Show Notes

[00:02:20] Rod’s LinkedIn: https://www.linkedin.com/in/roddrickphillips/
Rod’s email: SmilingMagicianEstates@gmail.com
Free Facebook Group: www.EastWestVentures.com/AIMS
Schedule a call with me: www.CallwithVee.com

[00:11:14] Rod’s girlfriend got him the book that started his real estate investing career. Rich Dad Poor Dad – https://amzn.to/37PMmHY

[00:12:53] Rod mentioned CAREI (Colorado Association of Real Estate Investors). CAREI was founded by our mentor Bill Bronchick in the mid-90s. It’s now being run by someone else.

[00:14:03] Door knocking is a really effective lead gen method.

  • Foreclosure is a legal process in which a lender attempts to recover the balance of a loan from a borrower who has stopped making payments to the lender by forcing the sale of the asset used as the collateral for the loan.
  • A short sale is a sale of real estate in which the net proceeds from selling the property will fall short of the debts secured by liens against the property. In this case, if all lien holders agree to accept less than the amount owed on the debt, a sale of the property can be accomplished.

[00:15:17] A double closing is the simultaneous purchase and sale of a real estate property involving three parties: the original seller, an investor (middleman), and the final buyer.

[00:20:07] The judgment that Rod talks about here is called a deficiency judgment. A deficiency judgment is an unsecured money judgment against a borrower whose mortgage foreclosure sale did not produce sufficient funds to pay the underlying promissory note, or loan, in full.

Rod delayed the foreclosure longer, which allowed the seller to stay in her home without paying her mortgage payment a while longer.

[00:20:38] Loss mitigation refers to the steps mortgage servicers take to work with a mortgage borrower to avoid foreclosure.

[00:24:14] Tim Goff was another mentor of ours. Unfortunately, Tim passed away a few years ago.

[00:37:23] Rod bought cheap houses at the Detroit tax auction. The first auction is in Sept every year. The second auction is in Oct. Houses that didn’t sell at the first auction will start at $500 at the second auction.

[00:40:24] Rod likes to buy in 48219 zip code

Full Transcript

Hey, this is Rod Phillips from TrueVest properties If you want to increase your income through real estate. Enjoy your life more and quit your nine to five. You should listen to the real estate lab podcast with my good friend Vee Khuu.

Unknown Speaker
Welcome to the show you were listening to the real estate lab podcast in this lab, we decode the stories, secrets and skills of the most brilliant minds in real estate investing and turn their wisdom into practical advice and knowledge that we can use to boost our income. And now let’s turn it over to our host Vee.

Vee
It’s a good day to be alive and to invest in real estate. My name is Vee Khuu and you’re listening to my show the real estate lab podcast. Hey, just a quick announcement. This week I am releasing two episodes on the same day. Besides this regular program that you are listening to right now. I am also releasing their pilot episode of the podcast in Vietnamese. If you understand the language, hey why not go over and check it out also. Alright in today’s program, I have one of my best friends on as a guest. He is swimming upstream. This guy is doing something that most people would tell you to stay away from. I was curious to find out what exactly he’s doing and their reasoning behind it. So I asked him to join me as a guest. Plus, since I hadn’t spoken to him in about seven to eight years, you know, podcasting is just a fun way to catch up. My guest today is Roddrick Phillips. He started investing in real estate just a few months after I did in 2008. He had done flips, wholesaling and short selling. You know if you have just started doing this real estate investing in the last few years? I bet you haven’t heard of that term before. I know I’m describing him like he’s some old-time real estate investor, but trust me Rod is still super young. Rod is currently investing in the Midwest. Specifically the D, the 313, D town. Do you know where yet? It is Detroit, the Motor City, Michigan. You will hear his thought process and insight of why he invests there and what he’s seeing in that market.

Vee
Rod is very active on LinkedIn so you’ll be able to find him there or just in case you’re interested in following up with him, just send him an email at Smilingmagicianestates@Gmail.com. Don’t worry, you do not have to write it down. It’s going to be available in the show notes. Before we get rolling Don’t forget to join our free Facebook community at www.EastWestVentures.co/AIMS. Also if you want to chat anything real estate or you just want to tell me what you like to see more on the show. Hey, why not get schedule a call with me you can do that@ www.CallwithVee.com. And that’s Vee with two E’s. Last but not least, podcast algorithm is unknown to everyone except for the few that worked at Apple. So the only thing as a podcaster that we can count on are the numbers of subscribers. The numbers of five stars ratings and the reviews that we have. If you haven’t done so yet, it would mean the world to me if you could go over to iTunes and hit the subscribe button. Leave me a five-star rating if you think I deserve it. And also write a review.

Vee
Hey, welcome to another episode of The Real Estate lab podcast. I have an honor here to be talking to one of my good friends and the longest friends in the real estate game. I have known for I’ve known him for 10 years now or more. He has been really active in the Colorado spring market in Colorado. Welcome to the show Rod.

Rod Phillips
Hey, Vee thanks for having me on man appreciate it.

Vee
No problem man. You know, we got to talk a little bit a few weeks ago it you know, a breakfast meet turned into a six hours conversation. And that’s why that’s why I wanted to have you come on as a guest here. But for our audience who haven’t known you, they don’t know you at all. Let me take them back a little bit so they know your profile and where you’re coming from. So let’s turn back the clock. Let’s say you know, tell me about a time when you were growing up in your household. What was it like when you were eight?

Rod Phillips
Oh, let’s see. So I grew up on the south side of Chicago. pretty rough. Southside of Chicago those gangs, violence, things like that. But I was pretty protected by my mom and grandma, they sealed it My brother and I from those things, went to a private school there. A private schools in Chicago to me are very similar to the public schools here in Colorado, in my opinion, just to give you kind of a reference point. So, yeah, so you know, when I was 8, you know, went to a Catholic school, Catholic private school there Chicago, you know, grew up, I said, the Southside Chicago. Yeah, you know, not, I wouldn’t say that the best environment but a very loving environment, you know, a very family oriented environment, but not the best. So in terms of the location you got to me.

Vee
Yeah, definitely. And I understand the South Side of Chicago is a rough part and it still is to this day. Yeah,

Rod Phillips
yep. Absolutely. Yep. It is. But you know, I’m I’m glad that my mom made the decisions as she did because it allowed me to be in the position that I’m at today.

Vee
Okay, so she so your family put you in private school Catholic school. Were you in private school up until high school?

Rod Phillips
Now now so, so we moved out here. And 96 moved out to Denver, Colorado. And then I went to public school, went to public high school, and Denver so into Kennedy. Now can the school for three years and then I transferred to graduate from Lincoln High School? Yeah. So But before that, you know, so from first grade to eighth grade, I was in private school, you know, a Catholic school in Chicago, St. Helena. They closed down now, but that’s where I am. Okay.

Vee
So how does it how does that shape your experience Let’s say when you were going from a Catholic school in Chicago to high school here in Denver, did you have a mindset change on your friend change? What were you like in high school? And did it help you in terms of becoming like an entrepreneurial spirit? Or, you know, becoming an investor now?

Rod Phillips
Yeah, absolutely. So, coming from wherever up to Denver, Colorado, it sold me and it taught me that there’s a whole lot more out there, you know, where I was living in Chicago is different is different than Colorado, you know, it’s different. So, you know, just show me that there’s a lot out there to the world that kind of opened my eyes up to the world and, you know, just made, it just made me want to do more. I guess it presented when presented me with more, so I got to see more and I like okay, so there’s a whole lot more out here. You know, that can do a lot more than I did.

Vee
So what got you interested in investing in real estate? You know, you coming out here you see a lot more to do definitely different than Chicago. And while you were growing up, you know, how how did that even come to your mind that, hey, I have a lot more things to do now, maybe let me buy some houses.

Rod Phillips
So that has kind of interesting too. So I went to college, Colorado Springs, I went to UCCS graduate from there. After college, I had a few options. So one of my options was to go to China to model another option was to go to North Carolina to work. And wait,

Vee
wait, so you you had an opportunity to go to China to become a model?

Rod Phillips
Yeah, yeah. Yep. Yep. So

Vee
Why didn’t you take it man?

Rod Phillips
you know, I you know,

Rod Phillips
China’s a long ways away, you knows I was nervous I was nervous about leaving, leaving the family leaving my mom and my brother and things like that. But it’s an opportunity that I look back on like, Man, I wish I could have squeeze that in somehow some way, you know, because I would have been pretty fun to go to China to model.

Vee
Yeah, man. You know, maybe, you know, you became super famous then. supermodel.

Rod Phillips
Yeah, that’s what you know, that’s my agent said. He said, You know, I would have

Rod Phillips
been loved over there. in China. He said that he said I would have done pretty well. But he said, Yeah, so yeah, so that’s what I did. So I had the options of, you know, between China and going to work in North Carolina. So, and I made a choice of working in North Carolina because this is what all my college buddies you know, all of us was going to be in the apartment together.

Rod Phillips
It was all in this apartment. We will work in and doing jobs last summer with just with all your cosplayers It was fun. So now in reality, that’s another reason why I chose that. And I don’t regret that choice either because that’s how I asked me got into real estate. I was at a customer’s house, and you know, he was on the phone. And you know that he’s a black guy, he’s on the phone and, and he was speaking Spanish very fluently. And I was I was pretty impressed by it. And so I asked him, let’s say, you know, what is it that you do you know, here’s a beautiful home, you know, beautiful This house was beautiful.

Rod Phillips
So I asked him you know, what is it that you do and he said real estate. And at the time, I didn’t know nothing about real estate that at all. And he said, so many used to looking to get into it. So we had this conversation we veered off from my job. So at this job, I got paid by the job. So it was 100 bucks every job and it took jobs about an hour.

Rod Phillips
So me spending four hours with him I missed on quite a bit of money that day but it was worth it just and I was able to use him as a reference and things like that know to contact him for advice and and that’s how they are to it.

Rod Phillips
And then from there my girlfriend time who’s not my wife told I was like I was telling her that I was interested in this book Rich Dad Poor that was at the Barnes and Noble so we were at was at Barnes and Noble and you know saw the Rich Dad Poor Dad book and you know, they know what I should get it and then my my girlfriend at the time because now my wife told me to go ahead and get the book and then I was like, Nah, I don’t think I want to get into this I know get I’m going to get you know soon as like I’m going to get it for you. So then she got it for me and then that kind of opened up everything else. Now I got three for more rich dad poor dad books and the flood gate was opened after that.

Vee
so she got you down this rabbit hole?

Rod Phillips
Yeah she did.

Rod Phillips
By encouraged me to get that book. You know, it’s crazy how just, you know that book that books a great book. I think a lot of real estate investors have read that book as an intro. But as we know a lot of people, they read those books, but then they don’t take the action. They don’t move forward.

Vee
So what did you do to take action and how did you get started?

Rod Phillips
So after that, you know, lots of reading. And then after that, I was like, Okay, so what do I need to do? Like, what’s my next step? so I join, I think in Rich Dad Poor Dad, one of the books they might have mentioned joining like your local real estate group, one of the books that I read mention that it might have been out, was the guy from Woodland Park.

Vee
Richard Roop?

Rod Phillips
Yeah, yeah. Yeah. So might have been one of his books. I can’t I can’t exactly. Remember whose book it was, but somebody with me Joining the local real estate investment group. And then I researched ours and I found enough out CAREI. And then I started attending meetings, I started meeting people. And, you know, that’s where I met you, and some other people. And then I did that for a while, probably about 3 or 4 months and then outside to join the coaching there. And then at that joined the coaching that led to my very first do that that did that first deal, you know, just a deal just kept going.

Vee
So for those of you listening, you don’t know what CAREI is. CAREI is the Colorado association of real estate investment, investors. And the club has since been sold to someone else the original coach that Rod is mentioning no longer is with that club. Yeah. And so so now Rod, what was your first deal? Let’s tell the audience a little bit about that first deal.

Rod Phillips
So my first deal actually found door knocking. And I yeah door knocked for four months, four or five months I door knocked. And this is this was during a time you know remember this is during the time of all the foreclosure, all the short sales and things like that that at the time also you know the rules were a little different in the way that we did things.

Rod Phillips
So I door knocked, ended up finally found this lady who was about to be her her house about be foreclosed on, I think the following week, and we were knocking on the door. I couldn’t even get my elevator speech out and She just like I’m done. And I was like, Huh, I’m thinking she’s upset with me, you know, like or something and then I stepped out I’m done with this house and I’m just ready to walk away. And so, you know, like, Oh, you know, you know what, don’t walk away because you know, it mess with credit and things like that. So you know, can we can we talk about this what you can do with with some of your options are? So yeah, yep. So So tomorrow, I forget the time she said, we said so tomorrow at this time, and we can talk and I sold up, you know, so we talked to work out sorts out short sale with the bank.

Rod Phillips
And I ended up double closing that house it out and the way I did short sales, you know, like a lot of people that went to CAREI did short sale. So you know, we’re always honest with the homeowners, we tell them exactly what’s happening. We tell them what we’re doing. So there was like, no secret sauce going in, you know what I mean? Nothing.

Vee
Yeah. And, and now, let’s clarify a little bit. Because, you know, this was in 08, 09, and the term short sales is not a popular term. Now, back then, everyone was talking about short sales. So yeah. Can you explain a little bit what a short sale is?

Rod Phillips
Yeah, yeah. So sales is basically where you’re underwater in your house. So You can’t sell it for what you own it. So let’s say that you you owe 200,000, but the market crashed or recession or whatever, you refinanced a bunch, whatever. And now your house is worth 100. So the short sale is when you negotiate with the bank of the bank table takes less than what is owed on the house. So the house is worth 100 yo to 200 the bank agrees to take 80 or 90 or 100. So that’s what the source L is.

Vee
Right? And it may not be relevant now. However, as you know, we’re heading toward a recession and we’re due for one. You know, for two years now and you know, I feel like it could happen next year could happen next year. We don’t know when it’s going to happen. But when it when it’s here, you will feel the impact and hear this term. A lot. Yep, yep. You know, short sale will come back in a big wave.

Rod Phillips
Yeah, I believe so too. Yep. I believe I believe short sale will come back. You know, and especially in some of these markets, like the, you know, like the West, you know, like our market. We talked to a lot of natives here. You know, they say they can’t afford to buy a house, lots of natives. So, to me, that just kind of says that, somehow, some way things are out of whack, you know, and that’s just my opinion about it. Yeah,

Vee
yeah. We have a lot of new money from out of town coming in, and we have a lot of new jobs. Growth has been great, you know, in the last five, six years, especially after they decided to legalize marijuana here in our state, you know, the first wave of people coming in were just for that purpose, you know, to smoke pot legally. But then the second wave and the third wave just since that first one, have been working professionals just coming in here because the job growth has been tremendous.

Rod Phillips
Yep. absolutely absolutely.

Vee
So you found his lady and by door knocking you just you know go out and knocking on people’s door who are in foreclosure and needed help. Right so you found that that first one then you double close which was just means that you have this deal under contract then you found a buyer and you had a contract you sell with the buyer, you closing your first transaction. So double close, you have the contract with this lady to buy and then you have a contract you sell with someone else. And all the magic happen in escrow and that’s what a double close is and you’re in the middle.

Rod Phillips
Yep, yep, so double close this house. I made about 50 grand that I made which is pretty good first deal, you know, and I got deal of the month at CAREI that month also. You know, for for that deal. And it was it was crazy because, you know, it was tough finding a buyer at that time, you know, because the market was going out people were scared and things like that. And so little guy who owned the restaurant, he bought a cash he was going to buy for his mom to fix it up, and you know, put his mama to it. And that house right now is worth 400 Plus, I sold it for 150 what that guy bought it from me for.

Vee
Right and I want you to explain a little bit more on why you did what you did so that people listening don’t feel like you took advantage of this lady. And you obviously make 50,000 but she she lost her house. If you didn’t help her and you didn’t showed up. What would have happened?

Rod Phillips
Yeah, so about it. So if I didn’t help her house was going to go to foreclosure. She was going to have that on her credit for the bank was also Gonna go after her but adjustment to sort of difference in the and what was owed and what they took, they wouldn’t gone up to her for that.

Rod Phillips
So, also what I did also so I did a lot of things for this lady. One thing that I did is I, I delayed the foreclosure even longer. So remember I said this is a week away from foreclosure, right? So what I did was for her, I drove this out, you know, I said, I said, I understand your situation. I know what’s got, you know, I understand it’s a tough time you lose your home and things like that. So how about we drag us out as long as possible, so that you can stay in your house as long as possible.

Rod Phillips
And while you’re staying here, you build up cash, you build up capital, and you use that to move into your next place. So I drag this thing out for as long as I could drag it out four, five months. I drag it out and I had the loss mitigator. Oh man, he like he was he was on my butt about closing this thing. Things like so. What’s up the buyers There’s always he was always the OK, so the buyer come through and, and kind of delay or, you know, kind of give him some type of spiel and delay and you know, to kind of push it out a little bit longer and then you know, finally got it closed but so that’s what would have happened.

Rod Phillips
She would have had that judgment over so that’s so anothing I did with the loss mitigator I had him write in the, you know, in our documents at the end point on the term, but the term the you know, where you where they settle? Where they settle, they wipe the slate? Yeah, yeah, yeah. So we had them write that in there. And so they didn’t get a judgment against them. They called it even they said, you know, you don’t owe us anything so that was nothing I did. So this time around my plan is this time around. Banks aren’t going to be that nice. I think banks has got hit in the mouth last time. They didn’t have systems in place. They didn’t for all these Foreclosure, those short sales and things like that, but I think this time around, they’ll have systems in place for foreclosure to get them done quickly. They’ll have systems in place to go after people, you know, for the for the money that they own somehow some way till this is my opinion that’s what I think they’ll do this time around but, but yeah, that’s what I did for this lady, you know, try to help help her out as much as I could. And

Rod Phillips
it was a situation where her husband

Rod Phillips
got sick. And that’s what I found doing short sales, you know, most times when people get sick, or they lost their jobs or things like that, you know, and and I’m just a kind of person, you know, about helping people not trying to get over people, you know, this way too much money to be the real estate to have to get over somebody.

Vee
Right. Yeah. And just so you understand, the IRS consider forgiven debt or unpaid debt as income. So the, the debt that was forgiven if the bank didn’t claim that it was satisfied and paid in full they could have issue a 1099 or they could have came after her for the deficiency judgment and that’s what Rod is talking about here. All right, let’s let’s take a fast forward here and we were talking about the recession’s coming and and what you think will happen to banks this time around? Yeah definitely because you know now that they have system in place they will not be that the generous like they’ve learned all right so what’s your investment strategy now? What are you doing now?

Rod Phillips
So my investment strategy now is a lot of buy and hold. So our mentor, you know, Bill Bronchick, I remember when the when all this was going on in 08, 09, I’ll never forget it. He said he stood up there and he said, everything’s on fire sale right now! And he was saying, you know, buy as much as you can, that he had never seen anything like this, since he’s been investing in real estate. So that’s stuck with me that’s always stuck with me. And I know his strategy was a lot of buy and hold.

Rod Phillips
And also Tim’s strategy to you knows a lot of buying holds. And I remember that saying that a lot of wealth is made when you buy and hold real estate. So during that time, it’s hard to believe that you could buy houses in Denver, Colorado for 30 $40,000. Like I remember, there were a whole neighborhood’s out and was that city out that way? Where you could buy, you could buy it for 30 $40,000 $50,000. And these houses today are worth 300 plus.

Rod Phillips
So now what I’m doing, as I’m buying and holding in Detroit, and because to me, I’m looking at Detroit. I’m looking at these prices in Detroit. To me is looking a lot like Denver did with these prices. Now granted there was Denver economy is a little different Denver has a lot of tech and Detroit’s kind of they’re trying to get there with the tech. They’re not there yet. They’re trying to get there but so yeah, that’s what I’m buying. I’m buying in Detroit.

Vee
So that’s interesting. A lot of people are staying away from Detroit. And you’re going in and buying in Detroit. Can you walk me through your thought process in the beginning when you decided to go there to that market?

Rod Phillips
Yeah. So the reason for me and this was the reason for me was my brother. So my brother he was the one that got me to invest into, into Detroit. He kept telling me that he needs to buy their they need to either but I finally did stop by and start looking into buying there and I’m glad that glad I did you know I can look at the prices and and look at what you can get a rent and you know, it’s pretty it’s pretty Pretty good. That’s pretty good return on your investment there.

Vee
So what kind of prices are your mind now?

Rod Phillips
I’m buying? Let’s see the highest that I bought at was 25. And the lowest that I bought at was 7000 $7000 I got that one at the auction.

Vee
Let’s talk this through the $25,000 property was it the one where you have been having a hard time trying to evict a tenant?

Rod Phillips
Yes, yes. Is

Rod Phillips
that one so, so this one, so this one I bought from a wholesaler? And for this my very first property there in Detroit, it had the tenant in it. And I was like, Oh, you know, okay, so I need to, you know, my mindset is, is I need to take action. I need to, you know, I need to do as much due diligence as possible, but not sit on the fence forever. So I did my due diligence on this house. You know, look at the rent rolls. She was paying rent. So sometimes the rent was own time, sometimes it was half at the beginning of month, half at the end of the month, but the rent was always there when I looked at the rent rolls.

Vee
How much was she paying?

Rod Phillips
she was paying 650 which is for this house was about 150 bucks less than what you could get for it.

Vee
Okay, so market is around 800

Rod Phillips
Yep, for that area. Yep. About 800 bucks.

Vee
So did you have to fix anything after paying 25 k?

Rod Phillips
Yeah, yeah. So so that’s nothing with Detroit the Detroit is kind of tricky because you got to have a very good team there in Detroit, but we can we can touch base on that later if you want. But uh, so what I had to fix there, so I had to fix the roof. I got a brand new roof put on. I had to put a brand new HVAC system and I had to fix the ceiling where the Ceiling was leaking. There’s some plumbing work that needs to be done. Not nothing too major, just old pipes that have to replace or replace Those pipes. And that’s about it man is you know, paint and, you know, so this rentals in pretty good condition except for the roof.

Vee
Overall How much would you say you have spent on it? That House.

Rod Phillips
Overall probably about after it’s all said and done I’ll spend about 10 grand will call it 15 of the team plus the 25.

Vee
So you have 40 into it right? Yep, yeah.

Vee
Are you bringing in the market right now at 800? Are you still doing 650

Rod Phillips
they’ll still doing 650 and I’m still trying to get this tenant out of the house. Okay, so we’re talking as a chancellor.

Rod Phillips
It’s been, yeah, six months so and it’ll end up being longer than six months, it’ll end up being at least at least eight months, because so with this tenant, I don’t know if she’s a professional at this or what her deal is, but she’s dragged this out, you know, she’s dragged us out.

Rod Phillips
In March she didn’t pay rent. So Detroit has has these has these laws and rules and things like that on on landlords because they try to crack down a slum landlords, which I get because they’re going to get people to buy there. And then they, you know, put people into these raggedy homes, unsafe homes and things like that.

Rod Phillips
So Detroit is trying to clean it up I understand that, but then at the same time, it hurts good. Investors like myself with some of these tougher rules, you know what I mean?

Rod Phillips
She paid rent. She paid rent in March. She didn’t pay rent, so she didn’t pay rent in February. She paid rent in March. So she gave money for March. And then that money in March was from March and February. Okay. And she didn’t Yeah, so she didn’t pay all of it. She only paid a portion of it. So then we signed a new lease in March and then later She reached out and she said, Hey, that money they gave you that was for March and April. And I was like, No, you know, hold on. That’s not for March and April, you old February, would you mean, that’s march in April?

Rod Phillips
You know, so then we, you know, went back and forth on that. And, you know, eventually we had taken her to go to court. So to the court, she ended up paying the difference, you know, that the rest of what she owe. She ended up paying that.

Rod Phillips
But then after that she hired a free attorney, you know, so this was I was saying, you know, this is, I get that if you’re a slumlord, but when you’re a good investor, and you’re trying to do right by your tenants that that, that doesn’t put a good taste in your mouth, you know, so you know. She ended up hiring a free attorney. She hired a free attorney. So she she had a free attorney, and I’m paying for attorney. So we agree on things. We agreed on certain things.

Rod Phillips
She wanted everything in the house to be replaced, you know, see just making things up a broken window here, a broken windows there and these things weren’t broken. She made up something you know that it was made. bathroom door. And this is something that you’re putting the agreement that the bathroom door had to be replaced. And then once that was replaced, a lot of these other things will pay rent.

Rod Phillips
So then I sent pictures of the house with the bathroom door on it. And then one of the pictures to my attorney who sent it to her attorney. This expressed it all comes Oh, you know, now the doors broken, you know, the door handles broken, you know, so she was just making things up, you know, just trying to paint me as a slumlord, just trying to get up paying rent basically.

Rod Phillips
So her and her attorney drove that whole negotiation process out for about three months. It doesn’t take three months to to negotiate on what needs to be fixed in a house, you know. So my attorney, my attorney will reach out to their to her attorney and work boils at whatever was happening on their end. They just wouldn’t get back you know, and during that time also her attorney also, he went on vacation for like two weeks or something like affected me. So that doesn’t know that hang up or whatever.

Rod Phillips
But so then what ended up happening was, you know, so then she signed the agreement, I signed the agreement. And then her and her attorney, the free Attorney, they ended up parting ways her attorney, I’m guessing that some, you know, he couldn’t work with her something like that, because she’s trying to back out of signing the agreement, you know, because I had agreed to fix the things she had on the list.

Rod Phillips
So then, you know, once we had everything signed, she said, Oh, you know, that’s not my signature on there. So see, that’s what I mean, like, she has to be professional at this, you know, so now, so now we, one of the things that we put into the agreement was that if she kicks anybody off the property that you know, now we can go to court and she kicked someone off the property one of the one of the contractors to keep them off the property because that’s what she was doing before I was sending contractors is over, and she would kick them off the property sent it they couldn’t work on a property, you know, that they had to be licensed or these people were like, you know.

Rod Phillips
So the second group, the second group of contractors, it was just sent out there she did the same thing to them and these people are licensed so the now ow we’re going back to court so my attorney gave her the 30 days 30 notice to quit. So that 30 day notice is up October 11, which is a Friday and then that Monday, he’ll file for another will know will go to court, which is another two to three weeks. So now that puts us into November. Yeah. And then yeah, and then after that, it’ll be another about 10 days or so. You know, so she’ll be there to be there for almost eight months. You know, not paying rent. Not paying rent. And if she does end up paying rent, you know she owes 650 times eight and she’ll have to pay that all at one time. You know, it’s not a portion type thing.

Vee
It seems like it’s almost like she is going to be able to You get free rent for almost an entire year. Almost right. That’s the route we have to take as investors, because cities like Detroit, or states that are tenant friendly, you will typically run into that situation. Sooner or later. And, yeah, you just have to kind of eat the cost and consider is that as your cost of operating your business? Yep. Absolutely. Because you do have a huge upside here and it could happen, right. So that’s why you you ultimately went back for more and picked up two more properties from auction.

Rod Phillips
Oh, absolutely. You know, because it’s a risk that I’m willing to take, but I would do things differently this time around, you know, so like I said, You know, I have to buy that one just to get things moving.

Rod Phillips
Because once I’ve got that one, that’s how I found my contractor, that’s how I found my attorney. That’s how, that’s how I start to sort out property managers and things like that. So yeah, so so from that one, I realize, okay, so this might sound crazy, but 25 for that house was a little bit too high. You know, I said, the pay 25 for you know, is that

Vee
And you shouldn’t have renew to the lease either.

Rod Phillips
It’s all absolutely not absolutely, I should not have renewed that lease, you know, but that’s just kind of, I made the mistake. We know that this is a business, you know, and sometimes I veer off from that and i and i live you know, I get a little personal with things you know, and I know better we know better as investors you know, that you have to treat it as a business at all times. You know, so when I was out there and I got to talk to her, she gave me this big sob story. Seeing the sob story, you know, see, you know, see about her having a kid and then single mom and things like that, you know, and I was raised by single mom, you know, my mom and grandma, so I’m like, okay, you know anything I can do to help you know what I mean? So yes, I renew the lease and then came back to bite me in the end, you know in the end she.

Vee
Rod, not to sound racism or profiling anything. I’m just wanting to know if she’s also African American?

Rod Phillips
yeah yeah yup she is.

Vee
yeah I mean she she you know had you where she wanted you emotionally. I mean she really well it seems

Rod Phillips
yeah yeah you know she does she does she does she did she plays she’s a professional. She is definitely a professional. And we know that from time to time in this business you’ll run across people that are professionals you know and i happen to run across one of my very first property in Detroit. But for me it did not stop me it didn’t put that sour taste in my mouth but you know what I’m never going to buy in Detroit again. is maybe made me say Okay, you know what, I just need to buy better.

Vee
like I said, so then your next property now is is way better, right? You bought it for what? 7000 apiece.

Rod Phillips
So let’s see. So actually I bought about one other property after that one my brother and I went in as partners on that property. We bought that one for about 20 and now has a great tenant in it, no problems with that tenant. And that one, you know, had a tenant in place also. And then the next one after that, I bought from my contractor who says the, I mean, I’ve never had a Do you remember Jose, the contractor that Tim had? So my contract in Detroit is far better than Jose. And not only just in prices, but he’s better just in like, he said he just overall good person. You know, he’s a he’s a genuine good person, you know, so, so I bought that. Bring up the top a little bit but I bought that second house. You know what brother and then about the the third house for my contractor. He told me about this house. And this is a nice house. Nice house. nice neighborhood. So he told me about that. So I bought that one. And then I bought two more at the auction. So then the two about the auction, bought one for 7000. The other one I bought for 10,000.

Vee
Wow, amazing. Kind of prices. Yeah. What auction? Is it?

Rod Phillips
So let’s add Detroit tax auction. So they had that every year is in September. So we have first auction in September. And then they have the second auction in October also. Yeah, yep. So in a second auction there when I was told as in a second auction things that didn’t sell in the first auction. They start at 500 bucks. No, crazy. Yeah. Isn’t that crazy?

Rod Phillips
I mean, when you look at prices that we have here in Colorado and some of the prices and some of the other places out west, you know, 500 bucks for a house I mean, you know, that thing of burn down and you have the land that you bought 500 bucks, you know it’s a Win To me, it’s a win. So, you know,

Vee
just to play this out, you know, may not happen. What’s your replacement costs on your insurance policy

Vee
for those houses?

Rod Phillips
So I have 40 to 50 grand so I 50 grand in certain policies.

Vee
So you can basically it’s so you can have the house you know, burn down, you still make 30,000 on the flip.

Rod Phillips
Yeah. So there was anothing till you know. So Detroit still trying to rebound is still trying to come back but the city’s not since changing. You know, it has definitely changed.

Rod Phillips
Yeah.

Vee
What what are you seeing there now? What’s improving and what businesses are coming there?

Rod Phillips
So Google’s there, they have an office downtown that I actually got to see when I was out there last and August. Beautiful, a beautiful office.

Rod Phillips
Microsoft has an office downtown. And you know, like said they’re just trying to bring in more tech. They’re doing a lot of remodeling the whole downtown area, you know that area is changing. And so I believe what their idea is, is to start downtown and fix all that up and then kind of spread out from there.

Rod Phillips
If you want to me Yeah, definitely. Yeah. Yeah. Because from my understanding from the people that I talked to, that was there, downtown was just a place you did not want to be, you know, you did not want to be there. And when I was there, but I mean, you know, I’ve been there, you know, hanging out downtown, you know, walking around downtown to remind me a lot of downtown Denver, sort of remind me of. You know, they got casinos down there. You know, and all the sports sports teams are downtown, you know, kind of like, I like how they are in Denver. So remind me of that. And I like that. I like that the sports teams are downtown.

Rod Phillips
I think that attracts people. Think of the tracks businesses.

Vee
All right. So what’s your plan now for these two properties that you just picked up from auction?

Rod Phillips
Some my plan now on one of them. I believe I’ll do a Airbnb on it. So I about this thing for 7000. You know, get it all nice and spit in an Airbnb. The other one, I’ll rent it out. So the one that I’ll, so they’re all in this in the 48219 zip code. I really like that zip code. I think that zip code is going to be one that’s going to be changing. I met with a guy by accident. When I was out there. His name’s John George. And he runs like bliss like busters and I guess he’s been doing it for like 30 years. But I guess I got to meet with him. I got to go into his store to shop his coffee shop. And it’s a cold and it’s it. I was just blown away by this building. You look at it from the outside. It says it doesn’t look like anything. Doesn’t look like were to just look like a little small storefront, but then you go inside. And this is amazing building, you know, just amazing. I can’t even explain it something that you just have to see, which are all night. But I was I was blown away. And then from that, you know, I got to talking to one of his crew members, and he was telling me what his plan was. And I was like, Okay, now because he doesn’t, it was changing, you know, like the zip code. So, so, so yeah, that’s my plan for those are tools to, to buy and hold to hold on to, you know, kind of learn from my mistakes in Denver of not holding more properties. You know, he was able to buy that 30 4050 $60,000 you know what I mean. Yeah, totally. Yeah, yeah. I mean, you know, we could have held on to, you know, those properties that we were flipping and wholesaling and, and things like that. If we could have held on to them instead of, you know, selling them. You know, that’s an extra million $2 million right now that we have extra. Yeah, easy, you know, easy.

Vee
Yeah, definitely. Yeah. Now, so Airbnb, that’s that’s interesting because Detroit is not like a destination city. Right? Well, I mean, why do you, you see people going there are people going to do?

Rod Phillips
So I think people will go there because of the Casinos that are there. I’ve talked to quite a few people, they have business meetings, this is crazy. They have business meetings in Detroit, you know,

Vee
Because it’s so cheap?

Rod Phillips
I’m not sure why. Maybe that’s why. But yeah, I’ve talked to quite a few people, they have business meetings in Detroit, you know, and these people from different industries, sales people, to superintendents, you know, as they have business within the trade is very interesting. And that’s what I think and and when I was in So, what also gave me an idea was when I flew into Detroit, you know, they had the Writing’s on the to Give you the wrecks and things like that, you know, right and, you know the English and that they will talk about this but it was also in Japanese, you know, so that so that that struck me is interesting that you know that there must be a lot of Japanese people coming over to Detroit. I’m not sure what they’re doing their their their own business or their their nose

Vee
They know something that we don’t.

Rod Phillips
Yeah, yeah,

Vee
Or they could be working for Toyota or Honda.

Rod Phillips
yeah. But that that struck me as interesting, you know, seen it right in there. And I was like, Okay, so, you know, there’s people coming in from Japan, obviously, quite a few people. If you’re going to put that in order to have the directions on the size of the airport. That means that you have had quite a few people coming there.

Vee
Right. Yeah, So now, you know, just just talk about your, your plan in Detroit for a little bit here. Obviously, they’re trying to bring bring tech into the city they’re trying to make Detroit for lack of better word great again, you know?

Vee
So I’m trying to see, you know, there are a lot of downsides to investing in these Detroit also, such as crimes, such as hard eviction law, you know, you’ve been dealing with this lady for a long, long time. Yep. So, this is not a fast play at all. This is more of a long term game for you.

Rod Phillips
It is it is. So as I guess the combination of both. So let’s look at the the two I just picked up an auction right. So let’s say the one at 10,000 and I’ll put 20,000 in to it and his house 30 or rented out for about 900 bucks a month. I’ll make my money back and five, six years or whatever. So I’ll still be making money. You know so we make money so even if even if the tradeDetroit doesn’t go where I think it will go I’ll still be making a profit quickly on so I’ll be making a high return on my investment you know i mean so but you’re right though like you know the crimes coming down a little bit crimes coming down Detroit used to be ranked number one believe they’re down like three or four now as far as crime for that so they’re working on the crime.

Rod Phillips
The police chief there pretty good police chief small world so my my good friend from Chicago actually used to work for this police chief when he was a police chief in Cincinnati and he was the one that told me like man like this police chief will turn that city around, you know, so that kind of gave me a little bit of hope Also, your crimes coming down and also Detroit is very, very tricky.

Rod Phillips
You know, one of the downsides that we are talking about like you acts as a district tricky because one block would be a beautiful roll of houses. You literally go one block over and you have burned down houses and there are vacant houses and just lots and then you go one black hole from that, and then there’s beautiful houses and then you go block away then you go a block or from that, and then there’s two houses on the whole block, you know, like, it is is something that you have to see you know, so you have to have people on the ground that you actually trust if you’re going to be invest in Detroit because otherwise you will get burned and like said, you know, like I said earlier that I have been fortunate with my contractor, because he he’s my boots on the ground.

Rod Phillips
And he he’s also an investor, and that’s the reason why he moved to Detroit because he got burned. So he got burned because he was trying to buy there. And they told about this house and it was you know, they they told me was beautiful things like that and he goes up in to see it. And it’s not what they sold it to him as. So then they’re like, you know what, like, I need to be here. So he moved there. And he was able to, to do things himself.

Rod Phillips
Actually see it. So if you’re going to invest in Detroit, you need to have people that you trust on the ground, you know, and so like to go back to my first house, my first house, I was told that, you know, the house was on a good block. And, you know, it was, you know, obviously a great tenant and it looked like a great time for the rent rolls. They told me it was on a good block, and, you know, things like that the house look good. And, you know, I had him do a video for me, you know, we did a, we did a FaceTime video of the house. And even through all that, they forgot to mention that this house had a massive leak in the kitchen from the roof. Just completely miss that.

Rod Phillips
So, I didn’t ask that because I, as we walked through the house to FaceTime, I’m assuming that if you see a leak or you see a hole in the ceiling that you would tell me about that and when they did tell me about it so so that’s why you definitely you need people that you trust there and that is that’s that’s one tip that I would give to anybody want to to buy Detroit is finding people that you trust finding those someone that you trust they’re connected look at these houses for you.

Rod Phillips
You know so for you know, another good thing was that my contractor he with these auction houses Yeah, so I went up there went out there with him. And we drove around we looked at his house but then there was other ones that I want to see after I flew back to Colorado, so I’m on the phone with him and talked to him it’s nine o’clock Colorado time, it’s 11 o’clock his time and again, you know, there’s two more houses man, I want to mention it in him. And he’s like, you know what, I’m gonna go check them out. And I was like, really? He was like yeah I’m gonna go right now and I’m gonna check them out. And he drove to this house 11 o’clock at night. Oh, wow. Check out these houses for Yeah, man. Like Whatever contractor that, you know, you know, like that would do things like that, you know, like, those things are kind of hard to find. And he’s been a good, a big help for me and my success so far and investing there.

Vee
Definitely Yeah, just like in any market, you need a good team and it started with your realtor, your attorney, your contractors, your boots on the ground. And you mentioned he went there at 11pm right. I mean, honestly, that’s like the best time to check out a house, in my opinion. Oh, yeah.

Rod Phillips
That’s that’s that’s so that is interesting that you said that because that was some of the feedback that he gave me on one of the houses that I sent him to he said he was like, don’t buy that house. He said because I drove by there and it was just all kinds of activity going on outside that they really didn’t outside the house. He was like, he said, don’t buy it, though, you know by So yeah, that’s funny you said that because you’re right. That is the best time because you kind of see what your kind of see if there’s people hanging out or whatever or if it’s quiet there’s no one around. Yep.

Vee
Yeah, definitely. And, you know, for for those of you listening if you are interested in investing in the Detroit market, definitely get in touch with Rod and, you know, get in touch with his team so that you don’t have to do everything that he did and you don’t have to learn the market the way that he did and go though all the painful lessons that he did.

Rod Phillips
Yeah, absolutely. You know, and so that’s another thing. So from this experience and experience the my contractor had been bouncing around ideas of trying to do things for out of town investors, because you have a lot of people in Detroit who look at out of town investors they like we don’t want you here.

Rod Phillips
We don’t we don’t want to you know, we don’t want out of town investors here because you guys are raising up prices or whatever. You know what I mean? But they don’t they have a lot of people They’re like that, but then you also have people there that are like, yeah, you know, bring your money here picks up these names, we want that.

Rod Phillips
So because of those people that don’t want you there you, you need to have those those, you know, those good team. So part of that part of what I was thinking about doing was building something to where, buy these houses, fix them up, get them all certified with the city, or sort of, you know, with the lead based paint and all that all that other good stuff. And we talked about that till later on about but you know, some of the regulation that the city has as far as lead based paint goes, but you know, what rentals but uh, but I will get these things, you know, certified things like that, and then I would sell them to out of town investors at a good price and obviously, we’re still make money, but where they wouldn’t have to worry about a problem tenant because I have a property management because I you know, have property manager company that puts in a quality tenant, and I was even thinking about this Something like, you know, like a year guarantee or something like that, like Do you have any problems with this tenant? Or they don’t pay rent and I’ll pay the rent for up to three months but is this something that was bounced around? And now No, I think I might do that sometime in the future you know this we’re out of town investors because you know, people don’t people they kind of look at us as as a way to get money. You know, take to take money from us you know, like, you know, you’re not here you can’t see these properties and there’s so many people that have gotten burned by people that say oh, this is a beautiful neighborhood, beautiful house, you know, things like that they buy it and then they go out and see it. And it is the only house on the block. You know, and

Vee
definitely, no, let’s let’s plan for that. lets you know when you feel is a great idea to have a turnkey operation going in Detroit. Let’s do a follow up episode. When you have it ready to go.

Rod Phillips
Absolutely,

Vee
absolutely. That’s awesome, man. Rod, thank you so much for your time today, man, I really appreciate you jumping on here. I know you have kids at home that you need to attend. I really, really appreciate your time here with us.

Vee
Oh, thanks for having me. Man. I appreciate you having me on as a guest.

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