Time Kills House-Flipping Profits: How to Scale to 52 Flips a Year | Nick Koenen

Nick Koenen (00:00)
When you flip house, time is the most important variable. It’s like if you had a store and you got your shelf stocked, you know, the store that is able to go through all of its inventory in a week versus a month, even if their margins are a little bit less, they’re going to make substantially more because they’re able to turn through it. Like everyone’s a good house flipper when the market’s doing this. But when the market starts doing this, the time is the most important variable. You gotta get in, get out as fast and efficiently as you can.

Joseph Crooms (02:04)
Hey everyone, welcome to Investor Fuel Real Estate Pros Podcast. I’m your host, Joseph Crooms. Today I’m joined by someone I’ve been looking forward to chatting with. His name is Nick. I’m not going to mess up his last name, so I’m let him pronounce his last name for me just to help me out. But Nick, I’m so happy that you’re here. He’s doing a lot of flipping and he’s talking about some components of flipping that are very important to you that may be looking to flip home. Hey, Nick, say hello to everyone and also share your last name.

Nick Koenen (02:37)
How’s everyone doing? Hope everyone’s having a good day. My last name is pronounced Koenen. So it’s kind of like Heineken, but Heine-Koenen. I like the beer.

Joseph Crooms (02:46)
Cool, cool. I think our listeners are really going to take something away from how you’re approaching the flipping business in real estate. You told me that you’re sitting in a real estate office now, I guess you’re building a strong partnership. So let’s dive in. So first off, for people who may not be familiar with your world, give us the short version. What’s your main focus these days and what markets are you operating in?

Nick Koenen (03:13)
Yeah, so we flip about 35, 40 houses a year. Last year we did about 30, this year I think we’re gonna be closer to 40. We’re based in Southeast Wisconsin. And yeah, we’re looking to scale. My next big goal is to hit 52 houses in a year— one a week. I think it’s a nice clean number. And yeah, just looking to, you know, iron out all the kinks in the business, really understand it at a basic, kind of first-principle level, so we can scale and continue expanding.

Joseph Crooms (03:50)
Wow, you said that you did 30 businesses on last year. Where did that land you at the beginning of this year as far as revenue?

Nick Koenen (03:59)
Yeah, in terms of revenue… well, I know I could— I’ll tell you profit, at the end of the day, profit. We were about $50,000 per flip is about what we earn. And I’ll be honest with you, Joseph, I don’t do the numbers, so I’m not as in tune to what our exact revenue is, but we profit, at the end of the day, about $50,000 per flip.

Joseph Crooms (04:22)
Okay, and so what is your position in the company? Are you just an investor? Are you in the real estate, or you’re broker? Explain.

Nick Koenen (04:31)
Yeah, so I mean… so I’ve actually been a mortgage lender for about seven, eight years. My partner in the— in the Ugly Duckling Houses— that’s our logo right here, “Fair quack and easy cash offers.” She— she’s a realtor and she’s had a— one of the biggest teams in Southeast Wisconsin for— for a little bit longer than I’ve been a lender. And we got into flipping houses when the market slowed down about four or five years ago as a way to keep her team busy with deals and transactions, so it kind of came naturally.

You know, think we had our first opportunity, looked like a good opportunity. We dove into it, made all the mistakes, learned a lot, and at the end of the day, we figured that, hey, we actually kind of like doing this. And so, you know, we made— made the brand for the flip business last year, or I think it was early last year. And so, kind of started doing different forms of marketing to get inbound leads. Previously, when— when it was the team look— searching for leads, it was a lot of outbound. And it was very effective, but it gets kind of old. You don’t want to feel like you’re, you know, being spammy at all if you’re going after pre-foreclosures and that sort of thing. Now— now we got— got it set up to where people contact us.

Joseph Crooms (06:33)
So are you still investing? Are you still an investor as well?

Nick Koenen (06:38)
Yes, sir. Yep.

Joseph Crooms (06:39)
So you have a combined new revenue. The flipping homes is like two years old, almost going into your second year, am I correct?

Nick Koenen (06:49)
Yeah, well, we’ve been doing it for about four to five years. The brand is only about two years old— Ugly Duckling Houses.

Joseph Crooms (06:56)
Good, good. So, and— and so you told me that, you know, you’ve been making money. How much monthly revenue do you think you make in the real estate industry from both that you do?

Nick Koenen (07:10)
From the— the flips?

Joseph Crooms (07:12)
Of flips and from the investor, it gives us an idea what kind of… why did you combine the business, and how do they support each other?

Nick Koenen (07:22)
Yeah, I mean, so I think my partner… like myself being a mortgage lender, that’s my health insurance job. Keep the family insured. My partner, you know, her being a very experienced realtor, she’s very good at what she does. It kind of just came naturally. And, you know, we’re doing seven figures a year, which is great, between all the businesses. And yeah, I mean, it was just a natural movement. And right now what I’m working on is a software to make flipping houses substantially easier, and the website for that is FLIP.house.

And, you know, really what it’s designed to do is to be kind of the brain and connective tissue of the entire flip operation with scope, schedule, communication, materials— everything kind of, you know, ironed out and optimized to maximize the return on investment. Everything kind of revolves around making the right decisions to generate the highest return on investment. Houses are different, right? You’ve got luxury houses, you’ve got basic houses, you’ve got kind of standard and designer houses in the middle. And all of these things need to be taken into account when you’re deciding on what is the scope of work on a given project. You know, “Should I put quartz countertops in this house or shouldn’t I?” And— and a lot of that’s kind of dictated by, you know, what neighborhood is it in? What’s the neighborhood norm? You don’t want to overspend on a house. And so that’s what I’m— that’s what I’m really excited about is this, you know, this— this platform we’re making and we’re going to be the first kind of power user of it. And once we get all the bugs and kinks ironed out and it feels magical, that’s when we’re going to kind of release it.

Joseph Crooms (09:12)
You think you’re going to release this new software?

Nick Koenen (09:16)
I’m hoping by fall, maybe sooner. Might release a dumbed-down version of it sooner, because really you got three stages is how we’re approaching it. You’ve got the acquire stage, and that’s where you’re running comps, you’re figuring out your rule-of-thumb scope of work, how much money and time is it going to take to get this house up to that neighborhood norm. With that information, you can back into an offer. And once your offer gets accepted, then you have the fix stage. And that’s where you’re creating the scope of work, you’re dispatching your contractors, you’re doing things in the correct order so you’re not having to rework stuff. And then once that— once that house is done, then you’re ready to sell it— that’s the third stage.

And our focus right now is heavily on the fix stage. As we’ve scaled this business, that’s the most frustrating part. You know, kind of the acquire and sell stages, those are largely realtor functions, which, you know, my partner is— is an experienced realtor, so we’ve got systems for that. But when you’re— when you’re managing teams of contractors, I call it kissing frogs— we’ve had to kiss a lot of frogs to put our team together. And material choices, you know, there’s a lot of variables that go into it— permits, lien waivers. And so having one central system where all of these things are managed, I think will just make— it’ll prime any business that uses it for scalability, because the operations piece is… you know, that’s where the magic, that’s where the value is created, you know? And that’s what we tell our sellers is like a lot of the income we earn is because we took the time, we bring the crews in, we do the improvements. And so it’s a lot of value that we created that was not there previously.

Joseph Crooms (11:41)
When you talk about the crews that you have, who’s a part of your team?

Nick Koenen (11:47)
Yeah, well internally we’ve got our— my partner, and she— she’s… she does the comps, she writes the offers, she lists the house. We’ve got our project manager and administrator, I guess you could call her. And she is ordering the materials, she’s working with my partner and myself to put a scope of work together on a new project when we get it, and then she’s lining up the crews, you know, the contractors, if you will. And then we’ve got one other person in our office that kind of helps just maintain stuff.

In terms of contractors, I mean, we’ve got contacts for everybody. We’ve got a few hourly guys that we try to keep busy 40-plus hours a week, and they’re going in, you know, putting cabinets up, laying flooring, painting. But then we also do have a lot of specialty guys that we can tap on if we get too busy. Like one guy, he’s very— very, very good at putting cabinets up. So if we get a luxury house and it needs to be, you know, super nice, we’re calling— we’re calling Brad. We’ve got plumbers, electricians, all of it. And— and that’s— that’s the… you know, probably the hardest part in flipping a house is— is working… like finding people that you can trust and building that trust. And it takes time to build that trust. You know, you might have somebody that performs on one or two jobs for you, the first one or two, and then they start falling off or they ghost you and you thought you had a good relationship with them, and it’s a challenging part of the industry. I think probably any industry is managing people— that’s the hardest part. And so, yeah, we’re looking to kind of solve that.

Joseph Crooms (13:29)
I noticed that a lot of my guests that come, they started out in flipping and they started out in investment. Why are you staying in flipping? What is it that motivates you to say, “This is…”?

Nick Koenen (13:43)
Yeah, I mean, I think we’re— we’re good at it. We’ve got a high conversion rate when we go on these appointments. And I think I enjoy trying to help people that are looking to sell their house. We try to be very prescriptive. A lot of times we’ll go on appointments and, you know, based on the condition of the house and the situation of the seller, we tell them like, “Hey, you guys should probably list this house because you’re not in a big rush. The house is not in bad shape. It’s going to put a lot more money in your pocket.” And, you know, even though they called us to buy it for cash, we try to just to help people and, you know, our reviews reflect that.

And I think we have an advantage because my partner is one of the top realtors, so we bring all the options, you know. We can get very creative in how we put a deal together. Sometimes if it’s hard to comp or it’s hard to know exactly what the house will sell for once we’re done, we can pad the deal with the profit share to the seller once the transaction is complete. Sometimes we’ll assume their mortgage, so we’re less out-of-pocket with our capital, that you know, that in terms of ROIs, when— when you assume a mortgage and maybe you give the seller a piece of money to walk away with or, you know, however much money it’s— the house is worth, you know, now you don’t have to— you don’t have to pay points. You don’t have to go through the whole loan process of getting a loan, and your out-of-pocket capital is just whatever you gave the seller plus the rehab costs.

And if you make a good amount of money on that, your annualized ROI… I mean, we’ve had deals that, you know, go into the hundreds, we’ve even had a couple of deals that exceeded a thousand percent ROI annualized, which is— which is cool. So the goal is to have all of your capital deployed in deals like that so you’re— you’re able to just snowball things. But the hard part again is getting all the, you know, managing all the people, all those projects, putting together good scopes of work, good timelines— that’s the tough part in scaling when you’re putting these types of deals together.

And to further answer your question, my bad, Joseph… yeah, I think I like the idea. Like, we go into a house, it’s junk, and then by the end of it, you know, a family’s moving in, it’s a beautiful house. We’ve improved the area. You know, I think there’s something like almost visceral about you take something that’s not— that’s ugly and you make it pretty. You know, I think that’s always going to be… there’s always going to be something that’s cool about that, I suppose.

Joseph Crooms (16:56)
Thank you for sharing that, Nick. So you love what you do, you come from an investor’s background, your margins and your annual income has increased or sort of maintained itself. And how long have you been operating at the level that you are now?

Nick Koenen (17:13)
Yeah, like I said, the past two years we’ve done about 30 flips a year. This year, I think we’re going to be closer to 40. And then the first year or two that we were in this business, we did maybe half that— maybe 10 to 15 flips— and that kind of warmed us up. And we kind of started figuring things out. So yeah, our trajectory has kind of been upward. The past two years was maybe a little bit stagnant, and now it’s heading up again. And we want to… my goal is to maintain that trajectory until we at least hit 52 houses in a 12-month period.

Joseph Crooms (17:53)
That bring you a monthly…

Nick Koenen (17:55)
Yeah, I think if we were to hit 52 houses, the expectations we’d, you know, profit about $2 million that year— two to two and a half million, you know, less advertising expenses and everything, paying our employees, I’m thinking probably closer to about 2 million.

Joseph Crooms (18:13)
Now, that’s great, but I know that a lot of things that you spoke about, they’re not easy, especially in this climate. What’s been the key to keeping that— your machine running?

Nick Koenen (18:28)
Key… I think just waking up every day and just going. You know, some days it feels like you’re just overwhelmed, you’re like a chicken running around with the head cut off, and— and you kind of just got to ignore… you know, you just got to ignore that overwhelming feeling and just, “Okay, what do I got to do? Put it in the list— boom, boom, boom, boom, boom.” And I think, you know, in any business, sales is the key— branding, marketing. And so I’ve been focusing, you know, quite a bit of time on getting the Ugly Duckling brand out there.

We’ve been doing… we— we started with Google PPC and that’s been very successful for us. Our ROIs are about anywhere from 20 to 25X. And right now we’re testing out Meta as a lead channel. We’re about two months into it— not nearly as good of ROIs so far, but the past couple of weeks we’ve— we’ve filmed a whole bunch of videos that will run as ads. And, you know, with this AI boom, I don’t know if you can see our logo— you got the little duck in it, little Superman duck. And so I was talking to AI the other day and I got all the scripts that we filmed for our videos, and I said, “Hey,” I uploaded a, you know, our logo, I said, “Hey, can you kind of like make this duck real and have them read this script? Like, you know, make a— make a scene.” And it did a great job of it. And so I’m hoping that these little duck ads can work well, because then I don’t have to film as much, you know? It’s just a one-minute thing, give it the prompt, and the duck talks, yeah. So yeah, it’s— it’s a combination of things, but I think overall, just prioritizing and never feeling overwhelmed. You just get after it, you know. Figure out, prioritize, “What do I got to do? I know I got a whole bunch of crap going on,” and just get after it, just get it done. ‘Cause a lot of times you might have a massive task list and it’s overwhelming, and all of a sudden you get through, you know, two-thirds of it and you’re like, “That took me 30 minutes.” Like, those are a lot of baby tasks when you’re— when you’re focused, like, that wasn’t that bad.

Joseph Crooms (20:42)
Now— now every operator I know has had a moment when things just got real, maybe a deal that went sideways or a time that they had to pivot fast. You mind sharing one of those moments with us?

Nick Koenen (20:55)
Yeah, it’s funny. I mean, today— today even, we just— we— we took a house… we took ownership of a house on Tuesday and today is Friday. And the owner… it was a situation like I was explaining earlier, we took over her mortgage. It’s very tight deal, there’s not going to be a lot of profit, but she needed 7,500 to walk away with, right? So we gave her the 7,500, took her mortgage over, she… we took title to the house. And— and she was supposed to be moved out by Tuesday. She’s very sweet girl. She’s— she’s got a lot of drama going on in her life. And— and it’s been super hot up by us lately, like a hundred degrees this whole weekend, so she’s moving all her stuff out. She did a great job moving out, but she’s— she had some stuff left over and we told her, “That’s fine. Put it in the garage. Put it in the garage, don’t— don’t rush. Come this week and get it. You know, we’ll tell our guys not to throw it away.”

Come to find out, our guys threw the crap away, even though we told them not to. So this is managing people— this goes back to what I was talking about. And so I was just on the phone with her maybe 30 minutes ago, and she’s frantic, she’s crying. She went to the house today to get her stuff. I’m on the phone with the demo guy, Jerry, Jeremiah. I’m like, “Dude, what’s going on?” And so now I sent someone on our team up there, he’s digging through the dumpster right now. And I’m telling you, she’s crying, she’s emotional. I’m like, “Calm down, it’s fine. All this stuff is there. Just started raining now.” So I told her, I said, “Get up there before it starts raining.”

And so that was an example. I know when we— when we started this brand, like I said, we’ve been flipping for a couple of few years and my partner, she was burnt out by the business and she kind of wanted to get out of it at that time. And I’m like, “Really? Like, I just put this brand together. I just— I built the website, I did all the branding, I did all, you know, filmed all these videos, did X, Y, and Z.” And I convinced her not to. And— and— and yeah, since then, like I said, we’ve been doing about 30 houses a year. Sometimes it just gets— it gets overwhelming, especially when you got transactions going, too, that are non-investment properties with buyers and sellers. You know, if you’ve got a lot of those going on, things can be… there can just be a lot of stuff that fills your day and it hectic.

Joseph Crooms (23:14)
Man, that’s the kind of people don’t talk about enough. And honestly, separates the folks who just dabble from the ones who stay in it long term. Let me ask you this: what are you focused on solving? I know you sort of briefed us, but what’s your next real goal?

Nick Koenen (23:33)
My next goal is to get this app launched, to get this FLIP.house, www.FLIP.house, and go there and sign up for the beta group. I want to get that launched and I want to get it working in our business. It’s going to be AI-enhanced. Like I said, it’s the brain and connective tissue. You’re messaging a contractor or the contractor is messaging you— maybe they opened a wall up and found a hidden mess that’s going to cause a change to the scope of work. You know, it’s… everything’s going to happen naturally the way it already does. They’ll text you a picture of it, but on the operator end, the AI is going to read that and understand the context of the situation and propose a change to the scope of work that you can approve or edit.

And then it’ll help you and the contractor come to an agreement on the change in price and the change in time, like the schedule. And you click one button and boom, everything changes, everything’s agreed to. And so that scope of work is the source of truth for the job, and all of the multiple scopes of work are the source of truth, essentially, for your flip company. And the idea is, if— if you’ve got kind of AI in the loop keeping tabs on everything, you can go in and you can ask it, you can talk to it: “Hey, what’s— how’s our profit looking on— on— on these jobs? What’s— what’s… which job is at the biggest risk of going over time or over budget?” You know, when you flip house, time is the most important variable. It’s like if you had a store and you got your shelf stocked, you know, the store that is able to go through all of its inventory in a week versus a month, even if their margins are a little bit less, they’re going to make substantially more because they’re able to turn through it.

Like, everyone’s a good house flipper when the market’s doing this, but when the market starts doing this, the time is the most important variable. You gotta get in, get out as fast and efficiently as you can. So that’s what I’m excited to build— something that just helps home flippers do that.

Joseph Crooms (25:42)
Thanks for sharing that, Nick. That’s big, especially when you’ve already got your logo in place and your brand, Duck. So the duck, can’t wait to hear it. And that’s in place. The next move can either compound things or create chaos, depending on how you play it. Now, I know a lot of people listening are early in their journey or looking to level up. Think they’re going to benefit from hearing this. When it comes to building relationships and growing your network, what’s made the biggest difference for you?

Nick Koenen (26:16)
Yeah, I think being genuine, being helpful, trying to be helpful where you can, you know, sharing information with people that… you hear a story, whether you’re working with a seller or you’re trying to network with somebody, you know, it’s a… like, I try to be an open book and offer advice and help where I can. I just have… I just had a friend last week that’s getting into flipping and he hit me up, picked my brain, and, you know, I try to tell them, “These are the hard parts, this is where you got to focus.” And— and part, you know, part of this job, I feel like, is what I said earlier, like kissing frogs. Like, some things are unavoidable and it’s like, if you want to get into this, like, this is what you’d have to be prepared to expect and just, you know, it’s… so yeah, I think just trying to be genuine, be— be help— be helpful to people. And just, I think if you’re— if you’re authentic, that shows through and— and creates opportunities. Stay positive. You know, we’re all connected, all in this big game together. And just staying positive if you’re feeling overwhelmed… like, you got to ask yourself, do you think in five years you’ll look like you’ll care at all about what’s happening right now? If the answer is no, then you just— you just, you know, assess the situation and just move forward and try not to be emotional about it, you know. But yeah, so hopefully that answers your question. I kind of rambled a little bit.

Joseph Crooms (27:45)
I don’t worry about it. Yeah, you can’t break relationships in this space. All right, before we wrap up, if someone wanted to reach out to you, connect with you, maybe collaborate or learn more about what you guys are doing, what’s the best way to reach you?

Nick Koenen (28:01)
Yeah, go to www.FLIP.house and reach out to me on there. We’re going to get the email set up in there. We just got the domain transferred about an hour ago. Website’s ready to go. So by the time this— this goes live, we’ll have it up. So yeah, reach out to me there or any of our socials on there, or you can go to uglyducklinghouses.com and reach out to us there in any of our Ugly Duckling Houses socials— all the links will be in those websites.

Joseph Crooms (28:30)
Give it to him one more time, Nick.

Nick Koenen (28:34)
FLIP.house or uglyducklinghouses.com. FLIP.house, that’s where the real bread and butter is gonna be for anyone listening to this. And then, yeah, so I’m hoping we can help any other fellow flippers out there. And to be honest, I’d like to invite people to go in, fill out the “Coming Soon” page, because we’re gonna be inviting people on and getting feedback and just really getting this thing working and orchestrating everything beautifully before we launch it live. So there will be benefits to anyone who signs up for that beta group.

Joseph Crooms (29:12)
Perfect. Thanks, Nick. Well, listen, I appreciate your time, your story, your… it says perspective, but your perseverance attitude, how to persevere. Thank you for sharing it with our audience. We need more people in this space who are doing it right, the right way. Thanks again for being here, I know you got value from this. Make sure you subscribe. We got more conversations coming from operators, just like Nick, who are out there building real businesses and also have a desire to help people. So we’ll see you on our next episode of Investor Fuel Real Estate Pros Podcast. I’m your host, Joseph Crooms. See you next week, and Nick, say it— we’ll talk to you soon.

Nick Koenen (29:53)
That was good, Joseph. I appreciate you, man. Thank you for having me.