- Chris Naugle — the cofounder and CEO of FlipOut Academy and founder of The Money School — saw the power of real-estate investing firsthand as a successful financial advisor well before he purchased his first property.
- After watching a 23-minute house-flipping show on HGTV, Naugle decided to pursue a purchase.
- Oddly enough, he wound up co-hosting a program on HGTV years later and has today completed hundreds of flips and oversees 37 units.
- He shared 4 investing strategies with Business Insider that he leverages for success.
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Chris Naugle — the co-founder and CEO of FlipOut Academy and founder of The Money School — knew it was time to give real-estate investing a go after watching a 23-minute house-flipping episode on HGTV.
"In 2006, I dove in completely blind: no mentorship, no studying … nothing," he told Business Insider. "So I bought a house off of the MLS. It was a foreclosure, and it was a disaster — and I began the process of learning how to flip a house."
Ironically, years later, Naugle found himself co-starring on HGTV's "Risky Builders."
At the time, Naugle's main focus was his career as a financial advisor, but the idea of investing in real estate had always been present. He'd seen the role these types of investments played in a well-diversified portfolio. That 23-minute HGTV show solidified his pursuit.
Unfortunately, when Naugle decided to purchase his first flip, things didn't get started on the right foot.
"I was completely under-knowledged," he said. "I went into it completely blind."
According to his analysis, Naugle's first deal was slated to capture a $30,000 profit. But when all was said and done, he walked away with $8,000 — less than half of his projected take-home.
Still, Naugle was undeterred.
"The $8,000 was a far cry away from the $30,000, but it was enough to say 'I can do this'," he said.
In 2007, Naugle completed another flip, but still wasn't bringing home the profits he wanted.
Then the education process started.
Naugle began attending local meetups and auctions, trying to break down and understand what the most successful investors in his local market were doing. Once he had a handle on the ins and outs of his local market, Naugle took his knowledge to the next level by paying for training.
All of that hard work seems to have paid off. Today, Naugle oversees 37 units and has flipped hundreds of homes.
Before we parse out Naugle's investing methodology, it's important to note how he comes up with his max offer. He says it's "the single most important thing."
"I've done hundreds and hundreds of deals, and I've learned all along the way," he said. "The only thing that really matters in real-estate investing, to begin with, is buying the property at that right price."
Although Naugle uses a slightly more complex methodology to carve out his max offer, he provided a high-level view of the calculation he employs.
After repair value x 70% – rehab costs = max offer
"I make a ton of offers on properties," he said "I never have a set strategy for that particular property."
Early on, Naugle realized that he need to be able to pivot quickly as an investor. If one strategy wasn't cutting it, he needed to have others to ensure his success.
That's why Naugle leverages four different strategies today. If his original thesis doesn't come to fruition, he moves on to the next, and so on.
Here's a closer look.
Plan A — Wholesale
"I have a firm belief that the fast money is the best money," he said.
Wholesaling real estate involves contracting a property and then assigning it to an end buyer at a higher price before the contract with the seller closes.
As soon as Naugle has a property under contract, he immediately starts marketing the product to potential buyers. If he can sell it for a quick $5,000, $10,000, or $15,000, he's going to take it and move on.
Plan B — Fix-and-Flip
If wholesaling isn't an option, Naugle says that he'll consider flipping a property if he can make at least a 20% take-home profit.
This strategy involves purchasing a distressed property, fixing it up, and selling it for (hopefully) a hefty profit.
Plan C — Wholetail
If the flipping numbers don't add up, Naugle will consider wholetailing the property. He aims for a 10% to 15% profit on wholetail deals.
For the uninitiated, wholetailing involves purchasing a distressed property, carrying out small cosmetic upgrades (carpets, paint, etc), and then re-listing the property. It's a combination of both wholesale and fix-and-flip strategies.
Plan D — BRRRR
"BRRRR" is an acronym for buy, rehab, rent, refinance, repeat. The goal of the approach is simple: Purchase a distressed property, fix it up, rent it, get a new loan that covers the initial loan and repairs (refinance), and do it over and over.
This strategy helps Naugle free up capital to deploy into a new deal. It is enacted if the numbers on his other approaches aren't adding up.
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