287: Turnkey Wholesaling and Flipping in Indianapolis

SHOW NOTES FOR EPISODE 285: TURNKEY WHOLESALING AND FLIPPING IN INDIANAPOLIS

Steve Lawson is a former Financial Planner who discovered that the best investments for retirement were not stocks, bonds and annuities but is actually real estate, which is secured by tangible assets and has one of the best ROIs of any investment available.  In this episode, Steve shares how he created wealth and cash flow through a unique “turnkey” service he provides though wholesaling and flipping to out-of-state investors.

What You Will Learn

• How recessions and difficult economic downturns really demonstrate the strength of any investment
• What “turn-key” flipping is and how you can make a significant return
• How he helped his financial planning retirement clients survive the 2008 crash by having them invest in rental properties
• What he defines as a “good property” and why those properties always provide great returns
• Why stepping back and systematizing your business and creating processes is the key to success
• Do’s and don’ts for real estate investors over 50

About Our Guest

Steve Lawson

Steve Lawson is the president of Indy Home Vault, a Real Estate Investment Consultancy in Indianapolis, Indiana.  Prior to the founding of Indy Home Vault, his current company, he spent 10 years designing retirement income plans as a CFP, RFC and CSA, with advanced education in Estate Planning, Tax Planning, Risk Management, and Distribution of IRA and 401k plans.  When the tech bubble burst in 2000 and 2001, Steve realized that real estate was a much better option for most of his investment clients, so he started advising them on how to invest in real estate instead of (annuities, stocks, bonds and mutual funds). In fact, he even ended up giving up all of his security licenses to focus 100% on real estate investments.  In the past 16 years, he has worked with and helped many investors acquire rental properties, fix and flips, through the acquisition of single family and multi-family homes, turnkey and distressed properties.  More recently, he has helped investors find ways to earn strong real estate investment returns (with even less risk than) without direct property ownership.

More About Steve

• Lifelong “Hoosier”
• Born and raised in Indiana, 25 plus years in Indianapolis
• Went to Indiana University
• Accounting and Finance major
• Went into the finance side out of college and became a Financial Planner
• Always loved real estate and his goal, right out of school, was to get a high paying job that would allow him to invest in real estate
• This was in the 1990s

Specialized in Helping Seniors With Their Retirements

• Specialized in retirement income plans specifically for seniors
• He worked with seniors around the country
• His job was working with seniors to make sure they could pay the most income, with the least amount of risk and pay the lowest taxes and make sure hey didn’t “outlive” their own money
• Became a Certified Financial Planner (CFP), Registered Financial Consultant (RFC) and a Certified Senior Adviser (CFA)
• By 1999, people forgot that a market that goes up, also goes down

Dealing With the Market Crash

• 2000-2001 the tech bubble burst and people lost lots of money
• Some of the issues people had
  • Those vested in the stock market lost half their savings
  • Those investing in fixed products, income was cut in half
• Steve began looking at ways to help out his clients

Real Estate Investing to the Rescue

• Saw that real estate investors were getting 10-12% returns
• Rent, over time, is always going to go up (with inflation and cost-of-living)
• Your principal will appreciate over time as well
• It solved many of the challenges his clients were dealing with
• He made the transition from advising clients to invest in the stocks and bonds and CDs to teaching them to invest in real estate
• Gave up all his securities licensees and moved forward (If you have these licenses, you are not allowed to recommend people to invest in real estate)
• When he saw that real estate was the better place for his clients to invest, he had to give up his securities license – it’s not that he wanted to but he had to

Re-Engineering His Business

• He got a real estate license because he saw that as the way he would get paid (a commission when he sold them their investment properties)
• He wasn’t sure how the business was going to look
• But it wasn’t difficult to sell.  They were earning 3%.  Real estate is earning 12%
• He started off by saying to his clients, “Try investing a little.  If you like what happens, then you can increase your investment.”
• Sure enough, as they started dabbling with real estate, they got more and more comfortable with it and would get more involved
• Some that had lost a lot wanted to wait for the market to come back up and then invest in real estate
• Steps recommended to his clients (years 2001 to 2006)
  • Steve would do market research
  • Find a “good property” that would provide about a 9% return (more conservative properties)
    • B or B+ properties
    • In a good part of town
    • Fair appreciation
    • Lower risk investments
  • He would provide them with a property manager (ones that already had sort of a turnkey approach)
  • Home was already rehabbed
  • Was rent-ready or already had a tenant
  • It was almost turn-key
  • And because of their ages, he told each of them to pay cash for the property — don’t finance it!

The Recession Hits

• Had to remind his clients why they bought the investment in the first place – you bought it for income.  Is it producing income?  If it is, then let it keep producing income.
• The only people who had issues were those that panicked and sold
• His advice:  Even though the house may have lost value, as long as it is still producing income, just hold on to it.  Most did that
• Fortunately, because all had paid cash, they had no issue with mortgages
• Most were paying $75-125,000 per home

A Second Re-Engineering of His Business

• Took a step back when prices were getting too high to recommend buying and became a business consultant
• When he came back to real estate (2012), he began more wholesaling to investors and also more turnkey
• He did not renew his real estate broker’s license because he was not more of an investor
• He would buy distressed properties, rehab them and put a tenant in place and sell them to investors as turnkey investments
• Started a property management company to support the sales of the turnkey properties.  As long as it broke even he was fine but, unfortunately, it tool a long time to break even and he stopped doing PM
• Over the years he lost communication with a lot of his old clients, especially as his business model had changed
• Over the last 8 years, Steve has been:
  • Wholesaling
  • Turnkey property sales
  • Flipping – selling to investors
    • Fix ‘n Flip – retail
  • Doing most of this for clients
• When he first started wholesaling, he would find a property, promote it and find a buyer
• In the past, he would find a property, then, try to find a buyer
• As time went on and his buyers’ list grew, he would work with the individual investor/buyer to locate the specific properties they sought out
• His wholesaling business expanded, as well, and he has even wholesaled apartment buildings, as well as single family homes

Biggest Mistake

• When he was providing his investors with turnkey rental properties, he would
  • Buy the property
  • Rehab it
  • Place tenants
• Ultra-focused on selling these properties to his investors, making sure he had a buyer for every property
• 2014-2016 – he was selling 8-12 of these properties a month
• He was so focused on selling, having a great relationship with buyers, talking with his investors, asking them what their goals were, etc, that he was not overseeing his rehab manager was doing his job
• He was so busy selling all these homes, he didn’t realize that many of the homes were not even rehabbed yet and that many of the properties were over-budget
• It was a nightmare
• He realized that you cannot manage every aspect of the business without having the right systems and processes in place
  • He had people in place
  • He was trusting that the people would be doing their jobs well
  • He provided some training
  • But he was more focused on sales and talking to the investors
  • He was not overseeing the rehab step close enough
• Lessons Learned:  Regardless of how you’re investing in real estate, tale the time to list all the things that could go wrong and, with each of those potential failures, determine how you can track data to warn you (in advance) if you are heading toward one of those failures
• If he had put better systems in place to track the rehab expenses, timing, etc., he could have seen the red flags and warning signals earlier than he did and have avoided a lot of headaches

Biggest Success

• He was able to wholesale three separate apartment buildings within a six week period
  • There 75-units total for the three apartments (one 40 unit and a couple in the mid to late teens – 17 and a 15-unit)
  • Found an older seller that wanted to sell all three properties
  • He went into it confident that he could find buyers
  • It involved getting creative with the marketing of the 3 properties
    • He marketed the properties as distressed properties
    • He marketed the properties at the price it would take to buy AND rehab the properties – instead of marketing each property “as is”
    • Marketed the properties as “turnkey” properties, but the work would be done AFTER the buyers bought the properties
    • The properties were still only selling for $200,000-300,000 each.  The 40-unit was under $900,000
• Lessons Learned:
  • Don’t be intimidated by an opportunity that looks too big
  • Whoever has the best solution wins: he could have wholesaled the properties without rehab but made much more by selling the properties “post rehab”
  • By being creative and having a better solution, he made it a bigger win!
• Two buyers had loans.  One paid cash

Advice for Old Dawgs Interested in Real Estate Investing

• He has focused on giving investment to seniors for over 25 years (even before he became a real estate investor)
• If you are between 20-50 years of age, you are focused on growth – creating wealth
• After 50, you need to be more cautious
  • Don’t get tied down with debt as you are approaching or are in debt
    • Avoid debt and financing any property
  • Get fixed rate returns that are secured by real estate
    • He encourages older investors to become “private lenders,” secured by real estate that is at least 150% of the amount of the loan
      • Make sure it’s done right
      • Backed by a lien – filled properly, like a bank would do it
    • That would give you competitive returns (6-12%), backed by real estate – safe
    • This is a good secure approach for those who want to preserve principle and want an income stream
    • Less stressful than rental properties

Current Business

• He’s improving a lot of neighborhoods by buying and rehabbing a lot of properties
• Sometimes he wholesales
• Other times, they buy and rehab themselves
• He has a program that helps renters become home owners now
• He loves the fact that he can make a difference by helping both neighborhoods and individuals at the same time
• He wants to continue doing more and more of this in the future
• His goal is to do this for 100 homes each year

Rap-It-Up

• Favorite real estate book:  The Millionaire Real Estate Investor by Gary Keller
• Favorite business book: The Richest Man in Babylon by George Clason  (getting rich through cash flow)
• Most valuable web site for success (other than your own): Zillow
• Favorite app: Podio
• Favorite quote: “If you don’t have time to do something right, when do you have time to do it again?”  John Wooden
• If you had to start all over, knowing what you know, and you only had $1,000, what would you do to launch your real estate investing business? He had a copy of Ron Legrand’s “No Money Down House Buying System.”  Sat on it for years and never looked at it.  When he finally learned and used it, he found out how to buy real estate with no money down.

How to Reach Steve

• Phone: 317-446-6026
• Email: IndyLawson@gmail.com

IF YOU LIKED THIS PODCAST, we would love if you would go to iTunes, Stitcher, GooglePlay, iHeartRADIO and Spotify and Subscribe, Rate & Review our podcast.  This will greatly help in sharing this podcast with others seeking to learn real estate investing as a means to achieve a successful retirement.

Check out our other podcasts at olddawgsreinetwork.com.

Get a FREE copy of our 3-Minute Rental Property Analyzer at olddawgsreinetwork.com.

Episode Sponsor: Meno Studio – menostudio777@gmail.com