What No One Tells You About Rehabbing Houses | Ryan Garcilazo
In today’s episode, we dive deep into the world of virtual real estate investing and the critical role of construction management with our expert guest, the KING of rehabbing, Rotty Garcilazo. Known formally as Ryan but affectionately called Rotty, he oversees all construction for my extensive portfolio of 28 single-family homes and multiple apartment complexes, all managed virtually. This episode sheds light on the unique challenges and solutions in virtual real estate investing, the complexities of construction management, and the art of working with contractors to achieve success in the flipping and rehabbing market.
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Justin: What is up? Science, living podcast listeners, the family, we are back with another incredible episode with another incredible guest here with me today is I affectionately call him Rotty, but his real name is Ryan, but let’s just go with Rotty. Listen, he is the guy that runs all of my construction. I have 28 single family homes with them. At this moment, he is running all virtual. I am buying them virtual. I’m remodeling virtual. I’m getting a virtual bid. I am also having him run my three different apartments that I have already bought this year. And as we record this episode, is March 8, and so we are running fast and going strong, and he is a major component of it. He runs all the construction right now for us all virtually. But I’m gonna shoot you straight Rotty, for the 16 years of my career, the bane of my existence, I have hated contractors. So welcome to The Science of Flipping podcast .
Rotty: Thanks for having me, but let me tell you this. First and foremost, everybody has contractors and they don’t blame them. So I’ve been a contract like 20 legitimate concerts 20 years, but I’ve been in construction since I was a teenager, about 14. The reality of it is, I don’t blame you dude. I hate contractors too. And one of the realities of why we got into what we’re doing now with the not only the Construction Management, but like we’ve had the academy and teaching is because I know you hate contractors and I think and I’ve learned over the years that the best solution for this is to start teaching people. Right? Like this is what we do. This is the day and life of us. This is the thing we’ve gotta think about. Here’s the things that we think about on your behalf, that you only think about on your behalf. We think about the finances just as much as you do. But the reality of it is, let’s just be frank, nobody ever really came into the game and was actually thoroughly taught. You know, here’s how to wholesale, here’s here’s how you invest their property, here’s how you analyze the deal, here’s how you negotiate and sell, here’s how you close, right? Here’s this foe. Everybody misses this, the miss the missing piece, which is construction rehabbing, right? So it’s the first people, the people that hate contractors, hate rehabbing, right? Because every single experience that they’ve ever had, obviously, the shit experience. But if you fundamentally understand that there are complex issues and challenges that our industry faces just like yours, right? Then you’ll understand that we just need to figure out how to meet in the middle. And more often than not, you’d be wise to collaborate with your consciousness more often, because you’ll figure out that’s a bad deal in the first place. You can’t squeeze it. The lemon has no juice, right? As Tim herring just said, there’s no sizzle to that steak. It doesn’t sizzle, so you can’t force it. And I think that, you know, being the country who’s had the opportunity to kind of look at everybody over the years, I can sit there and go, why’d you, why? Why’d you buy that? Like (Yeah), why did you? Why did you, you’re all you had is $50,000 you see, that’s all you’re going to spend. Like, let’s be realistic about that. Every house has a change order. It’s going to happen. It’s redevelopment, not development. We’re not building something new unless it’s a new construction project. Different story. But nine times out of ten you’re buying a house that’s over 60 years old, right? So you’re taking an old 1937, two by four. That actually was a two by four with today’s modern two by four, which is like an eighth to two a smaller crap doesn’t get fit right? And construction really stands for maybe work. You just have some code to follow. But construction means get creative. Make that work. And I love it.
Justin: These Cubans have built these houses with make it work in mind, put it together like I bought this home and it was already remodeled already, and I’m bougie, and I have my taste, so of course, I’m gonna go (you bougie. I can’t imagine). So, it’s my contractor comes in. He’s like, he’s Cuban, and he’s like cussing these guys out because the guys who built this home, like, the walls are crooked, right? Like no one can with their visual eye tell, but when you have to do certain things of what I was asking him to do. (Yeah) He’s like, you can’t hang a cabinet on here without it being like, there’s a bend to it because the wall. So now we have to fix the wall. We have to, you know what I mean, and so trust me when I know the Make It Work model. Now the challenge I have always found and if you’re a fix and flipper and if you’re not, you really need to pay attention. Rotty is the guy running all of my construction. And so, you know, I’m gonna have a very truthful, brutal, honest conversation about the pros and cons of everything that he does. And yeah, the things I’ve always found and some still remain true is you know, the assumptions contractors make, right? And to some extent, you need to make certain assumptions. But the other part of it is, we can’t assume all of it. To you I mean, you highlighted one point. You can’t assume there’s not going to be change orders, right? It’s safer to assume the change orders, right? So depending upon what coin I want to flip, when I talk about assumptions, I would rather the contractor assume longer meaning, I would rather say, Hey, this is going to be a four week project, is what you tell me. But then you say, You know what? Let’s make it an eight week project. I think it can get under four. If it goes to six, you’re safe. If it goes to eight, that’s what we expected. But I think it’s a four-week project. I would rather a contractor tell me that, because someone that raises money and monthly has debt servicing, I would just rather put it into my numbers. So I’m conservative, so I’m not coming at a contractor later, saying, “Hey, bro, like I’m 12 grand over budget on this deal because I thought it was gonna be the four weeks you told me, right, but you have these change orders based around whatever’s happening”. Does that make sense?
Rotty: Yep, no 100% so well, we could squash that thing right now. The reality of the business is, there’s always gonna be change orders, so you have to make peace with that. So the challenge when an investor is looking at a deal and we teach this whole time, I’m like you have your investor hat on, analyze the deal, you’re focused on a little bit of rehab, like, what does it possibly be? Maybe $30 a square foot in these or whatever you do in your process, as you should, right? But then you, of course, you’re sitting there trying to think about, I still got to close this deal. I’ve got to negotiate. I’ve got to go as low as humanly possible anyway, because I walk the wiggle room in the long run and I want profit. We all know that. I’m an investor as well. I know the process of the investment hat. What investors are failing to do, which we’re changing, is cool. You’ve done that, you’ve walked the house, you’ve made the call, you’ve had the phone call. You talk to the agents, you got the appraisers, you got all this things. You’ve had, you have all the Intel you need to make an educated decision, right? Then you got to take all that off and then go put your contractor head on. And people don’t do that. If they did that, they would understand the risk and preparation that goes into it, right? Well, the risk and preparation.
Justin: Now, do you teach contractors, or do you teach all the investors, or inspiring investors to think more? (All the above). I would tell everybody, if you’re watching this on Justincolby.tv. If you’re listening to this on pod Apple podcast, Spotify, reach out to Rotty. Because if you’re if you’re going to be buying and flipping, if you’re going to be buying and holding, and I’m not talking about interest rates, understanding the fundamentals of the construction side, understanding costs, understanding time frames, understanding the subcontractors and all the other things that Rotty has done for 20 years. It is imperative, because there’s like, I know it after 16 years of doing this, I even have Roddy come into my coaching and he’ll do a coaching call with my clients, but you need to be taught this, and Rotty does that, where, where, specifically, in general, can they go to find you, just to reach out to say, Dude, I need to know more about this before I buy a flip.
Rotty: Find me on Facebook or Instagram easily. So on Facebook, it’s “Ryan Rotty Garcilazo”, and then on Instagram, it’s “rottyflippedit”. You’ll see a link over our social media where you can join our academy. Our Academy is $25 a month per person. We just relaunched it up for four years. We actually, it’s funny, you asked that question. We just talked the first class was yesterday. For four years, was yesterday at noon. Every Thursday at noon is our live class. We have 60 topics, 60 weeks in a row of this things for everybody to learn. The Game investors, mortgage brokers, developers, architects, contractors. It doesn’t matter to learn the niche that we are in. Rehabbing is a niche of remodeling and renovating. Rehabbing is a niche of residential remodeling, a niche of multifamily remodeling. You could do commercial, whole tail, retail, anything, right? Whole idea is to understand your options as an investor with the investor mindset to say, Okay, I think I have $65,000 in my budget. Take that head up with the contractor, head on and go. What can I do for 65,000? Meaning, what must I do to get it to pass code and sell for $65,000 before I do my wants, right? And oftentimes, when you do that, and this is exactly what we thought, our first license was, risk of preparation, which I was going to tell you is there’s an imaginary risk wheel that you Justin Colby should be thinking about every time you look at a house. Okay, here’s the deal, here’s the asset, here’s the returns, here’s the cost, blah, blah, blah, blah, blah, we could close this deal. I got my funding partners in place. Great. Now you got to think about, well, where’s some of the risk? Location? Safety? What’s the budget really going to be? What’s my time and schedule gonna look like? What are my sub inventory? Do I even have subs for this type of project? How is my funding? Experience? People they sleep on experience like, what’s Justin’s experience versus Rotty’s experience versus the agent’s experience versus the city clerk who just got a new job? The Weakest Link is the worst person on the team. That’s as strong as you’re going to get. People fail to sleep like, Oh, you’re an agent. You automatically one of the best age in the world. Oh, you’re not. Oh, you’re an investor. You must know exactly what you’re doing, but you don’t. Oh, you’re a GC. You can build anything. No, you can’t. You see my point is you have to understand experience is a major risk. Weather, time of year, right? Buying the house in Chicago, where I’m at right now in November, to take you through the winter months. It’s a damn stupid. Unless it’s a massive like, multi-unit building that’s going to carry you for a few months, (Yeah), but a single family? No. You know? So, there’s so much you have to look at. Because all of that’s going to change your budget. And if it changes your budget, it changes your time frame. And the key KPIs on this, one of them is a change order. And I gave you a case study like our portfolio we did together, right? And I looked at some of these things that I do for our clients, I said, Man, change orders killed our time. Change Order. Every house killed our time on this. And they’re not major change orders. They weren’t like make or break change orders. They were change orders that required a licensed professional to do. Therefore the three, four garage band that we have rehabbing, they’re not skilled to do it, nor can they pull the permit to get it done. Therefore you can’t sell it. So we got to go, oh crap. Now we’re gonna lose three weeks on this, because I’ve got to get the plumber who’s already booked up, but he’s the guy that’s already signed up, so I gotta wait three weeks just for plumbing. That means other tasks set to wait, or we got to reopen a wall and sit there and go, Okay, when coming back, oh, on the 19th, it’s the second really, right? These are the things you’ve got to consider. And we, we really, really harp on our teams. And I actually work with your team way more than we ever have. I’m on a face as daily. I’m with Carson talking about numbers, and I’m like, Listen, guys, you know, I don’t like this deal. Here’s why? Like this is where we’re gonna mess up again. I don’t want to do that. We’re not doing that. I don’t want to rehab that. And I tell them, like, if I’m not going to rehab it, Who’s going to rehab it for you, nobody. So, listen to what I’m saying. And I actually put Carson and Anthony in my classes. I’m like, just sitting on Thursdays and just consume. Just consume, ask questions, network, of course, but consume. And the idea is, what you just said, If you literally will look at the asset at the very, very beginning and consider the risk and the preparation involved, that’s when you could potentially see what those change orders might be. And that gives you closing time and diligence time period, right? Sit there and go, Okay, I might have a change order with the roof. It doesn’t look too bad. Doesn’t look too bad. Doesn’t look to open but it’s obviously got a couple leaks. Can it be patched or does it have to be a tear off? Can we do a layer, or does already have three layers? Right? These are the things that actually matter, because at the end of the day, that $700 Roof Repair is bigger than it’s cheaper than a $7,000 tear off.
Justin: Amen. Well, let’s talk a little bit about your model. I think, (I go, I go, sorry) right. Well, because you can get in the trenches, like me talking about, you know, investing and wholesaling and marketing. I can get in the weeds, but I want to talk to people about, like, I obviously, and maybe it’s not obvious to some and if it’s not, you should look me up, right? If this is new to you, but I teach how to be a virtual real estate investor. And what I mean by that is, you shouldn’t just wholesale, you shouldn’t just fix and flip, you shouldn’t just buy and hold, but you can all do it anywhere you live. You run a very similar business model for construction, which I think most people don’t even understand how I do it. Meaning, how do you live in Miami? But you’re buying three different apartments in Alabama, two in Birmingham, one in mobile. How do you live in Miami? And you just bought three flips in Pensacola? How do you live? Because there’s a real process, there’s a real system, there’s a real strategy to do what I do. And once you dial it in, it’s a rinse and repeat model. So for me, I buy and remodel everything. You know that because you run every single property for me as a moment in time, right? And so I don’t care. And you can verify this, I do not do the lipstick in, you know, paint bullcrap, like, if I’m buying an asset, I’m doing a full remodel. I very rarely, I mean, rarely, keep the cabinets right? I very rarely, don’t, you know, change out the floors and redo the kitchen like very rarely, but it’s because that’s the system in the process. And A: You know, how to do that. So I have someone who were locked, you know, step with that. But B: It’s because there’s just a simplistic financial model that I can run each and every time to say, if I buy it for this and I’m willing to put this into it. I know my ROI is going to be this. Right? How do you run your construction business in a similar fashion? Or is it not similar to what I do in the real estate space, doing all the deals that we do together? And I know I’m not your only client. How do you do this all nationally, living essentially in Chicago, but I know you have spots here in Florida as well?
Justin: All right everybody, before we get back to the episode, let me give a big shout out to Rotty at the rehab depot for sponsoring this episode. Listen, everybody. If you want to work with the number one contractor across the country, please reach out to Roddy at the rehab depot. This guy runs. All of our construction nationwide, and works with 1000s of other investors across the country. He is entrusted not only to put together the budget and manage subcontractors, but to start and complete and close out projects from A to Z. Rotty runs the largest rehab Academy in the world. If you want to learn more about how to become an elite rehabber, you have to follow his program for only $25 a month, that is it. It’s that simple. Go to “go.therehabdepotvip.com” and sign up for weekly classes. Live with him. This will be the greatest investment you could ever make if you want to rehab houses.
Rotty: To answer your question, it’s always been a hub and spoke model, right? And I call it a business ecosystem. And one of the things I teach in our academy is the business ecosystem, right? What is your core skill set? For us, it’s construction, all right. So what can we do with construction? So over the years I’ve been in a 20 could have been 21 years now man, strictly reinvestments and rehabs. All I’ve ever done I had the hub is construction. Then I’m like, Well, you know, I’m realizing I should probably learn how the funding works, right? So I go to the hedge funds and learn high level management, because they were my clients when I was like, 22 right? So I’m like, well, they have an idea,
Justin: That’s few years ago, wasn’t it?
Rotty: Bro, don’t even start.
Justin: Hey, we’re both little dog. At least you got that looking good, though, still.
Rotty: But no, so I know from the hedge funds, management and finances and how they manage their money. And I’m like, Alright, if I could take a little bit and implement that my little anybody construction company in Chicago 20 years ago, I’ve won it, and we did that, and then we started winning all these awards and getting all the notoriety from the magazines and the all the big crap back then. And I’m like, All right, well, we got credibility. What could we do with it? How to spoke, right? I’m like, what other spoke can I use? So I said, well, the industry needs education, right? And that’s something that was trending around the last recession of 2008. That’s when a lot of education came up. Portion builders. A lot of things were happening. So I launched the first education for rehab, and I said, Well, they’re learning how to invest. I need to teach them how to rehab. Cool, no problem. It’s complimentary, right? Wasn’t even a competition. It’s value add, which is what I believe in, value add. Why? Why compete with. Let’s figure it out, right? So we did that. And in doing all of that, they became a spoke, and then they became boot camps. So we started doing boot camp stuff. Another spoke and I’m like, damn. You know, we’re really good with numbers and budgets. I wish I could create like a software program that existed. Nothing existed. I was using builder trend, but that was for custom home building. So I pay $400 a month to utilize 25% of the system didn’t make sense to me. So, I’m like, All right, I got a buddy of mine who’s in development. We built one. We built Rotty PM before the recession, I sold it two years ago to John Nolan, who’s also in a partner of mine now, but we’re still redeveloping a lot of that program now for the Academy, for project management and for lenders, so we can manage their draw process. So, we’re still in the SAS platform business. Again, another spoke when you get the idea, when you create a hub and spoke business ecosystem, you can go virtual. Because when you’re going virtual, like you are, right, you got a hub, right? I’m a spoke to your hub, right? In essence, you’re a spoke to my hub, right? So it’s, it’s how you look at the resources around you and utilize them to your fullest advantage. What is your singular skill set? Stay there, right? I do. I don’t give a crap about tech, but tech is my life. Find the tech guys that are passionate about that pay them to do it right. Boot Camps. I love talking to people. I love being on stage and show people what they’re doing right and wrong, and just watching them grow like a plant. I love that it fills my heart, right? Maybe that’s fine when I supposed to do all along. Who knows? But that’s where my passion is, right? But that’s a spoke to everything that we always do, which led us to the Virtual Call Center. I’m like, you know, I’ve always virtually rehabbed for myself, and technically, I kind of virtually read it for a lot of our clients at the time. Why not offer it as an actual service? Man, I just had a podcast this morning. I was talking about this exact thing. What a great up because I joined like, Oh, we’re gonna offer virtual construction management, and I’m gonna put project managers on it. But it’s just gonna be another service, another spoke, no bro, that literally became its own wheel, its own hub, because running a call center virtually construction management all across the city or across the country, that takes up all my time, right? So for a year and a half, I didn’t do anything but be in this business, operationally, 24/7 like I was before. And then you go through your career and you realize you could pull out of your business around 38-39 I had to really self evaluate and say, Do I have the balls? Do I have the testosterone? Do I have the desire to know I gotta go back in with an unknown time period of when it’s going to end? Do I really want to do that? And I said, Yeah, I want to do that. I still got the dog in me. So here we are, and I’m glad I’m doing it, because it’s working and it’s we learn something new about it every day. And. We’re learning is from you a need that you may have that we able to look like we can compliment that or I could take care of that or we can handle title like our virtual title partners, we’re bringing in more resources. So to go for virtual like you do, and to go virtual like I do, it’s really called the Hub and Spoke business ecosystem, right? Every spoke is a resource. You help me. I help you. We scale overnight. It’s a very fast paced thing. Why deal with construction? If you don’t like construction, right? Don’t. Esthetically, I’ll even like dealing with construction. I don’t even like contractors. I’m not gonna lie, I can call one of my subs right now and just cussing the crap out because I’m just aggravating when I hear his name, I just wanna punch his face. But he’s good at what he does. That’s right? And he knows that he’ll tell me what to do. I’m like, I’m gonna knock your teeth out, dude, just I don’t like it.
Justin: Well. So here. So, when you are running virtual how, what processes do you put in place, right? So, when I run a virtual business, the process of finding the lead is in place, the process of analyzing the lead is in place, the process of the underwriting and the construction piece is in place, the process of, how are we exiting, are we listing on the MLS? Are we refining out all that becomes in place. So, I mean, we could literally make a decision within five minutes of whether we’re going to be buying this deal or not. Yeah, but all those pieces in place. How do you run a virtual construction business where many people are going to be like, Yeah, but don’t you have to go see the home before you give the actual construction bid.
Rotty: So, here’s exactly our process. We look at the cost to build new construction in every market. We cut that in half. That’s our mid level, level two, rehab in that market. You don’t know this. I’ll teach it to you tomorrow. That’s our level two. I cut that level two and a half. Let’s say it’s 150 goes down to 75 I cut 75 and a half, right? Like, what? 34 seven, 35 seven Okay, that’s level one, level two 75, now I know what level three is. It’s over a hundred logic. You send me a deal. I process simple your team feels on our property and take form. We received it. I analyze it. All the information you get. We go online. We do the same, final searches. We go look at the local circuit courts and see what’s going on, any leads that we could buy. If we feel comfortable with it. We give you the ballpark initially. We text back that number. In your case, I know your boys, I just text them right back and say, you take 65 it’s gonna be 74 nine. Let me know if you green light it. That’s how fast that happens, no matter where we’re at in the country. I could be in the roller coaster, and anything could be like, Hey, real quick deal in Texas, which we looked at recently. And I said, it’s a small house. It’s gonna be a full good yeah, we just said to the Texas market together, right? So, like you look at that, I said, small house, 924, square feet. I said, I know. It’s on cinder block. The vinyl foundation is just, you just know. And that goes back to my risk and preparation. I said experience that’s a piece of your risk, either you have it or you don’t. And I looked at those houses are all all in the South. They’re all built very similar because of hurricanes and the type of storms, because weather is a risk, right? The way they do a roof is not the same as the way they do roofs in Chicago. The type of Windows you need in Tampa and Miami are not the type of windows we need in Chicago. So, by using that experience and knowledge, we can give you a ballpark. And the idea is for you not to buy a lemon. I’d rather my clients walk away from a bad deal. If I told them I don’t think it’s a good deal, dude, go to the next one. That’s what investors need. Is that that that mentor in the year, saying, maybe, but here’s your complications, man. So, you better have a side pot. Maybe have a side pot next.
Justin: Well, what I like about you? And first of all, again, where can, if everyone’s like, Dude, I want to learn more about construction. This is the missing link. Where can they go to get a part of your community, your group, the $25 a month? Where can they go find that?
Rotty: Join my private Facebook group. It’s called the Rotty Rehab Academy and Mastermind. The Roddy rehab Academy and mastermind.
Justin: Put the links comments below.
Rotty:I always post that link. I post our academy links in there all time. And we always get it seems like every single day we’re getting more and more guys and girls and teams. You know, whether you’re enterprise and have multiple offices and multiple staff, put the staff in. I’ve got people like RC and capital, who puts our acquisitions teams in there just to learn how to read a little bit better so they can ask better questions. I’ve got sales reps in there. I’ve got mortgage brokers, I’ve got contractors. So, my point is everybody in involved in the aspect of the asset of real estate, should be in this because all we’re teaching you, it’s how to manage that asset and get out of it or that’s not it.
Justin: Yeah. And listen, at the end of the day, the thing that stops most people is they don’t know how to analyze, not whether they know how to analyze, what the end value is the ARV. That usually most people can learn from myself and others, they get pretty darn close. Their challenge is they always underestimate the rehab value. And you and I have done plenty of this together where we’ll have a group of my members and we’ll say, Okay, here’s what we call some bubble math. And every time you and I go head to head, you have 20 years experience. I have my 16 doing it, but you’re the contractor and my bubble math is within, usually, like, 5% of your number. Very rarely are you at a number that is like, whoa. How did I not see that? But my bubble math is $30 a square foot, if you’re gonna do lipstick and paint, which I don’t ever essentially run that model personally as a buyer, $50 a square foot, which is where you were talking about is like your level two or your level one I think.
Rotty: level 1 about 40-45 see that answer your question. Like we had so many opportunities to reevaluate your numbers and the type of projects that you’re buying, and I was able to really, really dial in where you need to be. And we’ve determined that your level one’s like, you’re between your level one and level one and level two is like 40$- $45 square foot. That’s a home run. Because now I could say, Hey, listen, unless we need all the MEPs in the roof, 45 is getting it done, bro, and that’s a win. You know what I mean. And I’ve locked in so many of our crews of so many markets across the country that I know their labor percentage, I know their material percentage. I know that their market percentage, so I put all that into a budget and say, All right, dude, it’s gonna make $39,000 like, I can award a contract for $39,000 of a $52,000 contract. We control some of the materials on our end. We control the markups, and we control change orders. So, we that’s the other thing is, like, the big key to your success, and the success and the success of most investors, is when you could create your own budgets and then award contracts. Because theoretically, if you hire us young to us, right, we’re we’ve already bid it for you, essentially. So why am I going to have somebody else bid it? I already bid it, right? We know it works. So now we need to negotiate our contractors down and say, hey, listen, they’ll never know the full budget. I know I need wiggle room for the changeover, so I’ve got to control as much as possible. And it happens time and time again where I’ll say $65,000 budget. I’ll award it to a contract for 48 five needs a nice little pot there, right? People. Oh, you put that in your pocket. I go, no we’re gonna use that on a change order. I guarantee you planning changer. I’m like, he’s like, I need $2,400 I’m like, perfect. I’m like, no problem, approved, because I know I have it, so I like to tell your team there’s a change order. Doesn’t matter. I have it so and then, oh, the roof is leaking again. Blah, blah, cool. Go patch it $700 cool. I have it approved, right? They don’t need to know how to manage the money. I learned that from the hedge funds. So when you look at that aspect of what you’re saying, the key really is, in the very beginning, is learning your numbers and dialing them in making some mistakes, to figure it all out in the long run, right? Sometimes you got to slow you don’t have to stop, but you got to slow down, look at things, and then speed back up, right, like a Formula One race car, right? You don’t put, you don’t stop, on the gas, put the gas in there, while still fucking moving at a slower pace. That’s it.
Justin: Yeah. One of the what do you think the biggest mistake when you take on a newer client or maybe a newbie? What do you think our biggest mistake is? And then tell them how to overcome that?
Rotty: Having confidence in what they’re doing is something I hear in the voice, right? Because we do consulting calls on on certain projects, especially a newer investor. Because again, I’m not sure where they’re taught how to deal with contractors, but it seems like they have no clue where to start. So I like to have a conversation like this and say, Well, what’s your experience level? You know, is this your 1st house, 10th house, whatever do you buy? Oh, it’s like my first house. Me, my wife for it’s my 10th house, but in five years. So clearly, it’s not something they do every day. And we try to walk them through a process, and we try to let them know, like, if you follow the Rena depot process, the Rotty way, right? It will work for you but you have to trust yourself, because they buy houses that they’re unsure of. We go a little further in the conversation to go. Do you mind if I look at the deal before you close? Like, can I look at what you’re possibly buying? And then it’s easier to work with them that way, because I could look at the stuff we shared on the screen. I’m like, All right, unless you’re trying to, they were selling it for you try to buy for this. But I’m telling you, you rehabs more than you think it is. I’m like, you have to go back to the drawing board and renegotiate with the seller. And oftentimes that’s where they’re just like, Well, how do I do that? And I’m like, that’s not what I teach, but I’ll teach you how to sell, but that’s not what I’m here to do. You know, there’s many friends I have an industry that would be more than happy to teach you how to sell and close these guys, I said, But it starts with their confidence level. So if they’re not confident or competent in the beginning, going through construction is a hell and nerve wracking for them and you really have to hold their hands. I have a lot of students that are a lot of our clients as well, and they’re learning, and they ask so many questions, and I don’t have problem that, but they question everything from an invoice to a line item to wise and dry while they’re on a Tuesday, the truck didn’t get there, it’ll be there tomorrow. Do we lose time? Not really. You can make up for it’s only a day. So, yeah, it’s just things like that, right?
Justin: What about, like, can they make some assumptions? Is there again, what I call it bubble math. I essentially, now, obviously, I think everyone’s aware, like I have built a business where I have a general manager. I am not personally underwriting these deals, but the assumptions my office makes and my team makes is. Roughly every deal we’re looking at starts at $50 square foot for the rehab and that includes a new kitchen, new bathroom, but we’re also staying under a $300,000 price point for the most part. Sometimes, like this Austin deal, I think we’re buying it somewhere like mid threes.
Rotty: But the ARV is like 600.
Justin: I think the ARV 600 isn’t it?
Rotty: Yeah, the ARV is like 600 so there’s, there’s room to play there.
Justin: But it’s going to be a six-figure remodel, right? So, you know, people have to understand, right? If I’m going to buy mid threes, I’m going to have a six figure remodel, we’ll make some money, but it’s not like I’m going to make quarter million dollars, right? So I think the other thing is, they, they forget the holding cost. It’s going to be a nine month project. Whatever I say, all that to say, can they make, can people start making assumptions on price point and products? Meaning, I say $50 square foot anytime I’m buying a home under 300,000 like, that’s my starting point. Yes, there are people that, if you want to buy a rental and you just want to keep the cabinets and you want to do $30 square foot, can get you there for sure, right? I just never run that model. I replace everything, unless, you know, they literally just put the cabinets in, which is very, very few and far between.
Rotty: That’s a valid point, it’s a valid point. (Yeah). Some subs could definitely be made. For example, I had a student yesterday after our call for Q and A, and he said, How are, how are so many investors able to buy so many deals at once? And then I said, Well, how many deals have you done? He’s like, like, four. I said, Well, that’s the difference. I said, You gotta understand, higher level guys are using Lead Generation CRMs and contacts, and it’s a simple phone call. And they’ve got, they’ve got tenure and respect and credibility in the industry. People just call you. I said, You got to get there. I said, I said, don’t worry about that. Just mastering your lane. Stay in your lane. And I say the same thing about single family. Stay in your lane. Master single family, master the numbers. So to your point about, is there any way to make an assumption on budgets? There sure is. If you use the formula of cutting the cost to build new down, chop that down and start with those starting points. And of course, there’s no guarantee budgets are projected, right? Through moving targets. Schedules are projected. They’re moving targets. So, the only way to track your mission is the law of averages, right? You got to do three projects to figure out where, how much time, how many change winners? Did we have that? Were they all total? That you have your average, that you’re missing? How many days, or how many weeks were we late on these three projects? Then you have your total, then you have your you can figure out your middle same thing, right? You got to look at those things. How many times were inaccurate on the bid, on the budget itself, right? You can measure your metrics, but you got to make some mistakes. You got to fail forward, to start making better assumptions. That’s the only way to do it, because there is no, there is no this is how it’s made, right? This Pellegrino was made exactly like this. That is a science, science of flipping, right? That’s a science. You have to get that over and over and over again to get to a point where you feel you’ve mastered your science of flipping. That may take several long term mistakes, but you got to be fearless, man. But being around guys like you and me, being out around friends of ours, right? Like there’s plenty of help in the industry that can help you make those assumptions more and more accurate, right? Like, in our academy, my goal is to put you comfortable making an offer on a pretty decent budget. Like, if you’re like, I only have 45k Well, you’re gonna need 65 then they go, I say, let me know if you green light. Because our next step is to break out of your budget and get the contracts blah, blah. They come back and say, Oh, we renegotiated. I’m actually, I was able to lock it in. I’m like, Good job. All right. Now we can make this work, right?
Justin: I think what you just said is really everything Rotty, because we are able to go to you, and this is why I would really implore you guys to go find Rotty on Instagram, find him on Facebook, join his Facebook group and be a part of his community, because I have access to Rotty, which I don’t know if you offer this to everyone. So I don’t mean to blow up your spot, but like, we literally will make a buying decision on what. He basically comes back to us, usually within 15, 20, maybe 30 minutes backs, because he’s, you know, getting into his car. He’s like, I’m getting my car. Give me 20 minutes. He will say, Hey guys, you’re at 50 on the remodel. You gotta assume 65 out of the gate. Here’s why. Boom, boom, boom. We will make a decision whether we’re going to buy the deal or not. We will figure out if we need to go renegotiate right then and right there. It allows us to buy better the power of understanding your numbers, the power of understanding construction, allows you to be a better sales person. That’s what I think a lot of people don’t stand it allows me and my team to acquire more properties because of the confidence I have in Rotty. Or if you don’t have variety or don’t use them, you should. But if you have confidence in your contractor, contractors are so transactional, because if I have confidence in my contractor, they’re going to get all 28 properties of mine, or they blow it once because they want to over promise, under deliver. They got that one deal up. They get no more business like contractors should be better business people, because if you do it right, the first time, the business will continue to flow you. And so that confidence, though, again, going back to the confidence I have my team has, because of Rotty, allows us to renegotiate based around when we get a true itemized bid back from them in the inspection period. We say, Oh. Man, there’s 12 grand worth of whatever the hell you know. We got to go get a reduction.
Rotty: I thought, well, you just said, is gold, bro, because that is funny. I was thinking that, as you were saying that I’m like, this actually allows you as a company, right on the investment side, on the opposite side, to put more effort, maybe more education. It’s like an Anthony and Carson from the sales aspect of it. Because if I’m saying, Hey, we can make it work. If you can go deeper, hey, let’s focus on our sales skills. Because we do the same thing. We’re saying, we have to analyze properties all the time and say, how do we make the budget work all the time? It’s every client, every property, everywhere across country. So they’re going, you know, can we absolutely salvage those cabinets, though they are in myth condition. They’re just over. Can we actually give it texture, new hardware, new hinges? Can we make it a soft close? Is it worth the upper time and labor? We’re problem solving just as well. For example, one of the things we were working on, especially on your account right, is, is it butcher block? Is it granite? Is it quartz? So, we brought Hannah in, right? Our agent, I’m like, Hannah all I need you to do when you give us the COP is really tell me the material cop, because I want it to sell from these guys fast. I don’t want to put in butcher block if everybody expects granite, because that’s only a $1,200 to $1,800 difference. I’ll put the money in for that thing. But if that’s gonna cost us three months on market, crap that. We’re putting the granite in day one. So again, like you’re saying, the more effective you are on your side of the business, the more effective we could be on ours, and then vice versa. And we’re trying to complement each other so that this deal gets deeper, more efficient, faster sold. Repeat, right? The rinse, repeat model. So that was gold what you said about learning the sales aspect going deeper.
Well, this is why I understand so like even for a wholesaler in general sense, right? The more I know my buyer and what they buy at the easier I can negotiate, the better of a sales person I can be, because I know my buyer their buy criteria. So even if you’re freaking wholesale, listen to me here. If you’re watching this on YouTube, Justincolby.tv or listen to this, listen to me here. Even if you are a wholesaler, you need to be learning what Rotty teaches, because you can be a better sales person, negotiator when talking to your homeowner for your end buyer, you’re not buying it. You may not be using Rotty, but you learned his skill set so you can analyze the remodel component, so when you present it to a buyer, it’s at a price they can afford, because they might be using Rotty or a Rotty type person, you just need to understand the skill set. It is imperative for $25 a month, by the way, let me sell you that is an absolute no brainer. Everybody. That is insanity, right? And, you know, I tell you.
Rotty: The truth is no gimmick, because for 10 years we had the Academy, we were charging thousands of dollars for it. To me, I’m like, I would rather work with 25,000 investors who need the actual help. And if you can afford 25 bucks, because you really want to get started, that’s what it’s all about. Because it’s the simple information. Every time I speak, it’s one anyone you’ve seen somebody picked up, and they tell me all the time. Every time I just say something, my brain just goes, that’s what I’m gonna do apparently. It’s just one of those things I’m telling you. Anybody listening right now? It’s, it’s, you know, and he’s got, he’s got justincolby.tv on YouTube. I’ve got a YouTube channel working a lot. I’ve got 300 videos up man of educational videos of just me and a whiteboard thinking about a process, or me and a whiteboard talking about top 10 things subs need to learn. You need to learn that too. I give away that thing all day long. You should follow that on YouTube. That’s 100% brew.
Justin: Yeah. And guys again, I think it’s a perfect place to kind of say, you know, we could go in the trenches and I could pick his brain. But the reality is, you guys should just go and find him, pick it. You guys pick his brain. What was your Instagram again? And then what is your Facebook and Facebook group?
Rotty: Facebook, my personal Facebook and a couple. I have Rotty “R O T T Y”. I have “The Rehab Depot”. I have “Ryan Rotty Garcilazo”. And then I have the Facebook group of “Rotty rehab Academy and mastermind”.
I have four Facebook pages, all right, I’ll go through them again, “The Rehab Depot”., “Ryan Rotty Garcilazo”, and “Rotty Rehab Academy and Mastermind”.. All right, that’s where you can find me. On Facebook, on Instagram, it’s “rottyflippedit”, very simple. Rottyflippedit, all right. And then on YouTube, it’s Rita and with Rotty.
Justin: Say it again. Don’t you have an event coming up?
Rotty: I have a boot camp coming up in Chicago, literally in a month, April, 4 and fifth in Baton Chicago, at Maciano didn’t speak easy, and we’re going to go through our boot camps. People ask us well, what’s the difference between a boot camp and your academy? Academy is where we could take time two hours and really deep time a specific topic. Boot camp, we cover every topic in 16 hours in two days, right? No fluff. It’s straight. Our sessions break food our sessions break Food Network. Our sessions break food dinner, same thing next day. And what we try to do in the boot camp is help you evaluate the moment you’re in that room with all different levels of investors, rookies to the biggest veterans you can imagine, still learning new techniques for their teams. The first thing they’re doing is they’re analyzing really boot camps gonna tell you, where does your business sit today? The moment you’re sitting in that chair, what is your business look like? Because when I spit everything, you’re sitting there analyzing project man. These are analyzing, but it’s looking at time. You’re looking at leadership, talking about personality traits. We start talking about safety and dangers of projects. We start looking at how things are operating. You start really evaluating. We start talking about KPIs, of the things that your construction coordinators and positions and the people that are part of your team and who you should hire eventually. How you should pay? You start evaluating. Like, you know, on one end, you can be like, Oh I got a long way to go. Cool. We’re here for it. On the other end, you’re like, All right, cool. A lot of it I’m doing right. I just needed that one little piece, right? Cool it is. So the cap really is a high level overview where your business is. We touch every single topic. So, when you join the Academy, then you can sit there and cherry pick the curriculum and go, I don’t want to miss this one. I don’t want to miss this one. I don’t want to miss this one. And with 60 weeks, 60 classes, it’s a lot of learning and we record everything, and we put it in our student portal, where it’s private, and you can actually work with the other students and say you know? And I see it all the time. I could read some of the comments to each other asking questions like, Hey, did you? Did somebody? Was it me that was lost on the formula? Or did somebody else get it? And you seeing somebody else explaining it? It’s incredible. It’s the biggest of all method?
Justin: Yeah, hey guys. So if you can, where can they go to if they were close to Chicago. They want to go to it is or are there seats left? Is that something that they can go there.
Rotty are seats left. Usually. The reason why we call it a mastermind is because all of our students can choose to come for free. That’s part of the membership. So if you join the Academy at $25 a month, you can come to any camp you want free if you’re a student, right? So automatic capacity in that in that venue, which I love, is 60. We’re at half, but we don’t have to market it. The people that attend are already with us. So if you want to attend the camp, just join the Academy, and by default, you’ll attend it. If not, you’re going to pay 497, a ticket. No brainer.
Justin: There you go. Well, it’s a no brainer, dude. I appreciate you again. This guy’s done this for 20 years. He runs all of my construction as we’re recording this right now, including the three new apartments that we just got. So this guy knows what he’s doing. If he’s good enough to work with me, he’s damn sure good enough to work with everyone watching this and listening to this, that is for sure. Dude, I appreciate you spending some time here. Makie it can happen. Appreciate the transparency, letting everyone know that you even hate a contractor. So if they had more business acumen in the way you do, I think contractors would have a better would be looked at with a better light, right?
Rotty: 100% can I? Can? I leave you with one thought in the audience with one thought with what you just said, the key to our success right was the fact that we became a bridge when I learned hedge fund way of doing business and clearly doing low level construction, right? Somebody had to bridge that gap. The hedge funds don’t want to deal with a raggedy ass Garage Band in Mobile, Alabama, but they’ll go through here do that because they no longer get the respect of the field, and those guys were listening to what I’ve got to say, because I end them, and they know that they’re not me, right? I could feed them. Hedge funds know that I can manage them, but also hedge funds, though, I can have that high level conversation as well to make it work at a larger scale. So for new investors out there, and anybody who’s watching this, who want to get in the game, or are in the game, or are loving this, or inspired by this, think of yourself. But how do you become the bridge to what you want to accomplish? Who are the two people, the two teams, the two major resources that you need to brew your business? You become that centralized doorway once you’ve created that, you’re going to be set for life. Okay, I’m not saying you’re not going to be stressed, but you’re going to be good, like you’re going to have a future, you’re going to have a career, and you’re going to have financial freedom.
Justin: No doubt. Well, Brother, I appreciate you again. Make sure you go, follow him. Go rewind this. Listen to it. Watch it again. There’s gold in these hills, and you can go find him on all the social media platforms. Appreciate you showing up, showing out.
Thank you.
