Flip Real Estate Virtually with Paul Lizell & Jay Conner, The Private Money Authority
https://www.jayconner.com/flip-real-estate-virtually-with-paul-lizell-jay-conner-the-private-money-authority/
Jay Conner and his special guest Paul Lizell talk about how to utilize systems and processes that simplify the buying process of real estate.
Paul is the founder of The Virtual Investor, JP Homes, Inc & www.housedealsamerica.com He has been flipping properties since 2001 and is the original virtual wholesaler having purchased all over the U.S. since 2009. He has bought and sold properties in 44 out of 50 states and will continue to look at expanding into new markets.
Paul is a graduate of Drexel University in 1998, holds a degree in Finance and a minor in Economics, he now teaches at www.ReoAuctionAcademy.com. He focused exclusively on online auctions, bank REO’s, buying off the MLS and wholesalers across the country since 2013.
0:01 – Get Ready To Be Plugged Into The Money
1:42 – Jay’s New Book: “Where To Get The Money Now”- https://www.JayConner.com/Book
3:20 – Today’s guest: Paul Lizell
4:57 – How Paul Lizell gets started on the real estate business.
6:58 – What is wholesaling?
8:01 – What is the advantage of buying a house vs getting it under contract?
10:28 – When you buy a house in today’s market are you primarily selling them to other real estate investors at a profit or are you selling them to the people who are going to live in the property?
11:16 – What kinds of profit are you seeing in today’s market while doing your business virtually?
11:57 – Wholesaling vs. Wholesaling
13:01 – Do you think that Wholetailing is more popular now because of the lack of inventory?
13:58 – When you’re wholesaling a house to an end buyer, what’re your criteria for pricing that home versus a complete rehab?
14:52 – In today’s real estate market as long as it’s clean and smells good that property is okay.
15:34 – How do you find your buyer?
16:07 – How do you find deals given the low inventory in today’s real estate market?
17:35 – How do you get the leads?
19:29 – How to connect with Paul Lizell: https://www.REOauctionAcademy.com & https://www.FlipRealEstateVirtually.com
20:30 – How do you manage your people on the grounds to inspect the property?
24:21 – Do you give additional compensation to your bank-owned real estate agents?
25:23 – How do you find your REO agents?
26:56 – When you become the winner in the online auction how long do you have before you got a close? Do you make a house inspection before you take it down?
28:34 – Paul Lizell’s parting message: In my business model my time is my only marketing cost.
Private Money Academy Conference:
https://jaysliveevent.com/live/?oprid=&ref=42135
Have you read Jay’s new book: Where to Get The Money Now? It is available FREE (all you pay is the shipping and handling) at https://www.JayConner.com/Book
Free Webinar: http://bit.ly/jaymoneypodcast
Jay Conner is a proven real estate investment leader. Without using his own money or credit, Jay maximizes creative methods to buy and sell properties with profits averaging $64,000 per deal.
What is Real Estate Investing? Live Private Money Academy Conference
https://youtu.be/QyeBbDOF4wo
https://www.youtube.com/c/RealEstateInvestingWithJayConner
https://podcasts.apple.com/ca/podcast/private-money-academy-real-estate-investing-jay-conner/id1377723034
https://realestateinvestingdeals.mypodcastworld.com/11279/flip-real-estate-virtually-with-paul-lizell-jay-conner-the-private-money-authority
Flip Real Estate Virtually with Paul Lizell & Jay Conner
My guest is a good friend. We’re in a mastermind together. Well, he is the founder of The Virtual Investor. That’s right. He is a virtual investor and virtual wholesaler. He’s been flipping properties all the way back since 2001. And he actually is the original virtual wholesaler. And he’s purchased all over the US since 2009 virtually. In addition to that, my guest has bought and sold properties in 44 out of 50 states and continues to look at expanding into new markets. Now, in addition to that, he contributes his success to utilizing systems and processes that simplify the online buying process. He’s focused exclusively on online auctions bank REOs, buying off of the MLS, and wholesalers across the country since 2013. I’m so excited to have my friend and fellow mastermind member, Paul Lizell. Paul, welcome to the podcast.
Thanks for having me, man. I really appreciate it.
Absolutely. I’m excited to have you on here, Paul. And of course, we’re going to be seeing each other again here pretty soon at one of our upcoming mastermind meetings. And today we want to hear all about what it’s like to be a virtual wholesaler. What in the world does that mean? And what’s that process look like? But before you get started on all that, tell us, how’d you get into real estate?
Interesting story. So let’s go back to the 1990s when I was in college. I was working for my uncle who’s a general contractor and he bought a quadplex, a 4-unit building. We fixed it up, renovated it. He turned around and rented it out. He was making pretty good profits on this property, too, and still had a lot of equity in it. So that kind of stoked my interest in real estate. And that point on, after he bought a few more and we renovated them and I was going through college, I decided this is something I got to get into. It’s gotta be my long-term goal. So I did and basically in 2001, I started my first property. Unlike his, it was a fix and flip. I got into that so I could build up some cash. Eventually, I did build up, got some rentals as well, but stuck with the wholesaling, the fix and flip game owner-finance game, and I’d been doing that ever since.
That’s awesome. So, were you doing fix and flips a while before you started doing wholesaling? Or were you doing wholesaling and fixing flips simultaneously, like right out the gate?
Well, I really started in the fix and flip game and then when I had too many flip deals going on, I did a couple of wholesale deals. And I started to realize it was kind of easy doing these wholesale deals. So after the crash of 2008, 2009, when all the marketing was just tanking, and you probably remember that well, I’m sure, I decided, all right, let’s go more to the wholesale game and turn them and burn them, and we did that. And we still did fix and flips, don’t get me wrong. We kept those good deals, did fix and flips on them, kept some good deals, rentals, some owner-financing, but we basically became virtual wholesalers at that point. We started expanding. We started in Pennsylvania where I was originally from. I just moved here to Florida this past month, but originally I’m from about 45 minutes north of Philadelphia. And so I started in that market, expanded out, went to Pittsburgh, New Jersey, Delaware, Ohio, Indiana, the Carolinas, which I love and where you’re from. And then I started going down to Florida, Texas, before you know it, I bought and sold in 44 to 50 states.
First of all, let’s make sure everybody understands what we’re talking about when we say wholesale a deal. There’s more than one way to wholesale a deal. So, what’s your definition of wholesaling? And what’s that look like?
So for most people, they think wholesaling is getting a property under contract from a seller and assigning that contract and collecting assignment fee. So for us buying bank-owned properties, and we do a few of those, don’t get me wrong. We do a few of those deals, we get some of those referrals. But, primarily, what we do with auction properties or bank-owned or HUD properties, we have to buy them, take them down and then resell them. So, it’s a wholesale, it’s just we actually have to take down the property. So we do need the funds to be able to purchase it, whether we use transactional funding, private lending, as you’re great at, at raising money, we do as well. We love the raising money game and using private lending for that. But yeah, it’s kind of the same deal as it is with assignment of contract, it’s just we actually take it down so we show ownership at one point.
So, what’s the advantage of actually buying the house instead of getting it under contract and then collecting an assignment fee?
You know in certain states there’s been a crackdown, I think Tennessee and Illinois have had a crackdown on wholesalers where they’re making them become licensed realtors. So I think this kind of negates that because you’re actually purchasing the property, right? You’re showing you have the vested interest, not just the vested interest or equitable interest, you actually purchased it and took it down. So you have the right to do what you want to afterwards, and nothing can come back. So from a legal standpoint, we’re probably the safest and best. I am licensed in Pennsylvania. I probably will get licensed in Florida. And occasionally we’ll do some of those assignment deals, but for the most part, we just take them down, resell them. And in this market, as you know, wholetailing has been unbelievable, just getting the property in decent enough shape to be mortgageable reselling it, not sitting on it for 6, 7 months while the rehab is getting done, while the showings are going on. It’s much quicker, you’re in and out 30 days at the most, and you’re hopefully selling it in 30 to 45 days in this market right now.
So, it’s been much quicker and better.
Right. So the reason you actually buy the house and take ownership of it is, that way, regardless of where you’re doing business, you don’t have to worry about there being issues with just collecting an assignment fee. Am I hearing you right on that?
Yeah, absolutely. I mean, we would prefer to do it without having to have all the cash and buy it, but the banks don’t allow you. So if you buy a property from the bank, you can’t just assign it to another buyer, you must take it down in your name and you can do things with it. We’ve done things in trust. You know trusts are great. But the problem with that is, unless it’s an investor that’s a buyer investor, that trusts in you and understands what you’re doing, that they know what you’re doing, they usually don’t want to buy your trust, or if you put it in an LLC and sell them that LLC, they don’t usually want to buy it. And I totally understand that, they’re going to want to put it in their own name. We’ve run into that in the past with Fannie Mae. Fannie Mae had that anti-flipping where you couldn’t sell it for more than 20% of what you paid for. I think it was 90 days after the deed was recorded, not when you purchased, but when the deed was recorded. So with those properties, it either had to do something off the HUD, or we just had to wait those 90 days and then just sell it to them at that point, which has other risks. But, overall, if you’re making profits, I’m alright with that.
There you go. So when you’re buying the houses in today’s market, are you primarily selling them to other real estate investors at a profit? Or are you selling them to people that are actually going to move in and own the home themselves and live in it?
In this market, we’ve done more to end-buyers. More people are going to live there than in the past. Typically, we sell to other investors for the most part, but in this market, the way it’s been and the kind of properties that we targeted, we’ve kind of pivoted and go on into less of the trainwreck properties, the ones that need everything and more to the ones that just need a little bit enhancing to get it back to become mortgageable and then resell them. So we’ve kind of pivoted a little bit just in this market to try to take advantage of what’s there. Go after the low-lying fruit rather than everything else.
I got it. I know it’s going to depend on the market. I mean, you’re in all kinds of markets all over the nation, but what kind of profits are you seeing in today’s market doing the business the way you do it?
So our wholesale profits are generally around $12,000 per deal, and that’s your standard wholesale. If we’re wholetailing it, we’re around $32,000 and the full-scale fix and flip we’re into anywhere from probably close to your number, the $67,000, but we’ve had plenty of that have been $80,000, $100,000, even $120,000, especially in this market over the past year. So it’s been nice, but those are your full-scale rehabs. And those were the home runs, obviously, they’re not your average.
Right. And we’ve already said it, but I want to make sure our audience understands it. Tell everybody what wholetailing is versus wholesaling.
Yeah, great point. So wholetailing is more or less where you’re getting a property and it just needs some paint, some carpet, it doesn’t need a full kitchen gut. Maybe you just repaint the cabinets. Maybe you put new cabinet poles on them, or maybe put countertops on them. With bathrooms, you’re okay with them but maybe you just put a new toilet in, or a new vanity or even easier sometimes, just a new faucet on a sink. And then you’re reworking your painting and carpeting. Usually, you don’t have to do roof siding, windows, things like that. So wholetailing has really just been super profitable. It’s more so than the fix and flip, believe it or not, for us. When you look at it from a time standpoint, we’re selling those so quickly, as quickly as our full-scale fix and flip, but we’re putting less effort in, and our holding costs are so much lower. It’s been worthwhile for us and less management of contractors because it can be one of the most difficult, taxing things in this business.
Do you think that wholetailing, or in other words, “not doing a full rehab,” but you just make it okay and nicer? Do you think wholetailing is so much more popular now and working so well because there’s just no inventory?
That’s it. You hit the nail on the head with that, Jay. We go back to 2009 when I was doing fix and flips. If I didn’t do a full-scale, redo everything, you didn’t have that many buyers interested in the property unless it was the first-time home buyer. But as the market has gotten hotter and hotter and has lesser and lesser inventory, people are being less picky figuring they’ll do some of the work themselves. So it’s really just kind of taking what the market gives you. We follow it in our business. We follow the “Keep it simple, stupid” theory, and I think that’s the best thing to do in any business. Whatever the market is giving you, take that, right? If you don’t need to do the full-scale rehab, don’t, unless it’s going to warrant you getting an additional $50,000 or $60,000 where it becomes worthwhile, just take what the market gives you.
Yeah. So how do you determine how to price? Like if you’re wholetailing a house to an end-buyer, what’s your criteria for pricing that home at the stage you got it in versus a complete rehab?
So basically what we do now with the wholetailing, we’re discounting it at 10-15% off what the normal end, full-scale rehab would be, which is still giving some equity to the buyer, should they want to do something there. And still it makes them fly off the shelves, I tell you, they don’t last very long when you’re just doing the basics and people see it’s clean and easy. I can change the carpet. I can change the paint color or whatever, I can do this or that. So people aren’t as picky as they used to be because there’s just no inventory. It’s hard to be picky. You take what’s there, basically, more or less.
So in this market, as long as it’s clean and it smells good, if it’s dated, that’s okay, right?
Yes, dated, okay. You go do the ’80s, ’90s style. People can live with that as long as things aren’t broken, right? As long as you don’t have holes in the roof and things like that. Roofing is definitely a big issue, HVAC system for people. We just did one in Laurinburg, North Carolina, and unfortunately it did need a new HVAC system, so we did install that. We’re still gonna do pretty well. His property is still gonna net around $32,000, even though we had to do the roof and the HVAC system and the rest of it was a wholetail.
Gotcha. So when you’re wholetailing to an end-user, are you finding the buyer by listing it with a real estate agent in the MLS?
We are. So, 90% of the time we do that. And occasionally like we did in one in Charleston, Tennessee, which is a very rural area, I had my disposition manager reach out to a bunch of agents in that area to just let them know we have a property and we offered them 2% commission. And the only thing we had to do was put it in a hot water heater in that one. That was literally it.
That’s amazing. So first of all, to be virtually wholesaling, you have to find these deals and there ain’t no inventory to speak of. So everybody wants to know, well, if there isn’t any inventory, how in the world are you finding the deals?
Well, we got a little bit of an advantage over a lot of other people in the market. Most real estate investors out there stick with certain territories, maybe one or two markets out there. Occasionally somebody does three or four, but for us, the whole country is our oyster, really. That’s what we look at. We got inventory anywhere. We have preferred states where we’d like to do business, don’t get me wrong, but if there’s a great deal in another state where we don’t typically do business, we will go there. Just to give you an example, we’ve done 5 deals in New Mexico this year. We hadn’t done a deal in New Mexico in I think the previous 6 years before that, so we just kind of take what the market gives you. If there’s a deal there, we’ll take it. And we also hit those tertiary markets, and the second-tier markets that if you’re looking at a town or a city like Charlotte, go an hour outside, like a town like Kannapolis, Gastonia, and then go another hour outside that loop there. And then you’re in like a third-tier market. We target those markets because people do want to live there, especially now with what’s going on with the pandemic and everything. People are looking to be more and more rural. So it kind of fits right into what we’ve done all these years, which is a big advantage for us.
Right! So how do you get the leads?
So for us, it’s our own time. So we pay no marketing fees, right? We don’t have any marketing costs whatsoever. I had turned off the direct mail marketing in 2013 and I just buy exclusively off of these auctions. For me, it’s really looking at what’s on the auction sites right now. We use VAs. We have several VAs that do this for each different auction site, whether it’s Auction.com, Xome, the Hudson & Marshall, Hubzu, Realty Bid, Auction Network, HUD Home Store, Fannie and Freddie. We have them go through and they do what I call “First-level fig.” They look at it and we give them the criteria of what we look out for – square footage, repair amount – and then they’ll send me a spreadsheet on Excel. Yes, yes, no, no, no. So, let’s say there’s 250 properties on this particular auction that’s coming up.
We might weed that down to about 20 to 25 that we’ll actually bid on. And then as the bidding process goes, if we’re getting out there and we just let those go off and again, we pick the low-lying fruit there. We’re not going to get into a bidding war. Today, for example, there’s a property in Florida that was in Sarasota, which is a red-hot market. It’s a nice market. My maximum allowable offer is 141 because there’s a buyer’s premium on this property. So the most I would spend was 150 because the ARV was 350 tops. This thing ends up getting bid up to 203 with a buyer’s premium. It was over 210 that that person is purchasing a property for, plus it needed everything. This thing needed at least 125 and work. So basically whoever bought this is probably an end-buyer, but they’re going to be upside down when all is said and done. So we fall off that, we have our maximum viable offers that will go up to, and you can’t get emotional with it, right? That’s a nice market. I would have liked to have been in there, but it didn’t fit our criteria. So I let it go.
Paul, in case we’ve got some listeners that need to leave the show a little early, go ahead and let folks know how they can get in contact with you and continue the conversation.
Sure, absolutely. So we have a couple of different websites. www.REOAuctionAcademy.com is one of them. And also FlipRealEstateVirtually.com is another one. Both URLs work. You can contact us, and if you want to learn more about our coaching program, which we teach people how to do exactly what we do. As a matter of fact, we teach a lot of other investors who do direct mail, postcards, and PPC. They want to learn this aspect of the business. They actually hire somebody or have somebody who doesn’t have as much going on and let them handle this whole new arm of the business for them.
Again, those 2 websites are REOAuctionAcademy.com, and the other one is FlipRealEstateVirtually.com. All right, so you got the leads coming in. You got your VAs researching all the houses that are coming up on all these different auction sites. How in the world do you have boots on the ground, eyes on the ground, in all these different markets, taking a look at these houses to even know what a close estimation of repairs would be that you need to do? Because, obviously, you don’t want to bid on a property until you know what kind of repairs you’re looking at.
Absolutely. And this is one of the most important things. So how you develop these kinds of relationships and these relationships end up blossoming and give you more deals throughout the years. I’ll give you an example of it. So in Tucson, Arizona, there was an REO agent who I bought a bunch of properties through over the years from 2010, all the way through now, we still currently do. Basically, he saw I was a serious player in Tucson, Arizona. We wholesaled a bunch of them. And then he was starting to bring me deals and bring me leads and bring me properties. So he was my boots on the ground. And how that started was I just reached out to him initially after I was bidding on some properties, and this is what you need to do if you’re entering any new market, you need to contact the realtor or the REO agent for that property.
If it’s a bank-owned property, get some details. You’re trying to get the BPO, which is the “Broker’s Price Opinion” of the property. And if you can get that, that’ll tell you basically what they think the “as is value” is, the 30-day sale price, the 90-day sale price, the 120-day sale price. And they’ll show comps on there, and that’s like, that’s gold. That’s gold when you get that. So you utilize them for that. You also try to get additional pictures from them. And then you’re trying to get what kind of repairs are needed because they generally know, again, the utilities usually aren’t on, but they know what repairs were needed. They know if the roof’s leaking, they know if the air conditioner or heater looks really bad and it looks like it needs replacing, the hot water heater. They’ll tell you if the kitchen needs to be replaced. And the best referrals I get for contractors, hands down, is from these agents.
And the big reason is these contractors who work for these agents get referrals and they get a lot of referrals. So they do not want to screw over these agents when they’re giving them, basically, free marketing. So the guys that we’ve used from all the agent referrals have all been good, and I’m going to knock on wood when I say that, the ones that I run into that have been bad are ones that I picked on my own. I’ve also gotten great ones, but the best referrals from people who are there, who have boots on our ground and have local people, you know how to do those repairs. So we relied big time on the agents on these properties. If there is no agent, we use a company called BPO Photo Flow that’ll go out there and take some pictures of the property.
And if we have a lockbox, they can usually get inside, take more pictures. And we kind of tell them what to look for, like take pictures of the exterior, make sure there’s no cracks in the foundation, take a picture of the basement, the systems, make sure the HVACs are right, hot water heater, kitchens and bathrooms are important. You know, anything that they noticed cracks or issues with flooring, whatever, anything off-level. We want to know that kind of thing. If there’s moisture in the basement, just so we know what we’re in for an aid, generally do a pretty good job and they’re fairly inexpensive to utilize.
And what’s the name of that service? One more time.
It’s BPO Photo Flow, like “Broker’s Price Opinion.” BPOPhotoFlow.com. And they do a really good job. They’re not in every market, so sometimes we actually have to reach out to other local agents and send them out there. And then we just pay them basically more or less to go out there and take some pictures for us and then tell them if we buy it, we’re going to list it through you. We do offer that. And if we do buy, we do end up listing it with them or having them help us sell the property if they know some investors.
So these REO real estate agents, also known as bank-owned real estate agents, have the listing for these properties that are going up for auction. So obviously if you buy it, you don’t have to pay them anything for the purchase because the bank, the REO, is paying their commission. But do you compensate these agents in any additional way other than when you make a purchase, the bank pays them?
We do at times, like if we know they’re going to be doing above and beyond, and they’re not going to get the listing, we will definitely pay them. We’ll say, “What do you want for this? Or what free one for that service?” They usually are very, very fair with the prices and we’re glad to do it. We just Venmo them most of the time. I’ve never really run into any issues with that. Most of the time, they’re really happy to just hand the listing for you. I even have thought of them managing my rehabs for me because they know the contractors, they kind of manage, oversee, and take pictures. They’re happy to go do that. They see the progress and they want it listed so that they can get their permission when all is said and done.
Awesome. And how do you find these REO agents? I suppose one way you could find them is, well, your VAs are looking at auctions coming up. They go research the property and right there, they see who’s got the real estate listing on it. Right?
Absolutely. And you get a lot of these agents who will have 5, 10, 15, 20 different properties. And they’ll cover a huge geographical region, which is crazy. I mean, they’re running around all the time. Nobody works harder than an REO agent, that I can tell you. Those guys and gals, they work their butts off and they are good. Their numbers are so spot on. For example, on a property we had in Ohio a few years back, I was talking to the agent, “What do you think the value of this property is, as is?” And she’s like, it had to be somewhere between 17 and 20. Sure enough, we picked it up for like $7,500. We sold that for $17,500. She was just right on the money with it. And that happens time and time and time again, the only time, if you’re in with a newer agent, that’s where you want to be careful.
If it is a newer real estate agent, they’re not going to be as experienced. You’re going to want to try to lean on a secondary agent. Hopefully somebody that’s in one of these towns that has their own brokerage that’s been there for 10, 20 years and really knows the market. Well, those have been our best sources. Far and away, the people that are in small mom & pop shops, they just know the market. They know everybody in town. They usually know who lived in that property, especially if it’s a smaller town, like you live in, Jay, they know people, right? And they’ve been our greatest source all over every market that we’ve ever been in.
Let’s say that you make a bid and you win the bid at the auction and all these auctions are online, right?
So you win the bid. So now you’re the winning bidder. On average, how long do you have before you get close? In addition to that, do you sometimes, or always get a home inspection before you take it down?
So, Jay, I’ll answer the first question first. 30 to 45 days usually is what you got, time-wise. Sometimes a little bit longer. If the title is a little cloudy or there’s past issues or where something wasn’t done right at the Sheriff’s sale. That’s the answer to the first question. The second one, we never get a home inspection. We’ll just send a contractor out there. I don’t have too much faith in the home inspection field, business, people. Most of these guys learn out of a book and never swung a hammer a day in their life. So the people I rely on are the contractors. I try to find general contractors that really know everything, as many aspects of it. And yeah, if they miss some stuff, sure, they’re gonna miss some stuff here and there, but they’re going to see the big stuff. And they’ve been a great source for me and are far less expensive because you’re just gonna pay $400 or $500 for these home inspections when I can send a guy out there for a hundred bucks to give me a pretty good inspection, you know.
And again, as you said, you find these general contractors by referral from the bank-owned real estate agents, right?
Yup. And about 95% of the time, they don’t charge you a penny to go out there. They’re hoping to get the work.
That’s fantastic. Well, this is a fantastic business model you’ve got, Paul. Any parting comments?
I love it. It’s a great business model. The one thing I really like about it is that I can turn a business on or off anytime I want, unlike the direct mail marketing or the PPC where you gotta be on those calls right away. On a PPC lead or direct mail, it’s constantly going. If I want to go on vacation, I shut down for 2 weeks or a month. If I want to go overseas, I can do that and just stop operations and start right back up when I get back. So I do love that. That is my favorite aspect of the business. I also don’t have to deal with home sellers 99% of the time. So those are 2 facets. I really like how it’s really simple. It’s not turnkey, but your time is your marketing costs, right? Your time and energy, which is your most valuable asset. Your time is all your costs involved.
