to miss anything. So I start on the outside and basically what I start doing is a scope of work, so I’m going around their property and just inspecting everything looking for rotted wood, does the roof need to be replaced. And there are certain things that we do over and over and over again. It’s always going to be the same thing. We’re always in a pressure wash the outside, we’re going to pressure wash all the concrete. We’re going to replace rotted wood, rotted siding, things like that. So I spend a lot of time on the exterior just kind of going through everything. I also because I have been so involved with the sales of the properties for so long, I try to keep an eye out for things that I know inspectors are going to look for. FHA and VA have certain requirements for things that have to be done. So I try to look after those things and catch them ahead of time so we can fix them before we get to the point of selling the house and inspection and then they say, “Well, this needs to be replaced” and it’s something we could have done ahead of time, so try to stay ahead of all those things.
Danny Johnson: So what are some of the some that come up typically?
Melissa Johnson: Things like that would be like the VA always ask four window screens. Your house can’t have two or more missing screens. So I make sure that gets on for work. No rotted wood anywhere.
Danny Johnson: Which we won’t have anyway.
Melissa Johnson: Yeah definitely not. I kind of been teaching myself a little bit about just like roofing and stuff like too because that comes up over and over again like is the flashing where it’s supposed to be or is it missing. Things like that tend to come up over and over again and so that’s something I try to catch. If we do foundation work, the soil has to be pushed back like six inches from the base of the slab so I try to make sure that gets done. Obviously no broken glass windows or anything like that.
Danny Johnson: Yeah. So like the water heater needs to be raised.
Melissa Johnson: The water heater always has to be raised, has to be on a stand, has have a draining pan.
Danny Johnson: I was just going to say these are all the things for a long time earlier on that would frustrate us after the rehab then we’d sell and then the inspection and then we’d have all these kind of things that would come up over and over again and we get frustrated having to change because some of it’s kind of difficult with the water heater and stuff like that. Adding some of those when there there’s not much room or having the drain be able to drain outside from the drain pan and all that kind of stuff is kind of a pain in the butt. But after a while, you realize like we’re just going to have to do these things and we take care of them.
Melissa Johnson: Right. So I just try to get ahead of all that stuff because I already know it’s going to come out. So I might as well take care of it ahead of time. So those are always things on the back of my mind as I’m walking through our house and then I go inside with my notepad. I get pretty detailed with the scope of work because I feel like the more information I give the contractor it’s better for him to almost have it like a checklist like he knows every single thing that has to be done. I may miss one or two things here and there. But he brings it to my attention and if it needs to be fixed then we talk about it. But usually it’s just trying to get every single thing that I can or the scope of work and be as detailed as possible because that helps me come up with the price for the job. It helps him come up with a price for the job and it makes sure that everything is done the way it’s supposed to be done. So like if we need to take out a wall or rebuild a wall or reconfigure something, it’s all in there very specific so he can’t come back and say, “Well, I didn’t know I was going to do that.” It’s right there.
Danny Johnson: Right. Yeah, I remember one of the first rehabs that we did, that burned house on Kentucky. And we didn’t even specify which light fixtures we wanted to use for the contractor and stuff like that. I don’t know why we did it but it was just like putting new light fixtures in so we ended up with all these cheap brass fixtures that were disgusting. So now it’s like, I mean you guys have a process down and want I mean “you guys” like I think you and Grace went Lowe’s or whatever and spent time picking out Home Depot and Lowe’s and picking out skewes of of different materials that we use on the different rehabs, right?.
Melissa Johnson: Right. Yes, so that’s the other thing that I do. So after finishing scope of work my contractor packets pretty much the same – not pretty much, they’re always the same. SO in my packet the contractor will get a copy of the contract for work that spells out how much the job is going to cost, how long it should take. I noticed a lot of this in the groups and stuff lately people need to – if you have a date for completion, talk to the contractor and make sure it’s a reasonable date for completion and have a clause in there that says “if you are past this date, you’re going deducted $50 dollars a day” or whatever it is, so they know that you mean business and I try to lay all that stuff out ahead of time with the contractors so that they understand I have expectations. These are all my expectations. You’re going to sign this contract. You’re going to do all these things on the scope of work. You are going to be on a draw schedule and these are the materials that you’re going to use. So all those things go into a packet for the contractor, so they will have the contractor agreement, the scope of work, the material list. I try to add the prices for everything too because that also helps costing out the job and it shows them like these are the materials that we’re going to use. So if you don’t use those materials, then we have a problem.
Danny Johnson: Yeah. Because it takes out any room for having arguments about things because everything everything’s clearly labeled, materials you want, the time frame, the draw schedule for when they get paid. There shouldn’t be any arguments because everything was already spelled out very clearly. Yeah and so we learn that over time from having things not clear and then finding getting having those problems and you might have contractors like we’ve had some that kind of balked at the $50f a day thing. But what we tell them is basically if you’ve done everything and all you have left is exterior stuff and it’s raining for the entire week we’re not going to charge you for being over because of things out of you control. But what that’s mainly for right is keeping the job site from being a ghost town for a week where they go and work somebody else’s job to get a quick pay check or something and leave viewers just sitting there costing you money in holding cost because nothing is worse than that. Going to the job sites and nobody is there and there’s trash everywhere.
Melissa Johnson: Yeah, that’s bad. It’s really bad. That’s the point of the draw schedule too. That’s a big thing with me especially if I’m using somebody I haven’t used before. I don’t care if it’s Friday. If that milestone isn’t met, you’re not going to get paid. You tell them that up front. You spring it on them at the last minute, but you make sure that they understand because our draw schedule contains milestones. So every time they complete certain tasks or amount of tasks then they get a draw. And I don’t care if it’s Tuesday or Wednesday or if it is Friday that’s fine, but just because it’s Friday doesn’t mean you’re going to get paid if the work’s not done.
Danny Johnson: Yeah. And that’s the Friday afternoon.
Melissa Johnson: Yes. At 4:00 o’clock right?
Danny Johnson: Every time. Look at the draw schedule and the inside is supposed to be completely painted and they say it’s done and say, “Are you sure it’s done?” because you don’t want to go there and have them halfway done telling you it’s going to be completely done when it’s not.
Melissa Johnson: Well, that’s the other thing too. It’s checking to make sure those things are done because I know we had that problem in the past.
Danny Johnson: Right. And then you drove all the way out then you committed and spent the time and then you just want to just give them the check so you can go and start enjoying the weekend Friday afternoon and then you’ll hear everything about how they got to pay their guys and everything like that. And it’s like that’s why you want to have that conversation upfront with them about the draw schedule and say is this going to work for you because it has to because we’re going to stick to it and if you need to pay your guys you need to make sure that this draw schedule is something that you’re going to be able to keep up with to able to pay your guys when they need to be paid, all that kind of stuff. So if they’re not done with that, they’re saying, “Well, I got to pay my guys” or “I’ve got to pay my truck payment” or house payment or all those kind of stuff, it’s like you already agreed upfront and so that you don’t run into the problem. That’s the big thing especially with contractors that you haven’t worked very long with, it’s having the point where they get upside down, where you’ve paid them more than the work that they’ve done. So then they’ve got to catch up so they get all this work to catch up to get paid again and then it’s just easier to get another job sometimes and work on somebody else’s project, so then your property is sitting there waiting because they’re going to get a quick buck somewhere else first and that’s what you don’t want to hear.
Melissa Johnson: Having those helps prevent that and just being very clear upfront about what your expectations are. I just can’t stress that enough because I don’t know that people – they have all these ideas of how it should work, but it’s kind of like with your kids, you have to let them know these are the rules and you’re going to have to follow of them if you want to work with me and if you can follow these rules then you will have steady work. We’ve kept our contractor busy for years now with steady work.
Danny Johnson: Right. Whenever we’ve had times where – it gets the point where even you can get to where you don’t like flipping houses anymore where you get so frustrated and feel like everything’s a hassle, everything’s a nightmare is when we have bad contractors, we don’t have somebody good managing the rehab’s or doing the jobs that’s when the business is frustrating and super painful. But every time we’ve got somebody good we keep them as long as we can because it makes our life so much easier. And I mean we’ve got a crew right now that you use that that you absolutely love and so it’s just been great. It’s great when you’ve got somebody great. So if you’re dealing with contractors that are making your life miserable, find another crew because everything will be much better and that way you can spend more time on getting more deals and flipping more houses.
Melissa Johnson: Definitely. I can honestly say our contractor has made our life so much easier – my life so much easier. I mean we work so well together. We have great systems. He understands the way I work. I understand the way he works and that’s another thing too during these draw scheduled and stuff. Talk to the contractor and see what his workflow was like because that’s what I did. I actually sat down with him I said, “Okay, talk to me about what order do you like to do things then?” And then I was able to create the draw schedule tailored to the way he works. So it works out good for him and for me because we’re still hitting the milestones and he’s doing it in a logical or it makes sense for him and I think that’s been pretty helpful too.
Danny Johnson: Yeah. You just got to make sure that they they’ll do a little bit of demo on one section of the house and then paint the whole inside just to get that big draw. Because it seems like doing the painting of the inside like the walls makes it seem like they’ve done a lot when it’s one of the things it doesn’t take as much time. We’re doing things out of order where they still haven’t done demo on part of the house but they’re already like doing flooring in another part. It’s not good right?
Melissa Johnson: All demo should be done. Flooring should be done last.
Danny Johnson: I think in finding contractors I think a lot of people – my father actually, as you know, was a contractor for a real estate investor here in town who was also one of our mentors for the longest time. And then when he started flipping and my father started flipping houses, he hired contractors that works the way he did for an investor and I think we had that advantage of seeing the types of contractors and how they worked through who my dad was hiring so when we got into it we kind of knew who to look for. But I think a lot of people that are new or struggling with contractors and getting these rehabs maybe have the wrong idea of the type of contractor they need. Some higher end markets if you’re doing higher end properties, you need the GC, you need the great big contracting company kind of thing. But we’ve found most success with the type of contractor that my father was where he was running the job he had helpers but he was there working on the job sites.
Melissa Johnson: Yeah. Well, I mean I’m not working on job sites.
Danny Johnson: What I mean is the crews that you hire though are ones where the person that you’re hiring, the main guy, the general contractor is working on the job and not just somebody in a Hummer that’s hiring day laborers and not doing any of the work himself or managing the job.
Melissa Johnson: Right. They’re all pretty hands on in. I think some people too they hire a GC and expect them to handle everything and that’s good too. But I have also found I think with us having a good GC, but then having good people too that you can call for certain things, like, we have a great HVAC guy and so I deal with him personally. All I have to do is send him a text, “Hey, I need this done at this property.” And he is there any emails me an invoice and he does not bother me. It’s just nice. But we’ve had certain go-to people that we’ve used for years and years like James that does the countertops, just call him, tell him what I need. He takes care of it, mails me an invoice and that’s the end of it. There are certain ones out there that if you do find somebody that’s really good at something, if you have a good floor guy—
Danny Johnson: Yeah. So it’s typically roofer, electrician, plumber, the different specialties.
Melissa Johnson: Yeah. We have our guy that does the bulk of the stuff. But then if I do need HVAC, I know who to call. If I need some major electrical work done, I know who to call. Major plumbing, I know who to call. I got a floor guy, I got a countertop guy.
Danny Johnson: Right. So what are your favorite tips for bang for buck in rehab? So design wise or material wise, like, what are the favorite things that we’ve been doing lately to properties that you think have helped them sell much faster and to look better than all the houses for sale in that area?
Melissa Johnson: I think my biggest way of adding bang for buck is I’m kind of a tile junkie. I love tiles and I love shopping for tile and that’s just me. Some people may not like that but I find things like that is a really cool way, put a really cool back splash in or tile a shower like, I’ve been using this carrara marble-looking tile in the showers. Well, it looks fantastic and we’ve got some of those walk through videos that people want to look and see kind of what I been doing.
Danny Johnson: Yeah. That’s on YouTube.com/flippingjunkie. So if you go to YouTube.com/flippingjunkie, Melissa’s got a lot of walkthrough videos and you can see what she’s doing to all of these houses. It’s very cool.
Melissa Johnson: Yeah. I’m trying to do more of those videos. It’s a little awkward for me because I’m not you but I’m trying. And another big thing that I do is I like doing fireplaces and entryways. My contractor and I kind of sketched out a plan for him of some different like, we trim it out and we use the lumber grey tiles on there and then we just really jazz up the fireplace, make it look really really nice. And that’s been a huge huge thing to do and it doesn’t cost a lot. It’s just a lot of trim work and tile, but it looks great and people just love it when you walk into the house because it’s not just a standard flat boring fireplace in the corner somewhere. I try to make it a focal point. So fireplace is a big one for me and tiling in the master is another big one, backsplashes are a big one. On stock cabinets and stuff, I started having him add crumb molding to the top which looks really nice especially in our little more expensive price range of house that we’re doing.
Danny Johnson: And we’re still mostly painting cabinets right?
Melissa Johnson: Yeah. I always paint the cabinet I have seen cabinets that I swear should have been ripped out and he has actually been able to fix them.
Danny Johnson: That saves so much money.
Melissa Johnson: Yeah. It saves a ton of money. I can’t remember the last time I put cabinets in a house honestly.
Danny Johnson: Yeah. It’s funny isn’t it. I think about that all the time. There is only a handful of houses out of the hundreds that we’ve flipped that we actually changed the cabinets.
Melissa Johnson: Yeah. If they can be salvaged, he’s pretty good at being to salvage those great hardware also goes a long way.
Danny Johnson: Canned lights.
Melissa Johnson: Oh yup, canned lights is a huge one. I always put canned lights in the kitchen always and I just think it looks so good. The only time we don’t is if there’s not enough space up there. But a lot of times we get those drop down ceilings with those fluorescent lights which I think are hideous and so I always have him bummed that out in and add the canned lights to bump it up and the now canned lights looks really nice, canned lights over the fireplace too fantastic. And the LVT that I’ve been using on the floors has been – I was surprised by that because I’ve been using it a lot and so it’s the LVT is basically it’s a luxury vinyl tile so they’re plaint vinyl pieces and they’ve got a glue down version and then they’ve got a snap together and glued on version which is a lot more expensive but it looks so good. And so I’ve been using it in just pretty much everything. And so the last one we did, I think we have a walkthrough video of it but it was the $15,000 rehab house I think it was. I put it in there that house was for sale at $220,000 which is a higher price range house. It’s a higher price range house for us—
Danny Johnson: Yeah. Because our typical house that we’re selling is worth around $130-$150 or so?
Melissa Johnson: $130 to about $165 is our sweet spot. And so the house was selling for $220,000 but I wanted to use the LVT, I just wanted to see. I didn’t know how people would react to it in that price range of a house and they loved it. And I think if you do it right and do your staging, people really don’t care and that’s stuff is so cheap and it wears well and it looks nice.
Danny Johnson: To me it looks like ceramic tile. One of the first pieces I saw it was the club across from our house where they re-redid everything and they put that in and I thought it was ceramic tile and so they told us that was it. It was pretty amazing with a lot of that stuff and then they’ve got so many different variations, so a lot of different looks, so you can make it look like wood floors.
Melissa Johnson: Yeah the ones I use look like wood. They have a light gray version and I have darker gray reversion and so depending on their primary, I kind of play around with the colors a little bit.
Danny Johnson: It sure beats the dark carpet we used to use in the beginning.
Melissa Johnson: I know. I see so many rehabs that everything is tan.
Danny Johnson: Yeah, tan. Old school.
Melissa Johnson: Yeah, takes me back.
Danny Johnson: If you’re still rehabbing with tan, think about changing it up a little bit. When we first started, did we put green carpet because we were learning a lot from Robin Thompson? Remember that?
Melissa Johnson: No, no. We never put green carpet anywhere.
Danny Johnson: Okay, maybe ___ her videos.
Melissa Johnson: That’s disgusting.
Danny Johnson: Well, we did do the red mulch for a long time.
Melissa Johnson: Yeah. I don’t red mulch anymore either. FYI, black mulch please. It looks much cleaner.
Danny Johnson: So any other tips for first staying on top of contractors or kind of what you do when you go to check out the job sites when you’re checking on them? Tips on maybe not pointing out things that they’re still working on because they’re still working on it, so it’s kind of like saying, hey, this doesn’t look like – I’m still working on it. Anything about stuff like that?
Melissa Johnson: Yeah, that’s always kind of tough because your instinct just want to say, “What about ___” But we were together for so long that he knows when something’s not finished yet and half the time when I start looking in a direction of something that’s not done, he always tells me, “I’m not done with that yet” and so he knows. I try not to be overly critical when I go. Mostly I just go to make sure that we’re on track with where we’re supposed to be getting things done. And then if I notice something that maybe wasn’t on the scope of work, I try to bring that up or if we need to change something like, “I don’t think that’s really working right there is there something else that we can do here.” So just try to have conversations with them when I’m there, not so much nit picking everything because that comes at the end. So when everything’s done I do a punch list which hopefully everybody is doing on their rehabs before you give that last draw. Always do a punch list. The punch list for me is pretty much me with a blue tape bracelet around my arm and I’m pretty ruthless. He gets a little scared when it’s time for punch list time.
Danny Johnson: Because he thinks he’s done and then you’ve got two pages worth of stuff.
Melissa Johnson: Yeah. Two pages is not too bad these days and actually honestly most of the time we’re about one page. So I’ll go through with my notepad again because I’m old school and I will write down anything. But I’ll also mark it with blue tape because I want them to see what I’m talking about, so I have a point of reference. Here’s the list and if I say there’s a crack here and then it’s marked where they can see it, make sure that gets taken care or this patch of texture looks gross. We need to fix it and then I’ll slap some blue tape on it. He doesn’t like the blue tape at all, but it’s helpful. He gives me the list too because if they say they did something and they take the blue tape down and I see it hasn’t been done then I know.
Danny Johnson: So that’s the big thing is going around and not just like kind of glancing here in there, but like you said, sort of being ruthless and going through every room looking in every cabinet, looking in every closet, looking everywhere.
Melissa Johnson: Yes. Look up to because a lot of people probably forget to look up at things. I go through – so I kind of do like I do with my scope of work. I start with the outside and make sure that they got all the rotted wood, that everything’s painted, that everything is done on the outside and then when I go inside. I open all the windows make sure they open and close. I open and close all the doors especially after flooring has been installed because you’ll get a drag on the carpet a lot of times and the doors need to be adjusted. That happens probably 80%. We’ve got to adjust doors. Making sure I go through when I turn on all the sinks there’s no leaks under the vanities, in the kitchen—
Danny Johnson: Make sure there are no clogs either, right?
Melissa Johnson: Right. Because they have a bad habit sometimes of rinsing stuff down the drains when they’re working. I kind of got them off of that at this point, but it still happens sometimes, like, “Stop washing your paintbrush.” You really have to take your time at the punch list I found. It’s tempting to rush through it because you just want to be done and say okay here’s your last draw list, move on to the next one. But honestly spend that time and walk through, open and close doors make sure everything works, flush the toilets.
Danny Johnson: I’m reminded of I think it was over the Blossom neighborhood. I remember a story. We had a property over there that should have sold pretty quickly and it didn’t. It wasn’t selling and we were wondering why and so I went over to look at it. It had been on the market for two or three months or something and I walked into the house that we’ve had for sale that wasn’t selling after we fixed it up and I couldn’t believe all the things that I found – wrong with the place. There were even some vanity’s that had rotted sideboards on them and I couldn’t believe that we were selling that property, that we missed all of that stuff. It was my fault because at the time it was still my responsibility to make sure to do the punch list all that kind of stuff. But I just felt sort of sick to my stomach like thinking like we’re selling properties like this. You get so busy trying to get more properties and do more deals and then you kind of let some of those things slide and you cannot do that. I was just so embarrassed and obviously we went back in and kind of did a second rehab and more throw. Fixed all that kind of stuff upright and then it sold pretty quickly, but that was just embarrassing. I couldn’t believe that and I guess that kind of gets into like what we’ve been doing in the past when mostly really you’ve been growing the business and building up systems and hiring people for specific tasks or things like that don’t happen so that you’re doing a specialized task everybody else is doing specialized thing and can devote energy to it and not try to rush through it to get to the next thing that they do got to because everybody’s wearing a bunch of hats. We’ve been calling each other flip pilots because we’re keeping the 30,000-foot view of our flipping business and we set up a Facebook group and I think we’re probably surpassing 500 people today. It’s a closed Facebook group. But if you go to flippilot.com you can request an invitation and we’ll let you in there and it’s basically do we want other investors to also help each other and we’ll help and Melissa has been really active in the group and I’m trying to be more active in the group on helping people to run their business to where they’re working on their business instead of in it and getting bogged down. And so that’s the purpose of the group and it’s just been awesome. We just started that and over 500 people already – so if you guys are listening and you haven’t joined the Flip Pilot Facebook group go to flippilot.com and get your invitation so that you can get into that group and take advantage of it. What do you think about the group?
Melissa Johnson: I think it’s great. And it’s just fun just connecting with other investors and helping out with things because I feel like we probably all have things that we’re good at like better and some things and other things like I think for us, for me at least, having everything so systematized has been fantastic because it does make these rehabs a lot easier. And it’s a little shameful that it took 13 years because we’ve been doing this for 15 years now right.
Danny Johnson: I don’t know. I’ve lost track – 2003 so 14 years.
Melissa Johnson: Yeah, so fourteen years. So up until the past year we were doing other things but it wasn’t systematized like it is now. So now I feel like things run a lot smoother because we do have all those systems in place like the rehab system. And I taking all those other things off my plate has helped a lot too, like you said, everybody wearing their own hats. And I do have the time to devote to project management now which is really nice. It was hard for you because you were doing 10 million things and I was doing 10 million things, but basically I do what I do and that’s something that I enjoy doing. I probably won’t do that for ever, but at least I have it all systematized now that way when I decide to have someone step into that role, they know how I deal with the contractors, how I do work scope of work, how the rehab should be run to make it super efficient because I take a lot of pride in my work and I’m pretty happy with what we’ve been putting out.
Danny Johnson: I am too. I’m super proud. I mean, you guys have to check out her stuff her videos on YouTube.com/flippingjunkie. Some of the first ones we tried to do the audio while she was walking through and the newest ones you’ve been narrating after the fact, so the audio quality is a lot better. But I think it’s just really cool seeing the properties and honestly we’ve systematized this stuff so much and Melissa has taken over so much control of a lot of the flipping stuff I haven’t even seen these houses most of the time, so it’s incredible for me to even see houses that were flipping that I haven’t seen before, but that’s like the power of that. It’s like removing ourselves as much as we can and only doing the things that we really want to do in the business and that make it that much better. And then everything gets so much better like, all the quality of the work is better, the houses sell faster, they look better and you’re spending time and you’re focused on it. It’s just amazing the difference and then whenever you go to train somebody you’re not just trying to remember everything that you’ve learned over the last 14 years in that one or two or three times that you walk through properties with people that you’re training. It’s all written down right. It’s all systemized. And then as we find faults in our system like when we have problems, we go to find out how we can prevent that in the future and so decisions made when things come up you don’t have to like relearn things over the over the years and I don’t know how many times we’ve had relearned things and it’s frustrating because it’s like, “Oh, I remember that happened before. How did we deal with it?” And then we’ve got through figuring out what to do again and so it’s kind of nice. I think back in 2005 we started doing all that. We start making binders and we just started that. It generated a ton of leads and deals and then we got busy and we just never finished. We got bogged down being in the business so much.
Melissa Johnson: It’s so much different now. It really is. I mean, we have the people on our team that are so helpful and when I say “team” I consider a lot of people on our team, it’s our acquisition, it’s our lead intake, it’s me. I include our closer in that because she is freaking awesome. Our realtor is amazing. She’s actually one of my best friends. We’ve become so close over the years she’s been selling all of our houses since 2009. She’s fantastic. So get a good realtor on your when you’re selling these properties because it’s huge. It makes a huge difference. You do all this hard work making this house look fantastic, but it’s no good you can’t sell it.
Danny Johnson: I remember when we decided to start working with her. We had a realtor who was so timid and didn’t really do much of anything and we first sold own properties which was a nightmare and then we hired a realtor who started doing that and then we had a property that wasn’t selling. We finally got a buyer and there was like the day of closing the day before closing and come to find out like they couldn’t qualify for the full amount and this was back on the market we’re still recovering. And so things weren’t selling and we were stressing out, going, “Man, now it’s going to fall apart.” They can’t qualify for the amount. They’re not going to be able to buy the house. We’re going to have to put it back on market. Hopefully it sells within next three or four months and their realtor contacted us and said they’re not qualifying. It’s not going to qualify. They’re not going to qualify for the full loan amount and she had the nerve to ask if we would accept $20,000 the agreed upon price. Was it $20,000 or something? It was crazy.
Melissa Johnson: I don’t know if it was that much, but we have to do some creative negotiating to get that deal to close, but she made it happen.
Danny Johnson: Right. We reluctantly, but we needed to, so we agreed. And we were talking about it afterwards it was like, “I think most realtors wouldn’t ever think to do that.” They would just be like, “Oh, well it’s not going to work. We better find you a cheaper house.” But she was awesome. She was on it and we’ve been working with her ever since. So way to go Laura. You’re awesome if you’re listening.
Melissa Johnson: Yes Laura. We love you.
Danny Johnson: We’ve already been going 45 minutes here, but I’m trying to think of anything else with after we’ve bought the house and we’ve been fixing it up and then we’re going to put it on the market. So real quick is there, do you ever look at what other properties on the market look like that we’re competing against when you go into these rehabs?
Melissa Johnson: I do. And actually I do that before I go out there because I kind of like to have an idea in my mind of what probably needs to happen over there. So usually I’m given the acquisitions and we go over the repair estimate that he came up with when we bought the property because I want to make sure that my estimate is going to fit in with what we borrowed to do the repairs and everything. He’s really good about estimating repairs. So then we usually pull comps and we just look at what sold because obviously if all the houses have granite in it and ours doesn’t, we probably need to put granite. So we double check all those things, that way I can plan ahead of time because that’s another thing like when you are hiring other people to do other things like, a granite person, all those things have to be scheduled in a certain order. And so we want to make sure if we need a lot of granite in that it’s done when it’s supposed to be done. We checked for that and I check what do the yards look like? Are the windows replaced? Does it have central air? Just kind of looking to see what we’re competing against and then that helps me figure out what am I going to do to set my house apart from all these other ones.
Danny Johnson: Right. Which is huge. You think about it from the perspective of people looking at a house in those areas. You got to see what they’re seeing before they see your property.
Melissa Johnson: Exactly.
Danny Johnson: So that you can have one where they walk in and say, “This is different. Oh my gosh this is different. I want this house because I haven’t seen anything else like this.”
Melissa Johnson: And that’s what I try to do. I try really hard to make ours stand out and I guess it’s working because every time we listen when I mean we’re multiple offers within the first week every single property.
Danny Johnson: And we get some crazy ones like over a weekend rate like 40 showings and 18 offers.
Melissa Johnson: Yeah. We have the one recently. We had 42 showings and I think I had 13 offers. That’s always a treat coming through.
Danny Johnson: It’s a good thing, but then you’re trying to spend all that time trying to figure out which to go with.
Melissa Johnson: Yeah. Well, we can have a whole another podcast on how I negotiate offers.
Danny Johnson: And I think we should because the selling of the property and the things that come up, there’s a lot to be talked about with that and I want to cover all of that with the podcast that’s why we did the series. So if you’re new to listening to the podcast be sure to go back and start with foundation episodes that moves up into building your team and then finding deals analyzing deals and all the way through. We’re talking about everything in order and then we have some Day in the Life episodes intermixed in there. But really for the most part, a lot of those episodes are going through all the different things. It’s like a flipping house training course in this podcast and I’m trying to get into detail with all this. But as far as the fix up of the house what else maybe has come up in the past that we’ve had to deal with that people can learn from and hopefully avoid? We didn’t really prepare for this. I asked her to do this morning.
Melissa Johnson: Honestly, I’m staying away from foundation houses these days. I know a lot of people are okay with that. It just creates so many other issues that I personally just don’t want to deal with those types of things anymore because once you raise a foundation and you got plumbing issues and pipes breaking – for me personally it’s too time consuming. So I’ve made that actually one of our criteria for wholesaling deals. If it’s got a foundation problem I don’t want to touch it just because I don’t have time to deal with that anymore.
Danny Johnson: Right. What’s the other criteria that we’ve been using to determine whether we’re wholesaling versus rehabbing?
Melissa Johnson: For me, definitely foundation has been number one. Just because we did – I think I didn’t like four foundation houses in a row and I was done through the last one. I was just totally done especially after we rehabbed one and then we ended up having go back and make all these other repairs, bust open the floors, take up all the flooring. It was a nightmare.
Danny Johnson: I remember. I remember.
Melissa Johnson: It was not pleasant. Other criteria for me would be just the ease of a rehab too. I always check days on market also when I’m looking at what the houses look like. It’s like how long does it take to sell, which is actually work with acquisitions on that. If it’s a 20 days on market type scenario and it’s a light rehab, then I will totally want to rehab it. If it’s an older house that needs a lot, I haven’t been touching any of those anymore.
Danny Johnson: Yeah. It’s a lot of work.
Melissa Johnson: Yeah. It’s a ton of work and usually needs electrical and all that kind of stuff that I don’t really want to deal with. If it’s something easy and light and it just will sell quickly then I will rehab those, but pretty much everything else we’ve been wholesaling.
Danny Johnson: Right. And you can get to a point where you can cherry pick those deals when you’re generating enough leads. Our big thing is we look at how many deals do we want to do in the year and this year we’re trying to do 108. We’re going to, right?
Melissa Johnson: Yes. We are on track.
Danny Johnson: And in order to do that we’ve got to determine how many leads roughly we need and we’ve got to generate those leads, so you got to generate tons of leads. I bring that up because being able to cherry pick and wholesale some and then rehab the good ones instead of just like struggling to get each deal that you’re rehabbing stuff that you don’t want to rehab I think is awesome. But that’s also why I’m holding a webinar, I’ve been holding one every week. If you go to a flipwebinar.com or you could just go to leadpropeller.com/webinar either way – flipwebinar.com or leadpropeller.com/webinar. You can register for a webinar and I’m showing how we use our website to generate the majority of our leads. It’s really cool because I’m showing cost per lead, cost per deal of the website with organic ranking versus paperclip cost and comparing that to direct mail cost that we do because we also do direct mail. So it’s a really cool and interesting webinar. If you guys haven’t watched that yet be sure to register for that at flipwebinar.com.
Melissa Johnson: I was going to say to just real quick going back to the whole criteria thing. It’s also how much profit we’re going to make, right? So if it’s something that’s a quick light rehab that sells quickly and and we’re going to make 30K then yes we definitely will rehab that.
Danny Johnson: Right. This market has been so hot. We’re out of time and we’ve always adjusted throughout the years as the markets change we have changed with it. And right now we’re at the point where it’s really high again. It’s been high for a long time and there’s so many investors out there. It only makes sense to wholesale a lot of stuff because there are so many people striving for deals that we can sell them deals and make a great profit without having to do any work and so it just makes a lot of sense.
Melissa Johnson: And that’s why it’s been good to be able to pick the rehabs. The last few years that we bought, I said, “I don’t want to do that, but I do want to rehab that one.” And I can choose to do that. I don’t have to overload myself with rehabbing every single thing that we have because it gets to be too much and then you can take your time – well, not take your time. But you can do a better job focusing on those if you’re just doing one or two at a time and wholesaling everything else.
Danny Johnson: Right. Well thank you for being on the show and being down the hall.
Melissa Johnson: You’re welcome.
Danny Johnson: We’ve been joking because recently we were at the mastermind meeting and there’s been sort of a joke about Melissa being the real flipping junkie or whatever because she’s been doing so much of the running of that business. So anyway, so you might see some more stuff about that, so Melissa is the the real flipping junkie behind the scenes.
Melissa Johnson: I like to say I’m Mrs. Flipping Junkie.
Danny Johnson: Okay, that’s good. She’s the better one, but anyway. Thanks again. I’m sure we’ll do a couple more episodes because I want to talk more about the selling process and all that kind of stuff. But everybody listening if you haven’t subscribed, subscribe to the podcast on iTunes and leave a rating and review if you’re really enjoying it. I really do appreciate that and then like I said be sure to register for that webinar. I’m doing them every week pretty much so even if you’re listening to this a month or two later, there’ll still be some going, so go to flipwebinar.com or leadpropeller.com/webinar and with Lead Propeller, we’re having a special that’s ending on May 8th. So if you’re looking to get a real estate investor website, you should probably do that before May 8th as the price for the three websites will be going up. But anyway, so check those out and then be sure to check out flippilot.com to get an invitation to join that closed Facebook group. It’s a really awesome group and there’s a lot of great great people in there – people posting motivational stuff, people posting questions and helping each other. We’re all helping each other with improving our flipping businesses and getting it to the point where we’re having that 30,000-foot view of the business and guiding the business and working on it instead of so much in it.
So thanks again for listening and talk to you next time.