THE TRUTH BEHIND SUCCESSFUL HOUSE FLIPPING
After the tremendous success of the The Deed Episode “Mistake on the Lake” people have been asking why, what and how. The fact is that if flipping itself is hard, how about having success with it? Not just once or twice, but hundreds of times! To share some tips with you, we decided to interview the guy who played a major role in the success of this company: “Mark Ainley” ( Co-founder of GC Realty Investments). Learning from people who have really made it happen is invaluable, so without further ado, here it is from from Mark himself.
Interview with Mark Ainley
Question: The show opens with your business partner Bryan Sonn and yourself talking about the first property you decided to flip and how you made a killing on it. The first question is: what made you decide that you wanted to try flipping a house?
Mark: It was in the early 2000’s and at the time I didn’t realize how hot the market was. Real estate investing and flipping, even without reality TV, was front and center. I think this had a lot to do with easy access to leverage with loose mortgage underwriting standards, so everyone was buying houses and the price appreciation in certain MSAs was hard to ignore. I was at the age where I could finally start buying houses so I bought one myself and found it wasn’t difficult whatsoever. Bryan came to me with an idea to buy another house with little cash down, and the numbers were so good we decided to give it a shot. For me, it really came down to the buzz around real estate and the very low barrier to entry.
Question: The property The Deed episode is about was bought at a judicial sale, and while the mistake was more of an oversight by an employee, after that property did you have hesitations about going through judicial sales to acquire properties in the future?
Mark: At the time, I did have hesitations. It certainly is a very unforgiving process and if you make a mistake, there is no going back. There is no attorney review period, no 3-day right to rescission, no inspection periods; really no opportunity at all to get out of the purchase once the auction has been won. But the opportunities to find yield are so great within judicial auctions that we really couldn’t move past that acquisition option, so instead we adapted our process to ensure the due diligence prior to the auction was solid so as not to repeat our mistake.
Question: You talk at the beginning of the episode on how your ‘bread and butter’ was single family properties, but after seeing such a large profit flipping this duplex, do you see multifamily flipping being a path your company will continue down?
Mark: Definitely. One way a company can scale up is to do more units at one time, so flipping multifamily is a fantastic avenue to help us grow. From an acquisitions standpoint, the price per unit is typically lower with multifamily buildings, as are rehab costs since the units will share common features such as a roof.
Question: The property featured in the episode was financed with short term private capital from Sean Conlon. What are your thoughts on using short term private lending versus a traditional lender for flipping; what seems to work better or make more sense?
Mark: Within the realm of property flipping, short term private funding is the route to go. If you have a good relationship with a private lender, someone who has confidence in you that the job will get done, the process for getting funding is much quicker and easier than through traditional lenders. You’re going to pay a little more for it but the number of hoops you must jump through to acquire capital through mortgage lenders makes private lending very attractive if the funds are only needed short term.
Question: After working with Sean Conlon, what will be your company’s biggest take away, or what did he teach you that you are going to bring to your business?
Mark: Sean Conlon came into our operation and helped us to step outside of the business and look in. He helped us identify what our weaknesses were at the top of the organization, and showed us how those weaknesses permeated down through the organization. We identified these weaknesses and put procedures in place to counter issues. Being a business leader and owner himself, he really put into perspective the importance of having strong upper management and how this will allow GC Realty to grow.