Ep. #53 How to Score Off-Market Deals w/Andrew Kolodgie

Ever wonder how wholesalers and flippers score such great deals on properties?

Brian chats with Andrew Kolodgie, founder of The House Guys of DC, to talk about how he finds off-market properties to buy at a discount, why he pivoted from flipping to wholesaling real estate, how he juggles co-owning a lucrative business with his girlfriend, and how he spends so much time traveling each year.

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Brian Davis: Hey, guys, happy Tuesday, it’s Brian Davis here from SparkRental and, I am joined today by Andrew Kolodgie of The HouseGuys of D.C. Andrew, welcome.

Andy Kolodgie: Hey, how’s it going? Good to see you again, Brian.

Brian Davis: It’s great to see you as well. So, Andrew and I met in a bloggers group that supports each other because we both do quite a bit of real estate blogging. And we want to talk today about Andrew and his wife’s business model of flipping houses and wholesaling properties and especially finding amazing off-market deals, which is not the easiest thing in the world in this particular market. So, yeah, let’s just start diving right in. Andrew, tell us a little bit about your business model at the moment. First, a high-level overview, and then we can kind of dive into some of the details of that.

Andy Kolodgie: Absolutely. So, our primary moneymaker is wholesale wholesaling is actually a bad way to put it, it’s actually out of the contract assignment. But that basically means we take houses, we purchase them, we put them under contract from sellers. These are typically people who there are other pain points. So, they’re getting divorced, they’re going through inheritance and probate or something like that. Or the house needs a lot of work and they’re just not able to take that kind of hassle at this point in time. And we’ll take that contract, and we’ll sell to a flipper. We’ll sell it to somebody who wants to become a landlord, maybe somewhere in between, and then we make the delta between the purchase price and our sale price.

Brian Davis: Ok, that’s great is a perfect high-level overview of wholesaling now. We were chatting a little bit before we went live, and you said that historically you guys did more flipping. Where you would go and buy the property yourselves, you would renovate it and then sell it retail to a homebuyer. You said that during the pandemic, you’ve actually pulled back a little bit from that. So, tell us a little about why the change in strategy? What drove that that transition during the pandemic from flipping to wholesale.

Andy Kolodgie: Absolutely. So, we changed our strategy for two reasons, and I know Brian will probably appreciate this more than anybody but being focused on travel and not necessarily being in the area, it’s a lot easier to be wholesaling because you don’t have to be on the ground managing properties, managing contractors, managing materials, doing deliveries from Home Depot or Lowe’s or your local hardware store to the place. And if you don’t have that, if you’re not local and you don’t really know a person there that’s local, it’s very difficult to manage that. Some people do it. I haven’t figured out how to do it properly yet. And the second piece is we’re feeling a little bit iffy about the market right now. And that’s not to say the market’s going to drop, It’s not to say, the markets going to go up. I don’t know what the market’s going to do, but all I do know is I feel risk averse, and I don’t want to hold onto a property right now for the next six months and take that chance.

Brian Davis: Fair enough. I mean, at the risk of overusing words that have been used ad nauseum during the pandemic, uncertainty, and unprecedented. Absolutely! And uncertainty means risk. And, you know, we all have a different risk tolerance. And I commend you for knowing yours and adapting your strategy accordingly. So, you touched on a lot of things there. And I want to dive into a couple of them. You know, in particular, you talked about managing contractors, which is something that a lot of people struggle with. But before we get into any of that, let’s talk about how you find off-market deals, because that’s really the crux of your business, is finding deals with plenty of equity in them. So, you can then turn around and sign the contracts for a nice fee. And you’re end buyer still gets a good deal themselves. So how do you score these amazing deals with so much equity in them?

Andy Kolodgie: Absolutely. So, we primarily focus on inbound marketing, so we have a website, it ranks fairly well on Google, and people will search we buy houses, sell my house fast, sell my house for cash, that kind of stuff. And we will pop up. They’ll fill out a form or they’ll call us right then and there. And we always respond to a phone call within the first five minutes when we contact them, we will then walk them through our process, what we will need, what they would need, and make sure we’re a good fit for each other. And if we’re a good fit for each other at that point, we go visit the property. See what there is to see and then give them an offer, and if the offers in their range, then we’ll move to closing typically within seven to 28 days, whatever fits their preference, and the rest is history. So, we are looking to pivot and add some additional marketing channels, primarily Facebook ads. We haven’t finalized that yet. So, I’m not necessarily an expert and I can’t speak from an authority place on that one just yet. But we are looking to do and add other potential revenue streams.

Brian Davis: Ok, so your primary way of finding these leads in these deals is through online marketing and in particular, SEO Is that right? For your website. OK, so that’s interesting. I imagine you do a lot of local SEOS, right, because you operate locally in D.C., Maryland, Baltimore, Northern Virginia.

Andy Kolodgie: Yes, absolutely. And so, you know, it gets a little tricky when it comes to this, and I don’t know how deep you want to go in the SEO side. It is definitely local SEO. We don’t focus on a GMB, Google My Business optimization, which is a huge segment of local SEO. We found that typically people don’t click on that as much as we found it worth optimizing for necessarily. So, we focus a lot on what people say they’ll be searching from, let’s say, Alexandria, Virginia. Right. Or Arlington, Virginia, to probably will pretty well-known places. And they search I want to sell my house for cash, or I just inherited a property. What do I do? We’re going to pop up or one of our blog posts might pop up and it’ll show them how to go through the steps. And we’re not always the right fit either. I mean, we’ll tell them you can go talk to these agents. You can work with this other company. You know, here are your options. Right. And, you know, when we give them that kind of information, it comes from a place of authority, It makes them feel a little more trusted to us if that makes sense.

Brian Davis: It does. Yeah. I mean, you know, it is interesting how in today’s world, all of these different you know, you have this sort of traditional business model of wholesaling real estate, but you’re immune from marketing. It’s all digital and online, which a lot of people do. And that crossover, a lot of real estate investors do have that online component to their marketing and to their lead generation. It’s not all driving for dollars. Right. No more driving around. That’s a lot of work. It is a lot of work. And, you know, sending out mailers is a lot of work, too, and it gets expensive. Not granted. Online marketing is also expensive, obviously SparkRental, We do our own online marketing and it’s in itself a lot of work, but it goes to show that you can generate quite a bit of leads and revenue in income through niching down into one marketing channel and doing it really well. Yes. So let me ask you this. Do you guys ever do any of those We buy houses bandit signs that are so hated by so many? Out of curiosity, we don’t.

Andy Kolodgie: I do know quite a few people who do that style of marketing. It definitely does work. It really does work. And what’s interesting is it doesn’t always just collect leads where the bandit signs are. Sometimes it looks like someone’s driving by out of town to call it anyway. And that house they want to sell in New Jersey. And there are some pretty funny stories about that kind of stuff. I will add one thing that I have seen with bandit signs are the ones that typically do work the best are the ones that are not the small twenty-four by twenty or twenty-four by twenty-four or twenty-four by thirty-six sides. It’s usually the ones that are big stakes in the ground, you know, like at least six feet by nine-foot things that catch people’s attention.

Brian Davis: Ok, all right. So, wholesaling real estate really comes with two main skill sets. One is finding properties with a ton of equity in them so you can find the great deals to begin with. And then the other side of that business is building a network of buyers who will actually buy these contracts from you. Right. So, tell us a little bit about how you built your network and any tips that you have for other people who are interested in wholesaling, building on that side of the business, the actual investor who’s going to come after you buy the property, fix it up, flip it, keep it as a rental, whatever.

Andy Kolodgie: Absolutely. So, there’s three main ways that you could do this. I’ll say one of them is kind of conclusive to SEO. And so, we do come up with an advantage to that, but we also market for buyers through SEO, so if you search off-market real estate deals in Washington, DC, we’re going to pop up and you can imagine the people looking for that. And to add to that, there’s also retail buyers looking in that kind of segment, too. So, we’ve worked with retail buyers who want to buy properties off-market and they’re trying to buy it with a conventional loan, you know, FHA loan, that kind of stuff. And we are able to work with that kind of segment, albeit smaller, but it is still there. The second thing is working with other investors and partnering with them and using their network to explore because people who have been in the industry for a long time are going to have that network built up already, and then the third piece is, and this is the piece that people really should focus on the most if they want to find buyers that nobody else knows about they’re the doctors, the lawyers, the people who have they just have too much money. I mean, seriously, it is incredible how much money there is out there in this world. And it’s not being used it’s sitting there in cash, and they want to invest it they just don’t know what to do. Making that connection of being a trusted source for them, showing them how to invest their money and also giving them the property to invest it in and having it be a good deal, you’ll do amazing. You can’t fail. You really can’t.

Brian Davis: Now, if these people are not actively searching for you online, how do you find them? How do you network with them?

Andy Kolodgie: I can’t remember the book, but there’s a great book. It’s about referral networking and the secret to referral networking, if I want to find a buyer, I wouldn’t go to a networking event with other investors and other agents, right? They’re all trying to do the same thing as me. I would want to go to an event with other business owners, doctors, lawyers, business owners, executives, that kind of stuff. And they’re all trying to refer to each other, too. And you’re the guy there. You have deals that you’re trying to sell. Obviously don’t go there and kind of peddle stuff, but. Creating that referral relationship and building that network and having a true and honest relationship with them and then and then slowly transitioning to that style, that can be very productive.

Brian Davis: That’s great. You know, and in some ways, this is networking 101. But, you know, most people fail to grasp the basics of networking, which is really to provide value for people. And like you say, don’t go where there are a thousand people, just like you go to the people that you’re actually trying to build relationships within their home turf and find ways of offering them value. I mean, that’s great advice. We at SparkRental, We focus largely on rental properties and building a portfolio of income producing properties. Do you guys ever keep rentals for yourselves or do you always either flip the houses or wholesale the contracts?

Andy Kolodgie: We’ve got one rental property, I will say the DMV, the D.C., Maryland, Virginia, the average house prices are a lot. It’s like five hundred thousand dollars. I mean, for the typical single-family house. That’s pre-covid realistically, Right. So, to turn that into a rental property and to have it make money, It can be difficult without investing a lot of capital into it and having it sit there over time. So, we found and we’re working on this as more of a side project at this point, is to take some of this money. And if we’re going to build a single-family or multi-family complex, we’d like to invest some money in Delaware or another state that’s within the region within a couple of hours’ drives, but not necessarily in the DMV itself.

Brian Davis: That makes sense. I used to own quite a few properties in Baltimore, Maryland, and I divested most of them largely because they didn’t cash well, not because they were too expensive. The problem you have in D.C., but because there are just so many social and economic problems in the neighborhoods where I was investing. And of course, the local regulations were so anti-landlord that you just couldn’t make money. So, I got rid of most of them anyway.

Andy Kolodgie: And something relevant to tenant-landlord law, particularly Baltimore. And I will agree, Baltimore is a very different scenario than the DMV, largely because so many properties there are 10k 60k and it’s not uncommon, they change the laws recently where you can no longer not renew a person’s lease even if they’re not paying. So, the reason you cannot renew the lease might be if you’re moved back into the property or if the property’s been destroyed and it’s no longer livable. And I mean, the landlord-tenant law route, I mean, that is that’s a very tough road for a lot of landlords, especially in the post covid environment right now.

Brian Davis: Yep. This is why I no longer invest in Baltimore. And we actually talk about that quite a bit on our blog, which is not investing in tenant-friendly jurisdictions where they go out of their way to make everything all about the tenant, and it ends up amounting to ant-Landlord regulation. And it’s not a friendly environment to invest in. So, I don’t invest there. And I recommend other investors don’t invest in those kinds of markets either because they’re just inviting that extra layer of wrinkles and headaches. Being a landlord and making money is hard enough in this industry without all those extra wrinkles.

Andy Kolodgie: Absolutely. And I will add it’s the same thing with the District of Columbia, too. I mean, what we deal with as a landlord, the tenant set the kitchen on fire and now they have to replace the kitchen because the tenant can’t be evicted because it’s during covid and it’s now no longer livable. I would want to be that guy.

Brian Davis: So, we have a comment from the audience. Christina says that’s crazy. And she’s asking what? Yeah. People who don’t live in those sorts of markets and even some investors who do live in those markets don’t really understand how anti-landlord regulations can be in some of these cities, particularly coastal cities. And it’s something that really needs to be on your radar as a real estate investor if you invest in rentals. So, we talked earlier about managing contractors and how you like to travel and how it’s difficult to manage contractors from long distance. So, let’s talk about that for a second. You have done a lot of flips. You’ve done a lot of renovations. So, what are some of your best tips for managing contractors, keeping your rehabs on schedule in budget? Because that is one of the greatest challenges for a lot of real estate investors, whether they flip or they do the burn method. So, tell us a little bit about managing contractors.

Andy Kolodgie: Well, I will say we’ve been very fortunate and that we have worked with good contractors. We found that if we want to and this is somewhat tangential to your question so work with me here. But if you want to add the most effective contractors and you want to see them, get work done as fast as possible, you need to motivate them with the amount of money that they receive. The faster the job is done and the higher the quality of the job. And you really do those two ways. The first way is you can joint venture with them and basically split the deal with them. So, they take 50 percent, you take 50 percent, they’re not going to charge a general contractor fee. But, you know, the labor is the labor, and everybody wins. Right. The other option is its pay for performance. So, you said this is the bar. If you, you know, exceed the bar and you get it done faster, you made more money. If you get done slower, you make less money. That’s also a really good way to burn a bridge to somebody if they get it done slower and even if they’re a good contractor, things happen. You know, tile gets delayed. Windows right now can take three, four, five, six, seven, eight weeks. Right. I mean, it’s covid. Pretty crazy things can happen right now, when it comes to managing contractors specifically though, have a bulletproof contract. We had to go through three lawyers to get the right kind of contract to work with, To work with some specific contractors, and definitely verify insurance. Absolutely verify insurance do not make that mistake, it has happened to us and the same thing with some states require bonds if they’re a licensed contractor, make sure the bonds been paid. You can run into trouble with that you particularly in Baltimore. Yeah, I mean, that’s my general advice. Does that answer your question?

Brian Davis: Yeah. Yeah. That does. I mean, how aggressively do you manage your contractors when you aren’t doing renovation? Are you over the property every single day checking in?

Andy Kolodgie: Try to visit at least once a week. And when I say once a week, these are the properties that are no longer-term flips at least going to say, two to three months to finalize the renovation, like a full rehab. Yeah, and it is something that we’re turning around within a month. I mean, I’ll be there probably once every three days or someone will be there once every three days.

Brian Davis: So, you said someone will be there and it kind of ties in my next question, I wanted to go a little bit more personal here with you. So, the house guys in D.C., it’s actually one guy and one gal, right? I mean, so you’re in business with your wife. So how has that been running a business as a married couple? I know that can come with a lot of challenges.

Andy Kolodgie: So, we’re actually not married. Everybody thinks it. She’s nice, she’s good. But it’s a good business partnership and a good relationship. I mean, it’s definitely different running a business and running a relationship because, you know, everything is full-time. You’re around them the whole time. But it’s good. We have a good sense of balance. We definitely have focused more in twenty-one on more work life balance. It’s really easy, especially during covid when you’re not running around as much, and especially now that we’re focusing more wholesaling and as much flipping, we’re not running around as much anymore. And so, we’re right at the house or at a library or at a coffee shop.

Brian Davis: To clarify, so you’re not married, but you are in a romantic relationship? Yes. Yeah, because yeah, I just wanted to clarify that because I could have been totally off.

Andy Kolodgie: You’re good. You’re good. We met four years ago. We were actually in college when we met. We didn’t actually start this at a college really. I mean, she lived in Vermont. You know, I traveled up there every weekend, that kind of thing.

Brian Davis: All right, so any tips for people who are interested in running a business, either with their spouse or their significant other? Any tips on how to run a two-man operation without, you know, bumping into too much personal friction?

Andy Kolodgie: So, I would definitely say open line of communication. You know, if you can’t communicate with your spouse, first of all, it could be a tough relationship, but it could also be a really tough business relationship to that goes with everything, obviously. But I would say that’s the most important thing. If you can’t have a conversation, at least quickly, that day, Don’t let it fester. That kind of stuff. That answer your question?

Brian Davis: It does. And, you know, don’t let it fester is great relationship advice across the board, whether you’re talking about your romantic relationship, your business partner relationship. That’s the words to live by. So, Christine, I asked you here how do you define your roles with your partner?

Andy Kolodgie: So, this is something we’ve actually been talking about more and more, but I would say this is more my niche, so I’m kind of taking the leadership role and kind of more delegating tasks. She has her niche. And as we start the second business coming up soon, she’ll be taking more leadership role. And I’ll be taking more of the I’ll be delegated tasks and kind of tell what to do. So, from that perspective, it’s kind of easy to find roles because it’s you know, I’m doing more of the sales side and more of like talking to other investors and going to those meet ups and talking to other business owners, that kind of stuff. And she’s working on designing the website, writing the good content, building links, handling email conversations, that kind of stuff, which is full time!

Andy Kolodgie: Marketing. Yeah, absolutely.

Brian Davis: Yeah. And you said that you guys are going to start a second business what’s the second business you guys are about to start.

Andy Kolodgie: Well, that’s a good question. So, it’s going to be down the creativity route as at least the main niche you know. Liz has a lot more of a preference on the creativity side. And real estate’s more about money at the end of the day. And there’s not a lot of creativity in strictly money when it comes to real estate, at least from my perspective. So maybe wedding photography or crochet, I don’t know. We’re still bouncing ideas around. So, but I will say it’s a lot easier to start the second business than it is to start the first. I mean, at least every person I’ve ever talked to have said that. You’re more time, You have more of an understanding of how the world kind of works and how, things can bite you back if you don’t take care of them right away.

Brian Davis: Yeah, well, you know, that actually that ties in well with something that we talk about quite often that SparkRental we talk a lot about financial independence and retiring early and, really much more of the financial independence side of it rather than retiring early side. But, as you build income from several sources that be a business like yours, rental properties like yours, a stock portfolio, whatever, it becomes easier to go off and do other fun things with your career. In addition to what you’re doing now, you can pull back a little bit on the strictly income generating stuff and dive into some more creative fields. Like you said, you know, start hobby businesses because you do have more time and more money to devote to that stuff. So, absolutely. So, Julian asks here, Andy what’s your background and Liz’s background before you started this business?

Andy Kolodgie: So, we’re both software developers. So, I was working for the Navy as a software developer, and she was working for a contracting company that also contracted to the Navy as a software developer that we both went to school for computer engineering opportunity tech. So that’s the highlights.

Brian Davis: Ok. All right. Well, I mean, one of the nice things about that field is software engineering particularly, but also, you know, the sort of technical fields you know IT, is that you can earn a strong salary right out of college, which can then set you up to start a business like this, to go out and invest in real estate where as some other careers it takes longer to kind of work your way up the salary ladder. And it’s hard to set aside some money when it takes five years, 10 years to really work into some better salary. Yeah, but I imagine that you guys had a reasonably strong starting salary outside of college which helped fund this venture of yours.

Andy Kolodgie: Yeah, absolutely. And I will say from a technical perspective, I mean, coming from a computer background, doing the SEO also kind of helped because it helped us put this together.

Brian Davis: Oh, Absolutely. Yeah. it all reinforces each other. So, you know, before we wrap up here, I understand that you and Liz do quite a bit of traveling, which is, you know, right after my own heart, who does quite a bit of international travel. So, any travel tips or favorite destinations from one travel aficionado to another?

Andy Kolodgie: Travel tips for favorite destination? Well, I mean, rather that we loved New Zealand. I mean, that was probably our favorite place we’ve ever been. I’m sure we’ll see as soon as they open back during covid. There’s this town on the beach. I just forgot the name. And right before I got here, I should have written it down. But it’s one of the most breathtaking places I’ve ever been from the mounds to the beach. And it’s nice. Small, little. Quintessential town kind of thing, right there all the same time, and then I will add, you know, part of the reason if I was coming out of college or if I was coming out of high school and I turned 18, the first thing I would do is open a credit card. OK, a lot of parents and this goes full circle, there are a lot of parents that don’t own credit cards. I think that is bad, all that stuff. And I’m sure SparkRental harps on this all the time. But that’s not bad if you can leverage it in a way that produces money and credit cards and there you go. And credit cards and building a credit score and building that age of credit. And that’ll really propel you in the future, not only with good mortgages but with travel too and you can open up credit cards to get miles to the points there’s a whole system. And I’ve been down that road for a long time before we started this business. So, I probably would give one recommendation to an 18-year-old coming out of high school or twice a year out of college, open a credit card, just get the process started.

Brian Davis: Yeah. You know, as a real estate investor, your credit is much more crucial to your career than most industries. And in most careers, I mean, your credit really can determine your ability to operate as a real estate investor. So, it’s a great tip. It sounds so simple, but it’s absolutely true. You need to start establishing your credit from a young age or repairing your credit if you’re a little older and you have some damaged credit because that your credit score and your credit history really do impact your ability to do deals because otherwise, you’re looking at paying in cash or paying such a low LTV that you have to come up with a massive amount of cash to buy properties, which is going to impact on it or. Yeah, yeah, exactly. And Julian offers and comments here. He says fun fact. Some credit card providers let you put your one-year-old as an authorized user, having a 17-year history when you turn 18, it says, I would have loved that for myself. Well, you know, Julian me too!! I actually didn’t know that Julian so. Thank you for teaching me something today that I actually have a one-year-old. So, I’m going to get off this podcast and look into that. So, Julian, if you have a specific credit card company that you like for that, send it my way. I appreciate that. He follows up by saying high school graduation gift, a 17-year credit history, and IRA inter-group property. So, I love it on that note. Is there anything else that you want to share with the audience or any final tips you want to leave them with before we call this interview complete?

Andy Kolodgie: I can’t think of anything to top my head, I guess. Well, actually, the one biggest thing and remember if we harped on this but work with somebody else when you’re first trying to do if you’re trying to get in the off-market real estate game or try to get in the rental property game work with somebody else, don’t last to do it on your own thinking you’re the king of the world or the queen of the world. I mean, whether it’s your mom, dad, uncle or brother, or some guy that you met at a real estate, meet-up. Work with somebody more experienced, it’ll save you thousands of dollars in long run if we made mistakes not doing that and obviously a lot of other people make the same mistakes.

Brian Davis: That is a fantastic piece of advice, I tried to go it alone when I was in my early mid-20s, and I lost a massive amount of money because of it because I thought that I was going to be smarter than everyone else and I didn’t need any help. And lost hundreds of thousands of dollars on it took me a long time to recover from that, actually. So as an excellent piece of parting wisdom, Andrew from the Houseguys, thank you so much for joining us today. We will put a link to the Houseguys of D.C. in the comments and in the show notes. Andrew, thanks again. And we look forward to having you back soon.

Andy Kolodgie: Thank you. Thanks Brian, thanks again everybody.

Brian Davis: All right. We’ll see you guys next Tuesday at two p.m. Eastern. In the meantime, let us know what you want to hear about next week, so this is all about you guys so reach out. Don’t be a stranger and we’ll see you next week, bye now.

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