Coaching Student Case Study | Ray Benson
It all began when Ray Benson decided to attend one of our monthly HFS MeetUps, and liked what he was hearing.
Afterward I spoke with Ray about our bootcamps and how it could help get him started flipping houses. Ray committed to attending the bootcamp we held this past June, and was enthusiastic to learn this business.
Fast forward a couple weeks and my company has our signs up on a property we are rehabbing in Massachusetts . The sign says "We buy houses" and someone driving buy saw the sign and called us about a mobile home they were selling.
This was when I began to think that this deal would be perfect for Ray.
Not A Good Deal For Me, But Perfect For Ray
After receiving the call about the mobile home, my acquisition manager Bill asked me if I was interested. Bill and I looked at the property and determined the best we could do was offer $5,000 for the mobile home, as is.
After further research, and visiting the home with our contractor, we determined that for us the profit margin would be under $20,000 and it didn't meet our minimum threshold for profit of around $30,000. Bottom line is that I personally am not interested in the property.
However this deal would be great for a contractor that could do some of the "sweat equity" and manage the project directly, versus our model of hiring a general contractor (which make a mark up on all the subcontractors).
It then dawned on me that this deal would be perfect for Ray. He has the credentials and back ground. He has his general contractor license and he has many years of experience in the field of construction.
Ray also has his lead paint licence and mold remediation license, so this meant even more profits on the job for Ray by doing some of these things with his own company-instead of subbing it out.
The Specifics Of Why This Deal Works For Ray The GC (but not for me)
There are several reasons why this deal works for Ray but not for me.
For example, if I was to pursue this deal, I would of hired a general contractor, who would then hire a mold remediation company. The mobile home had mold issues that needed to be resolved.
Mold remediation would cost $7000, but then my GC would have to mark it up (because he is the one managing the rehab). My final bill for the mold remediation would be around $8,000.
On the other hand, because Ray has his general contractor license, he can do the work himself, for a fraction of that $8,000 price. Now this deal is starting to make sense.
Because Ray is a general contractor, I found many other aspects of this deal that would work well for him, but not for me. Instead of just passing on this deal, I figured I needed to bring Ray in and get him involved.
The Numbers, And Exactly How We Put This Deal Together
I met Ray at the mobile home and expressed how thrilled I was to have this opportunity. Ray was excited too and eagerly accepted the deal.
I decided to purchase the mobile home for $5,000. Then I sell the mobile home to Ray for $10,000. Our company makes $5,000, and Ray gets into a lucrative first deal. It was a win-win for all involved.
Now Ray had to raise a little money to do this deal, as well as carry some of the renovation costs. Ray's plan was to use the strategies discussed during the HFS Bootcamp to find money through private investors and if needed, hard money lenders.
Why I Invested Money With Ray So He Could Do This Deal
When Ray told me this I expressed that I may be interested in lending him the money up to around $36,000, which I have in a self directed IRA. I was not making much on interest and I figured I could help Ray out, and make a nice return all at the same time.
You can't use your own IRA to invest in your own deals because it is considered self dealing and breaks the IRS rules. However, this is now Ray's deal, and because it is Ray's deal I can invest in it. I will self direct the money from my account over to Ray, to fund most of the materials and some of the subcontract labor up to the $36,000.
Ray will put in as much sweat equity as he can to get this rehab done in 4-6 weeks.
Because I am a lender on the project I also offered to help assist Ray in any way I could. I wanted to bring value to this deal and help add profit to Ray's bottom line. I cannot physically do any work on the rehab because that would break certain rules set forth by the IRS, but I can oversee quotes and offer recommendations whenever I can.
There is a huge comfort level here for Ray.
Ray will also learn how self directed IRA's work so he can learn to work with others in this capacity. This will be a great way for him to raise money down the road.
Here's the project details:
- ARV is approximately $100,000 conservatively, and as high as $120,000
- Cost of repairs is still to be determined, but around $50,000 through Ray
- Approximate profit on the deal will be between $30-40,000
In Conclusion & Looking Forward
I am very happy that Ray decided to take action and attend our June House Flipping School Bootcamp. It is amazing how the universe often brings the right people together, at just the right time, in order to make great things possible.
Now of course I can't guarantee this sort of outcome for all my coaching students. A lot of things must fall perfectly into place for a deal like this to manifest.
However, when you work with me through one of my coaching programs, I will guarantee that I will do everything I can to assist you in your own pursuits and endeavors.
The key ingredient here is your level of desire to make this venture successful. Ray has that desire - do you?
Take Action & Get Started Through Our Online Training
As I mentioned in an email blast to the HFS list, over the past 6 months I've had more than 1,000 people email me telling me why they cannot get started flipping houses.
The #1 reason by far is that they believe they have no money. Over and over and over again I hear the same excuse - "I don't have money to flip houses" or something like that.
This really bugged me because I haven't flipped a house with any of my own money in over 4 years. It bothered me so much that I decided to do something radical, and get it up and going immediately.
So I put an online training program together to teach a select few on exactly how to flip houses, even if you have no money - as well as teach the whole process of flipping houses exactly the same way I do it.
And I want you IN.
What do you think? Let me know by commenting below.
See you at the top!