Why “Trust” Makes You Smart and “Verifying” Makes You Rich [Chuck’s Story]
When an expert investor talks, we listen. Every time Chuck approaches a deal, he trusts what sellers say as true BUT, always verifies. It is that mindset that supports decades of successful Houston investment property deals.
Since Chuck was 19, he’s collected rental properties and at one point even owned an RV/mobile home park. At this point, Chuck is semi-retired and wants to spend his time doing fix and flips.
Chuck knows how important it is to do your due diligence (aka verify everything). Even with this most recent deal, the actual ARV for the property was HIGHER than what was listed. It literally pays to run your own numbers!
When Chuck isn’t doing his own deals, he is walking others through the process. He’s even helped individuals own their own home through the rent to own process! Chuck wants to pay it forward, just like his parents did for him.
Listen to our conversation with Chuck in which he discusses his investing strategies plus…
- Exactly when to use (and when NOT to use) sweat equity
- What to be cautious of for owner finance deals
- How using cash can get you a lower price on a deal
NOTE: Since Chuck is a Premium Elite member, he received a FULL refund of his up-front membership fee for simply doing a deal! Find out more about our Premium Elite Membership here.
Tell Me About Yourself…
How did you get into investing?
I have been in real estate investing since I was 19 years old. I bought my first house and became a landlord right off the bat because I had to have a roommate in order to afford the house. I have been investing in real estate ever since.
How did you afford a house when you were 19 years old?
My parents helped me out. They borrowed $3,000 for the down payment and they handed me the payment book. I didn’t have any other credit in my name. I qualified with the 20% down, now this was back in 1977, that’s how long ago it was. It was a two year note from my parents, and of course, a 30 year loan for the house. I paid my parents off in a year and having roommates helped me afford the house. I’ve always been a little bit of a risk taker.
I ran across another house and I knew it was a really good deal, but it was one of those things where I was really financially strapped to buy it. My wife asked, “Are you sure we can afford this?” I told her, “We’ll make it some way or another.” We bought the house. At the time, I worked in the energy industry and it crashed. We ended up selling the house because of that, but we still lived in the house for a year and a half and made $10,000 on it. This was back in the early 80s, so it was a pretty good profit at the time.
Throughout my life, I have owned a lot of houses. I got it from my parents. They were always big on home ownership.
Have you taken any risks with investing?
About ten years ago, I went to an online auction site to look at houses. I was kind of flipping through the houses that were available on the site and I saw one that looked like the first house my wife and I built together. I didn’t even know where it was located. Then I Googled the location to see where it was exactly and found out that it was pretty close to my wife’s sister’s house. Then I put a bid on the house.
I saw six pictures of the house, never visited the property and ended up getting a really good deal. After living in the house for two years, we made a profit of $70,000.
As I said before, I have been accumulating rent property ever since I was 19 years old. I recently sold the first property I ever owned about three years ago. My wife and I invested our profits in rental properties. We recently sold a mobile home in an RV park that was owner financed. As of now, we have eight rentals under our belts that are 100% paid off.
I recently semi-retired from a company in the energy industry. I decided that I wanted to start flipping houses. I talked to our financial advisor and he told me that I had a bit of money so I didn’t need to do hard money loans. I looked up properties on a real estate site, found one that I was interested in, and it turned out to be a very successful flip. I did about 60 days worth of hard work on it along with all the contract work. It was a very successful flip. I bought the house for $70,000, invested $50,000 for repairs, and sold it for $173,000. The house was sold after three days of being listed.
How often did you purchase rental property while working full-time?
Every year or so we would find something. While I was accumulating property, I was lucky because I worked a 14/14 schedule. Fourteen days I’d be gone and 14 days I’d be home so I had time to invest in the properties. I put in a lot of sweat equity in all of my properties.
Do you think investors should put in a lot of sweat equity?
The advantage I had was that I was pretty good at it. I figured out what my time is worth and I would say that sometimes it’s not best to put in your own labor. Sometimes you can hire it out more economically if you figure out what your time is worth. It’s a trade off between how much you think your time is worth compared to the amount you can get the job done for. It’s also something you need to think about if you have any kind of high interest loan. In that case, maybe you shouldn’t be doing the work yourself.
Tell Us About The Deal…
What made you transition from rentals to flips?
My first flip was pretty successful. I bought houses for flipping in three different formats. I bought them at an online auction, county auction, and the most recent one I bought from MyHouseDeals.com. The one thing I can say about MyHouseDeals.com is to definitely do your due diligence when it comes to the ARVs and the cost of repairs. The house on the website claimed to have zero repairs. I don’t think the seller ever went to the property. They probably had a options period on it and resold it. I still got a really good price on the property, but it did need work. Someone stole the air conditioner and someone else stole the wire from the house to the power pole. So some work was needed.
What made you look at it despite those numbers?
This house was in the same subdivision as three of my other properties. I already knew about the property values. This one is slightly different because it’s a mobile home and not a brick and mortar home, but the ARV was higher than what was listed.
There was a discount on the home because it’s a mobile home, but short of that, this mobile home is about 200 square feet larger than the average home in this subdivision.
I am lucky to be at the point where if I have problems selling a house because it’s a mobile home, then I can keep it as a rental property. I try to leave myself open for that option where if I can’t sell a house for one reason or another, then I’ll just keep it as a rental. That’s how I buy all my properties.
How do you determine the ARV for a Houston investment property?
Reviewing the ARV and comps is such a complicated thing, honestly. On my very first successful flip, I probably did it the wrong way. I took one of the worst houses in the neighborhood and made it into one of the best houses in the neighborhood, from a comp standpoint that is. It was probably not a smart thing to do. As I said before, I sold the house for $173,000, but my real estate agent said that we should list it at $158,000 and that would give us room to go down on since that’s what the comp said. My wife wanted to list it for $180,000, but we compromised on $173,000. Within three days I got a contract on it. It actually appraised for more than what we sold it for.
Why do you think the house sold so quickly?
It was phenomenal! It was definitely the best house in the neighborhood. I put a lot of upgrades into the house and it was a very beautiful on the inside.
Wasn’t that risky?
It was. But I also knew that in the worst case scenario, the amount I put into the house I could get it all back on rent. I would still have a good investment. That wasn’t my preference but I would still have a pretty high rent on it since it was a very nice house.
How has investing changed your life and allowed you to help other people?
I helped two of my kids with down payments. I paid it forward by doing for them what my parents did for me. I have also done a couple of rent to owns for people. I didn’t give anything away. I made a fair profit but I have helped a couple of people buy houses that could have never afford to buy a house before.
We owned one property that was a hassle because it was so far away from where we lived. An elderly lady who was on social security moved in. We made a deal with her stating that if she rented it out for five years and rented out exactly what her rent was that day, we would not go up on anything and we would sign it over to her. She rented it out for five years. We never had any problems. We signed the deed over to her and it helped her out as well as helping us out.
How do you decide when to rent a house and when you want to owner finance a house?
I haven’t really done any owner financing. I have done rent to own. To me the difference is I don’t have to evict. Part of our contract says they have no equity on our property until the last payment is made.
We had the mobile home and RV park that we sold and are getting payments from, but we actually had to foreclose and get it back. It was really a nightmare because we had done an owner finance deal.
The guy who bought it got killed in a car wreck before the two year balloon payment was due. It got tied up in probate. I’m leary of doing another owner finance because it seems like once it got tied up in probate, our contract went out the window. We had to deal with probate law. We lost a lot of money on that.
How would you avoid that in the future?
I could have waited around or could have not taken the deal and just kept the park. I could have waited for another person to come by and buy it. I’m not sure what the right answer is. My caution to everyone would be this: Be very careful about owner finance because when it comes to foreclosing, that is if it gets to that point, there’s a lot of traps you can fall into.
What advice do you have for new investors?
Trust, but verify. I still go into relationships with contractors and sellers by trying to believe what they tell me, but I do my best to verify what they say is true. I don’t think there’s any harm in that at all. It’s not that you don’t trust a person, but you do have to make sure. Like I said, in the property that I got on MyHouseDeals.com, I don’t believe they lied about anything but I think they just probably didn’t visit the property and didn’t honestly know. It is about doing your due diligence.
Do you pay cash for your houses?
I do. The cash is definitely the way to go. I bought two properties where my offer was a little bit lower, but since my offers were cash offers, they accepted the offer. I have closed some houses in ten days by using cash.
What is the current status of the Houston investment property you found on MyHouseDeals?
My son-in-law recently asked me how he could get into real estate investing. I explained hard money loans and other financing options. With the MyHouseDeals.com property, I told him, “I’m going to give you a taste of what this is. I’m going to try to let you do most of the work besides what we hire contractors for.”
I paid for the property, paying for the repairs, and I’m charging 12% hard money. My son-in-law is doing most of the work and I’m doing all the financing, doing some of the work, and hiring contractors. I’m still doing my fair share of work. Once the work is all done, we will split the profits.
I’m trying to help him find out to see if he really wants to do this. He can then realize if he does or not without taking tons of risk. If it doesn’t work out, I’ll pay him well and I’ll keep it for rent property.