BiggerPockets Podcast 154 with Bob Couture Transcript

Link to show: BP Podcast 154: Finding Incredible Deals to Flip or Rent from 3,000 Miles Away with Bob Couture

Josh: This is the BiggerPockets Podcast Show 154.

Bob: I think that's the beauty of real estate. I couldn't sell it but I have other strategies, other exits to it.

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Josh: What's going on, everybody? This is Josh Dorkin, host of the BiggerPockets Podcast here with my co-host, Mr. Brandon Turner. A very Merry Christmas to you, Mr. Turner.

Brandon: Merry Christmas to you, too, Mr. Josh Dorkin. How are you doing? Happy Hanukkah.

Josh: Oh. That's really nice.

Brandon: I know it’s a little belated, belated. In my own defense, it is currently several weeks before Christmas that we're recording this so Hanukkah has not actually begun yet. Am I correct?

Josh: Wow.

Brandon: Am I wrong?

Josh: Do whatever you can to dig yourself out.

Brandon: Take it!

Josh: This is our third or fourth take of this. We can't get it right.

Brandon: I just become more racist every time we do this.

Josh: Unbelievable. Hey, everybody. Thank you for listening. We're really excited to have you here today. We've got a really cool show and we're going to get to it in just a minute. Before we do, let's get to today's Quick Tip.

Brandon: Quick Tip.

Josh: Today's Quick Tip is:you guys, it's the holidays. Take a day off. Enjoy the day with your family. If you're listening to this one, it's not the holidays, I don't know, take the day off today.

Brandon: I'll take a Quick Tip.

Josh: We all got to take some kind of time off. I'm guilty of never doing it. Maybe I'll listen and actually follow my own directions.

Brandon: I know. I heard a keynote speech this summer. It was by a guy named Grant Baldwin. Grant was talking about actually schedule time off for you to take time off. Don't just assume, "I'm going to take some time off in the future. I need to have time off."

He said go to your calendar right now. Mark a big X and say, "I'm not doing anything that day." When somebody calls you up and says, "Hey. Can we hang out on Saturday?" "No, I can't." They're going to be like, "Oh. What are you doing?" "Oh, I'm not doing anything."

Josh: Or, "I'm watering plants," whatever it is.

Brandon: "I'm not doing anything." His point is make time in your schedule to not do anything, to just be with your family or even by yourself and just not work. That's a good Quick Tip, Josh. Way to think on your feet.

Josh: There you go. There you go. On my toes, on my toes. Let's get to today's sponsor.

Brandon: This episode is brought to you by realtyshares.com. RealtyShares is a real estate crowdfunding platform that allows accredited investors to invest in pre-vetted real estate deals online. Investors can browse and invest in both residential and commercial properties that yield returns of 8 to 16% annually.

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Josh: Cool. Big thanks to our sponsor. Big, big thanks. All right, guys. Today we've got a great real estate investor to chat with. Before I move forward, really, really quickly, we want to thank everybody, everybody for leaving us ratings and reviews. This is the last show of 2015 and we're super excited. All right.

Today's guest is Bob Couture. No, he's not related to an MMA fighter.

Brandon: Or Juicy.

Josh: Or his good friend, Juicy. Bob is a real estate investor living in Southern California and investing in Massachusetts. Bob's got some really cool processes that he uses to actually do that. He doesn't do any kind of turnkey stuff. He’s actually built a system that works for him. It's great and perhaps it will work for you. Pay attention and let's bring on Bob.

Welcome to the show, man. It's good to have you here.

Bob: Great. Thank you. Thanks for having me.

Brandon: Yes, yes. It should be fun today.

Josh: Of course.

Brandon: You are our most bald guest we've had yet so that's exciting.

Bob: All right.

Josh: Wow. Way to just start there.

Brandon: I got to start there. Yes. You're also part of the most fit. I don't know. You look like you could take me in a fight.

Bob: I have to now after that comment.

Josh: Yes. His address is...how's it going?

Brandon: Yes. Bob, how are you doing today?

Bob: I'm doing great. I'm doing great. Yourself? Both of you? All well? All well in...where are you? In Washington, in Denver?

Brandon: That is correct. All well here, yes.

Josh: Sure. Where are you? Where are you located? Stop talking, Brandon. Where are you located?

Bob: I'm in Los Angeles.

Josh: Oh, nice. Nice. What part?

Bob: Hermosa Beach.

Brandon: Really?

Josh: Oh. Hermosa is awesome. Yes. Nice, nice. Is that where you do your real estate?

Bob: No. I invest in the greater Springfield area of Massachusetts.

Brandon: Oh, really?

Josh: Nice. Let's talk about that. Are you from Mass. or are you...how did that all come about?

Brandon: Yes. I'm originally from West Springfield, Massachusetts, moved out to California after college. Then, when I decided to get into the real estate piece, when I looked around and what I could do in Los Angeles with the money I had, I said, "Well, I know Massachusetts."

I had a good support network there. I grew up renovating houses and doing painting, interior, exterior painting with my Dad as a kid. He was looking for some projects to do. That's how it kind of all got started back there; saw what I had and where I could do it. I understood Massachusetts. I understood that area so I figured I'd go there and invest.

Josh: There you go.

Brandon: Can you let us know a little bit about who you are? What do you do? What's your investment strategy? So people will have an idea what you're doing from a long distance.

Bob: Yes, sure. I'm half of S&C Homebuyers. My other half, my partner is Justin Simmons. He's the boots on the ground. He lives in that area. He has his construction supervisor's license. He manages the projects, gets the rehab numbers.

Here in sunny California, I burn up the phone and fill up his calendar, get some needs there. We do a lot of direct mail. We also network with a lot of agents. I try to get him in front of a lot of houses and then I'll do the negotiations. My piece of it is the acquisitions and dispositions part so bringing those deals to the table and then go from there.

Brandon: Okay.

Josh: Cool. Let's take it back to the beginning. You talked about you grew up renovating houses and doing painting and stuff with your Dad. Was he a contractor?

Bob: Painting contractor, yes and then went on to do some remodeling.

Josh: Okay. You were kind of raised up through this culture. What kind of triggered it for you? Like, "Hey I want to start doing this. I want to get in to the business."

Bob: I kind of joke that I was the last one to know that I was supposed to get into real estate. I grew up in that industry on the contractor's side. I think my father expected me to kind of take on that business but I went off to college, went on to do other things, worked in corporate America, did some time with the military.

Then, once I came back from a deployment, went back to a nine-to-five job. I just couldn't find myself. I was trying to figure out what do I want to do with my life. My wife kept telling me real estate. Her family is in real estate, commercial real estate.

Then, I thought when you say, "Get into real estate," it was being an agent. That didn't seem very appealing to me. Then, this world of real estate investing opened up. I was like, "There it is."

Josh: How did that happen? Tell us about the beginnings.

Bob: I came back from a deployment from Afghanistan. I went back to my job at an aerospace and defense company. It was about six months in to it and I was like, "This is not for me. This isn't what I wanted to do anymore."

I was talking to my father. It was winter so things are usually slow. He's like, "Well, let's do a project together. Let's find a house and do something like that." It's something he always wanted to do and then it was born from there.

Josh: Nice.

Brandon: Cool.

Josh: What was that first project? What was the first deal?

Bob: It was a Colonial in Springfield, Mass. The house, I think we got it for $120,000, $125,000. I put another $25,000 in to it and then tried to sell it at the $180,000, $190,000 mark. It sat on the market and sat on the market. It sat on the market. Yes. It never sold. I had gone on to two other projects.

I know we started it too high and then I became an accidental landlord from there. I decided I'm not going to sell it for a loss. I think I can try to make it a rental and we went from there. Beautiful house and everything but I learned some good lessons out of that one.

Josh: Did you ultimately sell that property or do you have it in your portfolio?

Bob: No. No. It's probably one of my best producing rentals right now.

Josh: Oh, right on. All right. You get in. You think you're going to flip this house and you get stuck with it. You were able to hold on obviously and reap the benefits of the property long-term. You said you did two projects thereafter. Were those flips and were they successful? What happened with those?

Bob: No. Went on to another one and rehabbed that one. Again, that one wasn't selling. We're coming in to the winter. Am I going to hold it for another couple of months or get a renter in there? I was kind of doing a dual strategy -- had it for sale and trying to do for rent and take whatever came first.

Josh: Yes, yes. On the pricing, obviously you got the pricing wrong in the first one. Sounds like you got it wrong on the second one. I'm assuming at some point in time you realized, "Hey. I can't keep overpricing it," or "My comps are screwed," or "Something’s wrong here. What am I doing wrong?" What was this a-ha moment that your pricing wasn't exactly correct?

Bob: On the first one was I was taking the advice of the real estate agent and where I knew better but when I could be leaving $20,000 or $32,000 on the table, I'm like, "Well, that's the expert. I'm going to go with that."

The second one, I thought I had the price right. It just was not the right neighborhood for. I think comps-wise it was great. It was just the type of house. I learned from that. It was a sub 1,000-square foot house. That was just not ideal. Great rental but I screwed up on that one.

Then, I started becoming more and more conservative on those, on my pricing, on my ARV.

Brandon: Yes. In a way, you kind of became an accidental landlord but you figured this stuff out. A lot of people I know they try to flip houses especially if they don't sell. I know people just give up. They just say, "You know, I'm done. I quit."

I like the fact that you said, "You know what? I'm going to figure this out. We'll make it a rental. Maybe we'll sell it someday in the future." You got plans for selling it when the market's better. The market is probably better now than it was then. Am I right? How long are you going to hold that property for?

Bob: I've used both of those properties to put into a blanket loan to be able to invest in others and so I have these for five years.

Brandon: Okay.

Bob: Or I could go and sell them but there are some penalties with that but I think that's the beauty of real estate. I couldn't sell it but I have other strategies, other exits to it where if it was a sock, it's either sell it or hold and that's about it.

Brandon: Yes, yes. I love that. I love that your mind thinks that way. That's cool. It's one of the traits that I think is most important for a new investor is just that being able to figure it out. We talked about that last week or the week before on the podcast here just that trait of figuring it out when you're sure what to do. Kudos to you on that.

Your first few deals were those failed flips. I'm assuming you eventually got better at flipping. Am I right?

Bob: No. We're still doing that.

Josh: Why did we book you on the show?

Brandon: Tell us about your first successful flip.

Bob: That happened to be the one that I did not want to flip at all. I got this house. I was doing another one at the Capes. That's on the other side, at the very end of the state so I was kind of back and forth in Massachusetts. I'm bouncing from Western Mass. to Eastern Mass.

Then, I get this house from a website lead. I didn't want to flip it. I was trying to wholesale it. No one was biting. It wasn't a great wholesale deal but it had some room to do some work on it. This is a house where I learned about that you don't over-rehab it. I did the least amount to it and it was one offer, one sale. It was the quickest thing. It was the best one to date.

It was a great thing out of this, too. Great things happen from some bad experiences. This seemed to be like a really bad deal going in and ended up being a great flip and I got to meet my business partner because I tried wholesaling him the deal. We got to talking and just found out that we're both like-minded guys and then realized we were the pieces of each other's business that were missing.

Brandon: That's cool. That's cool. How many flips have you done total now with your partner?

Bob: With my partner, we're in our twelfth one together. Each of us did five each before partnering up.

Brandon: Okay, okay. You're figuring this stuff out. That's cool. I want to dive a little bit into this idea of finding the deals before we go too much further. We have about finding, finance, and all that. You mentioned direct mail. We haven't talked about that on the show here in a while. It's been a lot of episodes since we talked about that.

Could we dive in to your direct mail business a little bit? Especially because of the fact that you live across the country from where you're actually doing the work. It shows that people who are living in LA or San Francisco or whatever could potentially partner with somebody in another area that does the boots-on-the-ground work.

Josh: Hold on.

Brandon: Sure.

Josh: Before you go in to that, Bob. I'm just curious. If you didn't have that personal knowledge of Western Mass. yourself, would you feel comfortable investing there with your partner or not?

Bob: No. Not in the outset.

Josh: Okay.

Bob: Because when we first partnered up, we didn't know each other. I rely on him a great deal about his knowledge of that area but that relationship has taken a while and trust is developing. No. I'd probably have a lot of trouble with that.

Brandon: Okay.

Josh: Right on. Right on. Yes. That's something that would just come over time. I guess the real quick question is if you're looking to...for the listeners, I don't want to lead people to think like, "Hey, you just to find a partner who is an expert in an area and get in to bed with them," because it's kind of hard. There's a romance that comes before getting in to be with people.

I guess my personal belief is you should not just jump in to bed with somebody and expect them to be the expert. You have to feel them out, make sure you kind of feel comfortable with the area and with them before you do that. Would you agree?

Bob: Oh, absolutely. I'll add on, too. I still go back. I go to Massachusetts once a month. One, I think it's important to be on the ground there, to visit with my partner, also to network with our bankers, our private lenders. It should be just "that guy out in California." I want to be on the ground and meet the contractors, too and our A-team. I think that part is really important.

The beauty of if for me is my family is over there so I get to go back for my business and I get to be with my parents and my sisters and visit everyone. I try to create my lifestyle around this business and it's worked out great.

Josh: Wow. Cool.

Brandon: That's cool. That's cool.

Josh: All right. Let's get to the direct mail stuff.

Brandon: Yes. I just want to know. What are you doing for direct mail? What does it look like? What kind of letters do you send it out? Is it postcards? What does the specifics look like?

Bob: Now it's much more branded on our mail campaign. I think you've had in the past Tucker Merrihew and he's got the Deal Finders Academy. We've kind of styled it after some of those things. We've done some of our own. We've tested a lot of different things from postcards to branded mail to the yellow letters. We're continuing to cast and measure those things to see what works out.

I find the branded pieces are better for us because the phone may not ring as much but when they do, we're all on the same sheet of music. They know that I'm a home buying company and I want to buy their house. It's not that Couture wants to move his family in to your house and try to offer you something. I think that's been working out for us.

Brandon: You're not sending them a piece of yellow lined paper that just says, "I wants to buy your housez," or something like that? You're actually sending something nicer, like a letter?

Bob: Yes, absolutely. Handwritten letter and then...we'll go through some different sequences. We'll send out a postcard just in case that gets returned to sender, it's less expensive for us.

Brandon: Ooh. That's a good tip.

Bob: Yes. Then, the second one will be a handwritten letter and then we kind of move on from there. It might be a printed letter as we go through and then the last touch might be a postcard as well.

Brandon: Yes. It just never occurred to me but that's a fantastic tip. It was kind of casual for you. I never heard of that before, send out postcards first and then you get to see who is going to be undeliverable and then you don't have to send to them the letters again. I don't know. I like that idea a lot.

Bob: I just realized that about a week or two ago. I was trying to figure out 2016 and doing the plan. That just came to me just recently.

Brandon: That's cool.

Josh: What do you put in the letter? Forget what you put in the letters. Who do you market to? Who are you actually targeting with your campaigns?

Bob: Oh, a lot of driving for dollar leads. We'll also target absentee owners. I know that that's a very popular one so we got most of our competition there.

Josh: How do you mail driving for dollars people? I don't fully understand. Are you driving and then finding them and then mailing them or are you finding some list?

Bob: We have some bird dogs, some interns that are driving and then we'll mail those out. They'll identify houses in some form of distress; take those addresses down. They'll do some research on the owner and then the mailing address and then we handle the mailing from there.

Josh: Okay.

Brandon: Yes. Bob, I have a question about this whole...I want to dive into the topic of having other people doing your driving for dollars because we talk a lot about driving for dollars. It's one of my favorite strategies but it takes time to do that obviously. If I'm going to go get my car, that's not very scalable. I can't be analyzing deals if I'm driving for dollars. I can't be doing a lot of things if I'm driving for dollars.

You mentioned you have other people doing this for you. How does that work? Do you pay them to do that? Do they get commission? Do they wholesale it to you? How does that all work?

Bob: It's set up in a couple different tiers. One, it's not paid by the hour. We're kind of exchanging services. One is they're driving for dollars, creating that list that we're mailing out. It doesn't cost them anything other than their time and their gas and all that.

In return, we're offering to take them on to walk-throughs on properties and showing them rehab costs of that. They'll walk through with my partner, Justin. He had kind of taken them through that piece because that's the part where we're finding newbies or new wholesalers don't understand those construction costs or those rehab costs. That we think is a really good trade-off.

Then, if that lead comes in and there's a flat fee of...if I'm negotiating the sale then we'll give them a referral fee or if it comes in and they feel like they're ready to kind of take on that negotiation then they tell me what they want and they'll wholesale it back.

We have the marketing piece in place and then when it comes in they decide which way they want to go. Are they ready to kind of take on that negotiation? If so, they create their own fee. If not then there's a flat referral fee.

Brandon: That's cool. I love that for a couple of reasons. One, it obviously frees up your time so you don't have to be out driving for dollars. Everyday I get e-mails from people that are like, "How do I get started in real estate? How do I know what this stuff is? How do I find them? How do I do all these things?"

It's such a good way for them to be able to learn as well. It's such a perfect, I guess you could call it partnership or whatever, symbiotic relationship or whatever you want to call it. I don't know. I think that's fantastic. Is that your primary way do you think you're finding deals or is it more from the list that you're buying? What would you say?

Bob: I think on the driving for dollars, it's taken a while. It's not the primary or our mailing is not the primary. It's about a third of where our deals are coming from.

Brandon: Okay.

Bob: The driving for dollars piece is probably half of that as well.

Brandon: Okay. Okay. Where else? Is MLS? Is it getting stuff with agents still? Where do the rest of them come from?

Bob: For sure. MLS is a piece but specifically on the MLS it's the REOs and short sales and then our network is probably the other third, referrals or with attorneys or agents, things like that.

Brandon: Okay. Great.

Josh: Right on. You're a real estate agent, right?

Bob: I do have my license. I use it to sell our properties.

Josh: Got it. Got it.

Brandon: Do you find it helpful? Do you recommend other people to do that?

Bob: To get their license? I think absolutely. For us, it works out great. One is the power of the MLS and having access to that so we don't have to kind of wait around for an agent to view a property. Yes, it works out great. Also, it helps us, too on the backend, on the disposition of the property, that sale to keep a little bit of that commission in-house, too.

Brandon: Okay. Here's a question about the driving for dollars. I know we're jumping all over the place a little bit. The people that are working with you, if somebody is listening to this show right now and they're new. They're a newbie. They want to do that kind of a job for somebody. They want to get out there and meet a guy like you.

How should they approach somebody like you? How are you going to take them seriously and actually want to help them find you deals? How do you think they should approach you?

Bob: Our very first one was Matt Scott. Matt was really good about, "Hey, I want to take you out for coffee, learn a little bit about the business." He offered. "I want to intern. I want to learn. What can I do for your business to help you?" He's kind of really kind of the catalyst to that whole internship program. He's still with us and kind of growing as our business grows, too. That's been really great. That's the exciting story.

For others, we've probably gone through about 20, 30 people that said that they wanted to do this. Then, when they actually have to go out and drive or do something they just fall off the face of the Earth. It's like, "Oh. This stuff doesn't just happen. Are you just not going to pay me to go and learn in this industry?"

We've got a couple of really quality folks now. They're really trying to learn and grow their business and understand. I think it starts off with that but know that you've got to give a little bit. I think we might be at a point where we're going to ask for X amount of leads before we start investing some other time.

It sounds a little cold but when you go through about 20 or 30 people that want to learn and then they fall off the face of the Earth and you're spending this time with them, it's tough. I want to give back. We want to give back. We started the Real Estate Investing Association to give back but there are only so many hours in a day. Then, you got to filter through those that are serious and those that are not.

Josh: Yes.

Brandon: Yes, yes. It's so true.

Josh: The 20 or 30, how many actually ended up coming through and doing what they said they were going to do?

Bob: Three.

Brandon: Wow. Yes.

Josh: Wow. 10%.

Brandon: I did a webinar last night and I said this exact thing. I said, "Out of everyone here," I don't know. There's like a thousand people there. "Out of a thousand people here, 90% of you will never take action on anything that we're talking about. You'll never buy a property. You'll never get out there. You're going to too afraid. Only 10% of you will actually do anything."

I find it on BiggerPockets. I find it everywhere you go. It's like 10% of people actually do stuff. Even listening to this podcast, I bet 90% of the people here are not going to invest in real estate. I hope to change that. I hope 90% do but that's just a fact that most people let fear or whatever it is stop them from actually taking action. Listen to Bob here.

Bob: There's something else that...this was kind of an informal kind of a research. I start polling some folks that got into real estate investing and actually did a deal. I asked them to kind of think back, "How long ago was it before you decided you're going to do this and then when you took action?" Almost all of them, it was about a year.

If I find someone that just said, "I just started. I just decided," I think I'm going to start telling them, "Let me know how things go in six months or a year and I can help you from there." If they're still around at that point, I'll help them to get to wherever they want to go.

I think the year mark is it. I think it takes that year to overcome that fear for whatever reason or get the ducks in the row to be able to move on.

Brandon: Yes.

Josh: In terms of somebody who is serious, you're saying it's a year but I don't buy that. No offense to you. I get that that's how it's worked out but there's got to be some other signs that somebody's serious than they've been around or they've thought about it for a year.

Are there other traits that these people have shown? Have they done something in that year? What's going to happen in that time period? I don't think it's time alone. What exactly has occurred for those users, those people in that time period that makes them any different than the other ones? Can you think about any?

Bob: Yes, a plan. Those that say, "I'm going to buy a property by this date. This property looks like this. This is how I'm going to pay for it or finance it." Those are the ones that you know are going to go. For us on the intern side, are those that are actually producing the driving for dollars. They have gone on to buy property. They have gone on to do something else because they're interested in learning and getting there.

I think those that have the plan for are the ones that are really interested. You learn pretty quick. What do you want to buy? Why are you interested in this industry? When they're not too sure about that answer yet or if that's not clear, it's going to take them a year for that picture to get clear.

Brandon: Yes.

Josh: What's in that plan? You mentioned, I think you used a different word but you mentioned criteria I think, the types of properties they want to buy, two-bed, two-bath between X and Y price, yadda-yadda. What else would somebody want to or need to have in this plan that they're putting together?

Bob: Their support team in terms of knowing that they have maybe an attorney. In Massachusetts we use attorneys, not escrow agents. Having an attorney, that support team, an agent, the attorney, their contractors, the understanding that their finances, what they want to buy and what that looks like. Some say, "I just want to buy," but they're thinking of, "I'll go in to multifamily, or "I'll be a landlord," or "I want to flip."

Understanding which flavor or real estate investing are they looking for. I think those pieces go in to the plan. What area? I have had one guy who was kind of bouncing back and forth from Boston area to the Western Mass. area. You got to pick one.

Josh: Yes. Cool. Cool, cool.

Brandon: Yes. I like that. To go back to the year thing, I know exactly what you're talking about in that there are so many people that they take me out for coffee. I used to go out to coffee with everybody who asked, everybody. I'm like, "Yes. Sure. No problem."

Out of all the people I've ever gone to coffee with, I can think of two people who ever bought a property and everybody else is still thinking about it or they're no longer in it anymore. I know what you're saying. I kind of just want to say, "Come back to me in a year. If you're still interested then I know you're serious," because there are so many things in this life that are exciting for a few weeks.

For a while, I wanted to do, start this business or be part of this or join this MLM. I don't want to join an MLM. People always want to join these things for a few weeks or a month maybe. Then, they get bored or they realize it's more work than they thought and they go on to something else. I don't want to interact too deeply with people until after they're past the honeymoon phase, if that makes sense.

Josh: The shiny object portion.

Brandon: Yes. Yes. That makes perfect sense.

Josh: Interesting.

Brandon: All right. You're doing direct mail. You're marketing these letters. You get a phone call and you're the one answering the phone. I want to talk about this a little bit because I'm selfish and I'm kind of picky ring because I want to do this.

I'm working with...actually, funny. My little brother is moving out to the Boston area. We've talked about whether or not we want to work together on real estate. He might want to flip a house. I said, "Maybe we can work together." I'm on the West Coast. He's in the East.

How do you guys work that? You answer phones obviously. Do you do all the negotiation till the end and then you send in your partner to go and inspect the property? How does that work between the two of you?

Bob: I'm trying to get down to seeing what's the least amount that they're going to accept for the property, the homeowner and getting an understanding of what level of repair it may need. Based on that, if we can find ourselves in the realm of 50% to 60%, 70% of ARV then that's the right time to deploy him to go to that house, walk-through.

Sometimes people aren't going to give that number and if it's in a desirable area, he'll go out. I just really try to filter that down to something that it seems like a good lead to send him out to those houses because taking in quite a number of phone calls and he'd be out there all the time.

Actually, that was happening in the beginning. I get a phone call and before even really knowing where we are, we'll go get the rehab numbers. That wasn't working out so great.

Brandon: Yes. What I want to do is have my brother probably answer phone calls and have the flip out in my areas, probably what we'd end up doing. I was so afraid of it. He's going to get these phone calls from direct mail marketing and be calling me everyday like, "Okay. Go look at this property. Go look at this property. Go look at this one."

That would just drive me nuts. I don't have the time to go look at dozens of properties a day because I'm here hanging out with you guys on BiggerPockets. I need to simplify. I need to make the time make sense.

When you're on the phone with those people, do you tell them that you're across the country? Do you not let them know that? Do you say you're partner is going to come look at it? How does that work?

Bob: I have a Google Voice number that is for that area. Then, if it does come up, I let them know that I'm in Los Angeles. I offer that i go back once a month so I may be in town and be able to view but then I always say that the person that's going to come view that property is my partner. He's going to do the numbers and then I'll be calling you back.

Brandon: People never put up any kind of weirdness about that at all? You're building the trust with them and then your partner is going to actually kind of almost close the deal in a way, right? Do people have a problem with that ever?

Bob: No. He's there to build a rapport with them but get the rehab numbers. I'll be closing that negotiation with them.

Brandon: Okay but you just do that over the phone primarily?

Bob: Yes.

Brandon: Okay.

Josh: Nice. Very cool.

Brandon: Yes. This is good because like I said, I really want to do this stuff. I know a lot of other people live in expensive areas. Maybe that's a job that they can do. If they have a brother or sister, cousin, aunt, whatever in an area that's more prime for investing, this is a really good strategy if you can find the right partner like we talked about, not just anybody who's going to do but if you can find the right person to work with...

Josh: And you know the area. You feel comfortable.

Brandon: And you know the area.

Josh: Yes.

Bob: Can I give you one tip on the mailing?

Josh: Please.

Bob: Have that mailing go out postmarked somewhere locally.

Brandon: Oh, okay.

Bob: I hired a mailing service and it was out of Texas. Every question came up was, "This is a scam. It's coming out of Texas. You're from Massachusetts." I'm mailing everything out of Massachusetts now just to avoid that question.

Then, when I started, too I was sending stuff in California or if I'm calling from the California number; sometimes I make an error and I'll call from my cellphone and they're like, "What's this California number?"

You tell them, "That's where I am," but it's something that you could avoid or you've already built this layer of distrust when it's coming from somewhere else and you got to kind of peel away from that. If you're mailing it from that area, you won't have to deal with that at all.

Josh: That's awesome. That's great.

Brandon: Yes. I love that. I love that advice. I love it.

Josh: What do your letters say? You don't have to give us the exact content. What's kind of the gist of what you're putting in there? You got the postcard. What is the process and what is the flow of the content of the mailings?

Bob: Sure. That's just more of "We buy houses. We're looking to buy houses in your area. It could be any level of either from just minor repairs to major renovation. We'll buy the house for cash. We'll close quickly." A lot of it the standard language and then that we'll handle the closing cost. "You don't have to deal with commissions and agent stuff."

It's branded as well. It has S&C Homebuyers. They know they're buying from a home buying company. Once they reply then we go from there.

Josh: Okay.

Brandon: Do you happen to track your numbers precisely? If you don't want to share that, it's all right, too. Out of everybody who calls you, how many of those do you end up actually going to looking at approximately or how many do you end up closing up those phone calls?

Bob: Overall, and this is not just from the mailing, but it takes us about 30 offers to close on one house.

Brandon: Okay. Okay. That's...yes. That's not terrible. I like having those numbers because my mind thinks like a funnel. I like to think of how many deals can I look at my desk? How many can I analyze of those? Of those I analyzed, how many can I make an offer on? Of those I offer on, how many will get accepted? Of those that get accepted, how many will get closed at the end of the day? It works like a funnel.

Josh: I was going to ask what that is. You said of those offers, you make 30 offers. How many of those are you actually hearing back or you're getting a response to? How many are actually going in to negotiation to lead to that actual one funnel deal?

Bob: That's a tough one because...I would say about a third where we get in to negotiations. About 20 of those will get ignored and ten we get in to negotiation. Then, others we finally six months or a year later they're like, "Hey, I still got that offer from you. Do you still want to talk?"

Brandon: Okay, yes. People come back and no doesn't necessarily mean no forever. It could just mean momentarily. What do you say when you make an offer? This is something that I'll admit that I'm not very good at. I feel weird making offers. I've been doing this for a long time but I still am not very good at it I feel.

What do you say when you make an offer? Do you say, "Hey, I'm going to fax something over, e-mail something over, mail something over," or do you just tell them right on the phone, "I'll give you $50,000. How does that sound?" What does your process look like?

Bob: It's a little of both. When I come back on to the phone with them and start to kind of feel them out for what the offer is. We're almost kind of talking about what that offer would be and then I already know what that number is going to be. If it works then I'll say, "Hey, I'm going to e-mail you this offer right now."

Even if it doesn't work, if that number doesn't work for them, I'll still send them that offer and say, "Hey, keep it around. Keep us as a plan B or I'll follow it up with you in a couple of months and see if things change."

Brandon: Okay. Cool. You typically kind of do it over the phone but you're also e-mailing them the offer. Do you ask for their e-mail address somewhere in that process I'm assuming then?

Bob: Yes.

Brandon: Okay.

Bob: If I don't get that or if they don't have one, I'll put it in the postal mail.

Brandon: Okay. Okay. Very cool. All right. Moving on from that area, let's talk about...

Josh: Let's talk about the deals themselves.

Brandon: Yes, yes. Let's talk about you get the deal. You buy the deal. First of all, how do you finance it?

Bob: Okay. We've done it a number of different ways. We're really learning through this year because our partnership started December last year so we're a year in. We're trying to kind of merge these two companies and two different ways of doing business into one.

One way of financing is we have cash for buying houses with cash and then try to refinance with the bank because we couldn't really find the bank to be there in time to be able to close. We have to close twice and get refinanced and we're having trouble with bank financing, too.

It's just taking such a long time, 60 days, 90 days. We got through two flips by the time the bank came back on the first one. We had to change the address. By this time, we're three houses in. We've been working out the relationship with the bank. That was one way.

Then another was crowdfunding. We use that. That's been really good. We've done two deals using crowdfunding. That's great. That gives us a really good confidence that someone's going to be there if the bank's not there or if we don't have the cash at the time. We know if it's a good deal or not because if they don't fund it then it wasn't really that great of a deal.

Brandon: Can we talk about that for a little bit? Because we've never had a guest on who's used crowdfunding. I don't think anyway. Maybe...

Josh: I'm not sure.

Brandon: I don't think so. First of all, for people who don't know what that is, what do you mean by you use crowdfunding?

Bob: The funding source that I use is Fund That Flip. Crowdfunding is an online...just go online. Request your criteria. They fund the deal but then they go back out to accredited investors that backfill that funding, if that made any sense.

Brandon: Say that again.

Bob: Okay. They'll fund a deal. We need $150,000. That crowdfunding source will fund the deal and then they go back to their investors to backfill that fund.

Brandon: Ah. Ah, I get it. Okay.

Josh: It's a little different than the portals where you put a deal in and then the accredited investors can come in. They see it and they decide if they want to put up X amount of dollars to be a part of it. This is all managed by this Fund the Flip guys.

Bob: Right. If I had to wait for the other accredited investors to go in, we never know when that will happen. It could be a week. It could be a month. Yes, they'll fund it upfront and then they make that offer back out to the investors.

Then, you can watch it get funded up by the accredited investors. "Hey, you're at 50% funding. You're at a hundred." It matters in the long run but for me to get my deal and get working I've already got the money to go and go do that.

Brandon: That's cool.

Josh: Okay. They'll look at it, the company themselves. They'll vet the deal and they'll say, "Okay. This is a good deal. We're going to finance you." They go out. They find other people to, as you'd called it, backfill or give them the money that they spent to finance the deal to you. Presumably, they come up with some kind of rate on that and that's it. Okay. Interesting.

Brandon: Yes. I've not heard of that strategy.

Josh: Yes. I haven't either.

Brandon: How does that compare with hard money? If you're going to go to the hard moneylender who is charging let's say, I don't know, 12% interest, 13%, 14% interest...you don't have to tell us necessarily. I don't know if you can tell us exactly what interest you got. How does that typically compare?

Bob: To me, I find it's like the Goldilocks of funding because on the hard money side, it was fast but very expensive. Where we were, they're talking 15%, 16% with points. On the bank side, we're at 5% but it's taking 60, 90 days. Good rates but really slow.

They're at around 12% with three points and I get the money in about a week. It was just in the sweet spot for us. Definitely helped us to keep the momentum going and yes, it worked out really, really good.

Brandon: For those people who don't know, what is a point? What are we talking about when you say there's three points or something like that?

Bob: A percent interest on the overall deal.

Brandon: Okay. Like a $200,000 deal, one point would be $2,000. Does that sound right?

Josh: Yes, yes.

Bob: Bingo.

Brandon: Okay. I do my [Inaudible][41:59] right there. All right. Crowdfunding, kind of a cool...there are a lot of companies out there that do it. I've read about them. I've talked to some of them but never actually done it because I just, I don't know. It makes me...it's a new thing. It's a new...it hasn't been around for a long time.

Do you recommend other investors should go out there and try that? Should they wait until they're more experienced to try it? Do you think it's worth looking at right away?

Bob: I think you need to be more experienced. I know for Fund that Flip they want to make sure that you've done a deal or there are extenuating circumstances, either that you're a contractor or something. You have some kind of experience before they'll lend.

I vetted them. I was a little nervous about it because here is this online site and I believe Jay Scott was on the board. I went on to BiggerPockets, said, "Hey. What is this crowdfunding site?" It gave me a little bit more confidence of who they are. That worked out great.

Josh: Right on.

Brandon: Cool. Cool. What price ranges are we talking about for these houses that you're buying?

Bob: We're buying in around $75,000 to $150,000, $200,000 range and then resale at the $200,000 to $350,000.

Brandon: Okay. This might just showcase my ignorance here but I didn't think...Massachusetts, when I think of properties there, I just imagined $800,000.

Josh: He's at Western Mass. There's a big difference, big difference.

Brandon: That's different? Okay.

Bob: Yes.

Brandon: I didn't even know there was a Western.

Josh: Yes. It's where out there.

Brandon: Okay, a little bit different out there. Okay.

Bob: There is a casino going in to Springfield so it's going to be on the map here soon. You're going to...

Brandon: Okay. I really do.

Josh: There's something about basketball over there? I don't know. James Naismith, was that the guy?

Bob: That's right. That's right. Basketball Hall of Fame, yes and volleyball in that area, too.Big, big area.

Brandon: Okay. All right. Cool. All right. You're buying these properties for you said like the $75,000 to $150,000. You're selling them at $200,000. What did you say? $200,000 to $250,000 or something like that range?

Bob: Yes. Yes, about $300,000, $350,000.

Brandon: Okay. Yes, yes. Those are good numbers.

Josh: Oh, yes.

Brandon: How much do put in to those kind of deals? How much work do they need?

Bob: $40,000 to $60,000. $40,000 to $60,000. On the higher end when we have septic systems...on the higher end when you have to deal with septic, you're going to be looking at a higher rehab cost. For the most part, that's about where we're going to be.

Josh: Right on.

Brandon: All right. All right. Very cool. Let me ask you this kind of last question about the process. Your partner, the boots-on-the-ground, you said he was a general contractor. Is that right or something like that?

Bob: Right.

Brandon: All right. Does he do the work himself? Is he hiring it out? Subs? How does the actual work get done?

Bob: It's hired out. This was kind of a learning piece for him, too because he did all his deals by doing all the work himself but it's really hard to go and continue to look at rehabs and it would just crush the flow of it. Yes, he's been hiring all that out and he's done a great job of pulling together our A-team of subcontractors here to get these houses done.

Brandon: Okay. Okay. Very cool.Very cool.

Josh: That's awesome.

Brandon: Josh?

Josh: No. I was going to say it sounds like you've kind of put together a pretty cool process running this company from 3,000 miles away. Can't be easy. How many times a year are you going out again to visit?

Bob: I go about eight times a year.

Josh: Eight times a year. Okay. That's a substantial amount. Your goal beyond meeting with your partner, are you scouting areas? Are you looking for new potential places to invest, new markets, new farms? What's kind of the idea there?

Bob: Outside of Massachusetts or that particular area?

Josh: In where you're investing.

Bob: We're looking to expand to another county and then just pushing in a little bit in to Connecticut as well.

Josh: Got it.

Brandon: What is your long-term goal? Where are you planning, heading with this business? You want to get and buy more rental properties eventually or is it just the flip and make those ton of cash? What's the long-term goal?

Bob: For us, the flipping business is to make the cash and then we each have our portfolio of rentals. We want to build that for ourselves, our respective families to have those there. Hopefully, there's not too many of the failed flips that have to come fall into the fact for that category. Yes, that's where we see ourselves.

This year is going to be really focused on getting a lot of our systems down and perfecting the single-family flip. Then, the following years will be developing a rental portfolio for that company there.

Brandon: Okay.

Josh: Got you.

Brandon: Cool.

Josh: Got you. My last question, Bob, your license is in Massachusetts, correct?

Bob: That's right.

Josh: Okay. You were able to get your license in Massachusetts despite living in California.

Bob: Correct.

Josh: Did you need a physical address to do that or is that just...

Bob: I used my parents' address in Massachusetts.

Josh: Okay.

Bob: I did take the one in California first and then they had some reciprocal program of I still had to take the test but you didn't have to take the education part.

Brandon: Okay.

Josh: Got you. Yes, perfect.

Brandon: Cool. Cool. This has been super, super informative. Again, I really want to do a lot of what you're doing. I want to pick up my flipping in the coming years and I know I can't do it all myself so I know I'm going to have to bring on my partner and most likely it's going to be my little brother because we work really well together. It's been good.

Before we get out of here, let's move over to the world-famous Fire Round sponsored by...

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It's time for the Fire Round.

Brandon: Fire Round, these questions come direct out of the BiggerPockets forums. We're going to throw them at you. Number one, this is kind of a rental one. "I'm looking to buy a single-family with a renter already in it. I have requested the payment records and the lease agreement. What else should I be looking for when I'm buying it?"

Bob: Look at the records of any improvements that were done over there, if anything on the mechanicals, the heating system, any of the upgrades that were done to that property, I think taking a look at that. On the rental side I would just say that.

Brandon: I think that's missed actually a lot of times. I think people just they kind of walk around. They may be doing their own inspection but they don't ever find out what exactly the history of what's been going on here. What have you done in the last few years?

Josh: Maintenance records, yes.

Brandon: Yes. Not a lot of people, not everyone's going to keep them but if you can get that, "Oh, the furnace was updated two years ago," or, "Hey, the furnace hasn't been updated in 35 years," those are pretty important to know for long-term planning for rental especially. Great. All right.

Josh: Cool. "What should somebody look for when trying to find a partner to do deals with?" Knowing what you know today, if you would start looking for a new partner to work with, what would you look for?

Bob: What worked out for Justin and me is that we were the pieces that each other were missing. When we looked back at our businesses, we were finding ourselves going through this pattern of hustling, hustling to find a house. Then, you find a house. Then, you're hustling and hustling to get that thing out in the market. Then, you're done and now you're like, "Oh, crap." Now you got to restart that marketing machine again and going.

For us, the way it worked out was I didn't have that extra T's on the rehab side but I felt that I was a pretty strong marketer. I can keep that marketing machine moving all the way through as he's focusing on getting the houses to market, getting those rehabbed.

If you're going to look for a partner, don't look for someone that has the same skills as you do. Look for those missing skills. I think that's what works great.

Then, someone you get along with. Was it Rockefeller that had that quote? It's, "Friendship founded in business is better than business founded on friendship." We've developed our friendship through the business because we're like-minded but brought different skills, complimentary skills.

Brandon: Yes. I love that. It's gold.

Josh: Got you.

Brandon: All right. What are some tips you'd give someone who's trying to buy a property outside of their state?

Bob: Boots-on-the-ground, having someone definitely there that really, really know that area. Go there. Go travel there. Just buy that plane ticket. Drive those streets, definitely something that you want to do.

Brandon: Perfect.

Josh: Cool. Cool. What are the best types of neighborhoods to look for when looking for purchases? That's really a tough question to answer. I'd say, what are the kinds of neighborhoods that you specifically look for in your buying criteria?

Bob: School districts, when it's got a good school district and I think that's where we want to be anyways so that's what we look for. Good school districts, good communities, low crime. I think the good school districts and low crime are going to come together. That's where we want to be.

Brandon: Awesome.

Josh: Cool.

Brandon: Awesome. I love it. I actually never really cared about school districts much until, I don't know, was it four or five months ago? We had somebody in the podcast talking about that because I never even thought about it. I don't have kids. I don't have kids yet. I've never really thought it was a big deal. Yet, we interviewed someone in the podcast. I was like, "That is a pretty big deal. People care about that kind of thing apparently."

Josh: Oh, yes.

Brandon: Anyway, I did a ton of research in it. Now, that's one of the main things I look for.

Josh: People will move a block away to be in a good school district versus where they are. Yes, it's crazy.

Brandon: Yes.

Bob: Well that’s huge.

Brandon: All right. We're cool. Hey, let's move on and wrap this thing up with the...

Famous Four.

Brandon: Famous Four, these questions are asked of every single guest every single week so you probably know what's coming. Number one: what is your favorite real estate-related book?

Bob: "Millionaire Real Estate Investor," Gary Keller.

Brandon: Awesome.

Bob: Just finished that one a little while ago and that really kind of helped to put things into focus. It was timely for me because as we're doing our 2016 operating plan, that kind of brought, really helped me figure out the pieces I need to put in place and kind of forecast. That was a great, great book.

Brandon: Okay.

Josh: Right on. What about business books? Is there a favorite business book?

Bob: Yes. For 2015, for me, I was really focused on doing the direct mail and sales and negotiations. I was looking for sales and negotiation books. ZigZiglar's, what was it? "Secrets in Closing the Sale" was great. One, I think ZigZiglar is fantastic. He's really just about that kind of ethically based selling and looking for those win-win's. That was a fantastic book for me.

If I could add another one on the self-help or productivity side, I really enjoy "Miracle Morning." That's really helped me develop...I get up early now and get my professional development set. I have a feeling I'm much more productive these days.

Brandon: We've actually got Hal Elrod, the author scheduled to come on a BiggerPockets podcast in a month or two from now, something like that. It's on the schedule. We've been communicating. Yes, we'll get him on the show and talk about more about that.

Bob: That's a good one.

Brandon: Yes. I love that book, too. I love the book. Changed a lot of stuff for me. Cool. All right. Let's see. Next. The question, Josh.

Josh: All right. Bob, what are your hobbies? What do you do for fun?

Bob: I've got two young kids. For us, it's family and travel. I think that's fun. I used to have hobbies like golf and skiing and all that stuff but to try to carve out five or six hours to go golfing, that doesn't go very well over here.

Yes, traveling with the family. Last, last year we did the cross-country trip with the kids. It's off to Massachusetts. This past summer, we went off to Russia for a number of weeks. That's been a lot of fun. Yes, doing stuff with the family.

Josh: Cool.

Brandon: Cool. All right. My final question of the day: what do you believe sets apart successful real estate investors from those who give up, fail or never get started?

Bob: I'll put in to the not having the proper road map. I use a road map as an acronym. M-A-P. The M, mindset, just not having the proper mindset. You were touching on this earlier of those who are not thinking about how they can do something. They quit on it. I had a colonel that used to say, "Don't tell me what I can't do. Tell me how I can do it."

Having that mindset, in this century you got to practically will things to happen and in creating that environment for yourself, being around supportive people. I've got a wildly supportive family. I've got a great business partner. I surround myself with positive people that can get things done. That's one.

Abundance is the A part of it, just kind of giving back and wanting to give back and helping others. We've done that with our REA that we started. Actually, that was born out of BiggerPockets. It was on the forum. People were like, "Where's our meet-up for real estate investors in Western Mass.?" There wasn't one. I answered that guy, "Let's start one ourselves." Then, it went from there.That's kind of cool.

Josh: Nice. That's cool.

Brandon: That's cool.

Bob: Yes. Then, perseverance. You got to stick with it and particularly with the direct mail. A good example of that is last summer I started a mail campaign. It started in June. This lady received four letters from us and it took her until November before she responded.

I get there in November. Do the negotiation. It took another three months before she decided...three months and this giant snowstorm before she decided, "Hey, I'm done. I'm ready to sell."

You got to hang in there. That was a good, what, eight months, nine months before that came to fruition. I think a lot of people would have quit by then. I think those are the three pieces. That's the road map.

Brandon: Cool. I like that.

Josh: Cool. Yes, it may be.

Brandon: Yes. Cool. All right. Great.

Josh: Awesome.

Brandon: Josh, last question?

Josh: Yes. Where can people find out more about you? You're on BiggerPockets, yes.

Bob: Definitely. Definitely you can find me on BiggerPockets, LinkedIn or [email protected]

Josh: Perfect.

Brandon: Perfect.

Josh: Bob, thank you so much for coming on, man. We really do appreciate it. Lots of luck as you continue to build out your business.

Bob: Thanks. It's a real honor to be here and I like being here with you guys today. Thanks.

Brandon: Awesome. We'll see you around.

Josh: Thank you.

Brandon: Bye.

Josh: All right, guys. Big thanks to Bob for coming on the show. We really do appreciate it. Merry, merry Christmas to you. Go be with your family. Get out of here. I'm Josh Dorkin...

Brandon: Signing off.

Josh: Signing off.

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Josh: We wish you a merry Christmas. We wish you a merry Christmas.

Brandon: Are we sure that's not copyrighted? Bring us… bring it right here. Isn't that what the song goes?

Josh: Yes.

Brandon: That's such a demanding song.

Josh: I don't know. Don't use that.

Brandon: Okay.