Understanding Market Cycles: 6 Secrets Every Investor Should Know

John Harcar (00:01.913)
All right. Hey guys, welcome back to our show. I’m your host, John Harcar. And I’m here today with Joe Homs and what we’re going to talk about today, besides, you know, his experience in business and in real estate is he’s going to talk a little bit more about his business, about flipping homes. guys remember at investor fuel, we help real estate investors, service providers, I mean, kind of all real estate entrepreneurs, two to five X their business.

And we do that by providing the tools and resources to grow the business you want to have which in turn helps you live the life you want to live. So Joe, man, welcome to the show.

Joe Homs (00:36.814)
Thank you for having me, I appreciate it.

John Harcar (00:38.865)
Cool. Yeah, I’m excited to talk about flipping homes. You something that, you know, a lot of our listeners might be doing or, you know, especially lot of our Mastermind members. But before we talk about all this, tell us a little bit about you, kind of your background, how you got into real estate and, know, what got you to today.

Joe Homs (00:57.422)
So I started about 50 years ago now.

Joe Homs (01:05.197)
My dad got me into the business. I was in high school. He was buying properties. Back in the day, he was holding onto them, fixing them up and putting tenants in there. And of course, I was there helping them all along. So really learning the flipping process from the ground up. And after that, I ended up buying my first home when I was 20.

John Harcar (01:33.734)
Awesome.

Joe Homs (01:34.67)
my first investment when I was 22, which I still own today.

It was a condo that I purchased with no money down. It was a divorce situation and the lady put an advertising in a paper that take over my payment and I never heard of anything like that. I called her, I said, what’s going on? And she said, I’m getting divorced, I don’t want it. And you can just take over the loan. And so sure enough, it was an FHA loan, which are all assumable, they still are today.

We went into the bank and those are the days where you actually went in and talked to the bank president.

John Harcar (02:17.575)
Right.

Joe Homs (02:19.246)
We sat down with him and said, hey, he wants to take over my loan. And the guy goes, yeah, you’re two months behind. And I go, not a problem. I’ll make that up and let’s move forward. The loan ended up staying in her name, because that’s the way they did it. And nowadays, actually, if you want to assume a loan, they’ll put it in the new purchaser’s name. But back then, no. And then I…

John Harcar (02:45.169)
But they didn’t have probably the qualifying process back then like they do now. Yeah.

Joe Homs (02:47.574)
right? nothing. Yeah, it was like, yeah, there’s a warm body in front of me. So he’s saying he wants it. I, know, I’m too much behind. So I don’t want to fall farther than that. You know, that’s what the bank president’s thinking. And, you know, and I said, no, I’ll catch you up and, you know, make sure you get paid and all this stuff. And so we did we move forward and

The loan was on there until my tenant paid it off. It was in the original buyer’s name. And then my tenants paid it off. And then after that, since I became an instant landlord, I said, oh, okay, what do I do now? It’s like, what the heck? So the only thing I could think of back then, because they didn’t have podcasts like this, or even people that I could call, we didn’t even have cell phones back then.

John Harcar (03:29.967)
Right? Mm-hmm.

John Harcar (03:38.042)
Right

Joe Homs (03:43.054)
I’m being dated here, but I decided to get my real estate license. And I got my real estate license, I’ve had that for, in a couple of years, it’ll be 50 years, having a real estate license. And it just opened my eyes. I said, my God, my dad never told me I could do all these things with a real estate license. And…

John Harcar (03:48.656)
Okay.

John Harcar (03:55.931)
Wow.

Joe Homs (04:07.224)
Then I just started buying, holding, and then got tired of that. Then I started flipping properties. So if you’ve been in California for a while, you know that we have up and downs, dramatic up and downs. And I’ve lived through three of those. And so I’m kind of used to that. know when to buy properties here in California to hold onto them. But any other time, just like right now, we’re at the top of the market. I just buy properties to fix and flip. Move on to the next one.

John Harcar (04:13.511)
Mm-hmm.

Joe Homs (04:37.168)
And that’s how I make my, you know, portion of my money today is doing that. So.

John Harcar (04:43.527)
Okay, so you said you said you didn’t know how to be a landlord. How did you learn to be a landlord? mean, just getting your real estate license doesn’t really help you become a landlord or know about being a landlord. How did you overcome that? okay.

Joe Homs (04:54.934)
No, it does help you. It does help you. There were some courses back then, property management courses and stuff. One of the electives to get your license, I think you have to have like three of them. And so I picked property management. Ended up learning a lot. And my God, has that changed over the years. It’s gone from one end of the pendulum, you know.

John Harcar (05:00.935)
Okay, got it.

John Harcar (05:08.698)
Okay.

Joe Homs (05:18.88)
Yeah, we’re on the landlord side all the way down to we’re on the tenant side now. So, and you just have to learn the process from actually experiencing it and then moving forward and dealing with whatever the government throws out there at you.

John Harcar (05:21.543)
Mm-hmm.

Got it.

John Harcar (05:37.681)
Sure. And is this property in California that your first rental?

Joe Homs (05:40.588)
Yeah, all my properties. Yeah, all my properties are in California. Yes.

John Harcar (05:44.009)
I’m just curious, what did you buy that first rental for?

talk about like a hundred extra turn.

Joe Homs (05:48.894)
52,000. Yeah. Yeah, it’s probably 550 now.

John Harcar (05:58.201)
So that’s so awesome. So, okay. So your father was in construction and in, or, in flipping homes or, or holding rentals sounds like, what do you think were some of the struggles you learned a lot growing up, right? You had some of that experience and education that I think a lot of people don’t, you know, so what were some of the struggles as you started kind of getting into it more, as you started getting into the flipping houses and just turning this into a business.

Joe Homs (06:26.018)
you know, the typical everyday struggles that you would have purchasing a house. I mean, I still have those struggles today. It’s just I’ve learned over the years how to deal with them. You know, it’s something always comes up and you just have to learn how to deal with that. I would say though, I’m a very conservative person by nature. And if I were to talk to my 20 year old self now, I would tell myself be way less conservative than you were, because I would probably

John Harcar (06:54.407)
Mm.

Joe Homs (06:56.152)
own probably 10 times more than I do now. I’m very very conservative. When the downturn happens, you know the three downturns, I didn’t lose any money because I’m very conservative. The first downturn was the dot-com bubble.

John Harcar (06:59.899)
Yeah.

Joe Homs (07:14.798)
I was not invested in stocks. Everything I had was in real estate. And I’d have people tell me, oh, Joe, you ought to diverse. go, why would I diverse? I’m an expert in real estate. Why would I do that? So dot com bubble, I didn’t lose any money. Everybody was crying. I didn’t lose any money. And then the last downturn 2008,

I was still heavily in real estate, I didn’t necessarily, I was not buying stuff at the top of the market, because I knew that was the top of market. And then it exploded, and then once it went down, I went crazy and started buying properties left and right.

John Harcar (07:50.727)
Love it, love it. Okay, so you started buying more and more property. How many properties are you currently holding now? 15, okay, are you looking to grow that?

Joe Homs (07:57.198)
15? Yeah, 15, 15 buy and holds. And then me and my team of flippers and I’ve been training my daughter and son-in-law for about 10 years. And I train other people that I’ve met on a Zoom call. I met one of them and I train people all the time. So together we probably have about 25 flips that we’re doing right now.

John Harcar (08:22.407)
25 flips and these are all in California. That is so that is so awesome. Are you guys using private money? Hard money? How are you guys funding your deals? Hard money.

Joe Homs (08:25.088)
All in California, yes.

Joe Homs (08:33.72)
Hard money. Yeah, hard money. was mine at first, but my name’s not Donald Trump. I run out of money. And so we had to move into the hard money. And hard money is something that everybody should look at, but with eyes wide open, because it is expensive. And most of our projects were in and out in three months. If we’re not, then there’s a problem. There’s a problem that’s come up.

John Harcar (08:55.334)
Nice.

Joe Homs (09:00.418)
You know, we try to make it three months. We do flip condos as well. They’re 30 days. If a contractor can get in there and out in 30 days, then we’re looking for another contractor.

John Harcar (09:12.133)
Yeah. When you hit these market cycles and all that, how did you pivot? what was the whole, were there any mindset tools you used to just to kind of stay focused?

Joe Homs (09:25.294)
So I’ll go back to 2008, which probably was the biggest one. 2008, yeah, the world blew apart. The condo that I originally purchased actually went back down to 100,000.

John Harcar (09:29.126)
Mm-hmm.

Joe Homs (09:38.478)
It’s 500,000, 550 now, but it went back down in 2008 to 100,000. I mean, I’m okay with that. I’m still, you know, positive cashflow. My renters are paying, you know, positive cashflow, so I’m okay with it. But 2008, I think of me and I’m a real estate broker as well. Everybody’s looking around like, oh God, like what do do now? How do we sell properties? And…

John Harcar (09:47.941)
Alright.

Joe Homs (10:03.822)
I had experience because when I bought that original condo, Jimmy Carter was in office. And if you remember Jimmy Carter, 18 % interest rates, you you couldn’t sell a house. The only way to sell a house was with creative finance. Okay? And so now 2008, I said, okay, well, what does that look like? Oh, it’s called short sales.

John Harcar (10:15.612)
Yep.

Right. Creative finance. Yeah.

Joe Homs (10:29.422)
So I taught myself how to do short sales. I became an expert on short sales. I went door knocking in neighborhoods and I was literally probably getting four to five listings a week, just door knocking. And I was handling those and I love those because I would have investors reaching out to me and say, Joe, I like to buy this. I see that you have it listed for 125, I’ll pay cash.

And I would accept those over a buyer who’s looking to move in because if a buyer is looking to move in, it was taking me anywhere between four to six months to put the deal together because the banks were like super slow. And that buyer would literally, they’d go away and find somebody else. And then I call them four or six months later, hey, I’m ready. Or not me, but the bank’s ready to accept your offer. no, no, we already bought something else. Okay, so.

John Harcar (11:09.766)
Right.

Joe Homs (11:22.702)
I did not have that problem with investors. The investors were there. They were there. They kept saying, yeah, I’ll take that and anything else you have. So that was a lot of fun. Yeah, that was a lot of fun. That’s how I pivoted that business. like I said, I was doing four or five listings a weekend and then selling those until it got to the point where the banks got more sophisticated. They started putting procedures.

John Harcar (11:36.519)
Awesome.

Joe Homs (11:49.806)
They started sending out appraisers. They started doing a bunch of things where, you know, they did not, like the first offer I sent on one of my short sales, it was literally like 100,000 and the bank was literally thanking me. Like, thank you, Joe, thank you, Joe. Yeah, it’s like no counter, no nothing, you know? Like, yeah, can we get this done like right away? I go, yeah, let’s get it done. Yeah. And it went from there to…

John Harcar (11:52.643)
Yeah, right. A more steps.

John Harcar (12:08.015)
Right, right.

John Harcar (12:13.159)
That’s awesome. That’s awesome.

Joe Homs (12:16.13)
Yeah, we’re gonna send an appraiser out to look at the property. They’re really sophisticated nowadays.

John Harcar (12:22.189)
Yeah, yeah. So what does your team and your business look like today?

Joe Homs (12:27.182)
So about four years ago, I was asked to run a brokerage. And I do that now. I started with about 30 agents. I’m up to 350 agents. It’s a discount brokerage. It’s called Pelligo, if you want to look it up, pelligo.com. It’s very good to the real estate agents. And I think a lot of them joined because we are investor-focused.

John Harcar (12:40.091)
Awesome.

John Harcar (12:54.055)
Mm-hmm.

Joe Homs (12:54.802)
I’ve been doing this for almost 50 years. You know, I can train them how to work with investors, put in offers for investors, things like that. So I think that’s why I’ve grown so much. So that’s one part of my business. The other part is still flipping and teaching others how to flip properties as well. I don’t charge for teaching people how to flip properties. I never have. I don’t like go into that business model.

John Harcar (13:03.591)
That’s awesome.

Joe Homs (13:23.822)
I do partner with them, yes, I partner with them and then I hope that they’re adult enough to realize that if they find a flip that they can’t do, they’re gonna wholesale it to me or if they find a family friend or something, they’re gonna refer me to them and then I’ll make a commission that way. So it comes back, it circles around that. I just don’t, I don’t know if I could sleep with.

John Harcar (13:23.825)
Do you partner with them? Like partner with, yeah. Yeah.

John Harcar (13:46.458)
Yeah,

Joe Homs (13:50.734)
with myself at night charging somebody $25,000, give them the flip course, it’s saying here. And then most of my flipping stuff I do locally, so it’s more hands on, know, come to the office, this is what I do, let’s go out, look at properties, this is how I evaluate properties, things like that. I don’t do flipping, like if somebody wanted to flip something in New York, I couldn’t help. I didn’t do virtual stuff at all.

John Harcar (13:54.084)
Nah.

John Harcar (14:02.821)
Yeah.

John Harcar (14:15.111)
They don’t do virtual stuff, Well, and I think that is invaluable, know, right when you’re learning and then you have someone who’s experienced to be able to go and partner with them and work with them. And, you know, yeah, you might give up some commission or some, you know, of your assignment or profit now, but how much more is it going to benefit you in the long run? So that’s what I love about that. Well, that’s awesome. So.

Joe Homs (14:36.524)
Yeah.

John Harcar (14:39.557)
Let’s talk about flipping, right? And I know a big thing, you know, when people go out and evaluate and find properties is, know, kind of what’s that formula that you use, right? Some people use a 70 % minus repairs is their offer. So how do you formulate your offers? Like what formula do you use?

Joe Homs (14:56.258)
So I tell you the two hardest things there are in flipping. One is acquisition. Here in California is acquisition. And two is a contractor. If you don’t have a good contractor, you’re not gonna have a successful flip. So as far as acquisition, it depends. Like Orange County, we use 80 % because it’s very competitive. Riverside, where I think you’re at, we’re at 70%.

We go out to San Bernardino, we’re down to 60%. And now that’s 60, 70 and 80 total. We don’t subtract rehab costs from that. That’s included in there. So we’re pretty competitive on our offers. And we’re looking at the end of the day to make at least 10 % of the after repair value.

John Harcar (15:32.761)
Okay.

Joe Homs (15:42.21)
So whatever we sell it for, if we make 10%, we’re happy at the end of the day. And then obviously we’re brokers, so we don’t need to pay a commission on our side. So we save money there. The new NAR rule that came out last year really didn’t change much of anything for us. And I think people don’t realize that. Yes, it’s negotiable, but it was always negotiable. It was always been. If I wanted to say, don’t want to pay you,

John Harcar (15:56.187)
Mm-hmm.

John Harcar (16:05.031)
It’s always been… Exactly.

Joe Homs (16:10.574)
3 % then I would have never offered 3%, you know, we don’t. No, no, now in the purchase contract, you put down there, the buyer’s agent puts out how much they want. And then we just negotiate back and forth. It’s like, you know, okay, we’ll pay you this. And it really honestly, it all depends on the price. If you’re coming in at what our asking prices are over,

John Harcar (16:13.371)
Right, right. It’s not like a set and stone requirement that you pay them 3 %

Joe Homs (16:36.206)
you’re going to be rewarded for that because our bottom line is going to be pretty much the same. If you come in with a lower offer, $10,000 or $20,000, $30,000 lower, then yeah, we’re going to counter your commission or counter the price back, whichever.

John Harcar (16:50.809)
Right, right, right.

John Harcar (16:55.877)
one of the two. What do you see some other people, know, mistakes people are making when they’re going to start to flip houses? All right, maybe if they’re newbies or something like that. Like what are some of the main mistakes?

Joe Homs (17:03.95)
Yeah, the biggest first time flipper mistake is thinking that you, well you own the property, but thinking that you’re going to live in it. So, Joe, I want to put gold fixtures in the bathrooms and in the kitchen and because that’s what I would want, okay? No, flipping is pretty much cookie cutter. You put in the stuff.

John Harcar (17:28.347)
Right, right.

Joe Homs (17:34.749)
that the masses are going to like at the end of the day. And most of it is just literally just brand new stuff. Okay. I’m going to put in a faucet that you know, I’m going to buy depending on the value of the property I’m flipping, but you know, I’m going to end up buying at Home Depot for 50, 60 bucks. I’m not going to spend four or $500 for a faucet. And that’s probably the biggest biggest mistake is first time flippers make is they’re trying to flip it like they would want to flip it.

John Harcar (17:55.079)
Yeah.

Joe Homs (18:04.27)
And it’s hard to, I I tell them that, but it’s hard at the end of the day, because they’re getting input from other people in their lives, especially their significant others. Gosh, I would never live in a place like that unless you had this, this, this, and this. it’s like, I’m not flipping for you to live there. That’s a totally different animal. I’m flipping for the masses.

John Harcar (18:22.535)
Mm-hmm.

John Harcar (18:27.367)
Right

Joe Homs (18:30.776)
so that it looks good, it’s clean and people like it and move on, which is another thing.

John Harcar (18:35.655)
I call it nowadays the agreeable grays. Everybody likes the agreeable grays.

Joe Homs (18:39.66)
Yeah, yeah, yeah, we’re actually moving away from grays. We’re more towards the color that you have in your house. You know, the and then actually gold fixtures were out forever, but they’re coming actually back in. And so, yeah, yeah, we’re using we’re using gold fixtures on our higher end flips. And we try not to flip properties over 1.4.

John Harcar (18:43.943)
Are you?

John Harcar (18:48.059)
Mm-hmm.

John Harcar (18:55.877)
Really?

John Harcar (19:07.289)
Okay, why that number?

Joe Homs (19:10.914)
That number is pretty much in the middle cookie cutter family of two or three. We want a house. This is going to be our house for a long time. You get into that price range. You start getting to two million, especially enough. How many people are rolling around with $2 million that they want to buy a house? And then they also get extremely picky. You have people walking in the door, Joe, like,

thought I saw that tile at Home Depot. Did you use Home Depot tile in this? my god. So I mean, I don’t want to hear that. Just you know, hey, this is gorgeous. I love it. You know, we see our family in here. Let’s let’s put an offer in and move on. You know, so we started trying to say, I would say that the stuff we’re buying, because we are buying in Riverside and San Bernardino, anywhere between 400 to 800 900.

John Harcar (19:45.719)
Right.

John Harcar (19:58.267)
Love it.

Joe Homs (20:11.038)
is our target range.

John Harcar (20:12.999)
Got it. Okay, cool. And I wanted to ask you this earlier, because you had mentioned that like you help agents or teach agents about working with investors and whatnot. Why in your opinion do you think not many realtors or agents know how to work with investors?

Joe Homs (20:29.742)
Great question. I think honestly, that goes to anything and everything real estate related. People think that you get your real estate license, and then that’s it, you’re going to be a millionaire the next day. And you’re far from that far from that. I’m, I’m literally training an agent right now in my office how to work with investors. And she keeps sending me these properties like here, Joe, take a look at this one. And I go, No, that’s not how you work with an investor.

John Harcar (20:44.487)
No

Joe Homs (20:59.214)
You need to tell me, number one, what is the after repair value? What do you think the rehab is going to be? And at what price am I going to buy this? Okay? You need to be able to talk through all that stuff to an investor. Why, as an investor, am I going to get put on a drip system like they teach you to do at regular brokerages? Here, Joe, here’s 10 properties that you said you were looking for for 800,000 or less.

Well, what good does that do me? Now I have to do all the homework myself. Yeah, it’s like, no, I want you to actually go out to the property, make sure it’s good, do the numbers and justify why I should buy this property at the price you’re thinking at. And can I get it at that price? That’s to me, that’s a more experienced agent that I can work.

John Harcar (21:28.773)
Yeah, now I gotta do the due diligence and all that,

John Harcar (21:43.409)
Yep, exactly.

John Harcar (21:51.505)
Do you teach your agents to talk to their home sellers about creative type of financing stuff? if they’re, hey, this deal might be, I can maybe get you more if you’re willing to take X, Y, Z over time, whatever, right? The whole sub two pitch or something like that.

Joe Homs (22:09.1)
Yeah, so if we’re like reaching out to sellers directly through co-polling or texting, yeah.

John Harcar (22:14.149)
Yeah, yeah, yeah. even if they reach out to you and they go on a listing appointment, I do they ever talk about any of that type of stuff? Do you teach them those type of buy strategies?

Joe Homs (22:25.358)
I do teach them all that. And then I think the biggest one is like right now, let’s take for example me. I’ve been in my property for 45 years. I bought it for 160. It’s worth 1.4. If I’m coming out to a listing for me, what are the things that the listing agent should be telling me? One, Joe, if you sell this property, guess what?

you have to pay what’s called capital gains minus the 500 because I’m married. So 250 per person. So which means that I’m going to have to pay capital gains like about 600,000. Well, Mr. Listing Agent, what does that look like? Oh, well, yeah, it depends on your tax bracket. If you’re in a 30 % tax bracket, 600,000, you have to pay Uncle Sam 180,000. Do you want to pay Uncle Sam 180,000? Well, no, they’re not going to bring that up because they’re afraid to lose the listing.

John Harcar (22:55.313)
Capital gains.

John Harcar (22:59.303)
Right.

John Harcar (23:13.735)
180k? Yeah.

John Harcar (23:22.839)
Exactly.

Joe Homs (23:23.372)
was I teach them, said, don’t be afraid because I would be more afraid that this guy’s gonna call you back at the end of the day and say, Joe, can you give me 180,000? Because you didn’t tell me about this. Yeah, it’s like, no, it’s like, so yes, I do teach them to talk about all that stuff. I get calls from children, my mom, you know, let’s say me, my mom and dad are in,

John Harcar (23:34.823)
Mm-hmm.

Joe Homs (23:50.314)
situation. And I tell them, you know, I don’t mean to be morbid, but you need to have your mom or dad pass away first, because once they pass away, there’s a step up in basis. So whatever the house is valued, in my case, 1.4, that’s what they can sell it for and pay zero in taxes. So please wait. I know you’re going to put them in, you know, home or whatever. Hopefully there’s some equity there. I’m sure there is.

John Harcar (24:02.385)
Right.

John Harcar (24:11.527)
Mmm.

Joe Homs (24:20.12)
go get a loan to pay for their, you know, their care until they pass away. And you have to be smart about these things, you know, and a lot of agents don’t know that. They’re not smart. They don’t tell them. As far as we were talking about FHA and VA loans, I have a website that I have a vendor that provided me, but the Pellico website does the same thing.

it’ll tell you whether there’s a FHA or VA loan on a property and whether you can assume it or not. And so I’m working with a lot of buyers right now who are assuming FHA and VA loans. And the barrier to that is now I have to teach the agent, because this listed, I have to teach the agent that this is possible because, I checked with my broker and my broker says, no, that’s not possible.

That’s actually fraudulent, you can’t do that. God, here we go. So you have to teach them. They’re the gatekeeper for the seller, and then I just literally just say, please have the seller call the bank and ask the bank. And then they come back and say, I never knew that Joe. Yeah, we’d be interested in that. We’ve been on the market for 60 days. We’ll take anything. Because remember at the end of the day, sorry, one more thing. At the end of the day, the goal of any real estate agent is to earn what? A commission.

John Harcar (25:30.523)
Yep. Yep.

John Harcar (25:34.811)
Yeah, we’re ready to get moving. Well, awesome.

Yeah.

John Harcar (25:44.881)
Mission. Yeah.

Joe Homs (25:46.368)
Yeah, that’s it. So if you educate them correctly, they’ll move.

John Harcar (25:51.269)
Man, we can go on for days about this. I could keep talking. I have so many other questions, but unfortunately, we’re getting out of time. And I appreciate you sharing all this, man. It truly is some great knowledge. Joe, if guys want to get in touch with you, if people want to learn from you or just talk real estate with you, how’s the best way or what’s the best way for them to get in touch?

Joe Homs (25:52.994)
Yeah. Yeah.

Joe Homs (26:10.938)
You can go on my website, joehoms.com. Everything’s there. I’ve even got my, I believe I have my training course on there as well, my book that I wrote. My contact information’s there. Everything’s there. I’m on Instagram, but I’m old and it may take me a couple of days to look at it. Same thing with Facebook.

I am really heavily involved in YouTube. So if you want to go to my YouTube channel, I put a lot of YouTube educational contact out literally every day. So that’s another good place to go.

John Harcar (26:47.451)
Awesome.

Awesome well Joe man once again thank you for coming on sharing all the knowledge guys if you’ve listened to this hope you took some good notes reach out to Joe if you have any interest in talking with him and you know maybe having him teach you how to flip. Thank you guys for coming Joe thank you again and we’ll see you on the next one cheers.

Joe Homs (27:08.024)
Thank you.