Buying Opportunities: Making The Most In Times Of Crisis With Trey Franklin

FO 16 | Buying Opportunities

FO 16 | Buying Opportunities

 

Times of crisis might make your work more difficult in the short-term, but in the aftermath, buying opportunities open up, so you have to be ready. For real estate investors, these big buying opportunities have to be taken advantage of because they’re the perfect moments to see how you can scale your business and become larger than you’ve ever been. Trey Franklin is a real estate investor working in the San Antonio, Texas market. He joins Paul Lizell to discuss different buying opportunities that may be opening up soon in various markets. Now’s the time to get your resources aligned and ready so you can truly make the most of these upcoming buying opportunities, and Paul and Trey can help you get there!

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Buying Opportunities: Making The Most In Times Of Crisis With Trey Franklin

I’ve purchased properties in 42 out of the 50 States and will continue to dive into new markets each and every year. We use cutting edge technology mixed with some old school ninja sales tactics to buy and sell real estate with a focus on small-town America. 

With me is my good friend Trey Franklin. Trey is an investor in the San Antonio, Texas market. He’s also a student of ours, a star pupil who hit the ground running and continuing to do awesome. I’m sure he has a bright future ahead of him. Trey, I want you to introduce yourself, get in your background. How did you get into real estate investing? Where are you now? Where are you looking to go for the future? 

Probably similar to a lot of people, you see these shows, people flipping houses and it looks cool but then I had the mindset of one day when I get enough money, I can start doing this. Self-educating over the course of a few years and realizing that there are other alternatives other than buying a house, cash, and flipping it. The first property I ever took down was a sub-to deal, someone in foreclosure, borrow private money from an investor, paid them an interest rate. That’s how I got started. It took me a good 3 or 4 years before I had the confidence and knowledge in order to do that. I started actively doing it and since then, I’ve done three firms, four flips, and six wholesales. One here and then 5 or 6 virtually with what you guys have shown me.

The virtual wholesaling model, which is an awesome one. You could do it. I’ve done some of the virtual rentals. I bought rentals in different markets, some in Texas, believe it or not, and done that way. I’m experimenting with these virtual property management systems. That’s a whole other thing that I’m going to be going into. 

From what I’ve heard, that’s another beast. I’m still navigating the waters of real estate and investing in finding what suits me and my personality and what I want to do long-term. The wholesale stuff is great because you can do it from anywhere. Most of the houses I bought virtually were bought in a Starbucks drinking coffee in a line. It’s appealing because I realized I enjoyed it. Two rehabs ago, I bought and sold three virtual wholesale deals with the same amount of time it took me to flip one house and made the same amount of money. The amount of work that goes into flipping a house versus wholesaling is night and day.

FO 16 | Buying Opportunities

You can make the same amount of money flipping houses as you do from virtual wholesaling.

 

I first started getting in the business back at the end of 2001 and it was flipping. I was doing the fix and flips. I was in there doing a ton of the work myself and to make good money, don’t get me wrong, the market was going up at that point. That was before the crash and everything, but when that crash of 2008 came, I had a bunch of losses. I decided, “I’m going to switch this model from fixing and flipping to wholesaling.” The market was perfect. It was right for it and I’m like, “I didn’t have to do anything in this property.” I turned around and I made $40,000, $50,000, $30,000 on this one. I’m like, “This is the model.” 

It was a light bulb moment. My thinking with the virtual wholesaling is I’ve only done four, I’m no expert but I know the basics of rehabbing a house. I’m thinking is if I buy one of these virtual wholesale deals, the numbers are good. If I have to take it down and rehab it or I can still do that and make a profit, I want to make a quick couple of grand, which is nice.

Being a contractor yourself, you could deal with other contracts because you know what pricing is. Especially in some of these tertiary markets, we buy in more rural areas. You generally get contractors cheaper than you are in places like Dallas, Texas or San Antonio, Texas where you have a lot more competition. You can do a lot of wholesale deals. We do some wholesale deals with some of our properties out there, carpet, and that thing. You’ve got that ability. What markets have you purchased? I know you bought in Pennsylvania, where I am and Michigan.

The first house I bought was in the middle of nowhere Pennsylvania. I got my first deal and I learned the most about that because not being local there, I didn’t realize where it was in relation to some of the bigger cities. I still sold it. It took a little longer and I made some money on it. That was the first one. I bought one in Salisbury, North Carolina, and Louisiana. The last one I sold was in Benton Harbor, Michigan and then I did one in Corpus Christi.

That’s a hot market too, Corpus Christi.

Some of them go quickly and some of them take a couple more weeks to find the buyers. They’ve all sold and all been profitable, which is nice.

That’s the most important thing. You make profits on these things. 

I’ll do it again.

You did one in Shreveport, Louisiana. I remember this one here. The numbers weren’t coming to where you want it on a wholesale deal. You did a bit of a fix and flip on this. How much work did you put in? Was it more of a wholetail? 

It was more of cleaning it out. The people who had moved out of it left all kinds of stuff in there. I hired a guy to go in there and rip out the carpets, a couple of dumpsters in there to clean it out and wholetail it. I made $7,000 or $8,000 on it, something like that.

It’s not big for a little wholetail deal, a quick look.

It was quick. It was done in three weeks.

That’s not bad at all. I know you made a move here. You got two things that happened here. You purchased property, sold your house, and then COVID-19 hit. Talk a little bit about that. 

My wife and I had bought our first house a few years ago. Since that time, we’ve had two kids and looking for a little bit bigger than the place. My father-in-law had a rental that he had for many years and it was a family house, his father’s. It hadn’t been fixed up probably since the mid-’60s. We came in and gutted it. About 3.5 months of renovation. I did some additions, move some plumbing, knock down some walls, a bunch of cosmetic stuff, new kitchen, and all that. We finished that and moved in. We then sold the house we were living in and we got that under contract. The week all this went down it was a little scary, this 30-day period of figuring out what’s going to happen in the economy? Hopefully, the bank continues to lend. It all worked out. It got closed and funded.

Wholesaling is great because you can do it from pretty much anywhere. Click To Tweet

You purchased your house with owner financing, is that right?

Yes. Good terms too. We have equity in this house. A house down the street sold for substantially more than what we bought this at. We’re sitting well now as far as equity position.

Even if the market turns, you’re going to be in good shape with this property.

We have enough room there if we see a significant drop. We’re also in the cash position where I took the equity that I got off my old house and now I have that. The nice part about that is we lived there for more than two years. It’s tax-free.

That’s the best thing for new people starting out. A lot of people don’t realize it, but on your primary residence when you buy it and you sell it up to $500,000 per married couple, $250,000 per individual is tax-free. You get that profit and you’re reaping the benefits, you don’t have to worry about 1031 exchange or anything like that. That’s the beauty of it. 

It’s a better cash position. I was telling you before this, I have been sitting back. I’m still looking at the options. I’m no veteran in it, but the little time that I have been looking into this, playing in this arena, I noticed that the inventory has gone up quite a bit and the price has seemed to be a little bit lower than what I was used to seeing before COVID and all this hit. There’s going to be a lot of opportunities here in the next few months or so.

There’s a ton. They’re getting a little more lenient too with their numbers. A lot of times, they would counter you and try to get you to come up. Whenever they do that, I stick with my number and they’re taking it almost all the time. I’ve gotten eight deals under a contract of options here. The numbers are good and they’re lower-cost properties here. It’s when these things where I’m not worried about a price drop. The people that are going to be buying or either buy and hold guys or it’s going to be an owner finance type deal. It’s a little safer model, but I love what you’re doing. Get yourself in a strong cash position to be able to pounce on things as they come about. When you see these deals, you’ll be able to jump on them and take advantage of it.

That’s what I’ve been looking at as well at some of these lower priced. When I do look at the auctions, I look at these $50,000 houses because there’s always going to be a buyer for those more than likely. You’ll probably see it hit with the higher priced homes before we see anything ever affect these lower-end houses. You got to live somewhere.

You think about the cost of these houses. You can’t build houses like this for $30,000, $40,000, $50,000. They generally didn’t get hit. When I go back to that financial crisis, 2008 markets like the Carolinas, Indiana, Ohio, rural Texas, lots of different areas of Texas, they were not hit that hard at all. Dallas wasn’t hit that hard at all because a lot of people were fleeing to move to Dallas, San Antonio, Austin, and Houston because of the tax benefits there. You guys didn’t have any significant downturn, you had more Emmetsburg but you didn’t have any significant price drop.

I didn’t own a house during that time period. I was in college then. I listened to a lot of these real estate podcasts, you hear about the 2008, 2009 crash and how significant it was. I don’t remember it affecting the economy here as it did all these coastal cities and things like that, especially California, Phoenix, and Vegas. I don’t remember it being that significant here.

Other markets were hammered. The markets that are typically hit and hammered are Florida, your retirement markets. Southern California, Phoenix, Arizona because that market was hit, it increased quickly. Although there are lots of businesses, jobs and infrastructures there. That’s going to be a solid place to be still. Vegas because Vegas is a destination place. If people don’t have money, they’re not going to be going to Vegas and there’s not going to be as many trade shows and all those things. Those markets will be hit again. In Portland, Oregon area, Seattle, those markets that were overinflated too much and New Jersey and New York, their taxes are too high. Connecticut and Northeast, their taxes are too high. People are fleeing those areas. A lot of people are leaving New York City. There are a couple of articles that came out, people are permanently moving, leaving. They should have been doing it years ago. This was an excuse. This is the last thing. I’m out of here. I don’t want to deal with this anymore, these taxes and all this stuff that’s going on. 

I meet people all the time and half the people aren’t from here. Most of them are from the West Coast. I want to live here because the prices are cheaper. I see them as they’re expensive to me because I grew up here my whole life. I’ve known what prices used to be and they’re still steadily climbing, but the parts of the country it’s still a lower cost of entry. There are a lot of people moving.

A lot of people go in there. A lot of people go to Texas, Tennessee, and those areas in Florida, there’s always going to be people retiring to Florida. It’s a no income tax state like Texas is. You’re always going to have those advantages there. It’s interesting. We might be in for, I don’t know whether this is going to be like the 2008 crisis at all, whether it’s going to be bigger or less. I’ll tell you a couple of examples of properties that I bought because our inventory level got high and these were HUD properties. There were properties listed at $235,000 and I was getting bids accepted for $90,000. There are several of them I got.

This was back in 2009 timeframe, 2010. The deals I was getting, that first quarter of 2009 when the stock market was still tanking and went down $6,000 or $5,800. We had wholesales of $55,000, 2 of $50,000, 2 of $40,000, 1 of $45,000. That first quarter was like, “This is big.” We’re given the flippers. The flippers would fix them up and they were making a $100,000 on the flip. It was their potential. This is going to be a little bit different. It’s going to be a longer-term effect because unemployment is probably going to hit a lot worse. It’s going to be a lot worse than this. They’re looking at 33% potential unemployment. That’s scary. You won’t have that in Texas though because there are jobs.

I’m a little concerned with all the oil crisis. Houston, that’s their main industry. We don’t have a lot of it here, but Dallas is going to be affected, Houston and West Texas for sure.

When people are looking at virtual wholesale deals, they're thinking that the numbers are good. Click To Tweet

There are a lot of places as one of the rentals I have is in Sterling City, Texas. It’s near the oil areas. I’m trying to remember the names of some of the other cities around there. Those people aren’t going to have jobs. Luckily, the guys who rent from me is a truck driver, he’s busy. Some are in good shape there. It’s amazing. It’d be interesting to see what happened is that oil Armageddon we had where it was going negative. It’s unbelievable. 

That’s why I was telling you is I’m at right at this point in observing and talking to people. I’ve never been through a downturn. I know this one’s different. My biggest thing I didn’t understand was, “What are the exit strategies? If renters aren’t paying rent if you don’t have an extra strategy, then what is your strategy buying then?” I still think about your point. There are still people who have cash reserves and are still buying because they know this is when they’re going to get the best deal. Back to 2009 when that’s when everyone made significant money when they bought and held. Now they’re selling 1 or 2 years ago. They’re big money. I’m still fairly new and figuring this all out, but it’s good to have people like you to reach out to and help me navigate this.

My biggest regret personally from the 2008 crisis I went through, there was wholesaling all those properties. There were properties I should have kept. If I would have kept, let’s say 10 or 15 of those high-level properties there, I probably could have sold them all off, retired, and been living a good life. I was in the wholesale game. My mindset was that. It was continually growing doing other things.

You received a $50,000 check.

I’ll better make sure this time. 

My goal before all this went down was to buy 1 or 2 long-term holds. I still think that’s still doable. I still want to do some wholesales to create the cash to buy and that kind of thing. I won’t be doing any major remodels or rehabs, maybe a quick wholetail or something like that I’ll be looking at. What I’m thinking about is wholetails, wholesales, and possibly picking up some cheap rentals.

I have a property next door in my house I bought and it’s not a huge rehab but it’s a rehab. We’re about halfway through it, maybe a little bit more. Who knows what it’ll be like when I put it on the market here? We’re lockdown and realtors can’t show properties here, which is annoying. This is what I’m worried about locally and in certain markets of the country, wherever it’s a lockdown. I’m trying to figure out whose lockdown, can’t show real estate, and who can? That’ll tell me what market I should and shouldn’t buy-in. The ones that are lockdown, I’m not going to buy for the future. The ones that are still open and they’re having transactions go throughout of mind because what I’m worried about and my broker was telling me, he’s like, “We’re holding all of our listings.” I’m like, “That’s going to cause a problem.” As soon as we opened up, everybody’s going to throw their listings on there. You’ve got the inventory to be here. Now, it’s here. What happens to pricing? Pricing falls. It’s basic macroeconomics right there.

I’m worried about that locally here. We’re in a bubble where we are in a burst. We’re about 45 minutes North of Philadelphia, a nice, desirable school district and everything. We’re in a spot where people want to live, but the taxes are not that great. When I first bought this place in ’99, our taxes we’re under $3,000. Now, they’re $9,300. It jumped quite a bit. Part of it is because I’ve done additions to this house but because school taxes keep getting jacked up here. At some point I’ll be moving, I don’t know whether I’m moving to Wyoming or Texas. We’ll see. I’m going to be going to a no-tax state eventually where I end up moving. PA’s not bad. It’s a 3.8% tax. That’s not that horrible. It’s not like the rest of the Northeast. 

We haven’t dealt with any of that luxury yet with all this as far as showings and stuff. We’re still normal. I wouldn’t enclose it at a title company. I was expecting then, I’ve seen on a line that they come to your car and have you sign or send them a mobile notary to have you do that. We had to wear a mask when we went in there but other than that, they were still working.

I had the weirdest one when I sold a property and I was worried about two with the mortgage. They were FHA mortgage buyers. It’s the USDA, the rural if you have heard the rural loans. It’s the best loan out there, nothing down and no PMI, which is awesome. Anyway, it went through but we couldn’t go into the attorney’s office to close it. We had to go to his parking lot and he came to the window. The sign, notarize it there, everything. It was odd, but it was neat it went through. I didn’t care. It’s going to give unbelievable opportunities. There are going to be many opportunities coming up, it’s smart. You have your cash on the sideline. Wouldn’t talk about one other thing with what you’re doing too because you’re doing some contracting work for other investors to do and fix and flips, which is great. It’s another way to earn some income and also keep active.

This, fortunately, how it happened when all of this went down, I had people aware of what I’m doing, that I’m rehabbing. These were homeowners who had reached out and wanted some remodel work. I had three different remodels going while COVID has been going on, which has been great because I’m fortunate that I can still work and do that while many can’t. It’s worked out well. The timing has been great. I couldn’t have come at a better time and I don’t have to put my money at play. Essentially, making some money off, using other people’s money to rehab their house and my exposure’s practically nothing at that point as far as risk. It’s been cool. It’s different. I’ve never done it before. The last one, it was the first house I’ve done with someone living there. There are some obstacles to that, but it worked out. Got it all done and onto the next one.

FO 16 | Buying Opportunities

The inventory has gone up quite a bit and the price seemed to be a little bit lower than what we were seeing before COVID-19 hit.

 

It’s interesting. I had a similar experience during that 2008 crisis. When I was scaling back and changing my business model, I had a couple of buddies of mine. They wanted to remodel their house. I was doing remodeling of their house and get referred to this person, that person. I was keeping busy with remodeling while I was wholesaling. It was incredible. I’m getting income on that side. I’m also getting income on wholesaling these properties and stuff. The more ways you can bring in income, the better. There are days I love going in and doing the work still, which can be a problem in the business that we do. I should be in front of my computer bidding every single day or making offers, but there’s something gratifying about going out there and doing that work. 

That’s back to how I got into it. I grew up in a single-family, just my mom, and two sisters. From a young age, I was the man of the house. I was always fixing stuff, redoing stuff when I was younger. I’ve always had that in me as far as redoing stuff. I’ve always been handy. I enjoyed doing those types of things. You’re right. You make your money sitting here bidding on properties online, but it’s nice to get out, be physical, and do the work sometimes. It’s been a good mix for sure.

I can’t wait until you get back into the bidding game here and use the opportunities that come up here. We’ll talk, guide you, and help you in any which way you need too. You’re always going to be a student for us and always something. We’re going to help you with every single deal you ever got coming. I look forward to these opportunities that are coming up. I know a lot of people are scared, but I’m excited. I can’t wait to see what comes because there’s going to deal you’re going to get. Not just off of the auctions but the MLS. If you want to start doing direct mail in your area, targeting locally, many people that were in the game are going to be flushed out with this crisis. You’re going to have much less competition. You’re going to get good deals out there. Opportunities galore are coming up.

I’ve been thinking about that. There are some decent size wholesale operations here, people, companies, and multiple employees. I would have if I were a little bit more successful with some of the other wholesaling things I had tried. I used to do cold calling, text messaging. I probably had a lot more overhead if I would have had success with that, which I think about some of these bigger operations. You do have a lot of overhead with virtual assistants, in-house employees, retail space that they’re renting. I imagine they’re hurting. There are probably a lot of people who don’t have the funds in order to keep that machine running at this point. You are going to see people if not going out of business but scale back and there’s going to be a little bit less competition. Here locally, it seemed like whenever I was doing cold calling, these people I would call, as soon as we get the notice of foreclosure, they had talked to ten other people already. It was hard to compete. I can see how there’s going to be some more opportunity locally, which I’m excited about as well.

Fix and flips you want to do locally. That’s a great opportunity. We’ll be free in that direct mail marketing and a lot of investors I know and I’m good friends with, whether Dallas market or in Phoenix, what they’ve done is they’ve laid off or fired a lot of their people. They had overhead. These guys have overhead to $30,000 a month between paying people and the marketing because they’ll spend $10,000, $20,000 a month in marketing costs. Some are scaling back and then some of the big operations are pushing huge with the marketing and scaling back people. You’re seeing a nice blend with what’s going on there but there are also people that are going to fold up. You’re going to see people fold up and get out of the business, do other things, go belly up. That’s why I like this model better. I have no marketing costs.

It’s your time that you sit in. You can outsource it once you get to that level. I like evaluating the properties. That’s what I liked the most. Other than time, there’s zero marketing cost, which is amazing. I spent $15,000, $20,000 before I took your program. In marketing, I didn’t know what I was doing and trying things out. I’m a huge fan of not paying for marketing.

This business model has been one of the best things I ever figured out and found out to do because I don’t want to have to wear it. I used to do the direct mail up until 2013. I cut it off then. Spending thousands and thousands of dollars a month and had fallen up and it was a total pain in the backside. Now, I could do everything. I have the virtual assistant that does a lot of the initial scrape for me. They look at some of these properties and then I’ll go into a deeper dive and then do the full analysis. I only have one full-time VA for myself. Mike, who sells the properties, is a part-time VA. If we needed to, I could tell the VA, “I got to cut your hours in half.” She’s fine with it because she’s also doing part-time with another one.

She would still be fine. We’re in a good position and finding a new VA is easy. I got the training videos I’ve already made for them. It’s not like there’s this big huge worry about I got to sit down and waste weeks training this person. They may spend 1 or 2 weeks training, learning it, but it’s all doing those videos that were already made for them and showing them how to do what we do. It makes it a lot simpler. When you’re looking to get back into and getting busy with this, then you can also look at doing a part-time VA if you needed it. To do some of this stuff that you don’t feel like doing, whether it’s taking care of the files and handling the title company and the buyers. That’s always something you can look to have them add and do.

That’s for sure what I’ll do because I had three houses that I was trying to sell at once. You do way more than that, but three was navigating the title companies and the buyers and it was a lot. Once I get back to that point, I’ll probably look for some help.

That’s a process. For somebody, you can find people that are out there, they’ll handle a file for $500 for you, but you don’t always want to spend that. If you’re paying $5 an hour to a virtual assistant, they’re only going to spend ten hours doing it, so you’re going to spend $50 as opposed to $500. It’s having somebody like that to do that. Luckily, I have her manage my rentals and stuff too. She’s got other stuff she’s doing there. To take some of that burden off you so that you could focus on what you like to do and what you do well, which is to find the properties, analyze, and find out whether it’s a deal or not. That’s the most important thing. Pass it off, grow it, and go from there. 

That’s been one of my biggest weaknesses is passing things off and training people. I know how I do it, I just don’t know how to communicate how I do it sometimes.

You only have to outsource and spend for marketing costs once you're at a certain level. Click To Tweet

It’s almost one of those things where you got to sit down and record yourself whether it’s through Zoom, doing exactly what you’re doing, explaining what you’re doing, record it, store it away, and then you put that in your file. That’s what I end up doing. Record how I analyze or record what I’m doing on all these different processes, so I don’t have to do it over and over again. Use technology. Trey, I don’t want to hold you up too much longer. If somebody wants to reach out to you if they have any questions for you or are interested, what’s the best way for them to reach you?

Email, it’s TreyFranklin87@yahoo.com. I can give them my cell phone. I got no problem people reaching out. It’s (210) 216-2067. Text me.

Texts are always easier. I’m with you on that, especially when you’re holding the hammer stuff. It’s not easy to pick up that phone. Trey, I appreciate it. Thanks for your time. We’ll be in touch. Talk to you here soon.

Thanks, Paul.

You got it. 

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About Trey Franklin

FO 16 | Buying OpportunitiesTrey Franklin is a contractor turned real estate investor who has done multiple fix and flips in the San Antonio, TX market then ventured out into the Virtual Wholesaling space with resounding success. He has learned how to purchase real estate in a market with no buyers list and move them in unconventional ways.