This is the most competitive environment for finding deals I’ve ever seen. With historically low inventory and increased competition buying property, you’ll need marketing systems to find inventory. Getting your brother-in-law to build a website may have been enough 10 years ago, but it’s going to take more in this market.
Shows like Flip or Flop and Fixer Upper with Chip and Joanna Gaines have really glamorized the creativity and enjoyment that comes with buying a rundown home, fixing it, and then selling it for a profit. Some amateurs have ventured into this industry and have made a lucrative career out of it. But others, particularly when a market is stagnant, have lost their shirts. As a part of my series about the ‘5 Things You Need To Know To Create A Successful Career Buying, Rehabbing, and Selling Properties’, I had the pleasure of interviewing Matt Lavinder.
Matt Lavinder is President of New Again Houses®, a company that transforms old houses into fantastic modern homes. New Again Houses® transforms houses into fantastic modern homes. After their homes are purchased, they fully remodel each one and sell them traditionally as market listings.
Thank you so much for doing this with us! Can you tell us the “backstory” about what brought you to the Real Estate industry?
I started my career as a college teacher and coach. It was a consuming profession with little financial upside. I decided I wanted to build a business that I could grow with technology and systems. The house flipping business was and remains a mom and pop, low tech industry where there is a lot of opportunity for innovation. I transitioned to real estate development and never looked back.
Can you share with our readers the most interesting or amusing story that occurred to you in your career so far? Can you share the lesson or take away you took out of that story?
In the early days, we drove up to one of our projects. There were police cars at the house and we could see our painter running down the road. We connected the dots pretty quickly. It’s a reminder that while systems and technology are important, there is always a human element that can’t be glossed over. In a business where we create value with construction, systems will never fully replace humans. Technology’s role is ultimately to empower the humans, not the other way around.
Do you have a favorite “life lesson quote”? Can you share a story or example of how that was relevant to you in your life?
When Hannibal crossed the Alps with his African elephants, he is credited with the quote, “Find a way or make one.” That quote hangs on my wall. The biggest opportunities are in solving the hardest problems. It’s important to know yourself and I’ve never found any satisfaction in coloring inside the lines. I’ve always gravitated towards the challenge of solving difficult problems, and that almost always involves making a new way. You can’t have it both ways, though. You can’t tackle hard problems and easily find the solutions on the shelf at Wal-Mart.
Are you working on any exciting new projects now? How do you think that will help people?
The blue collar housing stock in this country is over 40 years old because we stopped building workforce housing decades ago. There is a lot of deferred maintenance to do on our housing stock and less skilled labor to do it. It’s a difficult problem because residential remodeling is a very difficult business to scale. That’s why it’s dominated by mom and pops. At New Again Houses, we’re focused on scaling residential remodeling by empowering franchise owners to scale their flipping at a local level. By using technology and systems to efficiently flip properties, we’re increasing the usable housing supply. With our franchise model, we’re uniquely positioned to do this at a national level.
What do you think makes your company stand out? Can you share a story?
One of our core values is Win/Win Relationships. To build a sustainable construction ecosystem, we have to make our contractors successful. We do this with systems and technology that help set our contractors up for success. It’s rewarding to see guys who struggled with the business side of contracting most of their careers and have found both financial stability and improved quality of life within our New Again Houses® ecosystem.
None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story about that?
I started New Again Houses® in a tiny converted roofing shop. It was just me but I installed three other desks because I was committed to building something larger than myself. Most of the people who believed in this crazy idea and occupied those desks in the early days are still with me. We’ve ridden the startup roller coaster together, sharing the highs and persevering through the lows. There’s no way to build something significant without a great team and each one of them has played an important role. I would say the most rewarding part of building a business is building a great team.
You are a successful business leader. Which three character traits do you think were most instrumental to your success? Can you please share a story or example for each?
The character traits that have helped me be successful are all double-edged swords. My super power is probably the ability to compartmentalize. It allows me to maintain focus on the important rather than the urgent. The house next door to our office caught fire last month and they had trouble getting me out of the building because I was doing something important. While compartmentalization can be problematic during fires and relationships, it’s pretty valuable for staying focused on solving important problems. Another character trait is relentlessness. I tend to stick with a problem until it’s solved. It can take years so I have to be careful not to chase the wrong problem. I picked up a tennis racquet 18 months ago and have played nearly every day since and just purchased an indoor tennis facility. It’s a character trait I have to be aware of and control. The third is the need to build things. If I’m only maintaining and not building, I get unsettled. This is something that can’t ever be turned off. It’s a personality disorder I’m fully aware of, but can’t do anything to fix. I just have to surround myself with talented people who can build, maintain, and tolerate me.
Ok. Thank you for all that. Let’s now jump to the main core of our interview. Can you share 3 things that most excite you about the Real Estate industry? If you can please share a story or example.
I think real estate experienced more change in 2020 than it has experienced in entire decades. The last year of real estate has been like watching a game in fast forward but it’s in real time. Volatility brings opportunity and we’re trying to stay ahead of the change. So, it’s an exciting time to be in real estate. At the same time, technology is developing at a mind-numbing rate. So, it’s also an exciting time to be in technology. Being at the intersection of real estate and technology in 2021 is especially exciting. We’re leveraging AI in real estate valuations and looking forward to implementing telepresence technology on the construction site. The residential construction site is one of the few places in the world that has yet to be impacted by technology and we’re really excited to be a part of changing that through our house flipping franchise system.
Can you share 3 things that most concern you about the industry? If you had the ability to implement 3 ways to reform or improve the industry, what would you suggest? Please share stories or examples if possible.
Wherever there is volatility, there is opportunity. Volatility also results in displaced humans. I’m concerned about affordable housing. There’s a real supply shortage of blue collar or workforce housing. We are trying to move the needle on supply, but it’s a problem much bigger than us. I don’t think the free market alone is able to solve the affordable housing crisis. I’m also suspicious of big government solutions. I feel strongly that local politicians are going to have to think outside the box to solve the affordable housing crisis at the local level. We can’t effectively pause new construction of workforce housing for 40 years without consequences. We have a particular rental property in a bad location that has always been difficult to rent. When it came available at the end of 2020, we had 450 inquiries when we stopped counting. I think stories like that could be the canary in the coal mine for the affordable housing crisis that’s coming.
What advice would you give to other real estate leaders to help their teams to thrive and to create a really fantastic work culture?
Real estate development is continuing to become more competitive as more hedge funds acquire residential properties. It’s driving much of the market and it’s pushing everyone to create competitive advantages. Doing so in a dynamic market like this one requires the creativity of everyone in the organization. Another one of our core values is ownership, which is fundamental to our franchise approach. It’s also a value at our corporate office where much of our innovation occurs. Innovation can’t be a top-down endeavor. Everyone in the organization must be a protagonist to compete in this market. My role as a leader is to surround myself with talented people, set them up for success, and stay out of their way. If someone is going to have responsibility for a project, they also need ownership in order to drive it to completion. I think leaders sometimes have a hard time giving up control and they become an annoying bottleneck that throttles growth. We maintain a very flat organization so we can foster a culture of ownership and innovation.
Ok, wonderful. Here is the main question of our interview. Can you please share with our readers your “5 Things You Need To Know To Create A Successful Career Buying, Rehabbing, and Selling Properties”? If you can, please give a story or an example for each?
I’m going to answer that with the assumption this audience isn’t interested in swinging hammers on the weekends and instead wants to build a business that happens to flip houses. Whether you aspire to simply flip houses or build a business that flips houses makes a big difference. Our franchise owners want to build businesses. To do that, you need to invest in infrastructure to create competitive advantages for the long term.
First, this is the most competitive environment for finding deals I’ve ever seen. With historically low inventory and increased competition buying property, you’ll need marketing systems to find inventory. Getting your brother-in-law to build a website may have been enough 10 years ago, but it’s going to take more in this market. Every lead source is a bit cyclical so it’s really important to build multiple lead source engines that will produce a consistent flow of deals. Foreclosures made up 20% of our purchases in 2019 and then they disappeared in 2020. We had other lead sources to make up for it, but the guys who were dependent on foreclosures had a tough year.
Second, you have to know the construction numbers. When a lead comes in, there is a very short window of opportunity and the most difficult and important number to calculate is the construction budget, or CB. I’m amazed at how many in the industry use primitive and unreliable calculations for this when it’s such a fundamental number. Contractors can’t be trusted with this number because they too often rely on their “gut” and their gut isn’t as good as they think. Others use software that takes too much time to input. The deal is gone by the time they get the numbers loaded into their expensive software. We’ve invested a great deal in systems that calculate this number with speed and precision. You have to understand this number to have a career flipping houses. If you don’t know the math, you’ll be taken advantage of by contractors, wholesalers, and agents.
Third, you can never have enough cash in this business. I know there are plenty of theories out there for buying houses with no cash, but cash solves real estate problems. The bigger your business grows, the more problems you encounter and the opportunities are in solving big problems. That often requires cash. Use other people’s money as much as possible and build as much cash as you possibly can. That cash will allow you to solve problems. We had a seller the other day who lowered the price $25,000 if we could give him a $10,000 down payment.
Fourth, build an ecosystem of high-quality partners and set them up for success. I know the current business culture views partnerships as transactional and disposable, but we’ve built New Again Houses on long-term win/win partnerships. Win/win relationships are actually one of our three core values. Creating win/win relationships requires a commitment. I think we probably spend as much time helping our partners be successful as we spend on ourselves. To solve big problems, we need reliable, talented partners we can trust. On the deal mentioned above with the $10,000 down payment, our attorney partner figured out how to get our seller the $10,000 while protecting our interests in the property. He dropped everything to get this done in a very small window of time because we have been building a win/win business relationship for ten years.
Lastly, it’s important to quantify risk. As a whole, I think the real estate industry is really poor at quantifying risk and I think there’s an important role for technology to improve this. Every property, just like a stock, has a unique risk profile. A 3/2 ranch in an established neighborhood has less risk than a 2/1 in a war zone. There is a clear relationship between profit potential and risk. Real estate investors are much better at quantifying profit potential than quantifying risk. I think that is why so many amateurs get burned flipping houses.
What are the most common mistakes you have seen other people make when they try their own hand at house flipping? Can you share any stories?
Instagram and HGTV. We get a call at least once a month from someone who is halfway through a flip project and ran out of money or time. The reason is usually because they spent more time on social media than they did with their numbers.
From your experience, what can be done to avoid those errors?
One of the most important things you can do on a flip is stage the project to 100% and avoid changes. The tendency is to make 70% of the decisions and kick the hard choices down the road. Those deferred decisions will get pushed to the very end and set your contractor and your project up for failure. There’s a ripple effect to change orders that sets everyone up for failure. Make all the decisions at the beginning so your contractor knows the full scope of the project. Then, stay off Instagram and HGTV until the project is done. Once the plan and budget are set, creativity is not rewarded. Changing the plan will only set your contractor up for failure and undermine any chance you have at a win/win relationship.
You are a person of great influence. If you could inspire a movement that would bring the most amount of good to the greatest amount of people, what would that be? You never know what your idea can trigger. 🙂
Maybe it’s because I’m a GenXer, but I’m a bit cynical about inspiring movements. I think the biggest differences are made at the individual level. Realizing our potential in making a difference is much like being successful in business. It’s a journey of self-discovery and finding ways to align our true selves with our work. When we better understand ourselves, our giving better aligns with who we are and goes further. Perhaps your journey of self-discovery leads you to discover you are a great teacher. Go teach people around you who are hungry to learn. You don’t need a movement to do that. If you discover you have an inner artist in you, go paint something for someone who needs a gift. The cool thing is we change or maybe we just get better at understanding ourselves. The exciting thing for me is the gifts we give in our 30’s will be different from the gifts we can give in our 40’s. So, my advice is to never stop trying to figure out who you are. But, don’t stop there. Find ways to live a life that aligns with that self-discovery, not just in your work but also in your giving and your relationships.
How can our readers further follow your work online?
Thank you for your time, and your excellent insights! We wish you continued success.