In this video, Chris Bounds shares his experience of turning a $10,000 flip into a $100,000 deal in the real estate market.
Chris shares valuable insights, strategies, and tips for maximizing profits and minimizing risks in the real estate market.
Whether you’re a seasoned investor or just getting started, you’ll find plenty of valuable information in this video.
Transcript:
Jamie Bounds 00:00
Our next speaker I’m really excited about because I am literally his biggest fan. And I just love this guy so much. I think he is beyond brilliant. And he is going to be talking a lot. Let’s bring him up. Oh, i love this man. Oh, and I can say that is my husband. He is going to be talking about turning a $10, 000 flip into $100,000 deal. It’s our favorite type of deal that we do. Chris is very much the numbers guy. So he’s gonna run you through this and take it away, my love.
Chris Bounds 00:49
All right, thank you. I have a 45-minute presentation that I have to condense down to 30 minutes. So I will be talking very quickly. First, if you have done a real estate deal before a wholesale deal, a flip. If you got a rental property Airbnb or whatever, drop a thumbs up in the chat. Let’s hear it. Most people say they want to get involved in real estate, but they never do. And so if you’ve done a deal like you’re in the game or at least you’ve played the game. And you’ve got the knowledge and experience you have, it’s just amazing. So jump thumbs up in the chat, and give yourself a high five. But if you’re brand new, you can be that person that’s done their first deal.
So if you’re brand new and you’re excited about doing your first deal, drop your favorite smiley emoji. I’m talking a lot about emojis today. Love emoji. So drop a favorite Smiley in the chat. I want to hear from you. I love comments. So I’m gonna show you the strategy that Jamie and I use, and we use specifically turn a $10,000 Flip or would be flip into $100,000 deal. And by the time I’m done, you’re probably not going to want to flip houses anymore. But your bottom line, your financials will be much happier because of it. So you’re gonna see the actual numbers of the deal.
And I’m gonna show you a couple of the case studies of six-figure deals that we’ve done. And then at the very end, if we have time, I’m gonna show you an actual plan of action on how you can become a real estate millionaire. So let’s light it up. Light it up in the chat. Let me know if you want to see that almost beat along. So I got started in real estate back in 2004. I was a broke college student who had no job. There I am sporting. I’ve never been a fashionable guy. Jamie reminds me of that. But it’s true. So here I am sporting cargo shorts, an Abercrombie shirt, high socks and some tennis shoes or whatever.
But hey, I’m 21 years old or so. And I just bought a house. So I don’t care. May not look good from a fashion standpoint, but just bought a house and did my first deal. Amazing. I ended up flipping four houses within that first year in real estate while still in college. And I did that all through joint ventures and using private lenders. A brief background of our history. So in 2011, Jamie and I got married and I dropped this bomb on her lap. She tells the story a lot better than I do, which she tells in her upcoming book. But basically said “Hey, I want to start flipping houses.” We both had jobs.
And what we ended up doing actually was buying rental properties. Really good idea at the time. Then in 2014, I got licensed. In 2015, I went full-time. In 2018, I join eXp Realty. And that was because it was a company that I saw that allowed me to build wealth and passive income within my business and while I invest. And so, it aligned with our goals and made just complete total sense. And then having all these extra collaborative opportunities has just been amazing. In 2020, Invested Agents was born out of a local event and then in 2021, we took a huge leap into most large multifamily.
And we bought a $42 million or we’re small partners in a $14 million asset in Florida. So all in all $65 million transactions over the years. $19 million raised from private lenders and equity partners and $44 million assets under management. Most of that is because of the apartment complex. Same as the 393 units. And again, we’re small partners on that. We took that on ourselves. 200 flips top point 5% with eXp Realty. This is a picture of my wife. So I get up every day before 5am. Sometimes on Saturdays too. Like this one. I got the 4:30 AM and I’m happy to do it. I do love real estate, but i love my family more. They’re my driver. You’ve already met Jamie. My kids are now eight-year-old son Nathan and five-year-old Ellie. They’re full of personality and all the craziness and love.
They bring joy to life. So, disclosures. I’m not a financial adviser, I’m not a CPA, and I’m not an attorney. I am a licensed Realtor in Texas. And I’m also a real estate agent doing what I’m about to show you. So everything that I show you here, I don’t necessarily share this to say do exactly what I’m saying. But take it and filter it with your own goals, your own risk tolerance, run it by your own professionals, your own CPA, and all that figuring it out. Figure out how we can help you meet your real estate goals faster than maybe you were anticipating or maybe a better way or in a way that is more impactful. So thumbs up or heart in the chat now.
Have you read this book Cashflow Quadrant? I was in college when I read it and it was massively impactful. I think at this point, I had already taken accounting classes and in college, I earned my C. I mean, it was a struggle. But I finally got it. And then I read this book later on. And it was like well, I learned more about accounting just from this book. And I did a whole semester and accounting class. And this book cost me like 15 bucks. But so most people watching now, the concepts in this book, they’re very elementary. But what makes this book special is how it outlines money and cash flow in its simplest way, how it’s made. It illustrates how money flows.
It shows the importance of not only buying assets but buying assets that provide passive income. There are only so many hours a day that we can work as a professional in assets that provide passive income and produce a compounding effect on our financial statement. And real estate is one of the best income-producing assets that you can ever own. And the cool thing is, anybody can do it. Like you don’t have to, it doesn’t take a certain college education or a certain education or background or whatever. Anybody can do this. So understanding that wealth really becomes better defined as time. When you have more passive income coming in each month than your expenses, your wealth continuously grows, otherwise, wealth declines.
And the unfortunate part is in a traditional retirement plan how normal America or normal financial planners are out there that are designing these financial plans. They’re really designing a plan to where your wealth decreases every single month. And the goal there is not a goal that I want to live. The goal is to die before you run out of money. And it’s just not the pressure I really want to have on my life. I plan to live until I’m 120. I was joking with someone in another thread earlier today about that. So I want to have my wealth grow every single month. And you can do that. This is well understood by a lot of investors. But most investors run their business in a way that looks like this chart, where you have money coming in. And that’s all being sucked out because of expenses. And they’re basically the job is they’re flipping everything. They’re wholesaling everything or if you’re a realtor, you’re working everything is you’re getting all your income through commissions.
And there’s nothing wrong with any of those things like everyone needs at some sort of active income until they can get enough passive income that exceeds your expenses. You still need that. Those are important. But what I’m going to illustrate is that there’s a big reward to not sell everything. Find a way to hold more assets. The landlord enjoys most of the benefits out there that the government puts out there for you. And not just the government, just the government from a tax standpoint, but also enjoy me join the equity pay down from your tenants, the cash flow, the appreciation, and then the leverage. So you can even turn marginal deals, deals that you would never buy into big profit. So I’m gonna show you a case study in just a minute. But here’s the strategy. Most of you are familiar with the BRRR Strategy. So there’s a slight twist that we put on it.
And we call this the slow flip strategy. First, the BRRR Strategy buy, search “Buy”. You’re out there buying a deal below value because it probably needs a lot of work. So you’re gonna need to rehab it. Right. You gotta bring it up to value to meet the market, whether you’re going to rent it or or flip it either way, you have to rehab it to that condition. But with a BRRR Strategy, the whole purpose is to rent it out. So you get a tenant in there paying your mortgage, then you refinance. You don’t necessarily have to wait until you’re in it to refinance, you can refinance the one. Or as soon as you’re done rehabbing it, refinance into your long term, lower rate mortgage, then you repeat, that’s the best strategy. But the little twist we have on that reason why we call it the slow flip is the new sell, which seems a little counterintuitive. Why would you sell if you’re trying to build a rental portfolio and it ends up being a reinvestment of equity to compound results over time.
And if you can do this, you’re basically flipping properties. It’s just not every 90 days, 120 days or every six months, you’re flipping a property over a 3, 5, 7 or 10 year timeline. And that’s where you can get some huge, huge numbers. So real life example right now. 7315, Willow Oak. This is 100k example, where I got the title of this presentation. So this is a house we bought at the end of 2020. It was a complete disaster. What emoji best describes this image right here? Here’s another one. So this was actually one of we remember, we flipped tuner houses, which means I’ve probably gone on more than 1000 appointments. Um, this was the worst one, the absolute worst house that I’ve ever personally walked, not only was a hoarder house, but it was like a hoarder house that a tornado went off inside. It was there was not a place you could walk inside the house and not step on something. I was just very thankful that whatever I stepped on didn’t move, because I didn’t know what rats and other things would be lurking underneath that rubble.
Jamie Bounds 12:05
But we turned it into this. Remarkable.
Chris Bounds 12:11
It’s a night and day difference. Now, we flip this property. We would have made about $10,000. That’s not an excitement, that doesn’t get me excited for all the work that we put into this deal. That definitely, I would have been pretty locked down with that. But we didn’t. And we actually never planned to but I ran this number because I wanted to illustrate specifically to illustrate to folks that are flipping because we flipped on our houses. I mean, this is a thought process. I go through now, had we not done that, like, where would we be? And of course, now we can make a change and do this in the future. This is what I’m trying to get you to understand if you’re out there wholesaling and flipping, or if you want to move into that, find a way to hold more assets. Because what is this $10,000 flip going to turn into? Well, this is a cash flow performer chart, we ended up getting in 1750 a month, it was actually a little bit more than we had planned in rent.
All we have to do now is let time play out. So cashflow, net cash flow. I mean, assuming there’s no major issues which those happen. But we also have CaPEx they can see in repairs factored in here. But there’s no like major issues. Knock on wood, hopefully you don’t want getting floods or anything like that. Look what happens in year five. Like cash flow grows slightly over over time. It’s not gonna be a lot. Definitely, not like life changing. But look what happens to your five. When we have a projected sale at the end of a five year period, we stand to walk away with a $91,000 check based on performance. And the way we underwrote this is if appreciation does not continue, like the crazy appreciation we’ve had over the last two years. So now, after you factor in acquisition costs and disposition cost and commissions and net cash flow over the years, we will end up having net out based on these projections that $87,000. What if you had one of these every single year or two of these every single year? How would that feel if you can build your pipeline now and had this going on every single year? But it actually gets better because we didn’t flip it. We held it long term.
Therefore, we have lower taxes on the deals now, long term capital game. We enjoyed depreciation on our tax benefits over the years so we get an accelerated use out of our dollar and it actually has appreciated a lot faster than we originally anticipated. As a matter of fact, just in the last six months, it’s gone up another 20 grand from when we looked at it last year. So in all likelihood is gonna be well over $100,000 gross or net at the end of a five year period. Maybe, even as fast as your fourth if this continued. So you may be saying, “Hey, it’s all projection. So on your pocket, what about an actual deal?” Well, I got a couple of those too. 2730 Mitschke, previous speaker jet lending, they actually loaned on this deal. So this is done with hard money. This was Jamie and his very first house, we bought this place it, it wasn’t as trashy as the other one.
It definitely smelled that bad, though. It was horrible. But anyway, that’s when we bought it. We ended up rehabbing it, rented it out, refinance in the long term. We do much better remodels. Now, this was our first one. So don’t do it just on that. In any case, what our objective was really just to rehab it to meet the comps. And we accomplished that goal and rented it out. It was great, but then the time came to sell it. And really what happened in this case was taxes, it was appreciating so quickly, that the taxes and insurance, the increase in costs was eating away with cash flow. So our margins were decreasing. So we decided to go ahead and sell it. So we did. And so we bought this house for $85,000. Put 65 grand into it between the initial rehab and then the final make ready at the end given and then over that time, we had a net cash flow of 14 grand and we sold it for $237,000.
I was already licensed at the time. So I did a list this. Had we flipped the house? We would have made about $25, 000 or $30,000. Which that’s a decent flip. It’s not like super exciting, but it’s a decent flip. We ended up making 100 grand. That’s really good. That actually excites me in and again it was lower taxes and we got depreciation along the way, which we had full time jobs still during that time for it. So the tax benefit was massive. Another case study video six Hoover, this house we had bought and it was a HUD home. Whatever the case was before when we bought it, it really didn’t need a lot of work. It was almost like a homerun deal for us. We ended up having to put a roof on it and do some little knick-knacks stuff. But since it was moving ready, we actually didn’t really do much on the interior. Bring it out, then, you know refinanced. Similar story to the other one, the area’s moving up in value, taxes are going up and insurance going up.
Therefore, net income is going down. So we decided to sell it. And so we do numbers on this $80,500 That was the purchase price we put about $36,000. At the time we owned it net cash flow almost 13 grand . We sold it for 224. You’ve given us a gross profit of almost $120,000 when had we flipped it about 30 grand. Again, 30 grand or 120 grand like, which would you rather have? And the cool thing was this was actually pretty close in time to the other one. So we ended up having some like bad paydays all in a row, which is nice. Alright, so the game plan, you’ll want to hear the game plan, the actual game plan that anyone can do. Whether you’re brand new in this business, you’re experienced, or regardless, anyone can do this. Because the truth is, if you want to build a million dollar rental portfolio, it doesn’t take as much as you think a lot of people think that they have to go do what Ben’s doing.
Like, buy these huge large multi-family properties, or they gotta go flip 100 homes a year like Don. Those are great things and you can do them and you can make a ton of money. But if you are happy, especially if you’re happy working a full time job, just doing your thing, and accumulating rental properties over time, it doesn’t take as many as you might think to supplement or even provide the majority of your retirement. Let’s go over these numbers. And you have to work with something and every market can be a little different. I’ve got to work with static numbers to keep it simple, but just to illustrate a point, I’m gonna show this game plan with a hypothetical property that is worth 175,000 ARV. Again, knowing if you’re in San Diego, California then like you can’t even get a spot next to a gutter. Worth that but just play with me here and or work with me here and you can fill in their own numbers and play this out. In full-time your market and see how it plays out, but I guarantee you it does play out. So ARV 175,000 loan 75% $131,000 rent following the 1% rule, $1750 a month. PITI.
Now, this is based on 5% interest, which you can get, at least for now, you can still get much better than a 5% interest rate. But PITI 1268 10% cash reserves because you have to reserve for taxes, or you have to reserve for vacancy, repairs, and CaPEx and then cashflow. So that leaves us with a net cash flow of $307. So what we’re going to do is we’re going to buy one of these properties a year. One property a year, anyone can do that. Go out and this is 2022 by one rental, that’s all you have to do. Now, if you’re flipping and you need to flip because you have to make money. Right. That’s fine. Flip three houses, hold one, flip three, hold one, and find a way to get one rental property. And if you can’t, because of credit reasons or whatever get in personally, JV on a deal. Matt was talking about how he used joint venture. We use joint venture on our first deals. Joint venture with someone who can help you and can fill that gap is something that you lack, whether it’s money, credit, or deal flow.
Maybe, you have the money. And so when else has the deal flow, find a way to get involved and get your first round this year. But this is what we’re gonna do. If you bought one rental this year, you’re gonna have $3 or $7 in cash flow based on this example, 43 grand and equity. It cannot retire off of this. So congrats, you gotta rent all you can’t retire by one a year, and do that consistently for the next 10 years. So this time when we’re doing the, what is it the 12th Annual Invested Agent Summit, or whatever. In 10 years from now, when you’re looking back, you have 10 rental properties. This is what that would look like. You’re a millionaire. So you’d have 10 rental properties paying you and a net $3,000 a month, that’s not life-changing? Well, actually, that is life-changing for a lot of people. You’re probably not gonna quit your job off three grand a month, especially with inflation.
But that can be life-changing for a lot of people. I’ve definitely realized that you have almost a half a million dollars in equity. But here’s the secret, you’re already a millionaire. You just have to let your tenants pay off the mortgage. That’s all you have to do. Because it doesn’t even factor in appreciation. And doesn’t even have to factor in, it doesn’t even factor in debt pay down. So you actually have more equity than you think you’re 10. But once you’re tensely paying them off, if they do not appreciate it all in value, you have $1.75 million in real estate assets that are now generating more income every single month, because you’ve paid off the mortgage. But the truth is, they are gonna go up in value. So in a 10-year period, some of them may have doubled in value during that time.
But a lot of them probably went up between 20% to 40%. Now, if you want to get aggressive with it, what if you use a slow flip strategy that was a static example, just buying one a year? What if you use this little flip strategy where you bought a property every year for five years? The starting year six, you sold the worst one, the one that just gave you the biggest headache. And when he didn’t like maybe the one that just went up a lot in value and you’re not gonna make a cash flow from it anymore? What does that look like? So over a 10-year period, you buy 10, but your 6, 7, 8, 9 and 10 you sold one of the one each of those years. So you still ended up selling five, but you use the money not to go out and buy a Range Rover or buy yourself a significantly bigger house. But you reinvested it, not back into just one property, but use the money to reinvest into properties, doubling each one you sold. So when you sold one, you bought two. So you ended up selling five but buying 10 more. Now, you have 15. Now ,your cash flow is $4,600 a month with $656,000 in equity, but you really have $2.63 million in assets under management. Like, how’s that going to impact your retirement? Now, what if you bought two a year? What does that look like? You bought 20 throughout the 10-year period.
You sold 10. So you sold 2. Your 6, 7, 8, 9, 10 and each other year you sold two but doubled them use the money to go replace the two and then buy two more. So now, you actually have 33 in 10 years $9200 bucks in cash flow, $1.31 million equity and $4.5 million assets under management. Finally, if you want to be super aggressive, buy three. You’re gearing up having 45 properties over a 10-year period, $13,000 plus in monthly cash flow, and almost 2 million equity. But you actually have close to $8 million in assets under management. And that’s just an arrangement. Again, it assumes that they didn’t go up in value at all. But they do. There’s not anyone here they can’t retire off $8 million. Inflation would have to do a lot. It would have to have a major impact for that not to work for you. So you probably got a pretty good retirement if you’re retiring with $1. If so, how can you do it in three years? You only need three, six properties. That’s it. For six properties based on this example, you’d have 1.5 million, a little over a million dollars assets under management, let your tenants pay them off. That’s two properties a year or just one propertytwo-barbersbers year if you want to in three years, but you do in six years. Like, would you be sad about that? If you just bought one property a year for six years and paid it off, then they’re gonna go up in value. So in reality, and a lot of markets 234 properties are probably getting you there. So a couple of key points here, you have to know your numbers, you gotta manage like a pro, which for most people, that means let them pro manage them.
That means you don’t manage them yourself, let a professional manage them. There are a lot of great property management companies out there. A lot of them flat fee now, like renter’s warehouse is a national franchise. I know the owner here in Houston. So reach out to them or if they’re not in your market, someone like them and or talk to a few to get some referrals. Unless you’re gonna be actively engaged in managing and you just happen to like it. You don’t mind the Friday or Saturday calls that the AC went out, and they get a clogged toilet because it always happens on Fridays and Saturdays. Let professional management manage it. That way you can do the fun things like manage the deposits come into your bank account. Financing, have to stay on top of your financing, to say on top of your books, which brings me to accounting.
Don’t do your own bookkeeping and let a professional handle that. It’s not very expensive, and it’s going to cost you a lot more money. Having a CPA, fix your problems, which actually means don’t do your own taxes and don’t mean going on TurboTax like the professionals here with bookkeeping and having a real estate professional CPA do your accounting. They’re going to far more than pay for themselves. And then that way you can focus on things that you’re good at doing or you like and then escrow. You have to escrow for taxes and insurance. Your mortgage is probably going to require that but they’re probably not gonna require that you escrow for vacancy and repairs and capital expenditures. Well, you will have vacancies at some point. If you hold it a certain amount of time, it will be vacant at some point. You will have repairs. Things happen. And there’s gonna be some type of big capital expense, a roof, HVAC system, a water heater or whatever. You need the money to pay for that stuff.
So you may be able to absorb just one but if you’ve got three or four that happen all at once and you got absorb those that wouldn’t be fun. So have the money. Keep it in separate bank account. And that way, you don’t get caught. And then last reinvest, you got to reinvest the funds. That’s the only way you’re gonna grow a portfolio if you’re spending everything you’re making. Which can be tempting, if you look at Instagram and all the folks that are in fake jets taking pictures. It’s not real, you know, it’s fake. Like, don’t try to live like the Joneses. Joneses do because the Joneses are broke too. You’re not. You’re investing and then 10 to 20, years you’re not taking pictures in front of a jet. You want one you could buy one, but probably don’t even need to do that too. Because that’s how you get rich. You reinvest everything. Right. So here’s how to reach us, investedagents.com