Listen to the podcast here:
Flipping America with Roger Blankenship
I’m excited to have a special guest on this episode. We have the man, the myth, the Flipping American legend, the one and only Roger Blankenship joining us. You are a making a name for yourself out there doing amazing stuff. I want to thank you for having me on your show. I wanted to have you back on my show to talk about real estate, the market and some of the good stuff. You’ve been doing a tremendous job. You’ve been an active real estate investor for a while. Why don’t you share a little about your background and who Roger Blankenship is?
I trained for the ministry and I spent 25 years in the ministry. People say, “How did you get into real estate?” I said, “A lack of communicable job skills and sheer desperation.” I had worked for little startups always with an entrepreneurial bent and little community-oriented nonprofits. I never had a retirement plan or anything. When I turned 40 I decided, “One of these days I’ll start slowing down. I don’t ever want to quit working, but I need a little extra income coming in for the days when I’m moving a little slower.” That’s when I started thinking about buying rental houses. A friend of mine had been to a weekend seminar and he came back all excited and said, “Let’s flip houses.” I said, “What is it?”
Long story short, I pitched the idea to my dad. This was 2002, but my dad had lost a bunch of money in the stock market. He had sold his business. He needed something else to do with his money. He wanted out of the stock market. He said, “I’ll put up the money, you do the work and we’ll split the profit.” We did a couple of projects. The first one he put up about a total of $95,000. Three months later we were splitting the $15,000 profit. Naturally at the next meeting, he was telling them about how he made all this money on this investment. His friends who also were losing money in the stock market said, “How did you do that?” He said, “My son’s some real estate genius up there in Atlanta, Georgia.” The next thing I know my phone’s ringing. His friends are calling me up and they’re offering me money and say, “Buy deals and fix it up.” Before six months were up, I had $1.2 million in capital from old retired guys in Florida to use their money to buy houses. We were buying foreclosures, fix the properties up and sell them for a profit. At that point, it was on. I decided in 2006 to go full-time. That was a great time to get into full-time real estate investing. We managed to get through those years and 800 deals later looking back.
Atlanta, where you’re at, was ground zero for a lot of that stuff in a lot of areas. We’ve bought a lot of distressed debt out in Georgia and vice-versa. There are great opportunities out there to be taking advantage of the market.
At the time, it was easy. In fact, from 2009 through 2012 when the market was so bad is when I made most of my money. There weren’t any other buyers in the marketplace and I still had cash from the old guys and cash from some other guys. We could buy everything in town. We’d sit there and buy eight or ten houses at the auction or a couple of times fifteen. We’d watched twenty or 30 more great deals go back but we were out of money.
Where do you see the market now in Atlanta?
The market in Atlanta is still hot. Atlanta, Phoenix and Las Vegas were three of the hardest hit areas in the crash. I looked at some numbers. We’d spend a lot of time looking at the data from ATTOM Data, RealtyTrac, CoreLogic and Market News Update. I believe, and the evidence is bearing this out, that Atlanta hasn’t completely caught up. Our market is doing a little bit better than some of the markets around the country in terms of year-over-year sales and year-over-year increases in pricing. We’re already beginning to see that little bit of slow down. On my show, I predicted that by mid-2018 we’d be slowing down and by the end of 2018, we’d be in a balanced market with about a three months’ supply. I was in one of our flip properties. Even though we’ve got the show and busy schedule, we’re still flipping houses. I went out to one that we’ve got ready to list and enlisted it. We listed it for $10,000 less than we thought we would when we bought it because prices are easing off a little bit. It’s inventory. We’re moving it.
It’s a smart thing to do. It’s better taking burden at hand than trying to get two in the bush at a future date. I’m sure you’re probably still making a nice return on the asset anyway.
It’s going to be good.
We’ll take singles and doubles all day long.
Most of my investing career, it’s been solid singles and doubles with very few home runs.
A lot of people that are getting into real estate, they watched the shows. They get all crazy up on the testimonies of making $80,000, $90,000. Some of the craziness that I’m sure you see out there. It’s a business model. You’ve got to focus on it like a business model. If you’re trying to hit home runs all the time, you’re going to strike out a lot.
If you’re in Southern California and you make $80,000 or $90,000 and you’re all in for $1 million, that’s not a home run. That’s not even a single. I wouldn’t do that deal because there’s too much that can go wrong to suck all of that out. I’m not invested in $1 million to make $80,000. I’d invest $1 million to make $200,000.
You’ve got to look at that spread there. When I was doing a lot of fix and flips, we always wanted to make sure we could walk away with somewhere between 15% to 20% in profits on that aspect of things. That was always the case. When we start narrowing down and getting tighter and stuff like that, there’s always an a-ha moment that’s going to kick in and wipe out a lot of stuff.
Here in Atlanta, I’m listening to wholesalers and I get about 70 or 80 emails a day from wholesalers who are saying things like, “This one looks a little thin right now. The way the price has been going in Atlanta, six months from now, it’s going to be great. It’s going to be wonderful.” I say, “Ignore that because you don’t know what’s going to happen six months from now.” What I teach and tell people is if the market is trending up, then base your decision on what it’s going to be worth as if you were selling it now. The market is trending down, then use the future price. Always go for the more conservative number.
That’s a nugget there that’s worthwhile. All across the country, we’re starting to see the market starting to straight out. The prices aren’t as much. People aren’t overpaying for houses in areas. Austin has been competitive here. We run using right around a two-month supply on the MLS. Dallas and Houston are hot markets too. You’re starting to see those higher-end homes dragging on a little bit. It’s starting to trickle down in the starter homes, the mid-level homes.
July was the first month in 36 months that more than half of the homes on the market experienced the price reduction before they sold. That’s normal. In a normal market, 75% of homes will have a price reduction before they sell. That’s okay. What that means is we’re getting back to a normal market. We don’t have anything to be afraid of. It’s getting back to normal.
That’s the truth about it. Definitely a little bit more normality, although you throw a hurricane in there and it will affect some things out there.
A hurricane does affect a lot of things including the default and foreclosure rate in South Texas and South Florida. We’re seeing a little blip in those. You pay attention to this too. You’re probably seeing some nonperforming notes down there to buy.
Texas has always been tight because we do everything so fast here; fast foreclosure, fast highways, fast executions.
Georgia has fast foreclosures but I can’t say that about our highways.
Florida has been leading the nation in foreclosure timeframes and increased foreclosures. Texas surprisingly enough is number two in the nation with foreclosures. We also see an uptick in the Gulf Coast area in Mississippi, Louisiana and Alabama. We’re starting to see some stuff in Virginia a little bit there, which also is a surprise. I would not be surprised obviously with everything that’s happened with Florence. I’m starting to see an uptick in North Carolina, South Carolina, those areas out there too in six to twelve months. We won’t see it immediately because what the banks like to do is they’ll come in and basically say, “Mr. and Mrs. Homeowner, you’ve had an experience. Let’s wait six months. Let’s help you get back on your feet. We won’t start filing deficiencies until six months later,” is what happens most of the time.
If it’s a disaster area, they’re prevented from doing that for a little while. The other thing too is it takes a little while for people to catch on to this because no one is out there thankfully teaching a seminar on this. They get their insurance settlement and realize, “We’ve got all this cash. We could walk and let the property go back to the bank.” Some people do eventually realize that. That’s why you get this little spike in foreclosures.
We’ve seen that happen in Harris County. I’ve got some buddies down there. They buy a lot of houses each year. They’re fixing and flipping 200 homes a year. They’re starting to see that uptick now since we’re over twelve months out, those houses starting to hit the market. The big thing that fixes this thing is if you’ve bought a flooded home or damaged home and fixed it up, you’ve got to wait around. You can’t be expected to buy and flip it. You’ve got to turn it more into a rental the way for the market to catch back up and the comps to come in line a lot of times.
What are you going to do? What’s next for you in Texas?
I haven’t bought anything in Texas. Most of the stuff I buy is outside of Texas for the most part. I do have my eyes on stuff down there, but it’s still overpriced for the most part. The bank still values it more so. To fix it up, I’d be breaking even on what the true value is. I’m still buying in the Midwest parts of Ohio, Michigan and Indiana. I’m still buying that debt at a substantial discount at 50% on the dollar or less for the most part. It’s a matter of ROI running for me. I keep my eyes out. If I see something that makes sense, great. Our business isn’t predicated on buying in our backyard, which has been helpful. Austin has been a competitive market for over a decade and that’s one of the smartest things I learned was, “Let’s find some other markets to go invest in.”
We’ve tried to perfect the model for doing fix and flips not in your own backyard. We’ve had a little bit of success with that. It’s given us some boldness to reach out in some areas. Atlanta is competitive. I have four Meetup groups in the City of Atlanta that I lead with a combined membership. These are real estate investing groups with a combined membership of over 5,400 people. Those are investors or investor wannabes in the Atlanta area. That’s fine and we welcome the curious. I’m glad so many people are interested in it. It’s one of the things that have made my show such a hit because so many people are interested in this. For us, it means maybe we need to look someplace where you don’t have 3,000 people bidding on every house that comes available. That’s why we’re moving to other parts of the Southeast.
Teaching people how to buy outside of their home market, what are some tips that you’ve given people to looking at secondary market besides their home?
The main thing is it comes down to your relationships. The first thing we look for when we go into a new city is the realtor that’s going to sell our houses. Over the years, we’ve developed a good profile for a realtor that’s going to work well with us. Some experience with investors is needed, a good competent realtor who sells a good number of homes but not necessarily the top realtor in a market. The top realtors in every market are typically the realtors that sell for builders and the realtors that sell REOs. They’re not going to pay any attention to us and they’re going to be preoccupied with what they have going on.
We want the top realtor in resales and/or somebody like that near the top and who has experience with investors. That person will know the number two most important person we need in town, a good reputable contractor. We have to fix the houses and it has to get done right. We know some things about prices and that thing. When you’re working long distance, you’ve got to be able to trust the people that you have on the ground. We’ve got a database of 30 character-oriented questions that we ask during our casual conversation and our actual interview when we’re looking to hire them. If we can find the right character combination and skill set, then we’re going to be all right in that market.
Those are great words of advice out there, especially some people like to chase the REO agents.
They’re not going to give you the time of day and they don’t have the time of day to give you. They have a captive customer. Being an REO agent sounds like a gravy train but it’s hard. What those asset managers from the banks require the REO agents to do is a difficult challenge. They don’t have time to fool with you or me.
Many of them are getting set up on their name and getting things rock and rolling. A lot of times the banks aren’t listening to the agents and what they get listed for. They have their own price set and they’re making the realtor list at what they believe the value is, not what the market shows.
If you could meet an REO agent, that’s not a bad thing. I like to be friends with everyone. If you can befriend an REO agent, you might be able to grab some pocket listings because they know that they’ve got these properties that are coming up that they haven’t been cleared to list yet. They can tell you about them and you can go ahead and do a little bit of diligence on them. Day number one, the hour it gets listed, you’re there with an offer. That can happen and there’s nothing wrong with that.
As we get into the fourth quarter of the year, it’s a prime time to follow up on properties that you’ve made offers on that have been declined, countered or not accepted. I love the next 90 days. It’s my favorite time of the year when it comes to investing. You end up buying more in this quarter than what you usually do the rest of the year, just because we’re following up with the banks, the hedge funds and making them an offer. We can close before year-end. That’s magic to the ears of asset managers. We can close before December 27th, which is the last Thursday in the year.
For our business, it’s good to stock up at the end of the year too because that means we’ll be working on them and have them ready to go when springtime comes around. We sell properties every month of the year, but not much in January and February. We sell a surprising number in December. We want to have stuff to be working on, keep our people busy and be ready to hit the ground running in March.
That’s a smart thing there too because everybody’s worried about their Christmas bills come January and February.
A lot of people move. A surprising number of people move over the Christmas break. Families with school-aged children are reluctant to move during January and February. They want to go ahead and finish out the school year where they are. The buying fever starts up in March and it peaks in the summertime.
I imagine you’ve seen quite a bit of an increase in your Meetup groups too come January and the first part of February. How is the attendance in those?
Not really. The attendance stays pretty steady all year round. It depends on whether the speaker and the topic are going to strike a chord. I have a great home inspector. He’s very professional. His role is critical. When we rehab an older house in the city, I like to get him to inspect the home before I even list it. If there are any bad defects, we’ll fix them. We put his inspection report out there on the countertop for potential buyers to see. This is a great strategy, a great plan and everybody ought to do it. I had the home inspector come and speak to my Meetup group. We had twenty people there. I was embarrassed. It’s not a sexy topic. I don’t want to hurt anybody’s feelings, but you could probably think of ten or fifteen things that people are not going to get in their car and fight Atlanta traffic to come out to here. On the other hand, we had a lady that teaches how to buy tax liens. We call her the Queen of Tax Liens here in Georgia. She has her own little following but we packed the room, standing room only. You couldn’t probably put five more people anywhere in that room. This is because of the popularity of the topic.
Why did you start the radio show? Why did you start the podcast?
It’s becoming so much more than I ever thought it was going to be. My background and experience are speaking in front of crowds. I never aspired to sit down in front of a microphone in a studio. In fact, the first few shows it was weird. I’m used to having people out there. I draw my energy from the crowd. They laugh at my jokes. We’re having a good time. If you say something funny into a microphone, there’s no one there to laugh and you laugh at yourself, then you’re thinking, “That was weird. I’m laughing at myself.” While you’re thinking about that you’re not talking, it’s dead air, the enemy of radio broadcasting.
Our mutual friend, Jim Beach, I interviewed for him on his show. After it was over he said, “You did well. I enjoyed that. Do you ever think about doing your own show?” I said, “No, I’m too busy flipping houses.” He’s in Atlanta. I’m in Atlanta. We like each other. We started hanging out, get a drink every once in a while. We meet for breakfast, talk business. One day he said, “I was talking to my syndicators and they need a real estate show. They’ve got a slot and they need a show. Why don’t you do it?” I said, “No.” Long story short, he talked me into it. He said it would give me a little bit of credibility and has it ever. I didn’t even know that I was seeking credibility. I got dragged into it but I am having so much fun with this show and the opportunities that it brings, the people that I meet and the ideas that I hear. The benefit brings to me, the way I operate my own business and the things that I’m learning from doing the show, that’s well worth it. Now hundreds of thousands of people listen to my show every week and it blows me away. We’ve done the show in front of live audiences a couple times and that’s fun. It’s a pain to take all the gear and set it up. When you put some people in the room and you get them cheering and yelling, coming out of the commercial breaks, that’s a lot of fun.
It definitely is whenever we can do it in front of a live audience, you’re live and we’re getting feedback from people, which are always phenomenal. With media being so much easier than it used to be, it’s so much easier to get out, get an audience and help share some things. I know you’ve got a passion for helping people with real estate. Do you want to talk about that, Roger?
People started asking me to teach them how to flip houses and it started with the lady who is now my wife. I knew I was going to ask her to marry me. She didn’t know at the time. She was hoping but honestly, I didn’t have time to teach her because I had 60 houses in inventory. That means we’re working on eight or ten at the same time. It was a full-time gig. I’ve been a speaker and a trainer. I have a degree in education. I was a school teacher for a while. I could teach the topic, I just didn’t have any interest. We went to a guru thing and I stroke the big check to pay for her the guru education and she got nothing out of it.
It’s an online course. After you pay all that money, you get an online course. She’s as diligent and as disciplined as they come. She got about two-thirds of the way through it and said, “I’m sorry, I’m not learning anything. I still don’t know what to do any more than I did. I don’t think I want to do this.” I said, “It’s okay. That $30,000 will come back to me some other way.” After going to one more of those events, I was talking to my realtor about it and he said, “Why don’t you quit going to these things and start teaching them yourself? You flip more houses than any of those guys have. Probably more than all of them put together.” I thought, “That makes sense. Besides that, I know how to write a curriculum.”
I gave it some thought and decided to do something a little bit different. I did agree to start teaching people, but I wasn’t going to invest a whole bunch of money into this mass marketing campaign and try to start off with large crowds. I wanted to focus on the techniques and the principles. The couple of the principles that are guiding me in this, first of all, we don’t teach real estate investing. We train investors. That means that there has to be a personalized approach. The things I know about Theories of Learning and that thing, we adjust what we’re sharing with the people based on where they are in their life. We had a new mentern start. We call it the Menternship Program. We had a new one start. He spent 30 minutes in my office after he had gone through some training out there, just get to know your time. What it is you’re looking to try to do and your background? How we can connect what we’re teaching? Some of the things that we said, “You don’t need to spend so much time on this one but watch this course.” The video courses are out there but there’s a personalized touch.
One of the biggest hurdles in this business is coming up with the money to do a deal. While there’s a lot of hard money out there, you can go get it but the typical hard money loan to fix and flip a house is still going to probably take $25,000 to $40,000 out of pocket. Not a lot of people have $25,000 or $40,000. That’s sad to say a report on the State of Affairs in the United States of America, but there aren’t a lot of people that can put their hands on that money to do a hard money loan deal. I decided early on that I would make my students the same deal my dad made me. I’ll put up the money, you do the work and we’ll split the profit 50/50. I’m going to teach you how to do the work and more than that, to protect myself a little bit, I’m going to give you a coach in your community that I hired to work with you. You don’t have to pay anything out of pocket, but when you do your first deal and we’re going to do this for four, on your first four deals, you’re going to split with your coach whatever it is you make.
Make a $60,000 deal, you’re going to end up with $15,000 but you have no cash in it. You know what your return on investment is when you have no cash in it. That’s a deal that works out well for the students. First of all, we don’t require them to use my money. If they have their own money and/or if they have the courage and the resources to do it, we do teach the structures of hard money and how to understand what the whole numbers thing is, to understand the difference between ROI and ROC, return on cash. We help them understand all of that. Even if they don’t use my money, they’re still going to benefit from everything that we have to offer. Of course, because they’re using my money and we’re profiting a little bit from them going down the road, we don’t charge nearly as much as the national gurus do. It’s working well. We’re adding a new station. That’s the flagship station of a large network. If all goes well for the fourth quarter, we’ll be on the whole network.
Where do you see the market going in the next twelve to 24 months? If you had a crystal ball, what are you forecasting?
I tell people my crystal ball is in the shop. We do pay attention to the data. One of the things that I like about real estate when you’re trying to predict the future is it moves slowly. If you’re paying attention, the signs are obvious. What happened to me in 2006 and 2007 is I wasn’t paying attention. I wasn’t even thinking about it. I was assuming, “This is what it’s been like since I’ve been in the business 2002. I guess this is what business is like.” What happened was probably a once in a lifetime crash. It was driven by greed and that thing. I do believe that over the next twelve to eighteen months, we’re going to see a little bit of a correction. I don’t know that the prices are going to go back so much. I think they will in the coastal areas. They’re overvalued from Washington DC to Boston. All of the West Coast is overvalued. Their prices have to come back to the little guy a little bit.
As far as the rest of the flyover country is concerned, I believe we’re going to see a slowdown in the rate of appreciation. Based on looking at the data from everybody, we projected 2018 would be about a 5.5% rate of appreciation nationally, with Atlanta being a little blip at 7.5%. It looks like we’re going to be pretty spot-on with that prediction. I would love to take credit for it but I’m getting the data from ATTOM and CoreLogic. I look at all the charts and graphs so my audience doesn’t have to. We take the cookies from the top shelf and put them on the lower shelf. People that don’t want to look at all the data and do the math.
I do believe that the market is going to be balanced. You talk about a two-month supply there in Austin. Eventually, you’re going to have a three-month supply. Most of the houses that get listed are going to have a price reduction. Those are not concerning things. The things that I look for that would be concerning for me is if they start loosening up the lending guidelines again. That portends a problem in the future. Do they still do subprime loans? Yes. This is news. They never stopped doing subprime loans. They never stopped securitizing subprime loans. What they did stop doing was the collateralized debt obligation. If you ever see something like CDOs or bespoke investment vehicles, then run. Get into cash because you’re going to have another downturn in buyer’s opportunity.
We’re starting to see an uptick of those. I track a lot of that stuff because that’s the stuff that we look at since we see stuff usually six to twelve months before it hits the foreclosure auctions.
The securitization of subprime notes, there is an uptick. We’re watching that too.
You see that there are a lot of new non-prime lending programs. It’s not quite as bad as it was, but we’re seeing an uptick with lenders getting back in. Lenders are starting to take those 100% financing or one day out of foreclosure, one day out of bankruptcy, 520 FICOs, that stuff that we saw a year as being an ex-mortgage broker back from 2004 to 2008. I saw that stuff and shook my head like, “How is this guy getting financed?” I’ve had a couple of long talks with some of the funds that had been doing it and they’re making money. They’re excited about making money because the property values are going up.
The banks are always going to be taking care of themselves. They’ve got some federal guarantees backing them up. They probably take chances that they wouldn’t if they were playing with their own money. The good thing about it is these things are concerning, but the next step that we need to see is non-stress related increases in default rate and foreclosure, non-hurricane or natural disaster. If we start seeing that, then it’s going to be time to start moving out of equities and into cash.
Things are staying pretty stable. We’re seeing a few little upticks across the country and some different areas. I don’t think it’s enough to cause a panic. We’re keeping our eyes out and we’re glad to see that you’re keeping the eyes out too. It’s a good sign that people are like, “It’s not all lifestyles of the rich and property-famous.”
It’s like, “Pay attention and you might do well in a few years.”
How can people get ahold of you more to find out information about Flipping America, your training, and the show?
We’re on the web at FlippingAmericaNetwork.com. If you go to the website, everything is there on the main page. Information about our mentoring is there. You can listen to the shows. I also would encourage everybody to download the free Flipping America app in the App Store. There’s never an in-app charge. There’s never an upsell. It’s completely free. When you do that, you can listen to my show anytime as a podcast. You can listen to it in your car. I sometimes script my openings. It’s all in the show notes. We don’t change anything. We stick it all in the app. When we are covering the news, we may have eight to ten new stories we’re going to try to get to on the show. All of those are linked in the notes for every show. All 190 shows that we’ve done are in the app and it’s completely free. The other thing I would say is if anybody ever has a question about real estate, not just investing, anything related to real estate, we have a dedicated team here. We answer 100% of the questions that come into the show, even if we’ve answered it a million times before. You can send your questions to us at Questions@FlippingAmericaNetwork.com and you will get an answer to your question.
Roger, thank you so much. Thanks for having a big heart out there and taking care of people. There are not enough people out there doing what you and I are doing out there. Keep up the good work. We look forward to your continued success.
Thanks, Scott. Talk to you soon.
Check out FlippingAmericaNetwork.com, great stuff on there. You’ve got a great wealth of knowledge there. Check out the app as well. Download it. You won’t be disappointed. Go out and make something happen. We’ll see you at the top.
- Roger Blankenship
- Scott Carson on Flipping America Network show
- ATTOM Data
- Flipping America app in the App Store
About Roger Blankenship
Roger Blankenship is the “Flipping America Guy.” He’s host of the nationally syndicated real estate show, “Flipping America,” author, educator, motivational and inspirational speaker, and business leader. He is a member of several professional real estate organizations and is part of the Forbes Magazine Real Estate Council.
Roger is a unique and visionary leader with a broad background in corporate and nonprofit leadership and a lifelong history of start-up ventures. His corporate career gave him a strong background in staff development, cost management, process evaluation and work-flow improvements. His skills in curricular design, strategic planning and vision-casting have allowed him to help many companies develop new approaches and new products. He has a track record for innovation, creativity, flexibility, and continual process improvement in a wide range of situations.
In 2007 Roger founded Whitestone Investments, Inc., a real estate investment company in Atlanta, Georgia. Whitestone specializes in the purchase and resale of single family residences. Since 2002 Roger and his team have purchased and sold more than 800 properties across the southeastern United States. Whitestone offers a complete solution for both homeowners who need to sell quickly and investors looking for quality properties at wholesale prices. In addition to purchasing, remodeling, and marketing properties, Roger has founded the Flipping America Mentoring Program which teaches the science and art of real estate investing. He has a new book coming soon, “The Ten Day Real Estate Investor.” Roger and his team teach real estate investing and provide coaching for new investors. Roger is in demand as a speaker and small business consultant. He has led seminars with groups as large as 5000.
In his spare time, Roger serves on the board of a non-profit organization whose purpose is to provide housing for the homeless worldwide. How does he manage all of this? Some time ago Roger developed his own paper planner, calendar and personal goal tracking system. This year he is making it available to busy and motivated people everywhere. The “GMS Planner” a life planner and calendar, allowing the user to track their Annual Goals, Quarterly Milestones, and Daily Steps to success.