Anthony: Good afternoon, everybody, Professor Moore here. Welcome to the Tuesday case study call. This one is special for me because it’s sort of in my backyard. I’ve got L&L here, Lionel and Lance, in my backyard in Raleigh, North Carolina. As you know, I’m in Charlotte, North Carolina, so not too far from me. I’m really excited about this case study. I met these two folks last year at Real Estate Ignited, when we had the huge event with Fortune Builders and just had thousands of people there.

I’m just really excited to have these two gentlemen on the call today and they’re going to share with us some of their experience. They are what I would consider vets in the industry. They’ve made a pretty good name for themselves and they have a great brand in their area in Raleigh, North Carolina. I’m not going to steal a ton of their thunder, so I won’t get into the deal, their background or anything like that, but what I want to do is let you know that if you’re brand new to this here’s how it works and here’s how you’re going to get the most out of today’s case study.

It is live, a live interaction, so there may be random audio glitches here and there. That happens. Just know we did test the audio prior to this and it’s up as high as it can possibly go. Make sure you turn it up on your computer. In addition to that, if you have questions or you’re confused about anything, I do want you to write into that questions panel. I want you to write in anything about this case study or you heard a term maybe you don’t understand, whatever it might be.

This is how we interact live so we’re not going to break up the presentation, but at the very end we’re going to open it up to the live Q&A. I’ll be answering some of the questions in the background, as well, so if you type in a question just know I might type one back to you. In just a moment, I’m going to mute myself and hand it over to the guys.

Now, case studies, the best thing to get out of case studies are a couple different things. One, the minutia of how they work through the transaction, how did they decide whether to wholesale or whether to rehab. Pay attention to things like the numbers: holding costs, funding, design choices on the rehab. That’s why we do these case studies, so you can see what’s working in your area, not in your area. Just understand that you have a lot of different options that are out there in this amazing business, this amazing real estate investing business, so latch onto those details as much as you possibly can.

Hopefully, you will connect with these two after the call. We have their Facebook page up here. Two excellent fellows, so definitely don’t be shy with that. We all want to stay connected as a Mastery family as much as possible. Without further ado, guys, are you out there?

Lionel: We’re here. We’re ready.

Anthony: Awesome. Well, I’m going to turn it over to you. I’m going to mute myself and let you guys run with it. I look forward to it.

Lionel: All right, thank you. Good afternoon, everyone, my name is Lionel. If you’re looking at the screen, I’m the guy with the bald head. My business partner is Lance, the gentleman right next to me there. It is definitely an honor and a pleasure to be on

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with you today. We look forward to sharing our knowledge and what we’ve learned, good and bad, the ups and downs of real estate.

While here on this main screen, just to give you a little background information on our company and our company name, Lance and I came together about a year ago and formed a partnership and so we’ve sort of branded ourselves as the Finley & Lightner Group. When we initially started out, I was actually under Fortified Solutions and Lance was under Tangible Resources and we came together to create our parent company, which is the Finley & Lightner Group.

A lot of times people are looking for us, so when people call we’ll ask how they found us. We probably have five or six different websites, so we like to get information and feedback from them. We’re branding ourselves a lot, so we just want to know what name or website they contacted us under. So without further ado, we’ll go ahead and get started.

Lionel: Just initially looking at the deal here, you can take a look at our numbers. I’ll try to explain some of them. Some of them are self-explanatory. If you look at our holding costs we sort of lump everything in there, so we want you to understand that actually includes our private lender fees. Also, we had a fee to the seller, which was a cover of a mortgage which we’ll explain here in a little bit. Also, commissions and we have some closing costs in there.

We’re sort of fortunate, I am a licensed realtor. So with my broker in charge, he allows us to list properties with a flat fee. We pay a flat fee of anywhere from $300 to $500 to list our properties, so we only pay commission. I know you’ve heard the coaches talk about needing your real estate license, so there is a benefit all the way around of getting your real estate license.

When Lance and I do a campaign, whether it’s absentee or whatever the campaign is, initially we always go in to wholesale a property. That’s sort of how we have our business model set up is to initially wholesale. Not that wholesaling is particularly easy, but when I say ‘easy’ it’s just that we can make $10 or $15,000 to wholesale or we possibly can rehab a property and make $10 or $15,000. So we look at all the numbers in the beginning to see what’s going to be best and if we can get a quick wholesale fee out of a deal then we’d rather wholesale it and then move on to the next deal and wholesale, wholesale.

However, with this deal here we initially set out to wholesale, but we realized this was going to be a sweet deal with a nice profit on the backend so we sort of changed it up a little bit and said you know what, we’re actual going to keep this one and go ahead and rehab it, even though we had some challenges as far as where the property is located. There is a business right across the street, but we didn’t think that was going to hamper us just because of the area the property was located. We knew it was in a good area and that we could really move this property pretty fast.

So when we met with the seller, she gave us a little bit of background on herself and told us that the property was vacant and she was living with her mother. Her mother is a lot older, so she moved in with her mother to help take care of her so the property is just sitting. As you can see in the pictures later on this slide, it’s not that

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the property looked horrible or bad. It did need some updating, but she was using the property to basically store everything that someone could own. So when we walked into the house, we could only take about four or five paces and couldn’t go any further. We had to actually clear a path to where we could sit on the couch and start discussing the deal.

Like I said, it was empty for about two years and we just wanted to see what we could do to help her to get her out of the situation and try to move forward and get a deal done on this property. All right, Lance.

Lance: Like Lionel said, the seller was struggling to make her first and second mortgage, so we agreed on a sale price of $60,000 after some negotiating. She wanted $80, we were at $50, so we sort of met in the middle. Lionel got all the contracts, mailed them to me, I printed them out and set an appointment to go sit down with her to get the signatures. When she saw the actual closing date she had a problem with it because she was concerned about making the payments, so we agreed with her that we would help her make the payments and that we would recoup what we put in as far as payments at closing and she agreed.

She was also concerned about moving all the stuff. She said I don’t have any help, I don’t know what I’m going to do with all this stuff. So we rented her a storage van and Lionel and I took a Saturday, we went over, backed up this truck and then we sort of realized what we had gotten ourselves into. Lionel just happened to look up the sidewalk and saw about seven or eight kids walking down the sidewalk, we recruited them. They were actually on the way to the swimming pool, so I’m really surprised they stopped.

We recruited them to help us move all the stuff out. It took a whole day, so we loaded the truck up. I went and talked to their parents, as well, to make sure we had permission for them to go with us to the storage unit and they all agreed. We took them to the store and got them snacks. We took them to McDonald’s afterwards and bought them meals, as well as paid them all some cash money. So they were very, very excited.

Lionel: With this deal and the acquisition of it we wanted to use a private lender and how we found our private lender was actually through our local REIA. She actually sort of came to us. She advertised a lot within the REIA that she was a private lender, so when I got her information I said I’d like to set up a time with you where we can sit down and discuss possibly doing some transactions together and she said fine.

Sometimes you meet different people that say okay, we’ll get a private lender and so on and so on, but what I didn’t know at the time was that this was actually her first deal as a private lender so everything was brand new. She was actually doing like a correspondence course to learn how to become a private lender, so I met with her husband. Of course, in the Mastery we have credibility packets and I had a credibility packet. I put everything together for her and let her see it and she was really, really impressed with the credibility packet. So use those packets, they do help. They really set you apart from everyone else.

We started negotiating, I think initially she was at 12%, I was at 10. Of course, I didn’t want to make monthly payments, but I knew since it was her first deal and she

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was still learning that I probably wasn’t going to be able to get around trying to forego the monthly payments. I told Lance we’re going to have to do this whether we want to or not, so we agreed to the monthly payments with a private lender and within a matter of weeks we were closing.

She did require an appraisal, also. Even though I’m a licensed realtor and I provided comps for her to feel better with this deal she wanted us to get an appraisal, so we had an ARV appraisal. That’s one thing that’s key, so I had to call around to a lot of different companies because the companies I previously used stopped doing ARV appraisals. Some of these companies will only do as-is which doesn’t work for us, especially when you have a lender who only wants to do 65 to 70%. So we had to make sure we were getting the right ARV for this lender to be able to loan us the money to complete the deal.

She loaned us, initially, $60,000. We said can you do $67, because we decided we were going to do a light rehab on this property, but the more we got into it and the more we looked at the area we decided that $7k wasn’t going to work and so we said we’re going to go ahead and bump our rehab costs up and over-improve this property. One of the reasons why we felt we could do this is because there was a property that was on the market literally two blocks from our property for $169,000. So we figured if we come in conservatively that we could get our number and possibly get a great return on this property.

So here it is. Believe it or not, this was not the worst-looking house on this street. There were probably a couple others, but you will see that the house is yellow and with the way Fortune Builders teaches us how to rehab homes, of course, this doesn’t really work. You want that three-color palette on your property, so if you take a look at the finished product on the right you’ll see there are definitely three colors there. We like to use a cream color, so we sort of shower it in white because we like the earth tone colors. That’s what we do on our properties to try to give it more character is more earth tone-type colors for our properties.

When we started out we would not have had to do the shingles on this house, but we ended up doing the shingles because we wanted to put out a great product. There were also some little patch repairs and we didn’t think that would be the way to go to try to get the number we were trying to achieve on this property, so we decided to go ahead and re-shingle the roof and also to add the shutters, a different design of the shutters.

One of the issues we ran into was that some of the Masonite on this house was dry rotted. So we knew there was some water getting into it, but at the time we couldn’t tell that there were actually termites. So when you’re looking at the front door right to the bottom left, there were four or five rows of Masonite there that were wet and we pulled them off and saw the termites. Luckily, there was no activity, but we did have a company come in and treat it.

We were comfortable and didn’t do a pest inspection on this one. On some properties we do, it just all depends on your comfort and level of experience. When we opened this up we saw that it wasn’t active, but we had it treated, like I said, just for sanity and to make sure there was no other activity going on on the property. It was relatively inexpensive. While we were doing that we had the company go ahead

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and do a vapor barrier below, so when we had our home inspection it looked brand new down there. We didn’t have any further issues after that.

Going a little further on into our kitchen here, this kitchen for us was a project, definitely, when we first started. If you look at this kitchen in the picture on the left, it was actually an L shape. That L shape came out so far to where you really couldn’t access the living room, which is that door further down to the left, so we had a good contractor, actually Lance’s uncle who’s been in business for a little over 30 years, and he was able to cut that down.

If you look on the right, you’ll see that one cabinet isn’t finished. He brought it beside the dishwasher and was able to relocate that cabinet and you can never tell that we moved anything in this kitchen. We went from an L shape and turned it into a galley. These cabinets, we actually refinished them and just refaced them. So it came out really well. We had a gentleman come in and, typically, what we like is for them to be sprayed, but we had them brushed and they still came out and looked pretty good.

Within here we also widened some walls. If you look at that picture on the right looking straight through the dining room that opening was only about 30 inches, so we had that opened up a little bit just to give more of an open-concept feel. Then if you look at the picture to the left, not the two doors right in front of you, but there’s a door to the left and we had that widened also just to open it up a little bit.

One of the other things we did here is that we didn’t put granite in this property because of the price point. We actually went to our local Surplus Warehouse and bought some Formica countertops, I think they were like $50-$60, but we had a gentleman that actually will spray your countertops. So if you have some older-type of countertops, then he will actually come in and spray them. We had him come in and spray this other finish on it to sort of match our cabinets and the backsplash, so when people came in and saw that it almost looks like granite once he’s done with it. So that’s one of the things we did there to sort of freshen it up a little bit.

Going into our living room, if you look at that picture on the left you’re actually coming in the front door. You can see how dark it looks in there. The key here is the fireplace, so if you look at the picture on the right one of the things we do, because Lance and I are very frugal and like to cut costs, we visit our local restore and habitat a lot and when we see stuff in there we will buy it. We have storage and we’ll place it in storage.

So if you see that fireplace you’ll see it went from brick to travertine and I think I paid maybe $150 something for the travertine. That’s just a little bit of it I still have some in storage. So we were able to go over that brick with the travertine, it’s just another way to, of course, update it and give it a modern look, but we were able to cut costs and we really like to cut costs a lot.

Also, with the floors you will see that it’s actually not hardwood, it’s actually a hand-scraped tile with that appearance of hardwood and everyone loved it. Once again, we love to cut costs, so I think the original cost was like $2 and something cents a square foot. I’m a veteran so I get an additional discount at Lowes. This was actually priced at $1.17 and then they gave us another 10% off of that.

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So we were able to get these floors and put them down. We actually ran them throughout the living room, kitchen, dining room and the hallway. Like I said, when people came in the first thing they said was oh, my goodness, look at these hardwood floors. We would just smile and grin and laugh and then we would let them know this is actually tile.

One of the reasons we did this is because, especially people who have pets, when you initially came into this house you could sort of smell a little bit of urine so we did have to cut out a portion of the subfloor, but going back over with the tile was just a great piece. Of course, there’s backer board under there, too. So for people that have pets, one of the things we were thinking about was that they won’t have that concern of carpet and hardwood floors that are stained and soiled.

Before we did this and you can’t see the picture because it’s not here, but this whole living room, the whole area including the dining room had peat carpet. I don’t know about you, but my wife doesn’t like peat carpet. So we just took all that stuff out and made sure that we could put out a good product.

I’m going to point this out now and we’ll talk about a home inspection later on, but if you look at the photo on the right, that back window to the left, we had to cut a piece of subfloor out there because there was water coming in from the fireplace stack. One of the things that happened was when the contractor cut it out he replaced it fine, but there was an additional little hole, probably two-inch in diameter. That wasn’t caused by the contractor, but it was there so in the home inspection the inspector found it.

Like I said, it’s not a big deal because it wasn’t rotted out or anything like that it was just a small hole. Remember, we went over the top of this subfloor with backer board and then the tile, but we’ll explain later how that cost us the first buyer on this property. Also, one of the things I ought to point out is the crown molding. That also came from our local Habitat. It wasn’t MDF that was the real deal from probably the early 1900s, so we like to reuse a lot in our properties.

Our dining room, of course, the picture on the left it was a mess. One of the things you have to try and do and we tried to do it in this house is to stay on schedule. Sometimes you want to have a lot of different contractors in there going through the property and working, so if you look at it we had some folks that were trying to take care of the drywall because this house had a lot of wallpaper in there and then also trying to put down some tile at the same time.

You just have to be careful of who have and when you have them in there. We were trying to get this thing rolling and speed it up a little bit. It’s no big deal, we were able to manage it and get it done, but one of the things to be cognizant of is that you have people working on top of each other. They start to get a little upset, we get a little upset, but we got through it and you can see the finished product there on the right.

One of the key things here, of course, is the dining room, but when you see those two doors in the back right-hand corner of the kitchen there was actually a washer and dryer inside there. So we took that out and made that a pantry, which is really

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huge. This kitchen is really a nice kitchen. So we took that out and relocated the washer and dryer to another area in the house, which we’ll talk about in a minute. We took part of a master closet, but we still made that master closet bigger.

Once again, one of our little ways to save money, if you look at this light feature here I want to say we paid $25-$30 on Craigslist and then we just refinished it. People came in and saw that thing and they were just enamored and thought we paid hundreds of dollars for that light set. Like I said, we definitely like to reuse when we can.

The main bath and the master bath, of course, you can see our before picture there. I’m pretty sure a lot of people out there, especially men, get haircuts. When you get patches in your hair, you can look at these walls here. My business partner, Lance, caught himself loosing sweat equity taking off some wallpaper, but he did a lot more damage when scraping it off. We’ll talk about sweat equity in a minute, but I really appreciated him helping out on this property because we did save some money on labor costs. We did what we could, but we had to get a drywall in there anyway so they came in and touched up the walls.

Of course, you can see the finished product on the right and you would never know that Lance was in that bathroom taking down wallpaper. The one in the middle is the main bath and then the bath on the right is the actual master bath. One of the reasons we over-improved is because we knew we could get our number for these bathrooms here. They’re really nice and we put a lot into them.

That picture on the right is the master bath and the only thing to the right of that is the shower. So it’s a really small master bath, but we knew if we made it nice enough that people would overlook the size of the master bath. No one ever mentioned anything about how small that master bath was, just how nice it was. If you look at those countertops they are Formica. There’s a company we go to and they actually like granite, but they’re actually Formica countertops and they came out and looked really nice in the bathroom. Like I said, we try to cut costs and do everything we can in our properties.

One of the things you’ll notice on the property on the left, that hole in the ceiling there, there was actually a skylight there. I’m not a big proponent of skylights, some people love them. I just think over time they can leak and, of course, this one was leaking, so we just decided to cover it up and took it completely out. Of course, we put popcorn back in there because that’s what most of the house had and just to keep it all around with what was going on in the house. But that’s what we did there, just removed that to make sure it all matched up with the rest of the house.

Management of the Rehab

Like I said, initially we only asked for $7,000. So you may be asking yourself, where did the rest of the money come from? We just self-financed that ourselves rather than borrowing more money from the private lender. We looked at it as we have a really hot market. This probably was in a good area close to what we call the Beltline here in Raleigh, so from this property they could get on the Beltline in literally five minutes. If they were going to go to Durham or Chapel Hill, wherever they’re going to go, they can get on the highway really easy. Easy access, so we

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know that was in our favor and then, of course, being in Raleigh and close to downtown was in our favor, so that’s why we decided to over-improve.

We know that’s almost one of the cardinal sins, but if you’re going to over-improve you just have to make sure and do your research that it’s going to be beneficial. As you saw from the beginning, it was beneficial to us to do it. We looked at the risk versus the reward and we thought it was worth it and so we just moved forward with it.

Contracts versus Sweat Equity

As I said, Lance’s uncle has been in the business for almost 30 years and he’s actually still working with us. We didn’t bring in a couple other people on the property, but I have sort of been doing this work since I was kid so I said, Lance, we’re probably going to put a little sweat equity into this since we want to over-improve and keep our costs down a little bit. It just depends on you, but we know that that’s not the best for our business for us to be in there doing work on the properties, but on certain properties we know we will probably have to do that just to cut cost a little bit.

We know that we can put more into our business if we’re out finding more deals and so on and so on, but that’s just something we decided to do here to try and maximize our profit margin in the end. That’s why we decided to put a little bit more sweat equity into it as we usually do in our deals.

I’ll let Lance explain his neighbor issues because he got the brunt of it instead of me, so I’ll let him go into what happened with the neighbor on this house.

Lance: We had a next door neighbor that had issues with a tree root and a big tree that was in the property yard. This tree was sort of hanging over her driveway and there were a couple roots that were going towards her foundation. We just had the property under contract one day and the seller invited me over to meet her and immediately the lady said you have to remove this. You need to cut down the tree, this, that and the other. I work early in the morning so you don’t need to be working at night or in the evening when I’m trying to sleep.

I just explained to her, I said, look. I have to talk to my business partner about the roots and getting it removed. I’m sure we could come to some type of agreement, but she was really nasty. I also told her, I said, look. We’re professionals, we’re accredited with the Better Business Bureau and she cut me off. She said well, you want to keep your reviews good. So she was basically threatening us saying that she would give us some bad reviews, which probably would have gotten her in some trouble from our lawyer.

It turned out that we removed the tree and that actually did us a great favor because it really opened up the front yard and the front of the house. Before we removed the tree, you would drive past this house and you would never notice it, it really just opened up the line of sight. Also, after we removed the tree a stump grinder just happened to be passing down the street, so he stopped by and ground up the stump and removed the roots from neighbor’s house, which took all of five minutes.

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So she was very happy and we invited her to come over throughout the process to take a look at what we’re doing. So by the end of the rehab she was one of our best friends and was telling us that people stopped by that wanted to buy the house. So we sort of took a negative and turned it into a positive.

Lionel: Thanks a lot, Lance.

Unplanned Repairs

I mentioned these same shingles earlier. The roof stack on this house was horrible. The entire roof stack, of course, we said was Masonite. I’m not a strong proponent of Masonite, but it was all just rotted out and soaking wet and so we had our contractor start removing it. Once he removed the Masonite, of course, what we sort of figured was that the underlayment was going to be wet and nasty, too, which it was. So we took all the Masonite down and we replaced all the wood there.

One of the things we noticed when Lance and I got up on the roof to take a look was that you could literally push on the roof stack. This house was built in the 1990s and it actually was not secured to the house properly. So you could literally push on it and if we’d pushed hard enough we could have pushed that whole roof stack over on the deck in the backyard. So we had to have our contractor get under the house and secure it to the house like it should have been when they built the house, but it wasn’t so we took care of that.

One of the things we pride ourselves on is if we find something we don’t cover it up, we fix it. We sort of look at things as Lance has a 10-month-old and a daughter that’s three getting ready to turn four, I’ve got a son that’s eight, so we always look at it and say would we want to live here, would we want our kids here, is it safe. So just keep that in mind, too. If you always have to question yourself whether you should do it, typically, we just do it because it’s just the right thing to do. People appreciate it and it will come back to you down the road.

In one of the bedrooms we had an issue and, remember, we could not properly assess the house on the inside because she literally had stuff stacked to the ceiling, literally, in every single room. So once we were able to get all the stuff out of the house then we noticed in this one bedroom that the ceiling and the drywall was bowed. We were like okay, it’s bowed.

The screws may have just backed out of something, but once our contractor went up into the attic he saw where there were two joists that had actually come loose. They just dipped down and had been that way for so long. Then she probably had over 1,000 empty boxes in the attic, so with all that weight over time that’s what happened. So we had to pull all that drywall down in that room and they had to repair the joists up there in that room.

One of the things that happened throughout this process, too, was that we had a contractor in there and we found out he liked to sort of cover things up. We explained to him that we don’t do things that way, we want you to fix it properly and if you can’t fix it property then we’re going to let you go. I brought that up because he did that on another house, the same thing, the ceiling and the drywall. After that we had to let him go. So don’t be afraid when they don’t do right to let them go because we will let them go quick.

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Selling the Deal

Like Lance said, after he established a good rapport with our neighbor she was one of our best proponents in helping us sell the house. It’s one of the things like Fortune Builders teaches you, you want neighbors to be able to pick their neighbor. Of course, the people she was sending to the property didn’t buy, but still we were able to develop a great relationship with her.

One of the things Lance didn’t tell you was that she told us if we didn’t take care of the issue when we tried to sell the property that every person she saw that visited that property she was going to go straight over to them and tell them all the issues she had and try to ruin our deal. So we were like, the last thing we want is for someone that’s trying to buy our house to see this lady coming over. They’re going to think this is going to be a problem. So that’s one thing, like Lance said, making good relations.

Lance also had some connections to some agents in the area. They work with first-time homebuyers, so he invited them to the property. Of course, word of mouth travels and we had other people come by and take a look at the property. This was actually before we even listed the property. We’d already had some activity in the property, so people knew about it. Some of the other neighbors came down, they wanted to view the property and we let them come in and take a look at the property. So by word of mouth we were getting out there, getting out there. Hey, this property is coming.

Once we did put it on the market we had over 45 showings. People say oh, that’s a lot, but one of the things we did in the beginning was we went and looked at another property that was on the market for $169. We went in and listed this property initially at $155, after about a week and a half, maybe two weeks I dropped the price $5,000 to $150 and when I did that the flood gates opened and we had all kinds of showings and multiple offers.

One of the things you have to realize is that a lot of people search online. One lady told me her search criterion was up to $150,000 and we were $5,000 over that. She was actually the second lady that we got a deal with. So just be aware of that when you set your price point of how to set them. Like I said, we probably could have sold the property for a lot more in the end, but once we got it down to $150 we had multiple offers.

We actually still could have sold it for over $155 if we really wanted to with the multiple offers. So just be aware of how you price it. Sometimes if you price it lower, you can possibly sell it for more than what you originally wanted to sell it for. Like I said, we did price it conservatively compared to another property that sold for $169 that was two blocks away.

Home Inspector

You will hear a lot of this in some of the Master and with some of the other students when dealing with home inspectors. You really have to be on site with home inspectors. As I mentioned earlier I’m a licensed realtor, but when your property is in

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MLS and then it also goes into CSS (Centralized Showing Service), they can show your property, especially if you gave them access to show your property without calling you.

So what happened on this was that he went through CSS, they set it up and the inspector went out. I didn’t know the inspector was there because, once again, it was in CSS and no one contacted me. So we get this inspection report, I look at it and I’m like okay, this is no big deal, just little small stuff. If you remember earlier I told you about that little hole in the living room below that window, believe it or not, that little hole cost us our first sale on this property with closing on time.

The inspector wrote it up and he made it seem like the sky was falling. The buyer saw it and said oh, there’s a big hole in the floor so she backed out on us. Then when I saw it I was like you’ve got to be kidding me. The insulation was on the ground there and it was just a little patch job that took maybe two minutes.

One of the things here about that buyer is that she was sort of kicking herself in the butt because she couldn’t find anything comparable to ours and was sorry that she backed out because, like I said, we had multiple offers so the day she backed out we were under contract the same day. So she sort of lost out in the end and it was because her home inspector didn’t do a thorough job and he made things seem a lot worse than what they were.

Just yesterday we had another home inspection done on another property and the home inspector said to me, I can’t really find anything on your home. So I’m not saying that they have to find stuff to justify their costs, but just be aware that sometimes these little things will cost you a deal. Like I said, I was there yesterday and I’m always on site now.

One of things I mention about CSS and how I get around these inspectors and appraisers going out to our properties without us being there is now what I do is I go into CSS after we have a contract on a property, but I make sure it’s under contract for at least two weeks and then I pull it out of CSS. That way the home inspectors and appraisers have to contact me directly now to access my property.

So I get to know when they’re going in, I get to make sure I’m there on site and then also I get to speak with appraisers and also be able to give them my comps, if they’ll accept them. Believe it or not, most of them will take what you have and consider it. So that’s the benefits of being on site. If it’s in CSS don’t just give carte blanche to go into your property because it could cost you your deal.

That concludes our presentation.

Anthony: Guys, this was phenomenal. I’ve got to be honest with you and tell you that I wrote more notes here that I wanted to recap with anybody and everybody on the call than I have on any other case study. You’ve got some great stuff in here and you guys did a phenomenal job. One thing I definite want to point out is that I really appreciate your integrity in sharing that with us. It goes back to an old saying a very long ago and that’s that you get more bees with honey than you do vinegar.

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That was apparent in the circumstance and scenario that you gave with the tree. That could have gone in a lot of different directions. I don’t know how much it cost you to remove the tree, but my gut tells me that at the end of the day you probably made that money and some back just by removing the tree, so great job there.

A couple different things, since it’s fresh in everybody’s mind. CSS, that stands for Centralized Showing Service. That is a showing service that a lot of real estate agents utilize through the multiple listing services. When they list a property that’s where other agents can book appointments to show the home, so that’s all that is. Basically, what these folks are saying is rather than leaving it to the showing service to book appraisers or home inspectors they’re removing that authority from them. So they need to call these guys directly, which is great.

It’s the same exact thing we do here. We want to meet appraisers at the property, especially. I agree with you, sometimes with inspectors the nicer you make your home guess what, they’ve got to find something. They sometimes can make mountains out of molehills. So that’s where it’s really important to build that rapport with the agent on the other end and making sure you have the occasion to do exactly what you do and that’s meet the inspector at the property.

Sometimes we’ll come in at the tail end of the inspection and say if you don’t mind me asking, you’re here, can you point out some of the items that you’ve found so maybe we can address them right now on site. We definitely do a lot of that.

Let’s see, a few things that I picked up from you guys here in this presentation. Number one, the colors in the bathroom. The whole house is builder beige. That’s a part of this process. If you want to bring in top dollar listen, your contractors are going to go in there and it’s much easier for them to spray the whole thing one color.

Believe me. They’re going to cry and moan about doing multiple color and things like that, but it turns your house into a home when you do that. It takes a small bathroom and makes it like a Finish retreat. JD talks about that spa-like retreat all the time. There’s a lot of small bathroom out there in California and you’d better believe they’re going to add some color to spruce it up. It’s such a simple thing to do, but you actually have to do it.

You guys had functionality. You added a large pantry, that’s a big selling feature. Probably a lot of similar type homes don’t have that in the area, so now you’re separating yourself from the competition.

You talk about your list price. I am also a certified SPS agent, which is a Strategic Pricing Specialist. One of the things I learned through that process is that most people set up their search criteria through $25,000 increments. So you’re right, you’re absolutely right, that price of $155 probably cut off a significant amount of people that were capping their search at that $150 mark.

I just had this conversation in my backyard with another Mastery student where she has her property priced at about $215 and asked me well, hey, should I drop it $5,000? I said what for, what good will that do? I said unless you drop it to $199 it’s not going to do you any good or $200,000. Low and behold, she didn’t take my word

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for it, lowered it and saw no activity. Since then she’s lowered it to that $200,000 mark and she’s got more buyers than she knows what to do with.

It is very important to list it correctly out of the gates, so if you’re at $150 your next jump would probably be that $175 mark. So you’ve really got to start thinking about that when you’re figuring out your ARV and whatnot.

Spraying the counters, we had a lot of questions on this and I’ve never actually heard of this myself. What company did you guys use, is it just a local company or is it a national company that would come in and spray those counters?

Lionel: Yes, it’s a local company. Actually, we have a Fortune Builders meetup group here in Raleigh and one of the other Mastery students he used this gentleman, it’s a local mom and pop. This gentleman was doing his floors and he said hey, I have a guy that sprays bathtubs. We said okay, fine, we’ve got a property where we need a bathtub sprayed. He sprayed the bathtub here at this house and once we met with him he said hey, I also do countertops. I was like what do you do with countertops? He said I can take that Formica there and make it look like granite. So he’s a local guy that we use and he’s really great on pricing.

Basically, it’s an epoxy with a lot of sprinkles. It’s almost like glitter, but it’s not glitter but something similar to that. He uses epoxy and that’s how he sprays those counters. You can really take Formica that looks horrible and turn it into something that looks nice.

Anthony: It’s kind of cool. It’s like taking the concept of re-facing cabinets, except doing it on your countertops. How much did that cost, by the way, roughly?

Lionel: I think we paid $150. Of course, you can get Formica cheaper than that and put it down, but we could not find anything that looked really well with our cabinets so that’s why we decided to basically have him custom that color. We just couldn’t find it and we didn’t want to pay granite prices, so we figured hey, let’s just pay the $150. It’s a little more than we want, but in the end the product shows for itself so we think it was worth it.

Anthony: Yeah, that’s great. That’s an excellent tool. If any of you guys are Raleigh locals, definitely look up these fellows and try to contact them. I’m sure they’re happy to share that.

In terms of the ARV appraisal, this is a concept that we don’t talk about a lot, but some private lenders want to see this and some hard money lenders want to see this, as well, wherein an appraiser will go out and basically do an appraisal as if you had fixed up the property, just like we do when we try to figure out our ARVs, but a little more professional. How did you guys go about finding an appraiser that would do that? I think some of the students here are struggling finding that.

Lionel: Basically, that’s what I did, just dialed a lot of different companies. One of the things is that when I called a lot of them, believe it or not, they don’t know what an ARV is. If you say ARV they’re like what is ARV, but if you say I want you to do an appraisal based on the renovations we’re going to do in updating the property they go okay, we can do that. So I just had to with a different approach. Rather than saying ARV, I

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said we’re renovating, updating. If I give you a statement of work and I tell you what we’re going to do, can you do that?

Believe it or not, they can do it. As a matter of fact, they just drove by the house and didn’t even go in. They just drove by and said okay, that’s the house. I have a statement of work and they did it based on that.

Anthony: Excellent. That’s a much better approach. You’re right. They’re not going to know what ARV is. Unless you’re in the investing arena, you’re just simply not going to know because it’s not a normal term used for a residential-type sale.

You mentioned something that I wrote down and another student had a question on. Actually, I didn’t know that you could get this, but you said you get a vet discount at Lowes. That’s pretty neat. I didn’t even know they offered something like that. What kind of discount is it?

Lionel: It’s 10% and you can get 10% with Lowes on a lot of things. It used to be seasonal around Veteran’s Day, but now it’s all year long at Lowes, Home Depot, all of those places. I mentioned Surplus Warehouse, places like that here in Raleigh, they typically don’t do the discount, but when I go in there and say your competitors one mile up the road gave me a discount, so they give me a discount. I use that whenever I can to get additional money off and, typically, these places will do it.

Anthony: Excellent. I like his good little tip. Always ask, right? It never hurts to ask.

Carlene has a question. How many bedrooms and bathrooms was this rehab?

Lance: It was three bedrooms, two baths.

Anthony: Three-two. I’m guessing that was probably standard for that community. I know in my area that’s what everyone pretty much looks for is a three-two.

Lance: Yes.

Anthony: Now, a question about the funding. Obviously, you originally said well, I want $7,000. Then you said well, I want to do a little more, which you called over-improving. I don’t know if you necessarily over-improved. You had another comp out there that was a little bit higher, so I think you probably just went to the height of the market. Did you guys pay yourself? Did you get creative with your own personal funds that you used? Did you loan yourself the money? You probably didn’t, but I figured I ask because the question is here.

Lionel: Actually, I don’t think we did on this one. A couple ones we did after that we told ourselves we’ve got to do 12%, but on this one we didn’t do it. It was so tight and we just wanted to go ahead and just get the deal done. Like I said, we knew we wanted to have a good profit margin. So we really weren’t concerned with that on this house, but since then we have started doing that.

Anthony: Awesome. Question for you, when did you guys join the Mastery Program?

Lionel: I joined Mastery I want to say it was October 2012. Lance and I have been together for close to a year, so Lance has been in Mastery for close to a year.

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Anthony: Okay. The reason I ask you is we had a question here. Have you been using, at any point in time really, some of the Fortune Builders Scope of Work templates? Do you utilize any of those? They’re relatively new, the templates JD has on the Mastery site, so I wasn’t sure if at this point in time you use them at all.

Lionel: Actually, I always use the Scope of Work. When I did my first rehab back in 2012, I had a hard money lender. My first lender was a hard money lender and I sent them a statement of work then. That was one of their requirements. I always use them, like I said, with private lenders. It blows their mind when you can show them a credibility packet and your statement of work with pictures and what you plan on doing, so I always use them in every single hard deal that I do.

Anthony: I wasn’t sure if you, at this point in time, use them at all.

Lionel: Yeah, actually I always use their scope of works. When I did my first rehab back in 2012 I had a hard money lender and I sent them a statement of work then as one of their requirements. I always typically use them. Like I said, with private lenders when you show them that it blows their mind. When you can show them a credibility packet and your statement of work with pictures and what you plan on doing. I always use them in every deal that I do.

Anthony: Absolutely and that brings up a good point. A lot of people say, I don’t have any credibility I’m brand new. You really have to leverage FortuneBuilders. I can’t tell you how much I leveraged them in the beginning. Print off some of those scope of works. I would bring in three or four different ones that I always bring around with me. I didn’t even have those available the way they are now.

When I started, and even though they’re not mine, I would present them as this being a very similar home that’s been remodeled. Here’s what I intend on doing and here are some of the before and after so you can see. Here’s the scope of work I intend to put on this property. That’s credibility right there, you don’t necessarily need to have done it or any of that. Just knowing you have a plan, a procedure and a process in place and you have something tangible that you can show the seller is a huge benefit, lender or whomever it might be.

Greg has a question… how many times did you have to meet with the sellers before you were able to walk away with the deal?

Lionel: Well, I think it was twice. We had our initial meeting in which we negotiated the price and then the next meeting was the next day when I went back to get the contract signed. We actually had to meet with her one other time when we met at the bank to make her mortgage payments, but other than that it was a lot of phone conversations and she didn’t allow us to put a lockbox on the house. So when we brought our contractors to get estimates and stuff she would meet us there. Basically, to get the deal done there were two initial meetings.

Anthony: That’s not too bad. Follow up is key in all these scenarios and you just proved that. Richard has a question… if you’ve been on site with the home inspector could you have made him change his report about the hole in the floor or would he have needed to come back after the repair was made?

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Lionel: I definitely could have influenced it, because that was just cosmetics. It was two inches in diameter so it wasn’t big. I would explain to him that we put down back board with tile over the top, so there was nothing that was going to penetrate that. In the end it was a simple patch repair from underneath and we put the insulation back. As I mentioned, I was at a home inspection yesterday and things that came up, I explained them or took care of them right on the spot.

Anthony: Excellent. If nothing else, maybe they won’t switch it because they want to point it out. Maybe they’re wording in the report wouldn’t be as harsh or scary. Maybe when the buyer calls he/she up, the inspector, and asks them about that line item they’ll say here’s what it is but I do have to point it out, I don’t think it’s that severe. That’s probably what would happen at the end of the day, because they are obligated to point stuff out that may/may not be an issue. There’s a big gray area there where they can make it really scary or not scary. That’s one of the benefits of meeting at the property.

Can you go back to some of the before and after and maybe periodically flip through them, some of the students want to see that again?

We have lots of questions and responses about the countertops. It probably is called reglazing in some areas and this is similar terminology to cabinets, sometimes that’s called reglazing as well.

Everyone is excited about the countertops, it’s pretty neat. We have some people in San Francisco that says it’s called ‘miracle method’. That’s something you can Google in your area and maybe find it that way. Thank you for that.

Valerie is saying they offer the 10% discount for vets at Home Depot.

Please mention moving the laundry room. Did you move it to the hallway? That’s right, you mentioned that you had created that pantry and said you ate up some of the bathroom in the master. Where did you move that laundry to?

Lance: It was directly at the end of the hallway leading to the bedrooms. It was actually a linen closet and we took part of that closet and it protruded into the master walk-in closet. We closed that in and designed it for a stacked unit, so it wasn’t wide just tall. Then on the side of the laundry we put another linen closet to the side and we were able to take a little room from the master close because it was a space in the bedroom that had a vanity and mirror or makeup counter.

We closed that in and extended the master closet. Something else, we put custom closet systems in all the closets, as a great selling point. Everyone that came in loved the closets.

Anthony: That’s a big deal. It goes back to what I talked about earlier in regards to painting the bathrooms. Such a simple thing. You did a lot of little things that make a house feel like a home. When you walk in do you say it’s upgraded great or do you say wow, this is beautiful I want to live here. Those are two completely different feelings and if you’re trying to get top dollar for properties you have to have those little items.

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Those are the difference makers, putting in the crown molding like you said. That’s what separates it. Great job. That’s why you get top dollar.

Question about the fireplace… when you typically have a fireplace or wood stove, do you have the pipes cleaned and have it inspected? What do you do in your area? We typically sell ours as is. We don’t have them pre-cleaned, but what do you do?

Lionel: On this fireplace here the only thing we did was to have it serviced to make sure it would spark like it’s supposed to. They replaced the spark igniter. I had another property where I had the whole stack cleaned out. It all depends on the property what we do and the condition. This fireplace wasn’t in bad condition, but if it were then we would have done that.

One thing to remember is that the fireplace stack is on the back of this on the outside so remember we had to take all the siding off and all the sheeting underneath off. So, when we took all that off we could actually see the whole unit once we took it off, so we knew there wasn’t anything major to get done to it service-wise because we could see the whole unit. That’s why we didn’t have it fully service. We knew we didn’t need to because we had to open the whole thing up from the outside anyways.

Anthony: Excellent. That’s a good point. Some of the things we typically change out, sometimes we change the damper because those get broke over time or you cap the chimney to make sure stuff can’t fly in. Those things are almost a guaranteed with your rehab, but in terms of getting it pre-inspected we don’t always do that. I think it’s a good rule of thumb, a good habit and it can’t hurt.

Allen… why did you rehire the same contractor after firing him the first time?

Lionel: No, in this house we didn’t fire him we basically had a discussion with him and said this is not the way we do business. This is the way we expect you to do it and then when we did our next rehab, this house wasn’t bowing down but we knew the ceiling had a water leak so we expected him to cut it out and replace it, but when I went in and saw it I said that doesn’t look right. I asked him what he’d done, he told me what he did and I told him he was done.

We didn’t fire him on this job, but we gave him a warning and he does great work but to us we’re building a brand and we can’t have shoddy work here and there and if you’re going to cut a corner then when we aren’t there you’re going to cut big corners. On the next deal we let him go.

Lance: Yes, and that wasn’t my uncle that was another contractor that we had working in addition to my uncle. My uncle had to go back and fix what the other contractor messed up.

Anthony: I’m sure that would have been tough if it had been your uncle.

Richard… you mentioned the house was vacant for two years, had the owner been approached by other investors that you know of during this time?

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Lionel: I believe she said other investors had contacted her, but I guess our postcard arrived at the right time, so she called us and once we met with her we built a pretty good rapport. I gave her my number and told her to call me with any issues or concerns she might have. I had a couple long conversations with her. It turned out that her mother actually knew some of my family, and once she found that out it was gravy after that.

We also made a mortgage payment so she was pretty happy.

Anthony: I think that proves a point. It proves that marketing consistency is really important. Had somebody reached out to her originally with the estate, and I’m sure someone did, she wasn’t ready. So two years later, I bet if someone sent her 4 or 5 different mail pieces over that time period, she might have called back and done a deal. You just never know in this business, which is why we’re big on drip mail campaigns and follow up.

Fred… what was the square footage of the property, roughly?

Lance: I think it was around a little over 1500.

Anthony: That’s a good starter home for our area. A lot of first time home buyers look at that standard three-bedroom, two bath and that $150k price point, 1500 sq. ft. That’s our staple in the Carolinas, or at least in Charlotte and in Raleigh as well.

You had an ADT sign out front, was that just for looks or did you actually have some type of security in there?

Lionel: It did have security but it wasn’t activated. On all our rehabs we put signs out front as a deterrent.

Anthony: Some people do that, we’ve done that in the past as well.

Janice… I love your pictures, were they professional done?

Lance: No, actually one of my good friends that’s actually trying to break into the industry as far as shooting houses for websites, he took them for us.

Anthony: They look professionally done and that’s important on a resale. Ninety percent of reselling that thing is from having quality shots. Don’t skip on that.

What kind of custom closets did you use?

Lance: It wasn’t a name brand. My uncle typically works in million dollar plus homes, so he designed them with several shelves, a high shelf to hang dresses and coats for women with a lower shelf to hang suits and dress slacks for men.

Lionel: One point there too is that Lance’s uncle actually had to sell me on that idea, because I said no that’s too much money I’m not doing that. He’s like no, I know a guy that we can buy MDF and he will cut the dimensions and everything. I said okay we’d try it and it was the best decision ever because it saved time because the MDF came precut, he did the measurements so when it showed up it was like a puzzle,

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he simply put it together and when we saw the finished product… I know there’s a company called California Closets it was similar to that… I was blown away.

I said that was money well spent and like Lance said, for people to come into this house and see what we did they were like, there’s no way we would have thought we’d have these type of closet systems in this house. A lot of times the contractors know what they’re talking about, they make suggestions and it was one that we went with that was well worth it.

Anthony: Awesome. I love that and it paid off for sure.

Do you document or record your personal expenses to make up the difference for the rehab budget? What do you do? If you’re doing a little work yourself and use some of your own funding, it sounds like an accounting nightmare? Maybe you buy some products at the Home Store in advance, how do you navigate all that?

Lionel: One of the things we do now is we try not to do that. The only thing is if there’s something really great, like we just bought two claw foot tubs last week after much searching and we’ll make a decision to do that and we account for it. One of the things we’ve done now is once we created the Findley and Lightner Group we have that company separate with its own bank account and we’ve been interviewing different CPAs and bookkeepers to start doing a lot of this for us, because it’s overwhelming.

I have been going crazy sometimes trying to keep track of expenses, so that’s something we’ve done now is to have three separate business accounts, so when we do things now it’ll come out of its own account. If we have to do something from our own accounts we just need to make sure it’s invoiced properly and then we’re paid back from our Findley and Lightner account. That’s something we’re doing now, we just had another office today and we were there yesterday.

Anthony: Perfect.

Beth… I’ve always learned to use one neutral color throughout for better resale, how do you feel about that?

I whole heartedly don’t believe that’s true, personally. I’ve been doing this now for 8 years and have sold real estate for another five. I think the reason we always have that misconception is strictly because that’s the easy thing to do for builders, contractors, etc. People may come across saying we keep it neutral so they can do whatever they want with it, yes and no. Here’s the truth, the reality… again after selling hundreds of properties, I can tell you that most buyers do not have vision.

I’m not saying that as a negative or being mean or anything like that, I’m just saying that that’s not their expertise, their area of knowledge. They aren’t designers and I’m not saying we are either. Now, through the main rooms of the home I have to use one standard color I get that, to include the foyers, living rooms, and things like that. When it comes to a bathroom, like in this case, I’ll use a different color, maybe a different shade in the kitchen. Gray tones are in right now and very popular. There are great gray tones with light blue accents and things like that.

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What I would recommend is getting a subscription to some designer magazines and flipping through to look and see what’s modern. In a master bedroom oftentimes we’ll put an accent wall, but what we don’t want is for a buyer to come in and say, where do I put my bed? You don’t want them confused because then they spend all their time trying to figure out where things go, rather than just being in awe about the room. An accent wall is simply a different shade of the color we’re already using.

You don’t have to be an expert at this to do it. If you make a mistake what’s the big deal, you simply paint over it. I would say give it a shot and try these things out, because they definitely will help. Claudia asks… Why didn’t you extend the tile in the bathroom to the ceiling?

That’s a good question. You stopped it whereas some people take it all the way to the top. Obviously, for money reasons you didn’t, but did you consider taking it all the way to the ceiling?

Lance: This tile that you see, I bought this tile over a year and a half ago from a second hand supply store where we sometimes get supplies. This is Florida tile, so I had a limited supply of the tile. On the floor if you notice is the same tile and in the other bathroom is the same tile and the same tile that’s in that shower. When we measured it out we had just enough to do the floors and the showers, so we had to make sure as well as plan for breakage and all that.

That’s one of the reasons we didn’t go all the way to the top and I know some people do that, but we wanted to make sure to have enough as well as wanting to put crown in there. If you look where the shower head is, it was one of those things where yes, we could have a tile to go there but how many pieces would we have broken to try and navigate that in both bathrooms. That’s the main reasons why we didn’t go to the ceiling. That’s also why you see accent tiles because we had to use that to cut on how much of our fill tile we were going to use.

Anthony: Great answer and good point. Normally, if you have it sure go to the ceiling it’s not going to cost a lot more. Those are the options and I think it’s good someone asked, because normally you would go to the ceiling but I like it because again you painted it a different color and you carried that color through. It looks great. I can imagine this with the beige tile, if you went ahead and painted that room a standard Navajo white, that it would look bland, so I’m glad you did it this way.

Cindy followed that up with, isn’t this one reason why we stage a home, like when I talked about the paint colors and being able to identify certain areas and regions of the home. Yes, you’re right that is one of the reasons we stage. It’s also one of the same affects you can get from painting.

Another very good example is when we open up spaces. A very popular design is opening walls. A lot of kitchens you rip down the wall and it flows naturally into your dining room. Guess what? If all that is painted one color, whether you have a table in there or not it’s not going to feel like its own space. So staging can only take you so far. What we’ve found is that people like the open feel but they also like the traditional feeling of it having its own separate area. The only way to do that sometimes is with paint.

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What we’ll do then is add a couple different tones to the room and it’ll give it its own feel. That’s something to think about.

All right, that looks like it for the questions. I want to thank you for spending this time with us. We had a few students to ask how they connect to that FortuneBuilders group if they’re local in Raleigh. It looks like we have some local students on the call. What’s a good way to connect to the mastermind meetup that you do?

Lance: Email one of us and we’ll get you the information, because it is a closed group. We’ll get you in contact with our administrator and we’ll get you in. We meet every other month and are thinking about doing it every month. Email us and we’ll get the information to you.

Anthony: Excellent. Thanks again for spending time with us today. You’re kicking butt and taking names, I appreciate you going through this case study with us, I think we all got a ton from it. Best of luck in everything.

L&L: Thank you very much.

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