An Interview with Brian North: An Expert “Fix It and Flip It” Resource
November 25, 2014 |
Article Written By: Tricia Covert
Over the past decade, the popularity of home television shows has skyrocketed. Top-rated shows such as Flip or Flop, Rehab Addict, Property Brothers, Love It or List It and many others keep captive viewers tuned in week after week. Phoenix metro even took part in the trend with its own television series that aired for the past 2 years called Property Wars – showing America how to find foreclosure deals through an auction process to make a quick profit.
Brian North knows that there’s a lot more to making a profit when it comes to buying homes for the purpose of “flipping” them, than the dramatic version played out on television. The term “fix it and flip it” may suggest that the process is easy, quick and can be done with little effort. On the contrary, there are many facets that someone interested in this business needs to understand; and gaining the correct knowledge is key.
Brian is the current owner of Green Street Real Estate in central Phoenix and a true expert in this market. He started in real estate in 2006 and worked through all the trials that the metro Phoenix market had at the time and the tribulations that came afterwards. Brian’s hands-on experience has given him a wealth of knowledge that he was willing to share with us as we invite others to attend our “Find it, Fix it and Flip It” Seminar.
Brian, can you share some information about yourself and your background?
I was born in Orange County, California and grew up in that area until I was 13 years old. I moved to Colorado and attended high school, then later college where I earned my Bachelor’s degree in Sociology in 2001.
I worked in restaurants for a while in Durango after college. In 2004, I waited on Werner Schumacher, owner of Schumacher Mercedes in Scottsdale – he offered me a job to sell cars at his dealership. I decided to take the job and move to Scottsdale with my fiancé, who is now my wife. In 2005, I met Derek Jarr, the current owner of Green Street Communities, and he became my mentor in real estate. I left the dealership to pursue a career in real estate investments with Derek. I worked as a Principal, buying and selling houses from April 2006 to January 2009, and helped Derek build Green Street, The Brokerage. In January 2011, I became a REALTOR® and earned my real estate license.
What is your current role in real estate today?
I’ve driven all over the Valley from Buckeye to Queen Creek for many years, buying and selling real estate. I have a family now, so I decided to work smarter and focus my efforts in my own backyard.
I’m currently the owner of Green Street Real Estate. I have a strong team of 7 agents – all of us live in the Arcadia ZIP code. About 80 percent of the business we’ve focused on over the last couple of years is representing the residents of Arcadia: the buyer, seller, investor and the “flipper.” I wear 10 different hats every day: making dozens of calls at a time, negotiating deals, working with various builders and architects for a potential spec home, assuming the role of consultant based on my experience, and sourcing deals when it makes sense.
I pride myself on education and knowledge, so my decision to focus on my neighborhood was really about adding value for my friends and people within the community. I’ve built a great book of business, and I’m confident Arcadia believes we’re players in that market. That’s a role we take seriously – we’re very thankful.
What motivated you to start working in the “fix it and flip it” market and how did you progress with this line of business?
Derek Jarr is the mastermind. He was my mentor, my coach and he’s my friend. Derek is an innovative, critical thinker and the most effective action taker I’ve ever met in my life. He was the visionary and the builder behind all the “fix and flips” and I was the sales component. Derek positioned me to be the front person for the projects, so for the first 5 years all I did is knock on doors and cold call to acquire assets for fix and flip investors. Most investors got to a point where they would trust my ability to underwrite the deal – if I said it was a deal, some might buy it without even looking at it.
I learned to understand all of the intricacies in a “fix and flip:” structural, mechanical, elementary engineering, safety, lot placement, why you do or don’t want to buy a house, why it may be a good investment, understanding how contractors bid, coming up with pricing…and all of those things. Most of the knowledge I would bring to the market from a value perspective would be everything but putting the shovel in the ground. As a result, I think I gained some notoriety of being a good resource for this market – while Derek is the actual “fix and flip” guy on the building side of it.
What are the trends with “fix it and flip it” properties pre-recession, during the recession, post- recession and today?
From a summary standpoint, pre-recession the conversation at a wine and cheese party was: “ I just flipped a house and made a bunch of money.” During the recession, the conversation changed to: “I just had to short-sale my house.” At that point people were becoming too risk adverse to the idea of “fix and flip.” They were happening, but I don’t know too many people who were “fix-and-flipping” at the trough. What most people were doing during the recession was buying and holding – hedge funds bought up thousands of properties below build cost to hold.
Right now, people are buying in the affluent communities, under market value, while the market is spiking up. They’re doing higher-end home room additions – far better remodels, rebuilds or new builds than they did before. But even that trend is phasing out. Spec homes are a new trend − buy an 1,100 sq. foot house on a 15,000 sq. foot lot, blade it and build a brand-new house.
The fact is, the world knows the market has rebounded in Arizona. Foreclosures, short sales and REOs are way down. So that changes the amount of distress in the marketplace, which changes the strategy.
If someone is interested in taking on a “fix and flip” project, what is your general advice and 3 fundamental recommendations?
First, identify your criteria and never waiver from your criteria – ever. Second, be conservative: overestimate your costs and underestimate your return, so you’re always in a break-even position. Last, don’t fall in love with the house: it’s not personal – it’s business.
What I would say for an entry level “flipper” is: the demand is moving central and the bigger buyer pool will be there. Central Phoenix tends to have a lot of houses built in the ‘50s – unless you have the capital and the knowledge to take on repairs like old plumbing and a new roof, those houses will present more of a risk. I would look for newer properties. There are also a lot of people who bought brand new – with decent interest rates in the 1990’s – who hung on to their properties. Now, they’re ready to move because of life changes.
What is a good starting point to enter this market and some focal points?
Try to identify what’s selling and what’s not selling. If a house sat there for 400 days, 200 days or even 150 days, there’s a reason. Pay attention to things like: low bed and bath count, does the house back or side to a busy street? A busy street can devalue the property about 30 to 40 percent. It’s going to take you longer to sell because your buyer pool is smaller, and you’ll end up incurring more hard money costs.
Aesthetics is key. But, what’s valuable to the buyer can be different based on various areas of the Valley. In Arcadia, it’s basically Restoration Hardware – wood floors, marble, white cabinets and crown molding. That isn’t the appeal in some other areas, where beige cabinets and neutrals are what the buyer wants. If you don’t pay attention to the aesthetics based on the area, you can get burned. Ultimately, you want to identify what you can deliver to the biggest group of buyers.
What are the biggest challenges and how does a person overcome them?
Finding deals is the biggest challenge – in most cases you won’t find them on the MLS. There are different ways to go about doing it: you can hit the streets yourself, which takes time, or you may want to hire someone who does it for a living. It’s not HGTV – there’s a lot to know and you need to be serious about making the deal happen. If you hire someone, be ready to perform. Sticking to a timeline is also really important – time is money.
Who do you think would be a good candidate to be a “flipper” today?
I think it’s someone who has a little fire for real estate and wants to diversify some of their other investments– especially because of what’s happened in the stock market recently. It’s a good opportunity to take some of your capital and apply it to real estate.
You’re known for throwing these great “house parties” that from my understanding have an attendance of 200 to 300 people. Can you tell me more about them and how they work for you?
From the beginning, everything I’ve done in this business was risky. I’m a grinder and a risk taker – I always think strategically. The parties helped create the Green Street Real Estate brand and allows us to move outside the box of standard, standard, standard. I needed my sellers to know that I’ll dig deep in my pockets to market their house.
We have local vendors in the housing industry support us in food and drink. We theme the parties – we have DJs and live bands. O.H.S.O. Brewing Company has been a huge advocate for us among other local, restaurants. We also support charities such as Habitat for Humanity. When everyone comes through the door we don’t hand them a flyer; instead we welcome them to a party. People don’t want to be sold to, but they do want to come to a cool party. It’s a great way to showcase a house.
I can’t tell you who attends the parties, because I don’t collect information – I just know it always works. A recent example is a house listed at $ 1.75 million. It was on the market for about 40 days and sold for $1,710,000. In the current market, that’s strong. (see photos) below
Brian North’s exposure to the metro Phoenix market in the “fix and flip” arena over the past 8 years has given him incredible perspective. Although his primary focus recently has shifted to Arcadia real estate, he continues to be a valuable resource for the Valley and lends advice regularly to people throughout the industry.
If you would like to learn more about this market, attend our “Find it, Fix it and Flip It” Seminar on Friday, December 12th, 9:00 a.m. to 12:30 p.m. at our Scottsdale Campus. Brian’s mentor, Derek Jarr, will be a featured panelist as well as Doug Hopkins from Property Wars.