New Jersey Real Estate Investing: Permits, Labor Costs & Creative Finance with Sam Fazilov

Mike Hambright (00:00.93)
Hey everybody, welcome back to the show. Today I am here with Sam Fazilov. We’re gonna be talking about how to operate your business in a difficult market. He operates in New Jersey. There’s a lot of red tape associated with flipping houses there and running this business. A lot of challenges that we’re going to discuss today in some of the more expensive parts of the country, for example, like New Jersey and the New York area. And then just some of the red tape associated with states that make it difficult from a permitting standpoint and things like that. So if you’re in a difficult market to operate in, maybe you’re going to get a couple of tips today. So Sam, welcome to the show.

sam fazilov (00:35.935)
Hey, how are you, Mike? Thanks for having me.

Mike Hambright (00:37.87)
Yeah, good to see you.

Hey, I’m excited to talk about this because I think, you know, every time there’s difficulty for us in our business, like the question is, you know, how do you navigate that better than your competitors? Right. So in challenging markets, like sometimes, sometimes you just have to out operate the other people. And it’s still a challenge. It’s still a challenge, but you just find a ways to kind of navigate those things. And sometimes by doing all that work, turns into some big paydays too. Right. And so there is some, that is the upside potential that everybody’s

sam fazilov (01:09.305)
Absolutely. Sure. So actually, I got into real estate investing, it was just completely by mistake. I was a student. This is going back, I would say about 10 years ago, 10 or 12 years ago.

Mike Hambright (01:09.58)
of seeking. before we jump into this, why don’t you tell us a little bit about your background and how you got started in real estate investing.

sam fazilov (01:31.85)
I was a student, just, I just got married recently. and, my wife got laid off and I was, and I had basically I was studying. I was going to become actually a rabbinical rabbi. So that was, that was my trajectory. and my study partner at that time, who I learned with at night was a real estate broker. You know, so he.

You know, we learned together, you know, the Bible and stuff like that. And, and I told them just, you my wife got laid off recently. kind of have to figure out my schedule. I have to figure out maybe find some type of opportunity. And then just like, why don’t you come work for me part-time and we can make some money potentially. And that’s how it started with it. I became a rental broker. Um, and literally I would say within the first six months, I was promoted to manager. I was an office manager there.

I ended up getting my broker’s license within the next year. I became a parker in the firm. I bought off shares office parker and we rocked it. We rocked it for a good five years. We had two offices with 30 agents and then we got into flipping. That’s kind of how we did it and eventually moved down to.

Mike Hambright (02:52.982)
And were you guys doing investing then as well or was it more on the retail and rental side?

sam fazilov (02:57.766)
First we were on the retail side and then once we got into different aspects of real estate, we got into property management, then we started doing flipping in New York at that time. Then once I moved out to Jersey, we split up. I ended up just staying in New Jersey and I started doing flips here by myself.

Mike Hambright (03:16.45)
Yeah, yeah, yeah. And I know, like, I think if you’re in Dallas like me, like you think of New Jersey and New York is both being difficult, but there’s some, there’s some differences, right? I think New York is generally even more difficult than what’s going on in New Jersey. what, what, like, how would you explain it to somebody that is, that lives far from there from a, from a real estate investor operator standpoint? How would you explain the differences?

sam fazilov (03:29.505)
Yeah, for sure.

sam fazilov (03:40.325)
So in New York, you have to use attorneys. It’s an attorney state. That’s the first thing. So automatically, sellers will get educated by their attorneys and they’ll tell them like you’re getting ripped off or you’re, know, this is this type of deal structure. Yeah, exactly. And so like, you know, that makes it very difficult in New York.

Mike Hambright (03:59.214)
and then they’ll go buy it for like a couple dollars more. Yeah.

sam fazilov (04:08.901)
besides the DOB and the permitting processes in New York, takes forever. So, mean, New Jersey’s not lot better, but it’s a little better than that. yeah, yeah.

Mike Hambright (04:14.082)
Yeah.

Yeah, it’s all real. It’s all relative, guess. So truthfully, even in Dallas, like things are way more difficult now from a permitting standpoint, just time frames like I think everywhere.

everything seems to get more difficult over time because cities, you know, they just want to charge more tax revenue ultimately and they do it under the guise of consumer protection, which there’s some element of that, but it’s also just to be able to charge more fees and taxes ultimately. That’s my opinion. But so let’s talk about, know, I think one of the things that we talked about upfront is just that sellers are a little more educated these days as to what’s possible. And I think especially up in the,

sam fazilov (04:34.616)
Mm-hmm.

sam fazilov (04:43.81)
on.

sam fazilov (04:49.957)
So.

Mike Hambright (04:57.808)
the Northeast, like people are typically known for maybe being a little bit more hard-nosed and maybe being a little bit more witty as to like what their possible options are. Not that anybody’s taking advantage of anyone or you should not that you should be taking advantage of anyone anywhere else, but talk about just kind of the like how you you know the difference in sellers in the New Jersey market.

sam fazilov (05:00.709)
Yeah, so it’s so I feel like there’s like a Definitely more of a stigma or you want to call it, you know gentrification

changes like in the Northeast. like, you know, there’s a big emphasis on investors converting, know, Manhattan is there and you know, you were constantly just building and building in New York, know, Northeast. So like people have like this thing in their head, like what they have is a real goldmine. So like they’re very protective of what they have. They want to make sure that, you know, they’re top dollar because it’s so hot, you know what mean? So that’s a lot of these sellers have that.

mentality over there.

Mike Hambright (06:00.014)
Yeah. Yeah. And I think, you know, even anywhere nationwide, like if you go back before the downturn, like if you go back, you know, to 2020 or 2021, let’s say, well, COVID was messy because people, it ended up being a good time for rising values, but people didn’t expect that initially. But let’s just say you go back to even before COVID, like people, it generally takes sellers a couple of years to come to terms with a market going down.

sam fazilov (06:14.979)
Sure.

Mike Hambright (06:26.35)
And so I think even during this like most recent downturn Sellers are finally now feeling like okay interest rates are probably not going down much anytime soon and Values might be going they might be going down or not going up as much as they were in the past and so but yeah that mentality of being in kind of the

I mean, that close, that proximity to New York of people just feeling like the values are just going to keep going up here because this is like the center of the universe is probably a little bit of a feeling. Yeah. Yeah. Yeah. So how about, how about, mean, I know you have some challenges probably with buyers too. So are there people that are moving, like just trying to get a little bit out of New York, like just trying to move out to the, out to the suburbs and stuff that, that I guess causes some competition?

sam fazilov (06:55.46)
Right exactly yeah yeah I that’s what it is for sure.

sam fazilov (07:06.338)
Thank you.

sam fazilov (07:12.457)
Yeah, for sure. For sure. definitely the political administration in New York now is making a lot of people want to move out of there. For the past few years, it’s been kind of crazy. So we’re definitely seeing a more influx of New Yorkers moving into suburb areas like New Jersey and stuff like that. So that’s, yeah, they’re definitely outbidding, you know, end buyer market.

Mike Hambright (07:40.802)
Right. So the sellers learn from that, that I can just sell my house to a New Yorker.

sam fazilov (07:41.515)
Again, that feeds into the mentality. A New Yorker, exactly, exactly.

Mike Hambright (07:48.386)
Yeah. So let’s talk about the fact that you’re, you don’t have, so a lot of deals still go through attorneys, but you can use title companies, or it’s a little bit of a hybrid there, right?

sam fazilov (08:00.961)
Right. New Jersey is a hybrid. mean, to say that legally you don’t have to use an attorney, but the practice is to use an attorney. like any retail buyer, know, any retail deal is going to be using an attorney. Like we’ve been have something called an attorney review, right? So it’s like a three day, you have three days to review with an attorney and then you officially under contract. But if you choose to opt out, you could opt out of it. But a lot of sellers,

It’s like a known thing. like they’ll tend to get an attorney here, which can make things difficult sometimes, especially if you’re trying to do anything creative, creative finance deals. Just a lot of these attorneys are not educated properly on these creative finance deals. So they’ll just, they’ll think it’s some sort of scam or something. Yep. Yeah.

Mike Hambright (08:36.43)
Yeah.

Yeah.

Mike Hambright (08:43.885)
Right.

Mike Hambright (08:52.518)
Immediately go to write the right to it’s a scam or there’s something wrong. Yeah, so let me ask you this on the buy side So when you’re dealing with a seller like are they a little bit more when you’re a distressed property You’re buying at a discount Are they a little more flexible in just using a title company versus an attorney on the buy side or is it they pretty much? Always want to go through an attorney even on the when when they’re selling to you when you’re buying basically

sam fazilov (09:19.747)
If I’m buying, would I use an attorney? Is that your question?

Mike Hambright (09:23.584)
Yeah, I mean, does the seller expect to use an attorney when they’re selling to an investor? Or are they like, whatever’s fastest, whatever’s easiest, like, let’s go that route.

sam fazilov (09:33.346)
So it depends. I find that it’s like 50-50. Half the times they’ll use an attorney. Some of the times they’ll just, they can’t afford one. They’ll think it costs them too much and they’ll just, they just want to do, depending on the type of trust I build with them, the rapport and when I can show them that we could do the same thing with going through title and that doesn’t cost them anything.

Mike Hambright (09:56.248)
Yeah, it’s just faster, right? And so not to knock attorneys too much, they, you just don’t, it’s not even just attorneys. like, you just don’t want too many cooks in the kitchen that are, yeah. Yep. So.

sam fazilov (09:58.143)
Yeah, for sure.

sam fazilov (10:05.506)
Yeah, yeah, for sure. Yeah, I also think it’s like a sometimes like an ego thing with the attorneys. You know, I find like, like, like, do your job, your job is to get the deal done. You know what mean? Like, it’s not your job to just like cause problems for no reason. You know what I mean? The seller wants to sell this house, like he needs to sell this house. You know what I mean? Like I’ve had a situation, believe it or not, when the attorney steered him away from our deal.

Mike Hambright (10:25.792)
Right.

sam fazilov (10:36.096)
and the guy was too late and he got foreclosed on. Like he could have made money from my deal with him, but he just, because it was a creative finance type of deal and know, and they’re turning just like, no, don’t do the deal. And he just calls them to go for foreclosure and he lost his house and did they make any money? Like I’ve had that.

Mike Hambright (10:53.538)
Yeah, yeah. In my experience, for any of my attorney friends out there, I’m not trying to punch you too hard, but in my experience, attorneys and contractors are the same way. It could be somebody that does like…

demo type work and if you ask them if they can texture walls they’re like yeah I can do that like they’ll they’ll never say no so most attorneys might have a specialization in one area but they’ll say they can do anything just because legally they can but they don’t necessarily know they’re not efficient in other areas and so

sam fazilov (11:24.064)
Right.

Absolutely.

Mike Hambright (11:27.788)
So yeah, so my guess is there’s a lot of attorneys there that really don’t do a whole lot of real estate stuff, but they’ll always say they can and they’re not efficient, so the whole process slows down. Yeah.

sam fazilov (11:32.865)
Absolutely. Yep.

Mike Hambright (11:41.132)
So let’s talk about kind of creative finance deals. So on one hand, you would say, hey, some creative structures are good because you’re in a high ticket area. So if you can minimize maybe some transaction fees or minimize some of the costs, or that’s how you can make deals work. On the other hand, the attorneys see it and they’re like, they don’t like it. And so just talk about like when creative deals make sense and how you operate up there from a creative standpoint.

sam fazilov (12:08.671)
Right. So for me, creative deals make sense. say, for example, if a guy is, let’s say, underwater, potentially, or like basically almost underwater, you know, his equity is basically nonexistent. But if he has a good rate on his mortgage, I would buy it at that same market value where he can’t really sell it on the market because he’s going have to pay a real estate commission.

He’s probably gonna have to go through some inspections and picks up the house and do some stuff. So in that scenario, like the guy has, the guy really, that’s, I’m his best option. You know what I mean? If I do a creative finance deal, I’ll take that mortgage over sub two and I’ll keep that low rate and I’ll keep that as a rental. I’ll do that all day, any day.

Mike Hambright (12:55.244)
Yeah. But how do attorneys feel? mean, attorneys could screw those up pretty easily, I assume.

sam fazilov (13:01.6)
Yes, yes, because I mean, you know, know, obviously that clause in the mortgage where it says that, you the bank, as soon as you change deeds, the bank could technically foreclose on you. you know, and not foreclose, I mean, escalate the loan. But, you know, we structure in a way where that doesn’t happen, you know, in a trust and all those things. But it’s just attorneys just don’t want to hear a lot of that.

Few attorneys are educated enough that they do. So, I think we just need to get more education out there.

Mike Hambright (13:38.616)
So, and then remind me, I know from on the New York side, and maybe it’s the same, is who picks the attorneys? Are there some rules around where the seller, like you can’t necessarily provide an attorney or recommend one, like they have to pick their own, or is there something like that?

sam fazilov (13:58.016)
Um, in New York, yes, they have to get their own attorney, you could, they, each, each party has to have an attorney. can’t have one attorney representing both. Um, but in New Jersey, like I recommend attorneys if they don’t have one, there’s nothing wrong with that. As long as they’re fully represented by them, I have a, then in that case, I’ll use a separate attorney for myself. You know, I just, prefer to them to use an attorney that’s familiar with creative finance, you know, and

Mike Hambright (14:25.422)
Sure.

sam fazilov (14:27.305)
that could educate them properly, so.

Mike Hambright (14:29.25)
Yeah, is looking out for their best interest, but you know how to work with them at least. Yeah, yeah. So what are some of the other challenges there are laborers, mean, you’re doing a little more fix and flip than wholesale. Is that accurate or? Yeah.

sam fazilov (14:36.383)
Exactly, that they’re familiar.

sam fazilov (14:47.839)
Correct. Correct.

Mike Hambright (14:49.43)
So talk about just, I know that there’s a lot of issues with like labor costs, permitting times, like just a lot of things that just add time. So let’s maybe jump into just the cost of labor and finding good people to do the work up there.

sam fazilov (15:04.255)
Yeah. I mean, definitely the Trump administration didn’t help for this. You know, the whole ISIS thing, it’s getting very difficult to find labor right now. You know, lot of these guys, a lot of workers are getting deported. And it’s just, it’s getting difficult. And the ones that are staying, they’re like, they want top dollar. So costs are going up constantly.

What it used to cost me to renovate a three-bedroom, bath, I was able to do it for $40,000 in the past. It’s almost double what I’m doing now. So not to mention the fact it’s hard even to find people. You know what mean? So like I’m limited. I have to wait till my HVAC guy finishes on a different project, then he’ll come back. I can’t find another HVAC guy. It’s kind of hard.

Mike Hambright (16:04.034)
Yeah.

sam fazilov (16:04.094)
for sure.

Mike Hambright (16:04.526)
I think, and I feel that here even in Dallas and I think everywhere, there’s finding good work is hard, finding good labor is hard, and everything seems to be taking longer, and everything seems to be more expensive. I was just looking up something the other day that I thought I knew the price on, and it’s like 50 % higher. This is like $100,000. I was like, oh, these are like 150 now. I was like, what? What’s going on around here? So, yeah, things getting expensive. I know in the Northeast and some really honestly kind of blue states,

sam fazilov (16:26.783)
More of a premium. A bigger premium for sure.

Mike Hambright (16:34.48)
They just tend to be, you know, costs are higher. What’s that?

Yeah, yeah. So let’s talk about just the challenges of permitting and things like that. I know that’s gotten tougher everywhere, but I know it’s even harder up there.

sam fazilov (16:52.472)
So whenever I could avoid it, I for sure would want to avoid it. there’s no questions asked. Like if I have a house that, you know, sometimes the decision to put in recessed lighting versus this less than existing light there, like I wouldn’t even go through the hassle of just because that that’s going to take up like three extra weeks, four weeks just to get that approved. Like it’s not even worth it. Like even though yet, it’ll probably get more money if I sell the house with recessed lighting. It’ll look nicer.

But it’s just sometimes it’s not worth it. it’s, I would just, know, sometimes you have no choice. The house is complete, you know, it’s a complete shithole and you need to fully remodel the whole thing and you know, and you have no choice. But it’s very difficult because.

Mike Hambright (17:37.294)
Do you tend to, like if you’re gonna, do you, if you’re gonna open up kind of Pandora’s box and do electrical work like that, you, sometimes you just probably make the decision to like, hey, we’re just gonna do a lot of work, because it’s not, it’s gonna be more expensive, but from a permitting standpoint, it’s not necessarily, like if you’re gonna change out lights, you might as well take advantage of like doing more electrical work. Is that, that, is that true or?

sam fazilov (17:56.902)
Yeah, because I’m waiting anyway. At that point, if I’m waiting anyway, I might as well now try to get top dollar for the house and do the necessary upgrades to get that top dollar.

Mike Hambright (18:00.685)
Right.

Mike Hambright (18:10.572)
Yep. how do you, so obviously investors in your market are all dealing with the same thing. So what are some things that you could do to,

You know, obviously you’re choosing to still operate in that market and there’s enough opportunity there to continue doing that. But how do you separate yourselves from other investors that are dealing with the same thing, whether it’s dealing with sellers or dealing with the cities and the permitting process or what can you do? You just, have to find ways to operate with those rules and those constraints, right? So what are some things that you do or that you can do to just make that a little bit less painful?

sam fazilov (18:46.882)
So, so I started recently, started more doing more whole tail. That’s definitely been helping, you know, make sure, you know, at least some of my products, some of my, inventory will move faster that way where I could just, you know, just clean up the property, paint it, you know, do some minor touch-ups, you know, nothing that would cause any permit issues or anything like that.

Mike Hambright (18:54.839)
Okay.

sam fazilov (19:11.759)
And that’s how I move it. That’s otherwise, you know, if you only do huge jobs and you know, these massive construction projects, the cash conversion cycle will kill you. That’s just the way it is. You’re going to, you have to have deep pockets for it. Or you’re just doing one deal at a time or two deals at a time. can’t, you can’t, it’s very hard to scale that.

Mike Hambright (19:26.124)
Yeah.

Mike Hambright (19:33.134)
Yeah, and I think that I’ve been whole tailing since like 2010 or so, a long time. And I just kind of found that play of people still, there’s still a value market. There’s people that are like, yeah, it’s not as nice as maybe some of the other ones, but it’s like $100,000 cheaper. And so we can just fix some of that up on our own. And so I think the same person that changes their own oil and…

goes to the outlet malls to get a little bit better pricing on clothes and stuff like that. There is a market for people that appreciate the sweat equity that they can get in a deal that needs a little bit of work still.

sam fazilov (20:05.34)
Yeah. Yeah. Yeah, for sure. Yeah, I’m starting to see that more and more. you know, I used to just try to make a full finished product, but now I’m definitely seeing the value in that. So.

Mike Hambright (20:24.664)
Yeah, yeah, awesome. Well, Sam, thanks for sharing your insights on and getting to know you a little bit better on what’s going on up in New Jersey. If folks want to connect with you, if they want to reach out, maybe buy some of your wholesale deals, sell you a deal, anything like that, where can they go to learn more?

sam fazilov (20:41.053)
Sure, can find me on our website, ravenbuyers.com. You can find us on Facebook. It should be an email, [email protected]. I’m always open to collaboration. anybody, any wholesaler want to reach out, send me deals, always open.

Mike Hambright (20:54.979)
Yeah.

Mike Hambright (21:00.246)
Yeah, awesome, awesome. Well, thanks for joining us today.

sam fazilov (21:02.717)
Appreciate you having us today. Thanks, Mike.

Mike Hambright (21:03.83)
Yeah, yeah. Everybody, thanks for joining today. you’re operating in a market that you think is difficult, know, there’s still opportunity. Wherever there’s people and houses, there’s opportunity. But it seems like everybody’s lining up against us from the permitting offices to more expensive labor, to more expensive materials. And that’s just how the business goes. I’m sure that whatever we thought was the good old days and, 10 years ago or 15 years ago, there are people that were doing this 20 years before us that think we’re crazy. So it’s a great business.

You just have to work it within the constraints you have and try to find a way to pull forward So appreciate you guys for joining us. We’ll see on the next show.