Wholetailing: Flipping Real Estate With No Money With Travis Johnson

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Have you ever thought about flipping real estate deals but don’t know how to do it? You’re not alone. Travis Johnson, a successful house flipper in Minnesota and author of the Seven Figure Flipping Book, learned how to flip real estate the hard way. With no books or training when he first started, he did everything wrong and took financial losses. Today, Travis shares his experience on how to get involved in flipping real estate deals with no money, wholesaling strategies, and treating real estate investing as a real business. Tune in!

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Wholetailing: Flipping Real Estate With No Money With Travis Johnson

Welcome to the show. With me in this episode is Travis Johnson. Travis, how are you?

I’m very good. Thanks for having me here.

I knew you from a mastermind but why don’t you take a minute to tell the reader a little bit about yourself?

I’m based out of Minneapolis and the St. Paul area of Minnesota. I started investing part-time in real estate in 2001. I went full-time in 2016. I built my business from the ground up and doing quite well at it. I do a lot of rural investing. I also do a lot of the metropolitan where all the other investors are at.

I like to start these episodes with what I call the bottom line up front. When I was in the Marine Corps, they always told us we had to tell the general the most important thing as soon as the briefing started in case he had to leave the room. Take two minutes. Talk to the reader about what you think the most important things are that they need to be paying attention to or doing in this market.

That’s a pretty broad question that you’re asking me to answer but I can best answer it in regards to interest rates having a huge play. Over the last couple of years, interest rates have been fantastically low. When you purchase a house, if you had another contract and there was delay after delay, it didn’t matter. The values kept going up. It was an easy extra payday. Now, you have to pay more attention to interest rates going up. If you’re buying a higher-value house, you have to pay attention to that.

The main point I would say is to pay attention to interest rates but also get out there and do stuff in regards to investing because wholetailing, which we can dive more into the show, is working well and will continue to work very well in the near future. I also have my little secret strategy as to how to invest in the rural market.

We’re going to talk about wholetailing and rural markets. I love the interest rate conversation. It’s one of those things that I’m always having but let’s go back. What is a wholetail?

How I define wholetailing is actual wholesaling. That’s where you get a property under contract with a motivated seller and then you’re going to find an investor that’s going to want to buy that contract from you on an assignment basis. You’re wholesaling it from the motivated seller to the end cash buyer and you’re making a fee in between.

On the wholetail side of it is retail. If you take the retail side, you’re selling it to the consumer. It’s someone that’s getting a bank loan typically for the property. The property has to be in lendable condition. All the safety issues are taken off the table. Not having a collapsing deck is a good example but it is move-in ready other than it probably needs updates. That’s a good way to look at it for wholetailing. If you can do the actual wholetailing and eliminate the wholesaling part knowing that you’re going to capitalize very fast on turning around your wholesaling to a cash investor but it’s to an end-user or the person that’s going to cash you out on the retail end, you would make huge margins on your deals.

How does that work? Are you charging full price? Is there a discount? What do the numbers look like?

In the last couple of years, it has gone through the roof that what I thought was well over retail for a nice house. That’s what wholesaling was getting. Now, the retail price is going even higher so it’s back-filling. That’s how it works in regards to that. For me, the better answer is, for example, a house all fixed up was worth $150,000. It’s move-in ready. The paint colors are neutral. The carpet is in. The hardwood, floors are done. Everything’s fine about the property. I’ll wholetail it for $150,000. I’ll probably sell it for about $130,000 or $140,000. There is a slight discount underneath but you’re hardly doing any of the work on the inside.

The nice thing is you’re getting this thing on the public market.

Yes, MLS.

For some people that wholesale or assign properties, part of their problem is they can’t test the public market to get the maximum price.

You’re going to have to take title to the property. There’s no way around it.

Is this an inner-city thing? Is this a rural thing? Where do you find this strategy has the most bang for your buck?

I’ve been fortunate to be very successful even in the rural markets. I’m doing that strategy a lot but if you want the biggest return, go to the heavy metropolitan areas where it’s a dense population. You’re going to make insane numbers doing the wholetailing strategy.

How long have you been doing this?

I’ve been doing it full-time since 2016 but investing part-time since 2001.

What’s been the best part about it for you?

The financial freedom and flexibility with family schedules. We have four kids. Being flexible with school schedules and getting everyone where they need to be, that’s what provided it for me along with my wife. In 2018, my wife quit her job and joined me in the business. We’re all in.

I hear a lot of people say financial freedom. What does that mean?

To me, it’s not necessarily being wealthy. The ultimate goal is to have wealth but financial freedom to me is I get to do what I want when I want to do it. That’s the definition to me.

We’ve got a lot to talk about in this episode but what are some hot-button things that you think we should cover? We talked about wholetailing. We started to talk about financial freedom. What are some other things you think we should talk about?

I want to harp on the rural market and the reason why is because there isn’t as much competition. It almost doesn’t exist in the rural market. I am picking up properties left and right with ease. No one’s competing against me. The motivated seller is going to sell to me or list with an agent or sit in that house. Those are their only options and that is nice where I feel like I can box someone in. Technically, I’m not trying to take advantage of the situation but in reality, selfishly in business, if you have less competition, it’s always better.

It makes perfect sense. We’ve talked a little bit about rural. I want to talk more about this wholetailing thing. I’d like to know how you’re running your contractors and what burden or effort comes into that. I would like to know more about the rising interest rate environment and how that’s impacting you. I’ve got to figure out what you’re going to do with your financial freedom. You’re in the business. How do you find houses to buy?

I have a lot of different marketing strategies that I’m deploying but also to be fair, if you’re new to investing, don’t feel overwhelmed with everything I’m throwing out at you. You got to start somewhere. Where I started was driving for dollars. I did it the old-fashioned way. I didn’t use the apps that are out there. I was writing it down, doing the courthouse records and doing the mailing but it worked. It was better than doing nothing to break down the barrier. After I graduated from driving for dollars, then it went into direct mail. If you went into driving for dollars, you had to send a mail anyways and get their attention. I went into addition to pay-per-click, which is Google, working on SEO, like a Carrot website. I used a Carrot website for my business.

For those that don’t know, you’re not talking about a piece of vegetable. What is a carrot website?

Carrot.com is a specialized website for real estate investors and also agents if you’re on that part of the arm. For investing-wise, it’s geared toward real estate investors. Carrot.com has perfect templates that make you look like an expert in your market right off the bat. They design everything. You pretty much pay the monthly fee and they’ll take care of it.

I’ve used them before in my house buying business. I highly recommend them. I don’t use them anymore because I am a web geek so I have my WordPress and do it all myself. Carrot is probably the largest template website for real estate investors.

The Carrot is what I call the SEO portion where you’re going to be found on the internet when someone goes on Google. They can do Yahoo, Bing or all those things but let’s face it. Google is going to be the number one search engine. I also do Facebook marketing at the same time but I also have radio and TV going. It’s affordable

Let’s talk about that. How do you decide in your business what is affordable or profitable? As an entrepreneur who’s been doing this for many years, what is that decision process like?

It comes down to cost per lead.

Is there math involved?

It’s very basic math. How much you spend or how many leads you got divided by two, that’s your lead cost. That’s what it comes down to. You’ll want the cheapest lead flow cost but you also want quality leads. I can also dig up a ton of leads for under $10 a lead but you’re not ever going to buy that house. You want something with a little bit of pain behind the motivation. By far, TV for me has the best results.

If you had to pick two where you’re at in your business, which do you pick?

The two that are performing best for me are TV and SEO. They are, by far, the best.

In a market like Dallas where I buy with my company, DFW Investors, SEO is probably the most competitive thing. With the pay-per-click down here, you’re paying $400 or $500 per lead. It is very interesting. When we can get these people to call, what happens next?

In my state and most states, I’m a wolf and the seller is the sheep. Apply yourself to your situation. If your mom or dad or grandma or grandpa was sitting across the table from the person you bought and maybe low-balling offer or take advantage because of the situation allowed you to, how would that make you feel? It shouldn’t make you feel pretty crappy. Hence, don’t do it. Also, karma’s a bitch. I live by the karma rule. Don’t do unto others what you don’t want to do unto yourself. If you live by that model, the universe will make you whole, in my opinion.

We buy a house from Aunt Mary. The next thing we have to decide is an exit strategy. Talk about some of the different exit strategies that you use and how you pick which one and when.

That’s very valid. In a perfect world, I always want to go in with the mindset that I’m fixing and flipping so then I’m buying on the correct numbers. I’m ready to share with you what I would also potentially do. Let’s say any of those strategies are ready to fail. The fix and flip will bail you out because you bought on the proper numbers. The worst case is you were going to fix and flip it.

If you’re fortunate enough to buy at the fix and flip numbers but do a different strategy, the exit and maybe you want to do seller financing on a portion of your deal, the rent-to-own or lease option because those are almost one of the same in my market, I’d like to stick with wholetailing because that is by far the best return on investment that you can get. My average payday on most of my contracts is above $50,000. I’m normally in and out of that property in under two months from the time I buy it to the time the money’s in my bank account.

Let’s back up. The average payday is above $50,000. When you first got started, what was the average payday?

It wasn’t wholetailing. Wholetailing wasn’t resistant at the time. I was feeling pretty good when I was making about $25,000 or $26,000, honestly but it also took me about 4.5 months to earn that much.

That’s 6,000 a month.

You got to do a couple of deals in a month to make it a viable business if you’re doing it full-time like we are.

What’s the most you’ve ever lost or the least you’ve made on one house?

The most I lost is roughly $8,000. I was fortunate that way. Net loss on paper and loss of opportunity was close to $60,000. If things happen the way they were supposed to on the deal, I should have had a way bigger payday but since I got eliminated, I ended up taking a loss. I had a couple of them. One was $8,000. Another one was $6,000. The smallest profit I made was $300 on a deal but it’s better than going backward.

I have lost more than $100,000 on a house.

It doesn’t make you feel good but it’s all about getting back up and doing it again. When you take that loss, it should still make you humble. Know that this business is real. If you treat it like a serious business, you should do fine. If you’re not losing occasionally, you’re not being aggressive enough on your buying, especially if you’re a little more seasoned. That’s the better way for me to explain it.

If you’re brand new out of the box, I’m not asking you to be so aggressive because you’re probably going to make a mistake and maybe do the formula wrong in calculating what you should have offered. I don’t want to see the first person lose money and drop out where there could have been a bigger success. When you have at least five deals under your belt, you should start to get a little more aggressive. If you’re not occasionally making $1,000 or $2,000 on some of these flips, I’m not saying that’s what you want but if you get that, then you know you’re being aggressive enough. Occasionally, one’s going to come up and bite you.

There’s a lender. We call it credit loss. You have to budget for something to go wrong because eventually, it will. If it doesn’t, you have to look at, “Are you being too strict and stringent? Are you paralysis by analysis? Are you stopping success?” You talked about treating it like a business. Talk about some of the things that you do to make that happen but also maybe some things that you did and looking back, you’re like, “I wasn’t treating this like a business.”

I know from day one when I went full-time that I was treating it in my head like it was a business. I started from home. That’s what everyone does. Your overhead’s low. You’re already at your home. I had crappy internet. I live out in a rural area so I didn’t have that going in favor. You’d die on the internet speed that I was on. That was a huge drawback in my business and getting off the ground. The other part is working from home. You’re exposed to TV and projects that you can take on. It is the shiny object syndrome that we all got. I feel like I got a touch of ADD.

The moral of that point of the story is that we’re programmed differently as investors and entrepreneurs that we’re always looking for the next thing that’s going to help us elevate our business to the next level. Being exposed to the home environment, I thought I was being disciplined. The internet was slow so then I get busy doing other projects at home. I was like, “If I’m going to put food on the table, I got to treat it right,” so I went out and got an office space.

I figured it was two birds with one stone. I can get some exposure. I purposely rented a building right on the corner of a busy intersection. It cost me $1,000 a month. In my mind, I figured that’s advertising dollars. If I can go ahead and snake 1 deal total out of that whole year, the 1-year lease, it would be well worth the $12,000 net lease was going to cost me.

You’re making $50,000.

At that time, that would have been about $26,000.

Even at $20,000, you still doubled your money.

It still would have made it but that’s assuming one deal but then that’s free rent. I got better internet but I also stayed focused because I went up and treated it like a job. I left home, went to work and did what I had to do at my job to run the business. At the end of the day, I’d go back home. It was no different than going to your 9:00 AM to 5:00 PM except you got the perks that you get with yourself but you got to be disciplined. That’s how I treated it more like a business. I went out and got an office space, desk and all that type of stuff.

It’s time for the Money Minute. Imagine there’s an investor out there and they’re only going to listen to 60 seconds of advice or information all week. We need 60 seconds of your best wisdom or the best juice you got to help someone make more money as a real estate investor.

Treat it as a serious business. Let’s assume you have no money at all to your name. Do driving for dollars. That is guaranteed the best return on investment. If you’re a new investor with no money in your pocket, doing the driving for dollars will put you in contact with more motivated sellers than what you would ultimately need to know what to do with.

If you can contact 100 houses driving around and getting those contact people that you need to market to, at that point in time, you’re going to be able to be very successful because it only takes about 1,000 houses. A lot of people’s mind blows when they hear that. They’re like, “1,000 houses? No way.” You can easily accomplish that in under one week. You get 1,000 houses and then market to that person. You will have a very high chance of snagging a motivated seller and using a wholetailing strategy will almost guarantee you a $30,000 to $50,000 profit.

Drive for dollars, then wholetail it. You’ll get $30,000 to $50,000. Get out and do it. That’s the Money Minute. Let’s move on to Rapid-fire. You’ve said a lot of things. I’m going to give you a lot of questions and I want the answer that’s on the top of your mind. With the real estate market, a lot of people say we’re in a bubble. Are we?

We are not in a bubble.

Why?

The main thing is there are not enough houses for the number of buyers out there.

Inventory is a huge issue. Do you see a lot of building going on up in your market?

Not as much as there needs to be. There is a massive shortage.

How many would they have to build in your market? Twice as many? Five times as many? Ten times as many?

In our market, they would have to build close to at least another 500,000 units in 2023 to even put a dent in it. There’s no way that’s going to happen. They’re not issuing building permits fast enough.

Do you think we’ll ever have another financial crisis driven by real estate loans?

With the same structure that we have in place, no.

Real estate investing is an unregulated Wild Wild West in many states and markets. Do you think we need more regulation or not?

I’m not a big fan of big government so I would always lean towards no but if there’s going to be anything, wholesaling could have some regulations put in place. Maybe have a limited license or they have to do a little bit of training with the state. A real estate agent might need 90 hours to get their license and maybe a wholesaler only needs 30 so they get a little rounded idea of how the business works. They tarnish us as professional investors when they don’t know what the hell they’re doing and they leave the seller high and dry and don’t close on the property. That gives everyone a bad name.

What’d you do before you did this full-time?

My last job title when I left the business corporate world was operations manager for a business telecom company.

If you had it to do over again, would you still quit the job when you quit and go do this full-time?

Yes. I wish I did it sooner.

What was the biggest challenge you faced as a real estate investor?

If you’re doing the fix and flip strategy in this climate that we’re in with the boom and the real estate, it is getting contractors out to the properties to work on them. The general handyman ones are so hard to forecast in advance to get them on the schedule by the time you buy a property and get them through the bid where they can show up to the job and start doing it. The biggest challenge for me for fix and flip, if that’s the mindset that you’re going to dive into real estate, is getting that contractor.

Do the hedge funds own all the houses?

Not yet.

Will they own all the houses?

Not all of them. That’s a pretty broad brush that you’re throwing out there. Will they own large chunks of major metropolitan areas? At the rate they’re going, if they’re not regulated, yes.

Is that bad?

No. It’s a capitalist system.

Where is the best opportunity in the real estate market? What segment of the business? What location?

It is anything that’s up and coming but always be in the first-time home buyer range in any area that you’re going to invest in if you’re always investing in the first-time home buyer bracket or the next move-up house price range. For example, in my market, sadly, a first-time home buyer is $200,000. The move-up one is between $250,000 and shy of $300,000. That would be the next step house. If you could stay below those numbers on anything you buy and I’m talking ARV, which is After Repair Value, I don’t care what happens to the interest rates. People are going to need to live in houses and buy properties. Someone’s going to buy these properties to put people in them.

Inflation is at 6% and 20%. What’s it impacting the most in your business?

It’s huge because I do a lot of commuting to look at properties.

You’re rural. By definition, that is way out in the middle of nowhere.

I’m spending sometimes 1.5 to 2 hours one way to get to a property. If the math adds up, I’m more than ecstatic if I go to the property normally three times in the rural area from the time I buy it to the time I sell it. If I can make a minimum in the rural area of $20,000, that’s a return on investment.

You have a book. It is titled Seven Figure Flipping: How You Can Build a Highly Profitable Real Estate Flipping Business in 12 Months or Less. It was written by Travis Johnson and foreword by Monica Main. First off, who’s Monica Main?

She’s the gala. She does a lot of apartment investing. I came across her because I was learning about apartment investing. I realized she did marketing and was like, “I’m interested in doing this stuff.” She was fascinated I was a flipper. It was a match made in heaven.

It’s neat that you’re trying to share experiences and help people. Where can they get this book?

The simplest way is to go out to the website, SevenFigureFlippingBook.com. That’s available. Go on there and pay the shipping fee. I’ll go ahead and send the book out. I won’t charge you for the book. This will get you started. This is a very well-rounded book. This is going to take anyone from A to Z. This is a roadmap. If you’re a linear thinker, as I am, you’re going to love this book because it’s step-by-step. It helps you educate about real estate but at the same time, it also has some advanced strategies for some people that have already dabbled in but looking for some new ideas.

How can the audience connect with you?

I’m not as big as I should be on those sites. I’m on Facebook. You can also call my office or send me an email if you want to communicate with me. You can also start the whole process by ordering the book and paying for the shipping. It’s $10 for the shipping. I send it out to you and we’ll start our relationship at that point.

There is also FreeTrainingWithTravis.com. Is it real estate training?

Yes. That’s if someone wants to bring up their game a little bit more. Once they read the book and realize I’m not full of crap and it sounds like I know what I’m doing, there are going to be people that will relate. They’ll understand how I speak and how I communicate in the book. If you feel like you could relate to me, I can further your training. The training is customized. Instead of me saying, “This is what I offer,” you tell me what you need and I will go ahead and form a custom training package for you. That’s how we get our journey started.

What’s your phone number?

My office phone number is (763) 742-1500.

The email?

Email me directly at Travis@FastResultsLLC.com.

Thank you for being here. I appreciate it. It was good spending the week with you at the Investor Fuel Mastermind. That’s about it for our time. I want to remind you that your network is your net worth and now, you grew both. Thanks for stopping by. We’ll see you next time.

Important Links

• Travis Johnson
• Carrot.com
• Seven Figure Flipping: How You Can Build a Highly Profitable Real Estate Flipping Business in 12 Months or Less
• Facebook – MN Nice Home Buyers
• FreeTrainingWithTravis.com
• Travis@FastResultsLLC.com

The following podcast program is furnished by RCN Capital LLC. The information provided is for general educational purposes only and does not constitute any legal, tax, financial, investment or other professional advice. The views, thoughts, and opinions expressed of any speaker are the speaker’s own opinion and do not represent the views, thoughts, and opinions of RCN Capital LLC. No information contained in this episode should be construed as financial, investment or legal advice from RCN or any individual, author, host or guest. You should always consult a financial advisor before investing.

• buy and sell
• financial freedom
• fix and flip
• house flipping
• real estate
• Wholetailing