91: Landing Your First Flip Deals

Mike Newby

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Show Notes

Mike is brand new in the investing world but brings a construction engineering degree, and 10+ years of construction background, knowledge and business sense. Alongside him is his beautiful wife, Sarah, and loving father, Jim, who have helped get their real estate investing company, Newbyginnings, off the ground and now full steam ahead. They have big dreams for the company and hope to help thousands of families create their new beginning. Mike is also currently a full time construction consultant and his wife is a full time cardiac ICU nurse at a local Children’s hospital.

When Mike started studying real estate investing, it only took him about 6 – 8 months for him to make the decision to jump into the industry. Mike found a wholesaler and got his first deal done. With a good foundation and knowledge base, he was confident in working his first deal for his real estate investing business. Where so many people give up before they hit this point, Mike kept going and is working everyday at making his business a success.

As soon as he decided to get into real estate investing, Mike found a wholesaler posting houses on Instagram. He sent a message, got into communication with someone on this wholesaler’s team, and started communication. This group has a wide range of buyers, so they were eager to talk to Mike. They walked through a few houses, and on the third property Mike made a bid and got it. It took 2 or 3 weeks staying in communication with this wholesaler before the property was Mike’s. What a great first deal!

For more connections, Mike has been networking in the Flip Pilot group on FaceBook. Finding other wholesalers is the key to starting up a successful real estate investing business. With both Mike and his wife still working full time jobs, and being full time parents, wholesaling felt like an easy way into real estate investing. As long as the numbers make sense, there’s no reason not to jump into it.

There’s a perception that wholesale deals don’t have much meat on their bones, but that’s just not true. Mike’s rule is 70% is the golden number. In his market, that’s tough to get, but you can expect to be around 80% – 85% ARV minus repairs. BiggerPockets has an ARV calculator, but Mike made his own in a spreadsheet to keep track of his numbers. With his spreadsheet, he determines if the numbers work for his marketing and business. This is the spreadsheet Mike uses, so if you decide to use this method, be aware that your numbers need to reflect your market.

For Mike’s first deal, Mike went through 2 wholesalers. Despite them both taking their cuts, there was still meat left on the deal. The property was a little rough, though. The property was supposed to be vacant, but it wasn’t. The sellers were there for 3 or 4 days after Mike closed on the house, which they weren’t supposed to be. Mike was still working on the plan for the property, but everything went well in the end. When the sellers eventually left, they left behind much more stuff than Mike was expecting.

Despite the unforeseen difficulties with this first property, Mike’s ultimate concern in with helping people like the sellers of this property. That’s where the name of his business, Newbyginnings comes from (in addition to it being a play on his last name). “You never know where your next deal is going to come from,” Mike said.

The sister of the seller had been waiting for someone like Mike to buy her sister’s house. After seeing the amazing success with her sister’s property, she mentioned that she’s going to be selling her house next year and wants to go through Mike. She even offered to make a testimonial, and took a picture with Mike, and wrote an awesome review for him. Her property will, hopefully, be Mike’s 5th deal for his business.

When it comes to actually rehabbing your property, communication is always key. Mike’s GC had brought in someone from other projects to help with the rehab, but staying in communication was a bit of an issue. Mike would talk with his GC, and thought that word was getting passed down to the other contractors, but with the mix up it didn’t. The plan in the future is to sit down over dinner with their GC and other contractors to get to know each other better, and keep the communication channels open. Making sure you know who’s responsible for what is important for keeping a real estate investing business organized.

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Episode Transcription

Danny Johnson: This is the Flipping Junkie podcast episode 91. [music] Welcome to the Flipping Junkie podcast, the podcast for flip pilots everywhere. Flip pilots are the house flippers that work more “on” our business instead of “in” our business by keeping a 30,000-foot view. You’re now part of this small group of house flippers that considers themselves flip pilots that strive to build the life of financial freedom and time freedom so that we can spend more time doing what we love with who we love. In this podcast, I give you a glimpse of the daily life of a flip pilot, so let’s gets started.

Welcome back to the Flipping Junkie podcast. I’ve got a great episode today for you. If you’ve been struggling to find that first flip or maybe you’ve got the first flip deal but you’re struggling to get the second one, I know how you feel, it takes a long time to get those first ones going, to build that momentum and have everything work out. My guest today is Mike Newby and he’s just landed his second deal and I wanted to bring him on the show to talk to him about what he’s gone through to get to this point and hopefully learn some of his secrets to overcoming obstacles that he’s come against and just pushing through it to get these deals. So, super excited to have him on the show. All right, we’ll get to talk to him in just a minute.

What I wanted to do first was give out a shout-out to people that have left a rating and review on iTunes because this really helps the podcast get going and get to more people. So if you’ve enjoyed this podcast and you’ve gotten some information out of it that’s helped you out, by all means if you would, take just a minute to go over to iTunes and leave a rating and review for the show. If you’re not sure how to do that, you can go to FlippingJunkie.com/rate and it will show you how to do that within just a couple of minutes. So thank you so much to everybody that’s left a review and if you would, please head on over and leave a review for the podcast. I’m going to give a shout-out to DJ Decrypt. I’m guessing that’s just the username but he or she’s left: “Danny has a keen awareness of what it’s like for some starting out in the REI world as well as tips for seasoned vets. On the conversations it starts getting deep into jargon, Danny has a helpful ability to zoom out and explain for people who are just getting introduced to the concept of flipping houses. Great podcast.” Thank you so much DJ and anybody else that’s left a rating and review, thank you so much. And for everybody else out there listening, if you’re getting a lot out of this podcast, if you would, please leave a rating and review and share it with somebody, share and help somebody else out to learn a lot of this information, especially a lot of the helpful series of podcast episodes that we did earlier on where we showed the foundation, the mindset, and building that good foundation to get started in this business and it’s shifting your mindset to becoming an entrepreneur and a real estate investor and then getting into topics like raising money or getting the money to do the flips and doing marketing and analyzing deals and all that kind of stuff. So we’ve covered a lot of material over all these episodes. So share those if you would. If you’ve got somebody that you think that would help, let them know about the podcast.

Thank you so much and let’s go ahead and talk to Mike now and find out how he’s gotten these first two deals and what he’s experienced on this journey that he’s been on, it’s so exciting.

So Mike is brand new to the investing world but brings a construction engineering degree, and 10+ years of construction background, knowledge and business sense. Alongside him is his beautiful wife, Sarah, and loving father, Jim, who have helped get their real estate investing company, Newbyginnings, off the ground and now full steam ahead. This is very awesome. They have big dreams for the company and hope to help thousands of families create their new beginning. Mike is also currently a full time construction consultant and his wife is a full time cardiac ICU nurse at a local Children’s hospital. So let’s welcome Mike Newby to the show.

All right. Hey, Mike, thanks for the being on the show.

Mike Newby: Yeah, thank you Danny. I’m excited to be here.

Danny Johnson: I was really looking forward to talking with you about the first two deals. So you just recently got the second deal under contract, right?

Mike Newby: Yeah. That one just got under contract last week. We’re closing on the 5th if all goes well.

Danny Johnson: Oh, nice. And so I guess we could start with how you got into this business and what got you interested in becoming a real estate investor and then we’ll talk about you progressing to where you got those first deals. But where did you start? Where did you first get interested?

Mike Newby: Sure. I was trying to figure out where I could start this whole thing without going too far back and all that. But I’ve always been interested in construction. I’ve always had an eye for it. My brother is an architect without the stamp, so I kind of got my passion from him. We tried our hand in it maybe like 7 or 8 years ago, but we did all the work in this house and really I should say my dad did most of it. He was there pretty late and everything. But I had run into a wholesaler, I didn’t even know what a wholesaler was and we got this house and then we did this whole thing. But fast forward 7 years, I read a book called Think and Grow Rich, I love that book. I listened to it four times in a row just back to back to back and just really soaked it all in, changed my mindset. And I found Rich Dad, Poor Dad – the cliché book that everybody mentions but it’s true and read that. Then kind of resurrected our company, Newbyginnings, and just really started building the brand for that and building what we wanted to do and everything kind of snowballed from there. Just really started taking the bull by the horns and taking action. I found Bigger Pockets and somebody on Bigger Pockets mentioned you and I found your podcast and I listened to like 70-some episodes within like a period of two months I think.

But the episodes that you have when you did that whole series from beginning to the end, really for a new person, that’s where you need to go. You had investor after investor after investor on and every single interview that you did, you had all these questions and you just knew how to ask the questions that a new guy wanted to hear, who wanted to know those answers.

Danny Johnson: I appreciate that.

Mike Newby: So from there, just really started getting into it and networking and learning and all that stuff and found a local wholesaler and got our first deal. We’re still working through that, we’re hoping to get that on the market we were trying to get it on this week, but it will probably going to look like next week to get it on. And some lessons learned there, plenty of lessons.

Danny Johnson: I’ve already got some good questions then because you’ve got the construction background. So the first question is, how involved did you get in the rehab of that first deal? We’ll get to you picking up that deal but I want to first talk about that before we move because I’m sure you probably had to swing a hammer.

Mike Newby: Yeah, there were some hammers swung. I was definitely in there probably more than I should have been. My father as well. Really, we had some unexpected bumps, some things that we’ve learned from. We ended up replacing the entire underground sewer system and that was something we didn’t see coming. Now we know it. Fortunately one of my buddies, Mike Brady, tipped me off to that and fortunately we got to it before we got to the end of the road and then all of a sudden had to tear all this stuff up. But, that hit us really hard and so we kind of had to pull back and figure out where we could do a couple of things ourselves and try to save some money. Plus, it’s also a learning experience if you can get in there and be in it and more than maybe you should be on the next ones. Obviously that’s not the long-term goal here. But, yeah.

Danny Johnson: I say that sort of jokingly it was a little bit easier for me because I’m not a handyman. I’m not very good with all of that stuff. I end up smashing my thumbs and all that kind of stuff. It’s just not pretty. But God had other purposes for me. And it’s not to say that if that’s like your passion or that’s what you really enjoy, by all means do it. But yeah, there’s a lot more money to be made if you’re not doing.

Mike Newby: Yeah, exactly. Honestly, it helps and hurts having that background because I know what I’m looking at. I was never a builder or a GC or anything like that. I actually worked for a roofer and then went into construction consulting, so I was doing inspections for homes and now I run our multifamily and commercial division. So I’m very detail-oriented and I know code and I know what to look for. But I don’t know necessarily how to get it to that point and so that was some of our hang-ups with this one. I don’t know the scheduling, I don’t know how to get it to this. I know what it should look like. I know what should and shouldn’t be there. That’s what can kind of hurt and help.

Danny Johnson: Well, I’m sure that the end product ends up looking really, really nice.

Mike Newby: Certainly.

Danny Johnson: You shared photos on the Flip Pilot group, didn’t you?

Mike Newby: I’ve done some. I don’t think I’ve done the finals on Flip Pilot yet. We’ve had some sneak peaks through like our Instagram account and stuff like that but haven’t actually posted the finals. We’ll definitely do that next week though.

Danny Johnson: Oh, cool. I’d be looking forward to that. If anybody listening out there is not a part of the Flip Pilot Facebook group, just go to FlipPilot.com and get an invitation and join that private group and you’d be able to see pictures of Mike’s first flip being completed that’s going on in the market. Hopefully, you said next week, right?

Mike Newby: Yes. We actually had pictures scheduled for tomorrow and we’ve had to cancel them.

Danny Johnson: Okay. So did you guys stage it?

Mike Newby: No. That was one of the things we plan to do. We’ll do some light staging. Not with all kinds of furniture and stuff. We’ll definitely place a few decorations here and there and towels and this and that and some plants and stuff.

Danny Johnson: You can do it on a pretty decent budget and I know Melissa has talked about it before and I think we have a blog post on Flipping Junkie about staging and where she goes to get some of the furniture. But everything has been done super cheap and really buying that staging furniture, if you’re going to be doing several rehabs and selling retail, it’s an investment. And being able to move that furniture from house to house is really a nice thing to have especially when you own all of it.

Mike Newby: Yeah, certainly.

Danny Johnson: Of course we’ve had a whole house of staging furniture stolen before too.

Mike Newby: Oh my goodness. I couldn’t imagine.

Danny Johnson: Yeah. I think I’ve shared this story before but the neighbor had noticed the garage door open and the refrigerator hanging half out of the door from the garage into the house. So called us because we had the sign out front “for sale” and went over there. They stole the towels, they stole the pictures off the walls, the couch.

Mike Newby: Oh my goodness.

Danny Johnson: Yeah, they loved the way it look so it was like shopping at IKEA or something.

Mike Newby: You just take it as a compliment, right?

Danny Johnson: Well yeah, that’s what Melissa did. But it was still like, “Man! Really? Are you serious?”

Mike Newby: That’s amazing.

Danny Johnson: But at least no damage was done to the house. Other than the backdoor being pried open.

Mike Newby: Yeah. Because usually what they drag, the cooktop across the whole wood floors and, you know.

Danny Johnson: Yeah, nightmare. Okay, let’s talk about then, so whenever you started studying, do you remember how much time it took from when you said, “This is something I want to learn more about,” to the point where you’ve got this deal from this wholesaler. How much time was that, do you think?

Mike Newby: I think it was probably about six to eight months until I actually said, “okay, let’s go. I want to find a wholesaler and get into this.” For me that felt like the easiest way to get in for the least amount of money. Definitely long-term we definitely want to do direct-to-seller marketing but that was about the time. It was 6 to 8 months and I probably could have jumped sooner but I really am the type of person I wanted to get a good foundation, a good knowledge base before I jumped in and went head first. So about that time.

Danny Johnson: It’s good to hear because I think that’s the typical timeframe for most people I think is they keep going and that amount of time seems like a lot of time and so many people give up before that amount of time. I think our first deal, it was six or nine months before we end up. I remember driving around, my father driving for dollars and telling him this doesn’t work in San Antonio like it does where you are. I was the one saying those things and I still remember vividly and him trying to convince me otherwise and it’s almost like as soon as I decided to believe him was when things started to come around and I started to see. You see what you believe, right? Well, what kinds of things did you guys do? Were you actively looking for the deals and how did you come across this one that you bought from the wholesaler?

Mike Newby: Yeah. So as soon as I was like, “Okay, let’s do this,” I was actually on my Instagram account and saw somebody posting houses, deals. I was actually trying to connect with different people and network and whatnot. I messaged him on Instagram and then he connected me with one of his other team members. I went and met that guy for Starbucks, one of my favorite places. We had coffee and talked about the different deals that they’ve gotten and he said they pushed out four or five a day sometimes.

Danny Johnson: All their own or from other people?

Mike Newby: Some of their own and some from other wholesalers that go through them just because they’ve got a wide range of buyer’s list. So it was through Instagram and then setting up with him and then we walked a couple of houses and then I think it was the third one that we were like, “Let’s do it.” The numbers made sense to us and so we bid on that third one. It was really quick. It was probably, I want to say 2 weeks max, maybe 3 since talking with him.

Danny Johnson: That’s awesome and it’s a great way to get started without having much outlay in the form of marketing because that marketing, until you’re ready to commit to it and put the investment into it, you’re like, I’m glad you didn’t do that right away if you weren’t ready to do it. I don’t know if you are now. But I just did the last episode on the podcast, episode 90, this is episode 91. Episode 90 is all about working with wholesalers so it’s kind of interesting how that worked out.

Mike Newby: Just listen to that one chance houses, I think it’s how you say that. Hilarious last name for the business season and I think you all talked about that too, it’s awesome. I’ve seen him on Flip Pilot and we were actually supposed to connect and just hadn’t got together yet. He lives just a city over from me, I believe, so he’s really close. So it’s neat to hear him on the podcast for sure but yeah, the wholesaling aspect just seemed like because right now I’ve got a full-time job and it’s 40-50 hours a week. My wife has a full-time job. She’s a nurse. She works 14-hour days. We’ve got two little ones. We’ve got a 7-month old and a 2 ½ year old and we got two dogs, two cats. We’ve got this brand-new family and here we are.

Danny Johnson: So now you got three full-time jobs.

Mike Newby: Yeah, exactly. We don’t have time. We’re still trying to figure out how to wrangle in two kids and manage all that with two full-time jobs and then we toss this on top of it. So it just seemed like an easy way in and if the numbers make sense, you know, why not? You know, if they make sense for what you want your end goal to be, I don’t see why not.

Danny Johnson: So here’s a good question regarding the numbers making sense because as I mentioned in the last episode, there’s this perception of the wholesale deals there not being much meat on the bone and that it’s kind of hard to get a good deal through them. How did you determine that the numbers did make sense for the deal? How did you do that? Just for other people wondering that so that they can determine that themselves as well.

Mike Newby: Yeah, certainly. There’s the golden rule of the 70 percent rule, right? In our market, you’re going to be tough doing that with the wholesaler. So you can go up to 80-85 percent sometimes and doing a rental, you might even go a little higher. But for a flip, that was kind of our threshold, 80 to 85 percent of ARV minus repairs. So that was kind of our rule. There’s lots of different calculators out there. Bigger Pockets has a free calculator. You can just Google some of them. I made up my own Excel spreadsheet based on some of those just so I can have it really readily available and just kind of put my own market numbers in there and just quick and dirty numbers, and so I can put in the costs associated with it and figure out whether or not it works for us.

Danny Johnson: Nice. Would you mind sharing that?

Mike Newby: Yeah, I can definitely share that. Hopefully it’s correct, right?

Danny Johnson: Well, we’ll put a disclaimer or something. Everybody should like modify it to fit your market and your purchasing and investment criteria. Obviously it’s just for educational purposes and not for any business advice or decisions.

Mike Newby: Yeah, I don’t want people calling me and saying, “Hey, you said this would work!”

Danny Johnson: Yeah, that would be cool if you can send that and we can put it on the show notes page. FlippingJunkie.com/91 will be the show notes page. So listen to this episode, download this episode and then also see the other things and we’ll link to your website as well that you’ve got set up and help you out with that. So, what are some of the things that came up from the purchase of the property? This was the first deal that you did. Did you get a contract to sign to you from the wholesaler or did you guys double close?

Mike Newby: It was a double close. This one actually went through two wholesalers. So it’s 1 percent took a chunk, the next person took a chunk and there was still meat left. If we wouldn’t have run in to a couple of unforeseen things, we’d be really doing just fine with it. But really, honestly, out of the gate it was rough. It was supposed to be vacant when we got it. It wasn’t. The sellers actually were still there 3 or 4 days after we closed. Fantastic people, super nice. We were okay with it, we still had some homework to do as far as getting trades in there and figuring out. We had foundation work that we know we needed done and we were just still coming up with our plan because the way this wholesaler works is they put out the deal, the showing is the next day, if it has somebody occupied in it and then you have anywhere from 30 minutes to an hour to look at it and then you put in a blind bid right afterwards. The bids are taken in and the highest bidder wins. So you don’t have a whole lot of time to come up with a plan for that, so getting in there as quick as possible and coming up with your design choices and what you’re going to do with the whole thing, that’s kind of what we were doing in those first few days. It would be nice if they were out. They left a lot of stuff behind too. Much more than we thought they were going to be leaving behind, so that was another unforeseen thing. We filled up a 30-year dumpster with their stuff.

Danny Johnson: Oh wow.

Mike Newby: But all that said, this is a people business, once it all boils down to it and that’s ultimately why we are also in this. We want to help people. We want to solve people’s problems. We want to be a sounding board if needed. We want to get them to the next stage of life. That’s where our name comes from, Newbyginnings. It’s a play on our last name but we’re creating a new beginning for people. That’s really what we’re trying to do.

Danny Johnson: I love that. You guys, I’m excited for you as you start to do the marketing direct to seller because it’s a genuine message and you can tell you’re not just saying that just to try to get more gain out of it. Like that’s really what you guys are all about and I think it comes through and I think it will in your marketing as well. So I’m excited to see you guys start to do that and find success in that as well.

Mike Newby: Yeah. Good deal. Thank you. And then talking with the sister. So again, you never know where your next deal is going to come from. And the sister was so elated that we bought their house, that we bought her sister’s house. She was head over heels. She was like, “I prayed for somebody like you guys to come in here and buy this house and God answered the call. And here you are.” And then, lo and behold, “Hey, actually I’m going to be selling my house at the end of the year and I want you guys to look at it.” It was amazing and she’s going to write us a testimonial. So she said such kind words, I got my picture with her and everything and still in contact with her.

Danny Johnson: So that’s deal #2.

Mike Newby: No, it’s not but maybe it will be #5. I’m trying to go for 5 before the end of the year. We’ll see if it happens.

Danny Johnson: Oh, but that’s the second deal. That’s one you guys are going to try to close or in the process that you just put under contract recently, right?

Mike Newby: No, no. The second one, that’s a different one. It’s actually through the same wholesaler too.

Danny Johnson: Oh I see. So that will be later on.

Mike Newby: Yeah. So that one will be later on. She’s not ready to sell until I think end of this year, beginning of next or something.

Danny Johnson: She’s willing to do a testimonial and sounds like she’d probably be willing to do a video testimonial and go even further. If you could get one of those, just have the cellphone and have somebody –

Mike Newby: Yeah, that would be good. I’ve seen some of those on your site. I definitely saw that. I’ve actually made myself a note to go back and write down the questions that you asked because they were really good questions. But yeah, those can do a lot for your business.

Danny Johnson: For people that haven’t seen those, just real quick, it’s basically about how are you feeling when you were looking for somebody to buy your house, what kind of situation were you in? And I don’t know. This I guess isn’t the proper thing for that. I’m starting to even forget what we were asking. But it’s like basically just asking them how the whole process went. Where they were, what they thought was going to happen, how did everything happen, how did it perform for them.

Mike Newby: Right, yeah. Just connecting with them. That can go a really long way. The next guy that comes in, I just want to buy the house and they may not be connecting with them. So that can really set you apart.

Danny Johnson: Yeah. It’s not always about the amount that you’re willing to offer them. I’m not sure if it was somebody I was talking to or if it was an episode that we did where just talking about people’s decisions that they make. They make decisions two ways and usually the real reason why they made a decision was emotional. There’s always a logical reason that they tell everybody and even tell themselves as to why they made that decision. But it’s always it’s because of the emotional reason. So that’s why, that’s the reason why they’re willing to take an offer that’s lower than somebody else’s because they had that connection with you or somebody else or we’re the right people for them.

Mike Newby: Right, yup.

Danny Johnson: So I want to find out more about any problems that came up. So they were in a couple, what, 3 or 4 days late and then you had the sewer problem.

Mike Newby: Yeah. So the sewer problem kind of during that front period, I was talking to a buddy of mine and he’s like, “You know, I used to live in that area and everything’s cast iron pipe. If you’ve got foundation problems, you’re going to have plumbing problems.” He’s like, “I hate to break this news to you but be happy I told you now rather than later.” It is what it is and I was praying and crossing my fingers that maybe somehow we weren’t going to have the issue but we ended up doing – oh, the house didn’t have a cleanout either because it was a 1959 house. So we had to have a cleanout installed to even do a test. So that was the first $1500 or so to put that in. Then you could do a test, test is another $600 or whatever.

Danny Johnson: And that’s the test prior to see if it holds?

Mike Newby: Correct, yes. So they’ll put the test ball in the cleanout and then they’ll fill everything with water and then see if it holds for an hour or so. They did that and it didn’t work, so it failed immediately. I think it was like 5 minutes into it. And so then they did some what’s called isolated testing. We had an option. We can either just say forget it, let’s just replace the whole thing or we can try and do some isolated testing. So we did some isolated testing, they tried to go down three different stacks and each one, they couldn’t get down. So they were broken off right at the elbow there into the house. So they tried three different spots and they were like, “What do you want to do?” And at that point, I said “let’s just call it and we’ll replace the whole thing.” So that was $16,000 to $17,000.

Danny Johnson: Wow!

Mike Newby: We had been through a few different companies but one tip I would give people is make sure that you’re going either through another investor that’s used somebody or a recommendation of sorts. If you’re really hard up and nobody has anybody which I would really doubt with the amount of networking that can be done these days or pages you can get on and people you can talk to, just go by somebody that’s recommended. So we went through a couple different ones and went with this company. Maybe we could have gotten it cheaper but at some point, you got to draw the line and move forward, right?

Danny Johnson: So a lot of that was basically from when you raised the foundation, it pulled, so the pipes that were stuck below it didn’t come up, instead they just disjointed, right, is what happened.

Mike Newby: Yeah. The cast iron pipe is rated for 30 years. They’ve seen some go to 100 but it’s in ideal conditions. Texas soil is not ideal conditions. If you had any type of little drainage issue, it just adds to the foundation problems. You’ve got foundation problems at a 15-year-old house sometimes around here and so yeah, it was already deteriorating from the bad drainage and so when they moved everything just like you said, it just started crumbling.

Danny Johnson: That’s actually caused us this year. Melissa said no more foundation problem houses because of that exact thing. We had so many in a row that required this exact same thing and it’s like, “You know, no more.” Let’s get more leads in, more deals in and do the ones that don’t require that and wholesale the rest of them.

Mike Newby: Right. That’s what I’m saying because it seems like every other one that we’d come across has foundation issues. I think you’re hard pressed to do one in Texas without foundation issues. But you know, I’m sure they’re out there.

Danny Johnson: So you guys have clay-like soil up there too where it expands a lot with rain and then dries out and really contracts a lot.

Mike Newby: Yeah. It’s just temperamental for sure.

Danny Johnson: In certain neighborhoods around here, you drive through and the road is like a rollercoaster and like oh, you know these houses have problems.

Mike Newby: Oh yeah. It’s the same way here. You know the areas where you’ve got issues for sure.

Danny Johnson: Yeah, it’s interesting. Any other issues with any subs or anything like that or anything else that you’ve learned through that process of getting this one done?

Mike Newby: So we were advised against this. I think it’s been said by numerous people but our neighbor is a GC. So we decided to use him on this job. We’re great friends, we’re like family almost, really. They’re great people. He’s detail oriented and he is a past home builder and he does custom work now. So we thought it was a perfect fit. I thought well, it kind of makes sense. He’s right in here. Let’s bring him in the loop and see what we can do together. So that’s kind of where it went and so he brought in a lot of trades. He got us acclimated to the building side of things and gave us a lot knowledge. We were able to ask a lot of questions and things like that. What comes before what and how do you put this here in this net.

Danny Johnson: That’s super important.

Mike Newby: Right, right. I was just going to say he brought – I want to preface this right because he brought us a lot of good information. The whole front of the things was really good and he brought us trades and knowledge and all of that. But things went on and we didn’t quite set the expectation of roles necessarily right upfront. My wife and I are very detail-oriented and so we want to make sure things are done right and things are caught and this and that. So we just started not seeing eye to eye on some things and thought he should have caught this thing and we should have caught this thing. So it kind of went back and forth a little bit. To salvage the relationship, we just stepped back and said, “Let’s just go back to being friends and neighbors and you can ask me questions and we’ll do it this way.”

Danny Johnson: That’s good that you guys didn’t deteriorate and get to a point where you couldn’t do that.

Mike Newby: Exactly. So what’s the takeaway from that? Set the expectations upfront with your GC with your trades. Here’s what we need, here’s what we’re looking for, we want every nook and cranny taken care of. We need you out on the site every other day, whatever. Whatever it is, just set some expectations upfront of what you’re going to be looking for so you don’t get down the road and be upset.

Danny Johnson: Yeah, because it’s tempting when you don’t know what you need to just say yeah, let’s get going, let’s get going. How much and you’re going to do everything and you leave it vague.

Mike Newby: Right.

Danny Johnson: I got to tell you, I still struggle with the whole setting expectations thing and as we’ve grown the flipping business and more so the software business, because that one, we’ve grown by so many more people with that, that’s still a problem where it’s like I just want to like “Come on, okay, you can do all this. It’s going to be awesome and this and that. But not setting expectations and then we have issues where they’re not sure what they’re supposed to have done. Like the expectations hadn’t been set and that’s really, really big. I say all that because I just want everybody to understand. That’s not just a minor thing in passing that maybe you should think about it. It’s an absolute whenever you’re working with anybody on anything, is making sure everybody knows what their role is down the smallest detail.

Mike Newby: Yeah, exactly. What we’ve learned from that going into this next one, so he actually brought another guy in that he actually uses on some of his other jobs. So we almost kind of had two GCs in this one. And so one of the problems we had was communication. We thought he was relaying the information that we gave to him to the other guy and so when I would tell him something, I thought it was going all the way through. He thought I was telling the other guy and so there was communication issues. So you got to be in tune with that and figure out a way who reports to who or who’s going to tell who this. So anyways, we’re still working with the other guy, Eli. And what we want to do before we get into this next one is go out to dinner, have dinner together, set the stage. What are we going to be expecting, how is this next one going to look differently from this one. Here’s how we’re going to communicate, here’s what we’re looking for, here’s what we expect from you and so on and so forth.

Danny Johnson: Yeah, and the perfect example of that is how you’re going to communicate, and that is, whenever we have a change order or we want to do something, we’re going to tell this person and then the other guy will say, “Well, I don’t even know about that too.” It’s all discussed so that there’s a plan and who’s reporting to who and who needs to hear each message about whatever thing that they’re handling. So it’s almost like an organizational chart. Even though you’re just working together on a job and not on as a company.

Mike Newby: Sure, sure. Yeah, I just finished The E-Myth by Michael Gerber a little bit ago. He talks about even though you’ve got one or two or three people in your organization now, lay all those positions out on the table and what are the descriptions of each of those positions and what are the tasks and own it. You take this one, you take this one, and you take that one. Then as your company grows, you can start giving those roles to other people. But in the beginning, you at least know who’s responsible for what.

Danny Johnson: Right now, it’s Mike Newby, Mike Newby, Mike Newby in all the boxes.

Mike Newby: Well, I don’t want to say that because my wife Sara is –

Danny Johnson: Well, not all of them

Mike Newby: She does quite a bit too so I don’t want to take her credibility.

Danny Johnson: Yeah, splitting it all up. Still a lot of boxes.

Mike Newby: My dad, he’s done a ton too. It’s really a family affair at this point.

Danny Johnson: That’s awesome and that’s another very good point and it makes it a lot easier with both people onboard and really excited about working together on it.

Mike Newby: Yeah.

Danny Johnson: Do you do what I do and have her good ideas and say “well, I don’t know,” and then later say the same thing and act like it was your idea.

Mike Newby: Well, I try to give her credit but I definitely do that. I’ll say one thing, “Well, I don’t know about that.” And then it will get done and I’m like, “Yeah, that looks really good.”

Danny Johnson: That’s awesome. Along the lines of The E-Myth, have you read that book Traction?

Mike Newby: I have not and I keep hearing it.

Danny Johnson: Yeah, you should read it. My friend Andy McFarland up in Utah recommended that to me and it’s awesome. It’s an incredible book and it helps walk through that same sort of things, a little bit more about the process of doing that. Even if you’re not ready to grow your business like that to have the plan of what that looks like so you understand all your roles. I think a big thing for us that we’ve learned and I’ve heard other people talk about is the tendency is to hire somebody and expect them to do 20 things when it really should be a focus of one thing. That’s kind of hard to understand how to do. If they should maybe be part-time or something. But it’s really good to try to do that instead of just hire somebody and expect them to take over everything

Mike Newby: Sure. Because otherwise, they can’t get really good at that thing and they’re so spread thin. They can do all these things but they’re not great at them. They probably could be if they focused.

Danny Johnson: In that way, they’re working towards what they’re strong with and not doing other things that they’re not enjoying that’s affecting all of their work. Yeah, it’s a great book. For anybody listening, if you haven’t gotten that book too, The E-Myth and then Traction as well.

Mike Newby: Yeah.

Danny Johnson: Awesome. So setting those expectations and the next time with the contractors planning out how all of it’s going to work, did you have an agreement, a written agreement for the scope of work and draw schedules and all of those kinds of things?

Mike Newby: So we didn’t. On this one we didn’t at first because it started out with our neighbor and we went that route. It was let’s just see how this goes and we trusted the relationship and the situation. Now we did have a scope of work that was written, it wasn’t signed by all parties but we definitely wrote down here’s what’s happening in this room, here’s what’s happening in this room and this room and this room and so on and so forth. We created that scope of work and that went on the walls at the house. So here’s what’s happening in each of these rooms. But as you know, things come up and things kind of have to change sometimes where you run into a pipe in this wall and so you can’t cut it back as far or now we have to do the whole plumbing so let’s move the washer from this wall to this wall because it just makes more sense. So different things came up like that and that’s where that communication really was key. But no, there wasn’t an agreement that was written out and/or draw a schedule but it’s definitely something that we’re going to look at for the next one. Just because of how this unfolded. So, lesson learned. And it’s amazing because you listen to all this training and podcast and they tell you these things and you’re like, “Oh yeah, but if I do it, it will be different.” And, no. But I guess people are human and sometimes you’ve just got to do it yourself and learn from it. If you can learn from other people’s mistakes, that’s a big thing.

Danny Johnson: That’s why when we were talking before we started recording, saying that that first one, no matter what you make on that first one, it’s probably one of the most valuable that you do in terms like you said of education. It doesn’t mean go out and get a super slim deal, lose money but learn a lot. If you can avoid that. And not saying that you did but for other people listening, I mean that’s really the big thing. You find out what you don’t fully understand or maybe respect I guess, what you know about that thing and once you go through and have the experience.

Mike Newby: Right, exactly. Those things that you learn start coming and you’re like, “Oh, yeah. That’s what they meant by that.”

Danny Johnson: That’s why that would have been helpful.

Mike Newby: Yeah, that’s why that would have worked right there and this wouldn’t have happened.

Danny Johnson: Well then the good thing is understanding too like even after 10 years, 14 years of flipping hundreds of houses, you’re still always learning. Each one might teach you something new and always being open to that.

Mike Newby: Definitely.

Danny Johnson: It’s sort of like after every flight, you’re supposed to have like a debrief when you go flying and it’s like a mistake or something that I make on every flight no matter how small, stop and acknowledge that and think about that. It’s amazing it still happens after hundreds and hundreds of flights. Like there’s something that I could have done better in looking at that. Did you guys spend a lot of – I guess you probably did with your wife because you’re planning the second one to take care of all the things and change things that you ran into on the first one so you don’t run into them on the second one.

Mike Newby: Yeah. So one thing we looked for on this next one, this next one is a pier and beam house, so a lot less chance of the sewer issue. So that was one thing we looked at. We definitely did not want to do that again on the next one. That hurt. So we were looking for things like that. We’re just going to do a lot more planning on the front end of this and we’ve kind of got a game plan for what we want to do with this one. Some of these houses are in Dallas and they’re a little bit older so this next one is a 1960’s house as well. The other one was 1959, this one was 1960. But they’re real tight, they’ve got furr downs, the rooms are small, they don’t have enough bathrooms. All these things that are working against you and so you almost have to tear down a wall or two or something like that to really get to that upper price point that you’re trying to get to. And so, we want to plan that out a little bit better in this one and actually get a plan. My brother is going to put together one of those for us and have that to hand to the GC. Here’s how it needs to look, here’s where this is going, this is going, this is going, and then write out the scope the same way.

Danny Johnson: Nice. And how did this one come? Did you mention how you got the second one? Was that from a wholesaler as well?

Mike Newby: Yes. So this one is also from a wholesaler. It’s actually from the same wholesaler. They send us, I couldn’t even tell you how many a week. And in addition to the countless number of other wholesalers list that I’ve started to get on, they make it pretty easy. There’s usually two or three sets of people going to these showings and you walk through it. I know you’ve got a short amount of time to make a decision but if you do your due diligence upfront, you know if the showing is the next day, do all your due diligence prior to, then unless you walk through that house and find something that’s wow, that’s going to cost us 10 to 15 grand to fix, we didn’t see that, then you pretty much know that you can offer what you need to offer to get it at the price you need it and make the deal work for you.

Danny Johnson: What are your plans? Have you guys started planning what kind of marketing direct to sellers that you guys are going to start doing?

Mike Newby: We haven’t yet. We’ve talked about driving for dollars and doing that for sure I think in this area would be good because Dallas is such a hot market and everybody’s got the list and every single motivated seller has probably 6 or 7 cards sitting on their night stand or whatnot, I would think. So I would just think people aren’t doing door knocking as much anymore from what I’ve heard. That driving for dollars and door knocking might be one of the ways we go to try to get ahead of the game.

Danny Johnson: I think that’s a good way and I’ve always loved the driving for dollars because you get to understand the whole area and all the different areas, ins and outs, where something changes when you go over railroad tracks and it’s a completely different area. You get to know every little place within your city and see where things are starting to happen and improve and stuff like that. But yeah, definitely. Going around and leaving your card at all of those houses, writing down the address and talking to the neighbors when it’s a definitely vacant house, looks like it’s been vacant for a while, talking to those neighbors and saying “Hey, do you know where they live? Do you know how to get a hold of them? Here’s my card in case they come here. Could you give it to them?” That kind of thing.

Mike Newby: Yeah. A big thing I think right now just because of the minimal amount of time and a lot of new people are starting out with little time and so for me it’s networking that’s a big thing. Our neighbor actually, one of his family members is looking to sell their property and so just putting your name out there, telling people what you do can really go a long way. Don’t be shy about that. Tell your family members, tell your friends, tell your church, tell whomever what you’re doing and you never know where the next deal is going to come from. So for us, we’ve got to get to a point. The end goal and hopefully my company isn’t going to listen to this podcast that I work for now, but eventually I will go full-time with this. That’s my passion and hopefully they see that. I feel like we’ve been called to do something big on ourselves and I think that’s going to be through real estate that we can help the most people. I think I’m getting off-track, I don’t know where I was going with that.

Danny Johnson: No, that’s good. You were talking about people not having a whole lot of time and I meant to ask you that earlier too. With the new family and the young kids and both you and your wife working this business together and having full-time jobs, how did you manage the rehab and the running of things? How did you do that?

Mike Newby: That’s exactly where I was going with it. It was minimal amount of time. So it was done during lunches. I’d run down there to the property, check on things, make calls, whatever it was. Make a call on my way down there, make a call on my way back. And then evenings. It was after the house goes to sleep which is sometimes 9:00 for us or 9:30, we will put a little bit of time, an hour or two into the business at the end of the day, and that’s how it was managed. Just where we can fit it in.

Danny Johnson: Did you ever begrudgingly do that? Those things? Like during lunch and in the evenings, did you ever sigh real deep and say “Oh, I got to do this”? Was it like that or was it different?

Mike Newby: No, no. It’s more “I wish I could be doing this more. I wish I could take a longer lunch.” Whatever. You know what I mean. I wish I had the freedom to do more and put more focus not just on this rehab that I could focus more on the next one or focus more on marketing or whatever it is that needs the focus that isn’t getting it right now to get this business moving quicker than it is. But you do what you can. So that’s where I was going with it. So I think through networking and through wholesalers and getting our foot in the door that way, because we don’t have a lot of time, is a good way to start off and then eventually we can move into some other things. I think wholesaling and getting from wholesalers is always going to be part of our deal inflow. There’s a lot of them here in Dallas and if you can take advantage of that, why not?

Danny Johnson: For sure.

Mike Newby: Your last episode was so timely because I was like, “That’s exactly what I’m thinking.”

Danny Johnson: That’s good. I really honestly think that the starting out part-time is really helpful. It forces you to focus on the things that do the most for you and get you for this long just because you have to. You don’t waste time on things that don’t produce or you just don’t have the time to do. When you go full-time you’re going to find it strange. You’re not going to know what to do with the time because you managed to do it before part-time.

Mike Newby: I’ll just go out and hang in my office parking lot and be like, “Okay, this feels a little better.”

Danny Johnson: That’s really cool and I’m really glad for you guys in the success in getting the first deal and second deal and then with another one in the pipeline for later in the year and doing well. So any last words of wisdom or anything for anybody listening?

Mike Newby: I think one thing, it can be tough, it can take a lot of work getting off the ground and it can really stretch you. My wife and I, she does all the design stuff and has done all of that for this house. She can’t do that on the days that she works because she is just all tired when she gets home. Plus, being a mother of two young kids, she works really hard. And so she’s tired and I get tired as well and it can get tough, but I think keeping your attitude and keeping your eye on the prize is a really big deal. One thing that I always, my pastors has said this, but your attitude is the hinge upon which the door to your destiny swings. And if you can really live by that, your attitude is almost the only thing that you can control in life really. So if you can just take that and keep your attitude right and keep your eye on the prize, you’ll get there.

Danny Johnson: I like that. That’s big. It covers everything. It’s nice. For anybody listening that wants to get a hold of you, do you have a way for people to reach you that you recommend that they find you?

Mike Newby: So we’re on most of the social media so we’d love it if you came and followed us on Instagram. It’s Newbyginnings Homes. We’re on Twitter as well but if you just want to contact me directly, email is [email protected] and that would be the best way to get a hold of me there.

Danny Johnson: All right. We’ll include those on the show notes page too. If you were driving and couldn’t write that down and want to get a hold of Mike, it will be on FlippingJunkie.com/91 and you can get the links. We’ll put the link to Instagram and to your Twitter profile and the email. Maybe not the email. I might leave that off or just change it a little bit so you don’t get spammed.

Mike Newby: Sure, I appreciate that.

Danny Johnson: Someone from the internet will grab your email address. But, thanks a lot, Mike. I really enjoyed talking with you and we’re not too far from each other either so I’d like to extend an offer to you if you ever down in San Antonio, reach out to me and let’s get together.

Mike Newby: Yeah. Likewise here. if you’re ever up in Dallas, let me know and really, I just thank you for your time and commitment to this industry and you’ve really helped us get off the ground a great deal. You’re a faraway mentor for us.

Danny Johnson: Thank you.

Mike Newby: Yeah. We appreciate everything you’ve done for us.

Danny Johnson: Thank you so much. Great. We’ll be in touch. Have a great day!

Mike Newby: You too. Thank you.
All right, everybody listening, thank you so much for listening to the podcast. I know you have a lot of options when it comes to podcasts to listen to and thank you so much for subscribing to the podcast and listening in every week. I’m trying to do some more of these Just Ask episodes so if you have a specific question you’d like to have answered on the show, just reach out. Just go to FlipPilot.com and get an invite to the Facebook Group and you can ask a question and tag it Just Ask. So it’d be #JustAsk and then include my name in there too as well. If you don’t want to be mentioned on the podcast, your name and stuff like that, you can specify and make it anonymous or something. But anyway, feel free to do that if you do have a question you’d like to have answered on the show and if you haven’t had a chance to grab a free copy of my book, Flipping Houses Exposed: 34 Weeks In The Life Of A Successful House Flipper, where I talk about all the marketing I did, the deals that came in, the leads that came in, how I analyzed them, all that information is just incredible. Go to FlippingJunkie.com/freebook to download your copy right away. Flippingjunkie.com/freebook to get your copy of Flipping Houses Exposed. Have a great week and talk to you next time!