Lex Levinrad is a South Florida real estate investor who has been wholesaling, buying, fixing and flipping homes for the past 10 years. He has written seven books about investing in real estate, and is a nationally renowned real estate speaker and coach.
Lex, please give us a little background about yourself and how long you’ve been investing in real estate? Are you a full or part time real estate investor?
Noland, I am a full time real estate investor. I have been a full time real estate investor since 2003 when I first arrived in Florida.
What inspired you to get into real estate investing?
Prior to real estate I was a stockbroker and money manager in Los Angeles. I did that for 12 years. I was one of the best producing brokers at my firm and I was very successful in that industry and had months where I made more than $100,000. However, in March of 2000, when theNASDAQ tech bubble burst and the stock market collapsed, I lost all of the money that I had invested, as well as most of my client’s money. The stock market crash of 2000 ended my career as a stockbroker.
A few months later I saw an infomercial on TV for Carlton Sheets “No Money Down” real estate system. That led to me reading many more books related to real estate investing including Robert Kiyosaki’s “Rich Dad Poor Dad”, and many others. I decided that real estate was something that was worth exploring and I began to read as much as I could about real estate investing. I began to go to real estate seminars, workshops and boot camps.In July of 2001, I purchased my first house with an FHA loan, with only 3 ½ percent down ($7,000).Prior to buying that house, I had never owned a home and had always rented.
I sold my house in Los Angeles two years later for a $100,000 profit. By this time I had already decided that I wanted to pursue a career in real estate. I decided that I wanted to buy properties to fix and rent, and California real estate was very expensive for that. So in 2003, I moved with my family to Boca Raton, Florida. I have been a full time real estate investor from the day I arrived in Florida back in 2003.
Tell us about your first real estate deal.
Well, I worked as a bird dog for my real estate mentor and his partner for two years before I did my first deal. I was basically a property locator for them and I would locate foreclosure deals for them to buy.If they decided to buy the house, then I would get paid 1/4 of the equity in the property. I did that for two years before I felt that I was ready to do my first rehab. I did a lot of deals with them and I watched them buy houses, fix them, rent them and sell them. Eventually I got to the point where I was locating deals, supervising the rehab crew, and even selling the houses retail. At that point I knew I was ready to start working by myself.
My first deal was a house that I purchased for $50,000 that required $25,000 in repairs in order to be ready to rent. I borrowed the $50,000 from a private lender and I borrowed the $25,000 for the repairs from my best friend’s mom, who lived in Los Angeles. I bought that property with no money out of my pocket (no money down). After I had repaired the property and rented it, I ordered an appraisal and that property appraised for $163,000 ($88,000 profit). For me that was the moment when I knew that I would be a real estate investor for the rest of my life. I managed to pull out $34,000 in cash from that property by refinancing and paying off both the private lender and my friend’s mom. I used that cash as a down payment to buy my first home in Boca Raton. So my first deal got me a rental property and my primary residence.
How many deals have you completed over the years?
I have been personally involved in buying, rehabbing, wholesaling, renting and selling hundreds of houses. We now count our deals based on how many houses we wholesale per month and our monthly target on our board in our office is 30 houses per month.
What was your most challenging deal and what did you learn from it?
I am involved in wholesaling, fixing, flipping and being a landlord every day, and they all have their own unique profit opportunities and challenges. However, one of my biggest challenges as a relatively new investor was when I was rehabbing my third house and the contractor that was working on my house, stole my $10,000 deposit for the job. The repairs on that house cost me $16,000 more than I originally estimated, and my profit was less than half of what I estimated it would be. That was the last time I gave a contractor their money up front.
What big mistakes have you made or have seen others make?
I believe that we all learn the most from our mistakes not from our successes. New investors should use their mistakes as a learning opportunity to become better investors. I have made mistakes along the way that I use as teaching tools to teach my students what not to do. I caution new investors not to be in too much of a rush to buy, to understand their target market, to make sure not to buy houses with illegal additions, not to buy 2 bedroom 1 bathroom houses, or small houses, and to not buy houses in war zone neighborhoods. The biggest mistake I see new real estate investors make is that they do not have a clear concise vision of their goals, how they are going to achieve those goals, and how they are going to overcome the obstacles that are preventing them from achieving those goals.
Goal setting is very important and we focus on goal setting with all of our real estate coaching students. ZigZiglar had a great quote where he said “tell me what you want and I will tell you how to get it”. Too many new real estate investors do not know what they want. You must have clear concise goals. For example, in our Group Mentoring Program the goal is very simple – to teach you how to wholesale. We are so successful at teaching students how to wholesale because the students know exactly what their goal is.
Can you describe what your perfect deal would be?
My perfect deal is when I buy and sell a house without seeing the house, talking to the buyer, or talking to the seller. If the deal happens in a city or town that I have never even been to, then that is even better. I love flipping houses in places I have never been. Building systems to handle leads for desperate sellers and cash buyers is the key to exponentially growing in this business. If you can systemize your business to the point where desperate sellers are calling you every day and cash buyers are calling you every day then you will make a lot of money in real estate. That applies regardless of whether you want to wholesale, fix and flip houses or buy and hold real estate for the long term.
Do you have a real estate license? Do you think it’s beneficial to have one?
Yes I do have a real estate license. I am a licensed Realtor and I think it is very useful for real estate investors to have a real estate license. I encourage all of my real estate students to get a license if they are serious about making money in real estate.In this business you either make it a hobby or you make it a business. If you want to make money then you need to treat it like a business. Paying $700 a year to have access to the MLS is a small price to pay for having access to properties, lock box codes, and broker remarks that the general public does not see on sites like realtor.com. If you are serious about making money in real estate then having a license will help you make more money.
Do you focus on a certain real estate investing strategy and if so, what is it?
I buy, fix and flip properties to first time home buyers and I wholesale properties to cash buyers and I also buy and hold real estate long term. I manage rental properties and sell these properties with seller financing and rent to own (lease option) to buyers. Our office focuses on wholesaling exclusively to cash buyers. Some of these buyers are also looking for turnkey properties with property management in place. Every new real estate investor should strive to learn all of the different techniques that are available in wholesale real estate and should learn how to be creative and think outside of the box. That is the key to making money in this business. This business is about solving other people’s problems whether they are a desperate seller in foreclosure, a cash buyer looking for a house, or a buyer with mediocre credit that needs seller financing or a lease option.
What key things do you look for in an investment?
I look for a return on my money in the shortest period of time, with the least amount of risk. If I can buy a property and have that property sold for a good profit before I even have to pay for it, then that is a great way to leverage money. If you do that 20 or 30 times a month, you can make a lot more money than you would fixing and flipping the same property. You will also have a lot less headaches. That is why wholesaling is so appealing for new real estate investors and why we teach our students how to wholesale at our Distressed Real Estate Boot Camp. On fix and flips and properties where we are lending, I look at the property from the standpoint of what can go wrong. For example in private lending, I always ask myself if I would be happy owning the property if the buyer did not pay. If the answer is yes, then that would be a good investment.
Do you have any unique, funny or even scary investing stories you like to share with us?
I have many funny stories and some not so funny. Definitely way too many to tell you all of them so I will just pick one. I was down in South Beach on a weekend with my friend when my phone rang and it was my tenant and she was crying because the house that she was living in had burnt down. I asked her why she was crying when it was my house that just burned down. That house worked out just fine. I purchased it for $70,000 and the insurance paid me back more than twice that amount in less than a year.
Do you feel a new investor should focus on one strategy?
Yes I think that new investors would benefit by first learning how to wholesale and locate great wholesale real estate deals for other investors. That is why we focus on wholesaling in our Group Mentoring Program. Once an investor knows how to find a great deal, then they can wholesale it, fix it, flip it, or rent it. But it all starts with finding a deal. If you don’t know how to find a great deal then you are going to get yourself in trouble as a new real estate investor. It is better to risk someone else’s cash and credit while you are still learning. Wholesaling is great for that, because it teaches you how to find deals for other investors, which is what I did my first two years in the business. When you get good at finding deals then you can move on to rehabbing and fixing and flipping properties. The most important thing to learn, is how to locate great wholesale real estate deals at good prices.
- Before we wrap this thing up, what three or so, key bits of advice you would tell a new investor?
- Understand wholesale real estate and retail real estate and why a distressed seller would sell their house for less than what it is worth.
- Understand what a great wholesale deal looks like and why cash buyers only want to pay 65% of After Repair Value (ARV), less the repairs.
- Learn how to find wholesale deals so that you can be the middle man (or woman) between the desperate seller and the cash buyer – that is where all of the money is.
Is there anything else you’d like to share with the rest of us?
Yes, everyone should strive to overcome their own self-limiting beliefs and fears. If you want to be a real estate investor then educate yourself on the subject matter and learn as much as you can by attending your local real estate investment club meetings, seminars, workshops, webinars, boot camps etc. This will help you overcome your natural human tendency to be cynical and skeptical. Then when you understand the topic and are educated on the subject matter it is time for you to act on the information that you have learned. Education without action is a waste. Action without education is foolish.
And one final thought. Now is the best time in your life time to be buying real estate.
Lex Levinrad is a South Florida real estate investor that has been wholesaling, buying, fixing and flipping homes for the past 10 years. He has written 7 books about investing in real estate, and is a nationally renowned real estate speaker and coach.
Lex’s Website: http://www.lexlevinrad.com