REI045: REAL ESTATE INVESTING LIKE A HOME INSPECTOR

W/ JUSTIN EATON

24 November 2020

On today’s show, I sit down with Justin Eaton to talk about his journey into real estate investing and how he looks at it through the lens of a home inspector. Justin is a successful real estate investor himself, having completed over 14 flips, as well as wholesale, BRRRR, house-hack, and live-in-flip deals. He is also the founder of South Jersey Real Estate Investor Group and Owner of DwellSafe Inspections & Engineering.

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IN THIS EPISODE YOU’LL LEARN:

  • How home inspectors view potential investment properties differently.
  • Major red flags to look out for in potential properties.
  • What makes for great rental properties and flips.
  • Major mistakes new investors make.
  • Repairs and inspection issues that are exaggerated and can be a good source for deals.
  • And much, much more!

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TRANSCRIPT

Disclaimer: The transcript that follows has been generated using artificial intelligence. We strive to be as accurate as possible, but minor errors and slightly off timestamps may be present due to platform differences.

Robert Leonard  0:02  

On today’s show, I sit down with Justin Eaton to talk about his journey into real estate investing and how he looks at it through the lens of a home inspector. Justin is a successful real estate investor himself, having completed over 14 flips, as well as wholesale, BRRRR, house-hack, and live-in-flip deals. He is also the founder of South Jersey Real Estate Investor Group and Owner of DwellSafe Inspections & Engineering. Let’s dive right into this week’s episode.

Intro  0:32  

You’re listening to Real Estate Investing by The Investor’s Podcast Network, where your host Robert Leonard interviews successful investors from various real estate investing niches to help educate you on your real estate investing journey.

Robert Leonard  0:53  

Hey, everyone, welcome to today’s show. As always, I’m your host, Robert Leonard. With me today, I have Justin Eaton. Welcome to the show, Justin.

Justin Eaton  1:01  

Hey, Rob. Thanks for having me, man.

Robert Leonard  1:03  

For the audience who are not familiar with you, tell them a bit about your background, your story, how you got to where you are today.

Justin Eaton  1:09  

I graduated college in 2012 with a civil engineering degree. I kind of fell into a job doing home inspections and structural engineering. I wasn’t really into the job too much. At first, I thought, “Hey, I just went to college. I got an engineering degree. I’m working for this small company doing mostly home inspections.” I wasn’t really into it at first and I was kind of sending feelers out for other jobs. I ended up just sticking it out. 

I got better at the home inspection stuff and eventually, I got my home inspectors license. 

Then in 2015, I partnered up with the owner of that company. We did our first flip property and we did seven flips together. Afterwards, we kind of went our separate ways from the investment standpoint, but I was still working for him. 

In 2018, he’s a little bit older so he’s thinking about retiring. We then were talking about how I was going to buy the business from him. Ultimately, it didn’t end up working out. 

I started my own business in January of 2019 for home inspections and structural engineering, and then investing in real estate since 2015 on the side.

Robert Leonard  2:11  

What does your real estate portfolio look like? What have you done for deals? How many units do you own?

Justin Eaton  2:17  

Between 2014 up to now, I’ve done 15 flips. Seven of those were with that original partner. The others were solo. I have done one wholesale deal. I have one single family rental now that I did the BRRRR method on. I’m actually in the process of doing another BRRRR method now. 

One of my second live-in-flip or second living investment properties… The first one was like a live-in-flip slash house hack where I bought a property and renovated it. Then I moved into it and had somebody rent one of the bedrooms. 

In 2017, I sold that property and bought an up and down duplex. Then I moved into the first floor. I had an upstairs tenant. It also has a three-car detached garage that I ran out separately so it covers 65% of my living expenses between principal insurance taxes. That’s kind of where I’m at right now. I’m kind of transitioning into apartment syndication.

Robert Leonard  3:06  

Based on that timeline, it sounded like you started with flips before you got into your house hack.

Justin Eaton  3:11  

That first one I bought to live in that was before I knew anything about real estate investing at all. I kind of bought it as I needed somewhere to live. My parents were splitting up and they’re selling the house. 

My boss came across this property and he was going to buy it as an investment and said, “Hey, I know you’re looking to move somewhere. This property is up for sale, if you want it. If you can make it work, do it.” It was a house in need of a rehab. That was before I really knew anything about real estate investing. 

Then maybe a year and a half later was when I started learning about real estate investing. That was when we did our first flip. 

Robert Leonard  3:43  

How’d you know you were ready to do a flip and why’d you choose flips over going into a rental?

Justin Eaton  3:49  

I saw people who were doing flips. From an outsider standpoint, it thought they’re making really good money. They’re making $20,000 to $50,000 at a time doing flips, which is obviously attractive to a 23-year-old. So that interested me. That’s kind of what it was. I can supplement my full-time job income with a flipper to a year. It’s a pretty significant increase in active income.

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Robert Leonard  4:14  

How was actually flipping those properties different than what you expected from the outside view?

Justin Eaton  4:19  

It was a lot harder. The first one especially, I probably made all the mistakes in the book. I tried to do everything myself. You think you’re going to save money on paint by doing it myself, save money on the carpenter with all the trimming, save money on demo. Though, in reality, it took three times as long as it should have. It was like a two month renovation and I’ve taken six months.  

The money that you save, you’ve spent on time plus holding costs if you have those. So after we did that first one, we figured out that we should just focus our time on working and we would hire subs for all this stuff. It became a smoother transition from there. I was more of a GC, kind of overseeing the subs from then on out.

Robert Leonard  4:57  

How did the rest of your deals go? Would you say most of them are successful? Did you have any others that were difficult? Did you have any failures?

Justin Eaton  5:05  

We didn’t lose on any of the deals. There were one or two flips, probably… Really just one that was like a breakeven flip where we went over on the renovations. Otherwise, I would say they’ve all been pretty successful.

Robert Leonard  5:17  

On those breakeven ones, why’d you go over on the rehab? Did something happen during the renovation that you didn’t expect? Or was the rehab budget just not set appropriately?

Justin Eaton  5:26  

I had a hard money loan on the property that took longer to sell. It ended up being like three or four months worth of holding costs, so it wasn’t accounted for. Then the main budget issue was the plumbing issue. The house we planned on, it was electric everything. We planned on putting gas in and converting everything to gas. That was more expensive than anticipated. Between that and the holding costs, there were other factors there too but those were the two things that caused us to get closer to breaking even.

Robert Leonard  5:53  

What were you doing to be able to estimate rehab costs so that you could get an accurate budget?

Justin Eaton  5:59  

The home inspection background, you kind of knew everything that had to be done. So it was easy to kind of put a scope together after walking through a house. Then I would send that scope to the subs. 

Sometimes if we had access to the property, I could send them out there before we bought it. I feel like if it was vacant, it was in a lockbox, we would try to get guys out there before so that we had a more accurate budget. We would over budget a little bit to give us some wiggle room there, if we were to go over on some things. We would always put like a 5-10% contingency on the renovation budget, depending on the scope of the project. 

Robert Leonard  6:31  

How are you finding all these deals?

Justin Eaton  6:34  

Again, the home inspection business, all your home inspection leads come from referrals. We would get off market deals or pocket listings from some of the realtors we knew through the home inspections. Some of them were just MLS deals, and then some of them were from wholesalers. Then two of them were from auction websites.

Robert Leonard  6:51  

So you were able to find some flip properties off the MLS and still make a profit?

Justin Eaton  6:56  

Yeah, this was a couple years back then. It was like the coolest thing out so in  2014 or 2015, you could still find like good deals on the MLS. Maybe not home runs, but a lot better than what you can find these days.

Robert Leonard  7:10  

Yeah, today, it’s a lot more competitive than it was back then. 

You mentioned your home inspection background has helped a lot with estimating the rehab costs. How about the structural engineering side? We were talking about how it helps the foundation, so does that allow you to buy properties that might have structural issues or foundation issues because you can analyze that better than someone else? A lot of times those properties could sell at a big discount, or a lot of investors just avoid them because that’s usually a huge ticket item and or they don’t understand it. Have you found that to be like a competitive advantage for you that you can go in there and understand the structural issue there and find really good deals that way?

Justin Eaton  7:43  

Yeah, so if we find a property that for example, it’s priced significantly lower than what it should be because of structural issues, then yes, we have a better feeling of what needs to be done and a good price on that. However, a lot of times it almost works against us, because we’ll be out looking at properties. We’ll see foundation issues and structural issues that other investors won’t see. I don’t know it’s like a catch 22 because we see it so we put an offer. That’s lower than what other offers are coming in at because we know that there’s a $15,000 foundation issue where other investors might not see it. So it ends up hurting them in the long run because if it ends up coming up, they’re going to have to budget to fix it. 

However, I feel like I lose deals sometimes because my offer prices are lower sometimes that what other people are offering because I know these other conditions. Does that make sense? 

It’s challenging. Sometimes I feel like I should put an offer in and then put some type of inspection report together. But being the home inspector, it’s kind of a conflict of interest too.

Robert Leonard  8:42  

That’s a really good point that I didn’t even think of. I just assumed that you would be able to take advantage of the opportunities and say this has foundation issues. Everybody knows this but because I know it better, I can make a good deal out of this. 

Whereas what you’re saying is that there’s some property that there’s a foundation issue, but people don’t know about it. Therefore you can’t be competitive with your offer because you’re taking that into consideration with your budget, whereas the other people aren’t.

Justin Eaton  9:05  

Exactly. It could come back to hurt them in the long run. If it comes up when they go to sell it, the home inspection may or may not find it then. It’s a gamble on their part, you know? 

Robert Leonard  9:15  

Yeah, absolutely.

When the new investor is buying a property, what are some of the big red flags they need to look for from a home inspection or even structural standpoint if they’re investors buying their first rental property or a BRRRR flip, what are the types of things you need to look for?

Justin Eaton  9:29  

I would always suggest having a home inspection done just because the home inspector is going to go in the attics and crawl spaces. He’s going to walk on the roof. He’s going to run the heat and run the plumbing.

As an investor, if you’re just pre-contract and pre-offer, if you’re just kind of walking it, look for water in the crawlspace water in the basement. At least stick your head up in the attic and see if it smells musty or moldy. Walk the perimeter. I don’t think most people will be able to look for termites, like in the basement and crawl spaces. 

I would say the biggest things that you could look for as an investor without getting into the nitty-gritty would be moisture problems because that’s going to lead to mold issues. 

Waterproofing is expensive. A lot of times, water intrusions in basements lead to structural issues and termites. So more moisture issues, you have more chance you have bigger issues.

Robert Leonard  10:14  

What are some issues with properties? So say somebody wants to buy a flip, what’s something they can look for that people often think is like a big thing and so it kind of turns off people. But in reality, it’s not necessarily that big of a deal and if somebody knows to look for that, they can then buy those flips at a discount. What is something like that that’s often overblown, but could actually lead to opportunity for people that know what they’re looking for?

Justin Eaton  10:37  

Yeah, I think foundation issues are sometimes overblown. People get scared away by cracking in foundations. Depending on the extent of the damage, it could be fairly cheap, relatively speaking. an investor might think, “Oh, this will cost me 20 grand to fix this foundation,” where really might only be like $5,000.00. That’s probably the biggest one, the foundation issues. It’s not terribly expensive to fix if it’s fixable.

Robert Leonard  11:02  

Where are you buying all of your flips these days?

Justin Eaton  11:06  

I haven’t done many flips lately. I did two in 2018. They were both popular listings off-market from realtors.

Robert Leonard  11:12  

We are in New Jersey recording today. Is that where you’re buying all your properties? Yeah, they’re all in South Jersey. 

Justin Eaton  11:19  

You said you’re going into the syndication space. Talk to us a little bit about your plan there and how you plan on raising capital.

Yeah, so I have a pretty good network of friends. These are people I have met through home inspections and through real estate investing transactions, where I kind of grew a network. These are people who might have some extra money to invest. 

Right now, I’m in the process of putting together soft commitments from investors to raise capital, and then possibly bring on other members of the GP side, general partnerships, who also could bring on limited partners too. 

Right now, I’m trying to figure out how much capital I can raise by myself. Then once I know how much capital I can raise from private investors, I’ll be able to target specific properties, maybe a 20 to 30 unit, or maybe a 40 to 60 unit, somewhere in there. I plan on doing one or two local like that first and then target out of state markets. 

Robert Leonard  12:14  

How are you approaching these investors? Are you reaching out to them saying, “Hey, I’m doing a syndication?” What are you saying to them when you’re asking for them to invest?

Justin Eaton  12:22  

Basically, all the people that I’m asking, know me and know what I’ve been doing when real estate investing. Now I have a home inspection business. That’s one good thing about posting on Facebook and Instagram, people are seeing what you’re doing. So then they’re comfortable with what you’re doing and  they know that you know what you’re doing in that space.

I basically explained to them this is what my real estate investing experience is. Most of them would already know but I would tell them that I’m in the transition now from one to four units investing into apartment syndication and I’m looking to raise private capital to use that to invest in larger properties.

Robert Leonard  13:00  

How do you know that you were ready for a syndication? I mean, you’ve done a lot of flips, which is obviously great. However, you’ve only done two rentals and a couple house hacks. How did you know you’re ready to go to a large syndication not as a passive LP, but as an active GP?

Justin Eaton  13:17  

That doesn’t translate all the way through. You’re going to read books and learn, but you’re not going to really learn until you do it. However, I think I’ve read enough about it and done enough research and networked with enough people to at least start the process. 

For the first one or two or three, I plan on bringing on GPs to assist me in the process and kind of guide me through it for the first time.  I’m not going to run straight through by myself, and I’m not going to be the only GP on this one. I thought of bringing someone with experience that’ll make me feel more comfortable, that’ll make my limited partners feel more comfortable. 

I feel like, personally, I have enough knowledge in real estate investing. I feel like I know enough about how apartment properties are valued and how they work like cap rate and all that. I feel like I have enough knowledge to make that next step, if I partner with the right people on the GP side and make the right moves.

Robert Leonard  14:08  

How are you finding those co-GPs to join your deal?

Justin Eaton  14:10  

Just local network groups. Matt Faircloth here to this office, he lives obviously near here, which is kind of where I’m from. SI met him through some local events. He’s one of the first ones I reached out to to co-GP with. He said he was all for it.  

Also, I’ve talked to some other people about coming on the GP side that don’t really have real estate investing experience, but have friends in their network that can bring on capital. Those are the kind of the two avenues I’m pursuing from the GP partnership.

Robert Leonard  14:41  

Yeah, you need someone that has the real estate experience, but also you want somebody that can bring in the capital and help you with that side of things.

Justin Eaton  14:47  

Exactly.

Robert Leonard  14:49  

So for your first syndication, are you looking for 100 200 unit property? Are you looking for more like a 50 unit, start maybe mid size or smaller syndication?

Justin Eaton  14:58  

I plan to target a 32 unit in South Jersey.

Robert Leonard  15:04  

Are there a lot of properties in that area of that size?

Justin Eaton  15:08  

Yeah, there’s more than you would think. If you’re not looking for those properties, you don’t necessarily see them. In the last two years, once I actually started looking around at the types of properties I’m driving by on a daily basis, there’s a lot more than you would think. 

So yes, I think there’s definitely deals to be had. You’re going to have to probably find them and hook up with the owner off market. You’re not going to find them on the MLS or loop net or wherever. To get the right deal, you have to be off market.

Robert Leonard  15:32  

Yeah, that’s my next question. How are you finding these deals because you’re not going to see a big for sale sign in front of a 60 unit apartment building, right?

Justin Eaton  15:39  

Yeah, exactly. I drive for dollars. So BiggerPockets talks about that a lot. I’ll write down the address of an apartment complex. I’ll go back and look up the tax records and who owns it. Then I’ll either mail them a letter or try and reach out to them via phone call. Try and get a hold of them somehow directly.

Robert Leonard  15:58  

When you’re competing in a market, obviously, you mentioned Matt Faircloth, who’s here at *inaudible* with us today. Then he’s going to co-GP with you so he’s not necessarily competing. But there are obviously other competitors in the market, how are you combating against other competitors and making sure that you win these off-market deals?

Justin Eaton  16:15  

I think it’s a matter of putting in the time and effort to get in contact with the owners, and putting different marketing schemes together and maybe some direct mail marketing to try and contact these owners before other investors because I know I’m not the only one doing this probably. So yes, it would be trying to get to these owners quicker than other investors might and show them off the bat that I have a track record, and we’re going to close the deal, not just out here pulling strings.

Robert Leonard  16:41  

Are you using any creative marketing strategies?

Justin Eaton  16:44  

Not at this time, not other than mailing direct mail.

Robert Leonard  16:49  

Just regular direct mail, nothing fancy?

Justin Eaton  16:52  

Yeah, I usually just have like a premade letter on my computer. I’ll type in addresses and like names and stuff, specific to those properties. I’ll just seal an envelope and mail those to their house.

Robert Leonard  17:02  

You mentioned that you were studying reading books, resources, things like that to get prepared so you’re ready for a syndication. What were some of those resources that you’re using to get prepared for the syndication?`

Justin Eaton  17:13  

A couple books that stand out… when I first started flipping, that’s all I wanted to do. I thought that was the best like real estate investing avenue was flipping because you can make chunks and chunks of money. Then I realized it was transactional. Then I read the book on rental property investing by Brandon Turner. That completely changed my mindset from I want to just flip to I want to just buy rentals. I saw that that was the true wealth generator in real estate investing, long term buying holds, plus the cash flow that they can provide. 

Then I read a couple of apartment syndication books, “Crushing It” by Brian Murray, and then I read a “Multi-family Million” by David Lindahl. That was the one that really flipped the switch for value-add multifamily, how they’re valued and what to look for. Most recently, I read Joe Fairless’ book, the “Apartment Syndication” book. That’s kind of like a step by step process that outlines everything that you would need to do from start to finish to find a deal and to close a deal.

Robert Leonard  18:06  

What has been the most surprising or most important thing you’ve learned throughout studying for the syndication process?

Justin Eaton  18:14  

I would say the most surprising thing is how much value you can add to a property by raising rents a little bit on each unit, because of how the NOI would correlate with the cap rate, which gives you your value of the property. 

Robert Leonard  18:28  

For someone listening to the show today, who hasn’t heard of that dynamic that you’re mentioning, of course, when you raise the net operating income, a commercial property is valued based on a multiple of the night operating income. Talk to us a bit about why that is, and how that increases the value of an apartment building so much more than other properties.

Justin Eaton  18:47  

Because of the multiple units all under one roof. So if you have 100 unit property, and you increase the rent by $10 to $20 per property, you’re essentially increasing the value up to $150,000-250,000, based on the cap rate in that market. 

It’s a lot easier to raise the rent $10 to $20, than it would be if you’re doing a single family or a two to four unit property, you’re looking for 200 to 300 per door, cash flow. The rent for something like that might be 1200 to 1500, where a $10 or $20 increase on that rent really isn’t going to change the bottom line or the value of that property compared to a bigger property. 

Robert Leonard  19:28  

Anything four units or less valued on comps. So it doesn’t really matter what the income is on the property, hypothetically, it can make a million dollars, it doesn’t matter. It’s based on comps, right? 

Whereas a property that’s five units or more at the hundred level scale, it’s true as it is with five units, it’s based on a multiple of the cap rate. So like you said, if you’re able to increase rents and that drops right to the bottom line, the net operating income is increased and the value of the property is increased. 

I think that’s why five units and up is such a valuable asset class, if you will, to get into it which is considered commercial property often by banks. That’s why it’s so powerful because you can increase the value of the properties so fast just by simply raising rents.

Justin Eaton  20:08  

Yeah, it’s an exponential growth. It’s an exponential value add, especially if you can increase the rents a little bit, reduce the expenses creatively, especially if you find a property that’s not efficiently managed and maintained for like a mom and pop owner who are doing everything themselves… 

They might be a little high on expenses. If you can bring those expenses down, increase the rents a little bit, that’s when you can generate real wealth exponentially through multifamily.

Robert Leonard  20:33  

Yeah, when you start looking at reducing the expenses by, say, $50 a month per unit, and then you increase the rents say, 100 bucks a unit, now you’re looking at $150 a unit on 100 unit property. That’s some real real money that you’re adding to the value of the property very quickly just by managing the asset appropriately and better than mom and pop investors were doing, like you said. 

Let’s go back to flipping what were some of the biggest lessons you learned.

Justin Eaton  20:57  

I got on that first one. I tried to do everything myself to save money on the renovation, but it ended up being a longer renovation. So if you have high holding costs on that property, it’s going to eat into your profit. 

I would say having quality contractors that you can trust might be more valuable than the cheapest guy you can find. You hire the cheapest guys, stuff will not be right. 

Sometimes you may end up having to go back and redo things or you might have paid a little bit more, but only had to do it once and not had to babysit your contractors. 

Those are the two main things from a renovation side. I think you got to get creative when you’re finding deals, especially these days to find deals where there’s enough margin in the project to make a profit.

Robert Leonard  21:39  

Someone listening to the show today who hasn’t done a flip yet, and they may not have heard of holding costs, what is a holding cost? Why is that so important when you’re looking at flips?

Justin Eaton  21:48  

Depending on your financing, obviously, if you buy it, your holding cost is basically utilities, taxes, insurance, and financing. They’re like the bulk of your holding costs. 

In New Jersey, specifically, the taxes are pretty high. So it could be $500-1200 a month, depending on the location, and then your financing factors. Obviously, if you pay cash, you’re not paying a mortgage on that property or construction loan or hard money.

Hard money, you’re going to be paying a pretty penny on financing. So that might be $800-1200. Sometimes more than $1500 a month, just an interest only payment. 

The primary factors there would be for the holding cost would be… if you have debt on it, you’re going to have a fine debt costs, and then your taxes. That’s going to be the majority of your holding costs. Every month you hold that property, or even break it down to per day, every extra day you hold that property might be $50-100 in holding costs alone.

Robert Leonard  22:43  

Yeah, just because you’re flipping that property doesn’t mean the taxes aren’t still accruing every day. You’re still going to get that monthly or quarterly tax bill from the city that you’re going to have to pay. Those are real costs that you need to take into consideration when you’re doing a flip. The same goes for the insurance and any other holding costs you might have, like you said, the lender fees. 

Now, going back to the general contractor. What makes for a good contractor? Obviously, that’s very important if you’re flipping and it can even be important if you’re doing rentals, especially if you’re doing the BRRRR strategy like you are.What makes for a good general contractor?

Justin Eaton  23:15  

Somebody you can trust. That’s number one, because if you can’t trust them, you know that you’re going to have that in the back of your mind constantly. Will this get done? Can that be done? Is he going to be there today? Is he doing it right? 

You should try and find a contractor that works with investors or has investor experience themselves, because you don’t want them going in… Except for electrical, you don’t want them budgeting for all these super expensive lights when it’s like you really just need quality lights, in certain situations. 

Same thing for plumbing and HVAC, you don’t want them putting the $20,000 HVAC system in when a $5,000 system would be fine for something like this. 

I think the biggest thing would be trusting the contractor and coming up with a budget and scope of work that they stick to. This way he’s not going to be hitting you with work orders and all this crazy stuff that’s going to blow the budget or make it longer for the project.

Robert Leonard  24:05  

If it’s your first time working with a contractor, how do you know that you can trust them? How can you find out if you can trust them?

Justin Eaton  24:11  

I would say try and get referrals from other investors in that market, because they’re going to have some sort of track record through people that you know who are doing the same thing that you’re going to be looking to do.

Robert Leonard  24:20  

How do you find a good contractor especially today because, I mean, you just said referrals, but a lot of contractors are so busy, they don’t have time, right? So how do you find someone that is available, but is also good? 

If you’re doing a flip, time is of the essence you need that contractor in there ASAP. They might have a bunch of different projects going on. How are you able to find somebody that’s not only trustworthy and can do all the things that you just mentioned their investor friendly things like that, but they also are available at the time that you need them?

Justin Eaton  24:46  

Yeah, and they may not be. You may have to wait a couple weeks or a month to start a project, if you want to go with that contractor knowing that it’ll be done right when it get started, orf you want to try and take the risk of finding finding somebody new that you’re not totally sure about to say like a month’s worth of time, it could be worth it. It could be a good contractor.  

I would say there are other ways to find those types of contractors would be through network groups, real estate, network groups, business groups. You could go on *inaudible* or homeadvisor. There are some good quality contractors on there that have reviews and a track record, so to speak online. 

That’s the other difficult part of the renovations is finding a good contractor, especially right now, there’s so much construction going on. A lot of these contractors are backed up a couple weeks or months on their timeline for starting. So it’s tough.

Robert Leonard  25:35  

I think that’s probably the hardest part, right? If they’re that good, they’re going to be booked, right? That’s just the way it is. It’s a competitive market right now. There’s a lot of deals going on. There’s a lot of money in the market. If they’re good, they’re going to be booked out probably for a few weeks. 

Have you ever delayed a flip? Have you bought a flip knowing and then you found out you couldn’t have your contractor for a few weeks, and you decided to just eat those holding costs for a few weeks because you really wanted to get that specific contractor in there?

Justin Eaton  25:58  

Yes. The way I’ve done most of mine, like I basically GC the job myself, so I’ll have subs go in there. So if it’s a contract,  I always use the same guy for kitchen cabinets and tile. Sometimes if I get to the point where I’m ready for kitchen cabinets and tile and he’s like a week or two or three out, we’ll wait because it’s worth it for me to have him in there. I know it’s going to be done right. Tile and cabinetry are going to look good. 

Though, usually there are things in between like electrical, plumbing, and HVAC, I haven’t had major delay issues with those guys. Usually, I can get them in on time. It’s the skilled carpenters and tile guys who are a little more booked. If you’re using a general contractor, that kind of throws a wrench into that whole situation. 

But for me, it’s easier if I have guys that I’m hiring individually, because if one of them can’t get in right away, at least I can get the other ones in there to get started and get it going.

Robert Leonard  26:47  

Yeah, as the GC, you could send in the plumber, right? Then if the next guy is electrical, and he’s not available for a couple weeks, maybe you send in some guy to do some carpentry or something else you could kind of finagle that because you’re the GC rather than bringing in the entire GC team who’s going to just hire out the subs. 

Now, how about your draw schedule? How do you manage that? What are your tips or hacks that you use to successfully manage your draw schedules that you’re not just giving them the full lump sum money?

Justin Eaton  27:13  

You mean from a construction standpoint to the contractors? Usually, I’ll do depending on the scope, they’ll do like a materials down payment and then partial labor, depending on the scope of work. 

Then sometimes I’ll set it up to where they’ll put the materials list together. Then they’ll order through Home Depot or somewhere not calling, pay for it, because I’m not giving them the money. The materials we paid for that I’ll give my labor deposit, usually like a third or one half labor deposit to get them in there and get started. 

Robert Leonard  27:40  

Have mentors played a big role in your real estate journey so far?

Justin Eaton  27:44  

A lot of my flip experience, so I did have a real estate investing mentor for the flip space in the beginning. I kind of like followed along his path, but not like directly with him. It kind of was just like watching from the side moreso. There’s a lot of learning on the fly with me, I learned pretty quick. Once I started learning about real estate investing, I started reading more books that definitely helped me grow quicker and learn better that way too.

Robert Leonard  28:10  

What books and resources helped you in the flipping space? We talked about some of the syndication space, what helped you in the flipping space?

Justin Eaton  28:16  

Estimating rehab costs. That one and I think maybe just more online research on the flip space to BiggerPockets forums, Home Advisor and stuff. I think a lot of the knowledge came from existing home inspection, building knowledge, in addition to flip experience after the first few.

Robert Leonard  28:32  

Bro, everything you’ve done, studied, what has been the biggest thing you’ve learned, and what is the biggest piece of advice you’d give to someone listening to the show today?

Justin Eaton  28:41  

Try not to think about it too much. If you’re going to get started in real estate or any business, a lot of times you can get analysis paralysis. You don’t ever start, you just constantly are running numbers on deals and you’re gonna find something that’s gonna be close. But then you’re like, “Oh, but the numbers aren’t great.” 

Eventually, you just got to pull a trigger on something and do at least one deal. Get your foot in the door and get some experience that’ll give you the confidence. You are going to learn from it going forward. You can’t sit around and wait. You have to get in the game eventually, even if you just break even on one or two in the beginning. 

Robert Leonard  29:12  

Now that you’ve done house hacks, flips and you’ve done a couple rentals, what do you think the best way is for a new investor to get started? Where would you recommend somebody brand new to real estate starts, be it a flip a house hack or rental?

Justin Eaton  29:22  

Depends on what they want to do. I would say a house hack is the holy grail of getting your feet wet in real estate investing, because you can buy something that needs work. 

Then you know you’re going to get some construction or flip experience that way. Then if you want to be a landlord or if you want to get rental properties, you’re going to be like an on-site landlord, essentially if you’re living in that property, running the other parts of it out. 

The financing terms are also attractive for living investment property. So you can get into the deal for cheaper most times. 

Yeah, so I would say like a fixer upper, two to four unit that you plan on living in would be the best way to start because like I said, you’re going to be able to get into it for fairly cheap, and then you’re going to get experience fixing it up and then landlording at the same time.

Robert Leonard  30:10  

A combination of a house hacking to live in flip? My first property was a house hack. And then my second property, which I live in now, was a live-in flip. I’ve done rentals since then but my second property, like you said, was a live-in flip. I think those are both really good strategies. 

Justin, thanks so much for coming on the show today. Where can the audience go to connect with you and just learn more about all the things you got going on?

Justin Eaton  30:32  

Yeah, so my home inspection, structural engineering businesses, DwellSafe Inspections, Engineering. The website is https://www.dwellsafenj.com/ 

To learn more about that business, I have an Instagram, it’s @Eaton_Homes, that is mostly my flip stuff and some of my rental properties pictures are on there. I also host, South Jersey Real Estate Investor Group, which is a local networking group in South Jersey. We usually meet up like once a month to network there. It’s been good. I’ve seen a lot of deals get done there, partnerships, friendships, businesses form there. So that’s been really beneficial.

Robert Leonard  31:04  

I’ll be sure to put links to all those different resources in the show notes. You guys can go check that out. As always, I’ll put a bunch of books in the show notes that relate to the topics that we’ve talked about so that you guys can go read up more if there’s specific topics you want to learn about. 

Justin, thanks so much for coming on the show. I really appreciate it.

Justin Eaton  31:19  

Thank you.

Robert Leonard  31:20  

Alright guys, that’s all I had for this week’s episode of Real Estate Investing. I’ll see you again next week.

Outro  31:26  

Thank you for listening to TIP. To access our show notes, courses, or forums, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decisions, consult a professional. This show is copyrighted by The Investor’s Podcast Network. Written permissions must be granted before syndication or rebroadcasting.

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