House Flipping: Michael Bourque of LendingHome On the 5 Things You Need To Know To Create A Successful Career Buying, Rehabbing, and Selling Properties
Educate yourself. Markets change constantly. The industry and economy does too. Keep in the know. Read, network, learn from others. Particularly when first starting out, many borrowers have told us that they shadowed another investor to learn the ropes. There are also many investors who are willing to help those who are new to real estate investing.
Shows like Flip or Flop and Fixer Upper with Chip and Joanna Gaines have really glamorized the creativity and enjoyment that comes with buying a rundown home, fixing it, and then selling it for a profit. Some amateurs have ventured into this industry and have made a lucrative career out of it. But others, particularly when a market is stagnant, have lost their shirts. As a part of my series about the ‘5 Things You Need To Know To Create A Successful Career Buying, Rehabbing, and Selling Properties’, I had the pleasure of interviewing Michael Bourque.
Michael Bourque is Chief Executive Officer of LendingHome. As a financial markets veteran, Michael’s 20 years of executive experience include financial leadership positions at General Electric across various industrial manufacturing and financial services businesses. Michael received his B.A. in Math from College of the Holy Cross and earned his MBA at the Wharton School of Business at the University of Pennsylvania.
Thank you so much for doing this with us! Can you tell us the “backstory” about what brought you to the Real Estate industry?
After a rich 15-year career at GE, I decided I wanted a change and the chance to move to a smaller company where I could make a big impact. That intrigued me. During my time at GE, my family moved around a lot and we bought and sold homes four times, usually with limited financial success — although we loved everywhere we lived. So, the opportunity to move to a company in the real estate space and get nearer to this massive industry and learn about it really interested me.
Can you share with our readers the most interesting or amusing story that occurred to you in your career so far? Can you share the lesson or take away you took out of that story?
Early in my career, I was on GE’s Corporate Audit Staff, which was a fast-track development program for future leaders where they moved you around to a different GE business somewhere else in the world every four months. Part of our training was a session on emotional intelligence, and it blew me away. I hadn’t heard or learned anything like that before. Anyway, there was a time when one of GE’s divisional CFOs thought they may have a significant problem, and I was sent across the country with one of his trusted lieutenants to figure out if a problem existed or not. The leader at the site was not told the two of us were coming, and he was incredibly upset when we arrived. He took us into his office and yelled and screamed at us endlessly. Bad words and all, really foaming-at-the-mouth angry, for about 20 minutes.
I thought about that training and stayed straight-faced and calm the entire time. At the end, I acknowledged how he felt but said that we have a job to do and appreciated his understanding. When we left, my co-worker stopped me and said that he’d never seen someone react so calmly to such a crazy situation. I just didn’t think rising to match his anger would have been helpful. At the end of the day, none of us can control anyone else and even sometimes the circumstances we find ourselves in, but we all can build up awareness about the right way to handle it. That emotional intelligence training really stuck with me, and I think it’s something everyone can benefit from.
Do you have a favorite “life lesson quote”? Can you share a story or example of how that was relevant to you in your life?
A book I read four-to-five years ago was called Peak Performance, by Brad Stulberg & Steve Magness. It’s really about helping high performers sustain that over time without burning out. One of the concepts in there is a simple formula, “Stress + Rest = Growth.” This applies whether you’re talking about marathon training or being a business leader.
The idea is that you can’t redline forever without doing yourself harm, and ultimately, you need to follow periods of intense training or work with periods of recovery. In doing so, you create the ability for real growth.
Earlier in my career, I’ve found myself pushing the envelope too hard — little sleep, poor nutrition, no exercise — to the point where I’d barely get to a major milestone, like a deal closing, a board meeting, etc., and then my body would almost always shut down immediately after and I would fall ill or get sick. This just isn’t sustainable. And so, this simple formula to me is a reminder to be intentional about how you’re living, to take care of yourself, especially in times of stress, and be sure to give yourself the right dose of rest when needed.
Are you working on any exciting new projects now? How do you think that will help people?
Keeping happy customers is important for us. There are situations that might come up where if we could anticipate an unhappy customer, we could take steps to remedy it before the customer starts to think about going elsewhere. One of our data scientists has been digging into this problem and is developing a machine learning model to help us predict when a customer might be unhappy. We are optimistic that we can use this to predict these situations early enough to fix them.
In mortgage origination another interesting problem is how do you efficiently and safely determine your credit policy for making underwriting decisions. In other words, what are the criteria for determining if you will lend to a particular borrower. The more permissive you are, the more customers you will have but the more risk you will take on. The key to scaling as a lender is to have a sophisticated approach to defining credit policy that allows you to lend to borrowers who are good credit risks but maybe not obviously so. This requires looking at many more variables and having more rules and models factored into the decision. We have a project underway to reimagine this credit policy as a modeling language that our risk analysts can use to create, test and then deploy directly into production. This will allow us to safely iterate on our credit policy without having to involve our software engineers in the process.
What do you think makes your company stand out? Can you share a story?
LendingHome is the only company focused on serving real estate investors across the entire lifecycle of a transaction. We do this by leveraging our purpose-built software platform that creates structured data that we use to help our customers be successful.
To put it in perspective, we’ve aggregated over 900 million data points across more than 25,000 completed transactions to date. That gives us a tremendous information advantage over our competitors, most of whom are more traditional, offline lenders. The significance of that is best illustrated by looking at customer outcomes: For people who buy, renovate and resell homes, our analysis shows they make money about 76% of the time. If you are a LendingHome customer, that number jumps to 93%. We’re really proud of our abilities to give customers a great experience and help them be more successful.
None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story about that?
I had the privilege of working with so many great people across my career. I wouldn’t be where I am today without them. That said, I’m particularly grateful for the mentorship from Pete Mondani during my time at GE. Pete was the head of HR for the finance function there, and he also was a Holy Cross grad, and the person who recruited me into the company as an intern. So many times, over the years, he went out of his way to share feedback, observations, and perspective and also to give me advice on my career, on life. I can’t thank him enough for his counsel and friendship over the years.
You are a successful business leader. Which three character traits do you think were most instrumental to your success? Can you please share a story or example for each?
Hard work. It still surprises me when I come across someone who is unwilling to put in the extra effort to be successful. I remember something our coach would say during my high school hockey days, “Hard work beats talent if talent doesn’t work hard.” Many times, in my career, I haven’t been the smartest person in the room, and that’s been great because I’ve learned from some incredible people. But regardless of that, I’ve always made sure I put in the best effort I could.
Don’t shy away from things that are difficult. Every now and then something will come up in your career that’s big and challenging, maybe even a bit messy. Some people run from those. I’ve always looked at those as opportunities to challenge myself and gain unique experiences.
When I arrived at Ocwen, the company had been growing very quickly but had caught the eye of regulators, especially those looking to exact pain from mortgage companies coming out of the global financial crisis. A few months in, when it was clear the situation at the company was becoming very challenging, most of my mentors advised me to cut and run and not get caught up in the situation. I took a different view. Given I was new there, I know I didn’t create any of the challenges we were facing, but I felt an obligation to our 12,000+ employees at the time to try to find a path through. It turned out to be an incredibly difficult four years, but I wouldn’t trade the relationships, lessons and personal growth that I acquired from that experience for anything.
Active listening. When I was working at GE’s Oil & Gas business in Italy, late one Friday I was meeting with our CEO reviewing the quarterly outlook with one of the analysts on my team. The individual was an awesome guy who had boundless energy but wasn’t always the best listener. At one point Claudi, the CEO, said to him, “when I’m talking, are you actually listening or just waiting to talk?” We had a good laugh about it at the time, but that phrase really stuck with me. It’s so simple, but so true sometimes. And so, since then I’ve tried to be a good listener, be patient in conversations, and really hone in on what people are saying. That’s helped me build stronger relationships, be more empathetic and also ask better questions.
Ok. Thank you for all that. Let’s now jump to the main core of our interview. Can you share 3 things that most excite you about the Real Estate industry? If you can please share a story or example.
The real estate industry is enormous. It’s the largest industry in the country and there is so much potential for growth and for positive change.
Real estate presents opportunities for everyone. A great example is my grandmother. She was a successful realtor in Connecticut for over 30 years, but only after she raised five kids and put herself through community college. That she started her journey later in life didn’t matter. Real estate was there for her. I love that people of all backgrounds and all levels of experience can find a place in this industry and be successful.
The other thing that’s exciting is the rapid change occurring now. There’s so much information available online for consumers, you can’t help but be well informed about what will probably be the biggest purchase of your life. That’s great. We’ve also seen all sorts of new business models pop-up over the last 10 years trying to bring more transparency to the process and make things simpler and easier. And the emergence of companies like LendingHome that are bringing new software tools and technology to the space is also very exciting.
Can you share 3 things that most concern you about the industry? If you had the ability to implement 3 ways to reform or improve the industry, what would you suggest? Please share stories or examples if possible.
Unfortunately, the real estate industry has a dark past as it relates to racist and segregationist housing policies. These disadvantaged minority homeowners, especially Black Americans, as they were often unable to live in certain areas or unable to obtain mortgage financing. While these policies started changing in the ’60s, it meant that a generation of Black Americans missed out on significant wealth generation and class mobility opportunities in post-WWII America, when housing was a major force of growth for the country. While today some of the more overtly discriminatory policies are gone, too many cities and towns still have zoning laws around lot sizes, minimum square footage, restrictions on multifamily development, etc. that disproportionately impact minority communities. This needs to change.
Another structural element of the real estate industry that needs to change is some of the outdated fee and service streams consumers are forced to incur to transact a home. One example is title insurance. 50 or 75 years ago, it made more sense that you’d want some protection against the seller not actually owning the property they were trying to sell given how hard it was to verify ownership. Today, with the widespread availability of records in this country, it seems a bit silly that consumers are still paying $1,500-$2,000 per transaction for this. Claim rates are minimal and this really just acts as a private money tax on transactions.
What advice would you give to other real estate leaders to help their teams to thrive and to create a really fantastic work culture?
Culture is not about the things you say, but rather about the things that you do or don’t do, or that you accept or don’t accept other people doing — all of these things influence culture. When I think about how we’ve really transformed our LendingHome culture over the last few years, it’s been driven by a few clear things:
We care. We treat people right — like we would want a loved one to be treated. This includes things like fostering an environment of teamwork and shared success, assuming positive intent in every interaction, and sharing developmental feedback to help people grow. We also extend trust to each other to do what’s best for the company.
We challenge our people. Ultimately, we all want to work on things that matter, and learn and grow ourselves in the process. At LendingHome, we’re trying to solve hard problems and positively impact society, and helping people understand how what they do everyday fits into that is really important.
We have fun. None of us takes ourselves too seriously, and we make sure to celebrate our successes.
Ok, wonderful. Here is the main question of our interview. Can you please share with our readers your “5 Things You Need To Know To Create A Successful Career Buying, Rehabbing, and Selling Properties”? If you can, please give a story or an example for each?
To scale a business in buying, renovating, and selling, there are a few things real estate investors should do:
- Research their local market, understand comparable sales, and figure out what home features and details sell well in the area you are investing in. This knowledge is often gained through experience but discovering the perfect balance of how many bedrooms/bathrooms, square footage, home repair needs, floorplan, and the overall project plan is extremely beneficial to creating a successful project.
- Have a budget and business plan in place every time, and do not veer too far from it. Also, leave room to be flexible as projects run into unforeseen mishaps occasionally and you should never be in a position that can jeopardize your returns on investment. Plan ahead and think smart.
- Develop strong relationships with your partners. A lender you can trust is crucial to the success of a project. Having reliable funding is key to hitting deadlines and ensuring that your renovations are completed. Other key partners are real estate agents, stagers, contractors, project managers, attorneys, and wholesalers, though not every role is important to each real estate investor.
- Set a strict timeline with contractors and pay them incrementally as they finish projects within the renovation. A lot of our customers say that this tactic is instrumental for success. It avoids issues by keeping timelines clear and sets the right incentive while ensuring the project moves along smoothly task by task.
- Always keep an eye out for investment opportunities. Sourcing a property is a difficult issue for many real estate investors. This feedback was actually a main inspiration for the creation of LendingHome’s Property Marketplace. Investors should use digital marketing tools and social media (there are many public Facebook groups that are helpful) to stay connected to the community to find homes that fit your portfolio plans.
- Educate yourself. Markets change constantly. The industry and economy does too. Keep in the know. Read, network, learn from others. Particularly when first starting out, many borrowers have told us that they shadowed another investor to learn the ropes. There are also many investors who are willing to help those who are new to real estate investing. Don’t be afraid to ask questions and discover what you are good at in the field, and what you can improve upon. And once you turn your business into a bonafide career, you can delegate the things you don’t do as well to others.
- Just do it. Get out there and try. Make offers, create a scope of work with a contractor. LendingHome’s Director of Sales, Charles Goodwin is also a real estate investor. As he says it, “You learn the most by trying, failing, and falling forward.” Be careful, but you will learn the most by doing.
What are the most common mistakes you have seen other people make when they try their own hand at house flipping? Can you share any stories?
Common mistakes we have heard from borrowers is overextending their budget and timelines and buying a house to renovate that has too much damage. Overall, not doing enough due diligence on everything needed to fix the house in order to make it market ready can be a large bottleneck.
For instance, say an investor accepts an offer on a house without the inspection contingency for timing’s sake, and later learns they need a new roof. That’s a lot of incremental expense that can significantly reduce the gains an investor might make on the property. Those kinds of scenarios come up often, unfortunately.
Lastly, not doing research as it relates to title work, hazard disclosures, and other details can also cost thousands, as there can be buried surprises in those documents.
From your experience, what can be done to avoid those errors?
Doing due diligence and research and developing a carefully thought-out business plan often help real estate investors avoid mistakes and mishaps. It is also very important to take your time. It can be exhausting to go analyze dozens of deals. Falling into the habit of working and assessing too quickly is easy to do, but detrimental. It’s important to take your time and make sure you don’t miss anything. Avoid cutting corners at all costs — you usually will pay for those in the end.
You are a person of great influence. If you could inspire a movement that would bring the most amount of good to the greatest amount of people, what would that be? You never know what your idea can trigger. :-)
There’s a lot of positive change the world could use right now, but first I think we need to start smaller and focus on ourselves as individuals before we can tackle the big things. What I mean by that is, I would love to find a way to help everyone live better and be happy. There are no quick fixes and no amount of likes that can overcome things that are missing in life, and none of us can improve the world if we first can’t improve ourselves.
I’m going to cite the Peak Performance authors here again, but I think they’re spot on in advocating for the following habits: move yourself a little bit every day, eat whole foods, find community, spend time in nature, don’t eat or drink too much, and don’t smoke. And the importance of the ‘community’ part of that has never been more apparent having seen the detrimental impact that COVID-imposed isolation has had on so many individuals.
If you follow these habits, you find perspective, you figure out what matters to you, and with that, I really believe happiness can follow. The more people can do that, the more space we create to focus on the things that really matter like families, like relating to each other in a healthy and productive way, and solving some of the generational defining challenges in front of us like climate change, humanitarian crises, etc.
How can our readers further follow your work online?
Thank you for your time, and your excellent insights! We wish you continued success.
