With so much negative and unpredictable news about the current market, how should you start house flipping? Our guest has so much value in his pocket to share today. Travis Wilt, the CEO of MTGW Acquisitions, discusses the fundamentals of house flipping to help you get your real estate game right. He explains why you must convert your leads, the power of doing consistent follow-ups, and the importance of having the right resources and commitment to do it. Travis also reminds everyone to be careful of consuming too much negativity that could mess up their mindset and game plan. Take note of these golden nuggets of wisdom to discover where you can make good money right away!

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The Fundamentals Of House Flipping With Travis Wilt

Before I get into the conversation with my buddy, Travis, we are going to talk a little bit about some business. As I have been talking about here on this show, we have done a lot of amazing things in 2022. In the Flip Talk community, we have launched some mentoring. We have the Inner Circle Elite mastermind community. We have other amazing things going on. Head over to FlipTalk.com and check out. We have free resources up in the menu tab. There are links to check out: the Coaching, the Mentoring, and the Mastermind community. With that said, Travis, how are you doing?

I’m doing great, Don. Thank you so much for having me on. It is truly an honor.

It is an honor to have you on. I want to hear your story and talk to you about your business. This is exciting for me. As we jump in, for people who haven’t heard about what you do or don’t know who you are, let’s talk about how you got started in the business, what your background was, and what life was like before real estate investing.

I have always had an interest in real estate. It goes back to when I was about seventeen. I worked for a local real estate investor. I’m learning things from the ground up, which is a tremendous opportunity like, “What does it take to do plumbing on a home if you are taking new from a water heater throughout and different avenues there?” He was a buy-and-hold investor. It was to cut my teeth at that point in time, which led me to get my real estate license after that. This was in 2006. Between 2006 and 2007, I got my real estate license, and we know what happened to the marketplace after. That is what got me interested and started, and seeing there is a great opportunity in real estate.

You started right around the time we had the crash. How did this gentleman navigate that? What did you see and learn from that time period, 2008 to 2010?

 

 

During that time period, there were a lot of things that were going on at a time when there wasn’t much above board. There are some not-great things that I could take from it and go, “He went under being upside down on all of his properties.” During that time period, it was a tremendous learning experience. Knowing there are sound fundamentals in this business, you have to run your business with sound fundamentals with the right numbers. That way, you could have weathered that storm with no problem.

Let’s talk about that for a minute. We are going into a big question mark. As the market is transitioning, there are a lot of so-called experts who think they know it is going to happen. I saw posts on Facebook where somebody said, “The market is not going to crash.” I’m a firm believer in protecting your downside, preparing for the worst, and hoping for the best. I believe in running a solid business with the right fundamentals. I’m going to put you on the spot here a little bit. What would you say are some of those fundamentals you learned from going through all that you think are crucially important to running a good business?

Protect your downside, prepare for the worst, and hope for the best. Click To Tweet

At that time, it was the buy and hold. 1) Do you have the appropriate cashflows to sustain a potential downturn and the home value itself? That would be one thing. 2) Make sure that you have purchased them with appropriate valuations. Looking back, it was prior to a lot of adjustments being made and how a home would be appraised. You could select any appraiser you wanted at that time. They could say, “I’m in this part of the market. I’m going to comp it with homes and this other completely different market that was better.” Make sure that you have a true value of your property.

Something that we are doing is I’m looking at whether I could sustain a 10% hit in equity within the next few months from that property. 1) If I could cashflow on it now, and 2) If I could sell it at a minimum of a 10% discount within two months and still make money, I know I got a good buy. During that time period, I had my real estate license. I got connected with another real estate team. I worked with them for several years. This was traditional real estate sales.

From 2009 and 2010 on, it was about an 11% decline in our market per year over the next several years. When you look at that, you go, “It is not like the stock market where you are going to see all of a sudden real estate drops drastically.” A few things that we look at now are the market absorption rate, how long our homes have been sitting on the market, and also buyer demand. You go into those things going, “If it is dropping 1% a month, I could still beat that market absorption rate of 4 or 5 months by selling my home quickly by dropping it 7% to 10%. I still make money, and that way, you are out.” Now, we do fix and flips. If we are not going to hold the property, it is going to be a quick turn. That is what we are looking at.

When you are talking about the cushion you have of 10%, that is market-specific. In my market, we dropped almost 30%. You got to know what your market did in the last situation, and that is important. The other thing that you didn’t mention that is important to somebody is the vacancy. Do you have cash reserves to handle an above-average vacancy? There are people running their mouths. They were like, “The rents don’t go down.” The reality is, anybody in 2008, in a lot of markets, there was an adjustment for rents. For a minute, the rents went up. It was competitive.

The rents did decline because people were moving into the family. With family, people were moving out of state. There were all kinds of things they were doing to conserve money because of the uncertainty they had or because they lost their job. There were many factors. I’m on this show saying, “I don’t believe it is going to be 2008 again.” It is a matter of you wanting to make sure you are running good fundamentals in case.

I agree that reserves are extremely important.

You worked with this guy for a minute, and you went out on your own. What did your first deal look like as far as where did you get it from, and what was the structure? What does that look like?

Throughout that time period, there were a couple of different deals. They were always partnered with somebody. When I went off on my own in 2018, the first deal was from our Google PPC Campaign we were running. At that time, I didn’t have any funding or anything set up. What I did is, from my real estate background, I called several of my past clients to see ones that I knew who had purchased cash before and ended up wholesaling it to these couple investors. We did around $18,000 for that first deal.

What does your business look like now?

We do 40 to 50 flips. The volume has increased. We purchase 90% of what we get in our contract. We will take down whether we will do a full rehab or a wholetail on it. We rarely do any wholesaling anymore. We will take it all down.

Between breaking down on your own and doing that first deal on your own until now, what are some of the things you feel help get you to where you are?

I would say the Inner Circular Elite community pretty much from the very beginning. That is why it is such an honor to be on your show. I dove into the show and modeled a lot of what we had done based on what you had said from your show. I was an avid audience and took a lot of notes as far as what were some of the fundamentals you were using to run your business. I was quick to adopt and take action. Throughout that time period, it was not only what I coupled with making sure that you are getting the right people to tell you to guide you in this business but being quick to take action. You have to be quick to take action.

 

You mentioned PPC. What else are you doing? Is PPC your loan marketing tool, or do you have some others?

PPC is our main source. We have some cold calling going on and direct mail that we are dropping. We have different relationships and wholesalers. We get some deals that way. From my previous relationships in real estate, I’m reaching out to different real estate agents I know. We get a handful of deals each year from real estate agents who are like, “This home would not sell on the market.” They know that I will pay their commission and take care of them as long as we can get the numbers to work out.

PPC is something that scares a lot of people. What do you feel are some fundamentals to make it work out for your organization?

It comes back to the fundamentals of speed to lead. This goes for any lead source that you have. You are replying and responding to them within five minutes. We have a tracker to make sure, “Are we getting in front of these people within five minutes of them reaching out to us to set up an appointment?” Two would be the way we handle and take care of the lead.

With the investor side, it is a little bit different circumstances why somebody would come to us. Through a PPC lead, when they fill out our form, we know some of those motivation points up front. It helps us come in with great sympathy and empathy for their particular situation. Speed to lead, and from that point, it is going to be meeting with them quickly, building that rapport with them, and also the follow-up from that point. All of those things have to be dialed in, and you got to be quick.

A lot of people think a lead is a lead. Fundamentally, it is not. A PPC lead is somebody that has a problem that is looking for a solution. That is a lead you are going to want to give your attention to almost as quickly as that lead comes in. Text messaging or cold calling, you are outbounding that individual and tapping them on the shoulder. It is going to be a longer cycle to get that lead to a conversion. You got to have the resources or the commitment to make sure you are doing follow-up and having some of those long-term sequences in place. That way, you can convert that lead.

A direct bail lead is a lead that you tapped on the shoulder, but they are looking back at you and going, “What do you got?” They are not as urgent as a PPC lead, but it is something that you are going to want to have somewhat of a system in place to be able to have those conversations sooner than later. Answer those calls as they come in, and make sure that you have the appropriate sales process in your organization. That is why I want to tackle a lot of PPC because a lot of people think, “When a PPC lead comes in, I can get to it when I get to it.” If you don’t get to it right when it comes in, they are off to the next person below you in the Google Ad campaign.

I liked it when I was in the traditional real estate space. When the average consumer sees you on Google or whatever site that you are on, they scroll down. There are about 3 or 4 other people that can see at the exact same time. It is going to be that person that gets to them first, builds that rapport, solves that problem, and is able to convert that lead.

Not only the page and a half or two and a half pages of SEO opportunities that are right below the paid ads. That is the point. They are looking to have that problem solved immediately. They want to know if is somebody that is going to address those issues. You are rehabbing a lot. Let’s talk about a couple of things. First, when you are doing your deals, how are you funding your deals?

It is 100% private funding. We get 100% of the purchase price closing costs. If the wholesalers are involved, it’s all of those fees and 100% of the renovation costs.

I love it when people pay attention when I talk. The only way to run a healthy rehab business is to have 100% of it covered and not have any of your money projects. That has helped your business grow successfully with less stress.

The only way to run a healthy rehab business is to have a hundred percent of it covered without using any of your money and projects. Click To Tweet

This business, in and of itself, being a marketing business, is still a capital-intensive business. Being able to have that leverage is what now can help us to have the seven I have on my board now that is going on. Having 100% funding, if we did not, would have crippled us.

First and foremost, let me do justice to the newer person reading this. We are talking about PPC, and that is Pay-Per-Click. I want to make sure I addressed that earlier. That newer person who is coming into the business is going to have another knee-jerk reaction, and they are going to be like, “100% financing this is a unicorn. It can’t be done. Did I talk to someone who tells me I have to have skin in the game?” We have heard it. How have you found your lenders to do 100% financing? What do those conversations look like?

Those lenders that I have up to this point have largely been people that I have been connected with already, whether it is investors that I had dealt with being their real estate agents a few years back or other relationships. The conversation can be easy. When you are going to them with the mindset of the opportunity you are bringing to them, you are shifting from, “I need this help.” I have been in that spot where you were like, “I need this cash.”

You almost want to do about anything in order to get the funding that you need. However, you are showing them the long-term value of doing it upfront and also being transparent. Show them, “Here is why I need 100% because of all the deals that I’m going to be bringing to you in the future. Everything I’m doing is setting up and being able to do more deals with you in the future.” There are a lot of people that want to be involved that way. If you can talk to them confidently about the process, what you are going to do next, and how you are going to get them their money back and move into the next deal, you ease the lender.

 

I had a conversation with a lender. It is a lender I have worked with over the years. I sent over a rehab project to them. I was out of town, and he called me up. He said, “The market is shifting. I would feel comfortable if you put up half the rehab.” I didn’t say no at the time. I stepped away from dinner to take the phone call. I thought about it for a couple of days. I preach this to everybody I talk to. I have 100% from lenders. Don’t put any of your own money into the projects because you go from a position of power to a position of weakness. When you do that, you start operating from fear and anxiety.

Once you break your norm or rule, you open up to making that same decision across the board. You start to deplete your reserves. I got him on the phone with me. I explained that to him. I said, “I get that there are concerns. I’m just as concerned. We know that I run a conservative business. You have done lots of deals with me through the years. You know that I always am conservative with my numbers.” He said, “You have treated us great. You have always taken good care of us.” I said, “That is what I want to do here. If I get in the habit of breaking my rule and putting money into a project, what is going to happen is you take that and you times that times five, and you times that times ten. That is much money that I have less in my reserves.”

I said, “That doesn’t make me a good bet. Do you think me having a scan in the game is going to make me more committed to the project? You are going to be better protected. When I deplete my operational reserves and don’t have money to run my business, I start making decisions on the desperation of if one thing goes wrong, I don’t have the ability to protect your money.”

I said to him, “In this one account, I have X amount of dollars. If I operate the way I always operated, where you put 100% in and every other investor puts 100% in, and anything goes wrong in that project, I can afford to write a check if I have to to make sure you are whole. I would rather be in that position than not be able to handle something going wrong.” I explained it to him. He said, “You have been good to me. Send me a breakdown of X, Y, and Z. Let me take another look at it. I get what you are saying.”

The point I want to say at the moment of vulnerability, our first human instinct sometimes is to concede to the request of our investors. My first human instinct was, “I got plenty of money to do it. Why not do it? This is a one-off. If this is what is going to make him comfortable, I don’t mind doing it.” That was my first instinct because I’m human, but I had to check myself and think about it.

We have systems and processes boundaries in our organization for a reason. They protect the integrity and health of our organization. If I allow myself to say yes once, I’m going to say yes ten times. That is fundamentally how you end up broke in your business. That was a tangent I probably didn’t need to go off, and I’m speaking on your show, but I wanted to throw that out there.

You think about the impact that may have on your team. They see you as the leader, and I see myself as the leader. I know there are times when I have been in the same situation. I can look back and go, “I made the wrong decision.” That also sets the wrong tone for the rest of the team, being able to be vulnerable as a leader to be like, “Here is why I’m not going to make that mistake again and have that conversation.”

It is sticking to your guns, especially right now when there are a lot of question marks. It is more important than ever to have our capital in a position to make healthy decisions. It is a lot easier to protect your lender’s money in a project when you have money in the bank to back it up. You have money in the bank to write that check if you have a loss. Write that check if you have overages on the projects so that you aren’t prepared for it. It is much better fundamentally at the end of the day. What have you learned as a rehabber that your hard and fast lines in the sand like you do on every rehab? Are you required to a big contract that you want to share that allows you to be fundamentally successful?

 

They are going to be able to take all of these tips directly from some of your other rants. We do nothing upfront with our contractors. Everything is paid out. In the beginning, we have standards and practices that lay out their expectation of the process. After we have already gotten the breakdown and the scope of work, they need to know how they are going to be able to get paid.

The work has to be proved that it has been done. They are going to have to submit a work order for whatever piece of the invoice was finished during that time period. They have to give it to us on Monday in order to get a project manager out there to review it and make sure that the work is acceptable. We do want to pay quickly. Many of the contractors need that money fast. Usually, by that point, there is no reason why we couldn’t get them money out by that Friday. We want to be quick because we are not giving them anything upfront until work is done.

Making sure you control the money is ultimately the best way to control the timeline of the project. What advice would you give somebody that is starting out in the business?

There are a couple of things. If we were to ask this question a few years ago, it might have been a little bit different. I would listen to what is going on in the market or make sure that you are getting the right advice first. You need to know your market completely. It would be good if you knew historically what your market has done.

Real estate is centralized in two different markets. You could be experiencing something different than what I’m experiencing. Historically, what has your market done? You have to take action quickly but base it on the numbers. You can take so much out of this business if you base it on the numbers. Know your market and numbers, but make sure you are getting some good advice from others as far as what they are doing to protect themselves but not letting it cripple you either. There is so much negative news out there. Be careful of too much negativity that you are listening to. What are those fundamentals you can take? You then take action. There is still a lot of good money to be made right now.

The books that you have read have helped you in business or life, what would a couple of those be, as far as something you think would affect somebody that is getting into this business?

One would be Traction if you wanted to run your business like a business and have a good little blueprint for how you are going to run your meetings and structure your business. Two would be Profit First. It’s about what you are going to do with the money that you get. Those are a couple of books that have helped our organization. There are some others I am rereading or re-listening to, but those are a couple of good books.

They have Profit First For Real Estate Investors by David Richter, which is the version for real estate investors out there. There are two versions, the original and Profit First for Real Estate Investors. Tell everybody how to get a hold of you if they want to find you.

They can find me on Instagram or Facebook, MTGW Buys Houses.

I appreciate having you on the show. I’m looking forward. I will see you in Chicago.

I think so.

If you got value from the show, make sure you like it and share it out there with everybody that you can. Give us comments. Always help us and grow. Make sure you are following me, @TheRealDonCosta on Instagram. As always, go to FlipTalk.com and find out how you can become part of the Flip Talk Universe. Travis, thank you for being me. I appreciate you.

Thanks, Don.

 

Important Links

• Travis Wilt
• Inner Circle Elite
• Traction
• Profit First
• Profit First For Real Estate Investors
• MTGW Buys Houses – Facebook
• @TheRealDonCosta – Instagram

 

About Travis Wilt

We buy houses in Dayton OH & Surrounding Areas as a way of helping people that don’t want to sell the conventional way. We believe having the option to sell a home fast allows people to spend their time doing what they want to do. It’s all about helping people.