BiggerPockets Podcast 158 with Jeff DeCarlo Transcript
Link to show: BP Podcast 158: An Easy-to-Follow Blueprint for Building Your Real Estate Deal Pipeline with Jeff DeCarlo
Josh: This is the BiggerPockets podcast show #158.
Jeff: You know, that’s the kind of things that you don’t learn in these courses. They don’t tell you what to do. I mean, they say get the deal, go out and market it, sell it, make cash and you’ll be forever rich, but there’s kind of that second layer of, you know, doing the—
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Josh: What’s going on everybody? This is Josh Dorkin host of the BiggerPockets podcast here with my cohost Mister Brandon Turner. What’s going on, Brandon?
Brandon: Not a whole lot. What’s going on with you?
Josh: I’m good, man. Are you thawed yet?
Brandon: I’m getting thawed, yeah. I was just flew in from Minnesota where I went to the—this show actually comes out a week and a half later, but I went to the Vikings/Seahawks game in Minnesota because I was born and raised in Minnesota, but I’ve converted to a Seahawks fan.
Josh: You’re a traitor.
Brandon: I am a traitor. A lot of people have said that. It was negative 6 degrees in an outdoor stadium for 5 hours of standing there and the Seahawks won in the last 25 seconds.
Josh: It was a great game.
Brandon: It was an amazing game. Best football game I’ve ever watched, but a very sad bittersweet ending to it because nobody wants to win by the other team missing a field goal, but whatever, I’ll take it. A win’s a win.
Josh: It was all good. So your toes have—
Brandon: My toes are getting unthawed, yeah.
Josh: Yeah, that’s awesome. Cool. Well, welcome back.
Josh: Cool. So, yeah, everything’s great with me. It’s been a crazy first couple weeks of the year. Just lots of stuff happening, lots of excitement happening here on BiggerPockets.
Brandon: I love January because of that, right?
Josh: Oh, yeah.
Brandon: Because people love real estate in January. It’s like they’ve got their goals and they’re like, “I’m going to go and,” and traffic just explodes. Listeners on the podcast explodes, everything just explodes. It’s great. You guys are awesome.
Josh: Yeah, I’ve been calling it the January affect for the past decade. It literally is such that every January we see a pop in our traffic and across the board you’ll see that in the real estate space, and personal finance and things like that because everybody’s made their new year’s resolutions, they’re super excited and they’re ready to go. Well, this is a perfect show for January because this is chock full of action items and we’re definitely going to help lots of the beginners and there’s actually a ton of cool stuff for folks who’ve been around for a while as well.
Brandon: Yeah, today’s show honestly is one of my all-time favorites. I know I say that all the time, right? But like in terms of actionable content that I’m going to apply to my life this show is definitely one of my favorites. You guys will love it.
Josh: I think what I like best about it is a lot of people ask about how to do things and they go and they do them, but there’s always going to be contingencies, right? So, I believe it’s, Charlie Monger, Warren Buffet’s old partner, Buffet and Monger, he talks about looking for alternatives, right? So what’s going to go wrong? Before I proceed what’s going to possibly go wrong? Well, the cool thing about this show is, not that it’s what’s going to go wrong and using that to stop you from doing things, things are always going to go wrong. What this show looks at is when things go “wrong” what can you do to move forward? What happens is most investors, most people, stop when the “wrong” happens, and as you listen to the show you’ll get a better idea of what I’m talking about, but most people stop there.
What Jeff does, our guest who I’m going to introduce shortly, he takes it a step further. He does the things that the average guy does not do.
Josh: So this thing is amazing. There’s so many little tidbits so we’re supercharged about it. Before we get into it big thanks to everybody who’s been listening to the show. We’ve seen a nice pop in the amount of people who’ve been listening to the show this January so we’re super excited about that. If you are not yet somebody who’s left us a review or rating please, we love these things. They help us out. They help spread the word. Jump on iTunes and leave us a rating and review.
Brandon: And subscribing helps us a ton as well.
Josh: Oh, subscribing is huge. Absolutely. Subscribe to the show. Otherwise, let’s get into this. So let’s talk about today’s Quick Tip.
Brandon: Quick Tip. Alright. So today’s Quick Tip, I’m going to keep it short, we probably mentioned on the show before but in case we’ve never spent time on it we have a free video course on BiggerPockets that’s like 5 or 4 and a half hours of video lessons with over 60 lessons that’s called The Beginner’s Guide To Real Estate Investing Course and it’s just a free course you can go and take right now at BiggerPockets.com/Courses so check it out.
Josh: Cool. Yeah, we took our Ultimate Beginner’s Guide and made it into a video course because different people learn different ways so check it out. Awesome. So let’s get to today’s sponsor.
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Josh: Great. Big thanks to our sponsors. We really do appreciate that. Let’s get to the show here, man. Jeff DeCarlo is our guest. Jeff is a resident of the Pittsburg area; he’s been investing only for a few years but he’s really crushing it right now.
Brandon: Yeah, didn’t he say, like, 75 deals or something like that? Wholesale deals so far plus multiple rehabs going on at one time?
Josh: I don’t know, I wasn’t listening. Do I ever listen to these or what they say?
Brandon: Yeah, he’s doing a lot of stuff. He’s doing multiple deals every single month.
Josh: He’s crushing it.
Brandon: Yeah, consistent deal pipeline just coming in. Deals, deals, deals coming in and he’s going to teach you exactly how he does that on today’s show.
Josh: Right, and he does focus on wholesaling primarily. However, if you’re a buy and hold, if you’re a flipper, or if you’re a wholesaler or anything else, the techniques that he talks about are going to help you. They will help you get more deals so definitely pay attention. Let’s bring him in. Jeff, welcome to the show, man. It’s good to have you here.
Jeff: Thanks. Appreciate it, guys.
Brandon: Yeah, it should be fun today. Thank you, thank you, appreciate it. So we’re going to talk about marketing today and we’re talking about, a little bit, about wholesaling, about flipping, all that good stuff. You do all that, right?
Jeff: Absolutely. Yep.
Brandon: Awesome. So one of the reasons I wanted to have you on the show, which I was excited when I saw you were coming on, is because I want to take up my direct marketing to a new level. So I’m going to pick your brain a lot today. This show is about me and you. Josh is just here to, you know, entertain.
Josh: Hey, Jeff, have you listened to our podcasts at all, Jeff?
Jeff: I listen to every one of them, yep.
Josh: Okay, yeah, so I don’t know if you noticed but every time we have somebody who does marketing Brandon says, “I’m going to take it up a notch,” and then does he? No.
Brandon: I sometimes do. No, I really am though. Seriously I was on a plane ride yesterday and I sat for like an hour because I didn’t have my computer because it was dead and it was a long flight. Anyway. So I sat there and I just worked out a funnel, like a direct marketing funnel, and I was like, “I really should be doing more of this,” so today I want to learn the best way to do it and you seem like the guy to talk to. Is that right?
Jeff: I am, I guess, yeah.
Jeff: I’ve been in the same position. You know, knowing I needed to do more and just like everything else you’ve gotta do it.
Jeff: It makes a difference.
Brandon: Yeah. I mean, and the reason is for me, and a lot of people listening right now, the MLS is getting more and more and more difficult to find deals on. I mean, even if I’m the first one to offer on a property there’s like six offers now on a bank repo in my area. So I can’t even rely on those anymore for consistent leads so I need to come up with a better source for consistent leads. So that’s what we’re talking about today, but why don’t we get started?
Josh: And it’s not about you so why don’t you stop talking?
Brandon: It’s not about me. No, I was just transitioning, Josh.
Josh: Jeff, Jeff, alright, listen, we’re done with this guy.
Brandon: I’m done.
Josh: Let’s talk about you. You work for an auction company.
Josh: You work for a real estate auction company and then something didn’t go so well and tell us the whole story. How’d you get the game going?
Jeff: Right, right. Well, yeah, I worked for a real estate auction company. I was doing business development so basically my job was to wine and dine bank executives to get them to give us their, what they call, special assets; Sports complexes, funeral homes, restaurants, things that didn’t fit into that traditional mold for the MLS that they could put out there. We would come in, we’d advertise it, we’d auction it and hopefully sell it and sometimes sell properties even for higher prices, but in the recession 2008 I was laid off. We were the first ones to go. We had company cars, expense accounts, phones, I mean, we had everything but we were the first ones to go when the crash hit and people say, “well, how do you get selling bank foreclosures when there’s more bank foreclosures?” but it was at a time when, you know, $3,000,000 special asset properties were selling for 1 or less and it just everyone put the brakes on it and kind of just were waiting for the recovery.
Again, we were the first ones to go. So I myself started in the buying MLS properties as well and then, same case as you, had a dry up and had to look for other sources and realized it wasn’t a business model that could sustain and income and something that’s predictable on a monthly basis.
Josh: So how’d you end up in the business? I mean, how’d you fall by this auction job?
Jeff: Well, I actually right out of college I started selling cars, right? It’s a tough grind, but you really learn all the sales you need from there.
Jeff: And I, rewind a little bit more, had saw an advertisement in the paper. Someone was looking for someone to help with a real estate business and it was a guy who was doing lease options and long story short he really didn’t have any of the sales aspect down.
So people would call, he would send me out on these and give me the script and these CDs to read, to listen to, and he was sending me on a ton of just no deals. I got some experience there, but even when they did come through he wasn’t able to pay me and such so I basically applied for—they also owned an auto auction and I applied for that job and they said, “well, you do have some real estate experience there. It’s always been a passion of mine,” and kind of just fell into the job with the auction company that way and really enjoyed it and its passion now.
Josh: Right on. So you got laid off and where’s your mind and how did you end up taking those first leaps into actually doing your own deals?
Jeff: Right, and like a lot of people I just started studying everything I could and I’ve always had an interest in it, I think probably, like 95% of the people out there. I mean, I knew everything. I could talk at a party with it. I had real estate fever where, you know, at a party they’re like, “oh, here’s this Jeff guy. He’s going to talk about real estate,” but, you know, people would say, “oh, great. How many houses you have?” and I’m like, “well, none,” and I didn’t have any, you know? But I did all the research and bought a lot of programs and got to a point where money was getting tight and I found a program on wholesaling HUD houses and actually had to borrow the money from my girlfriend at the time, not my wife, to buy the program.
So really I just had burned the bridge. I had to make it work because it was, “oh, another program you need and now you’re involving me in this and it’s costing me money,” so just studied it, learned everything I could and that’s how I got started was buying and wholesaling HUD properties and buying them off the MLS and it started off good. You know, there was the first one I made every mistake in the book, you know, kind of just trusted the process and it’s even a joke now with one my best buyers.
I got it under contract and it was 2 days til my contract expired and I put it on Craigslist. He came, looked at it, and he was like, “alright, I like it,” and, you know, you read all these guys, “oh, people close in two to three days cash buyers,” and I was like, “great, can you close in 2 days?” and he’s like, “well, how’s the title work?” and I just kind of fumbled my way through, “oh, it’s a HUD deal. We’ve never had any issues with those in the past,” and he was like, “no, I understand that, but have you done the title work on it?” and I was like, “well, yeah, it’s being done,” but, you know, that’s the kind of things that you don’t learn in these courses. They don’t tell you what to do. I mean, they say get the deal, go out and market it, sell it, make cash and you’ll be forever rich, but there’s kind of that second layer of, you know, doing the title work and doing inspections and we have to do what they call dye tests. It’s plumbing to make sure that your gutters don’t go into your sewers, but these are little things that I had no clue about.
You know, if you never took that first step, never did that first deal you’re never going to fumble your way through and figure that stuff out and that’s kind of the other side of the shiny object is, you know, how can you figure it out and just fumble your way through? Now the guy is one of my best buyers. He probably buys 10 to 15 properties a year from me, but that’s everyone’s biggest fear is, “what if I look stupid? What if I say something wrong?” which was my fear, and I’m sure yours at some point as well, but it didn’t kill the relationship and now, again, he’s one of my best buyers. So that’s really how I got started.
Brandon: Yeah, there’s a ton of stuff in there I was to dissect.
Brandon: Let’s talk, maybe first, about the idea—you bought a course of some kind.
Brandon: And I like what you said there, you know, like we talk about courses and gurus and things like that quite often here on BiggerPockets and generally we like to tell people you don’t need them necessarily. That said, I’m sure there’s good information out there, but I like what you said is courses tell you a little bit, they don’t tell you everything on how to do it, right?
Jeff: Right. The courses just give you enough to get started and there was good information in it. It kind of gets you over that hump of how to do the mechanics of it, but there’s a whole second layer and another aspect of once you get this property what do you do now? You know, how do you sell it? How do you do the next steps to get it into title and to get the permits? That’s what I didn’t know and the course didn’t tell me that. Every area is different so I guess it really can’t tell you that, but that’s what I think a lot of the courses are lacking is what do you do once you get it other than put it out there and try to find a cash buyer, close it and make big checks? You know, that’s glossed over. There’s some of the behind the scenes that really if you almost didn’t know before you started, and it might prevent some people and that’s maybe what it is, but, again, it’s stuff that just needs to be figured out and done and that’s why I had the next step from there.
Josh: Yeah. I mean, and that’s kind of my whole thing is these courses are sold as the end all be all. Like, “hey, you’re going to take my course, you’re going to be rich, you’re going to have the tools you need,” and you don’t. You don’t have all the tools that you need and you’re still out there fumbling and making mistakes and trying to figure it out and it’s like, “okay, this is the problem”. This is why BiggerPockets was born is I have issue with that personally.
Josh: So as such the BP was created, but okay. So you’ve gotten through this, you’ve taken the courses, you’ve kind of fumbled through figuring stuff out and you survived, right? You got that first deal. Can you remember what it looked like? Can you tell us about it?
Jeff: Yeah, I can. It was a $25,000 property. It was in a blue collar part of town, but it still had a good school district so I knew it was, you know, a part of town I could probably sell. A good rental area. Got it under contract. The real estate agent was actually a friend of mine and we still joke too because she called and they accepted it and said, “well, I guess it’s getting real now,” you know, we’ve gotta figure out what we’re going to do with it next.
So I put it on Craigslist and went to the real estate club meetings and was trying to, you know, and some people said, “that’s not a deal,” and you kind of, “aw, shoot. Maybe it’s not a deal,” and you start to second guess yourself, but you have to put a down payment on it too and, again, at that time I was pretty broke. So not only did I have to borrow the money for the course but I also had to borrow money for the down payment, the permits and everything too.
So, you know, I think it really helped me looking back in retrospect because I had to make it work because it couldn’t be another one of those, “oh,” you know, now I’m involving other people in my trials and tribulations if you will. Just, you know, had to figure it out, had to make it work, and like you said, put it out there and 2 days before my contract expired I did find a buyer and with the HUD deals you can actually pay them money and extend those contracts out another 15 days so we were able to do that, able to get it closed. I think I made about $2,000 but it was proof of concept.
Jeff: You know, it didn’t solve all my problems. I wasn’t rich immediately, but it proved that it worked. It proved to the people who leant me the money that it worked, but there’s another aspect to MLS deals and HUD houses is you actually have to come up with that funding whether it be transactional funding or borrowing it. That’s another thing too because, again, as you said Josh, the courses don’t tell you that. They say there’s transactional funding, but the title company is saying, “okay, great. Well, how are you going to come up with this $28,000?” I’m like, “well, I don’t know,” you know?
They also say to mark it up $5,000, you make $5,000. With the MLS and the HUD properties you have to back to back close them. So I actually have to pay full transfer tax on that front end because they’re exempt, and exemption doesn’t mean nobody pays it, but exemption means they don’t pay it, you pay for their side and yours. Then the title and then I had to pay it all over again to sell it again. So to price it up $5,000 I think I walked away with about $1,900 at the end of the day, but it was a huge learning lesson and I think it really taught me what’s on the other side once you do get the deal and how you need to move it through to a place where you can close it.
Brandon: Yeah. So I want to go back and touch on a few things you just said there for people who are listening that might be completely lost and they’re like, “wait, what’s wholesaling? What is a HUD house? What does all that mean?”
Brandon: So maybe we can just take that from the beginning. First of all, when you’re talking about wholesaling what does that even mean?
Jeff: Well, what that means is that I’m going to put a property under contract and within the 30, 45, 60 days, whatever the timeframe that I’ve agreed to or the bank has agreed to, I’m going to try to find another buyer to buy that property at a higher price than I did. That first deal I got under contract for $25,000 with HUD and I put it under contract with my end buyer for $30,000 and I thought it would be as easy as I get to make this spread in between.
Jeff: And that’s really the difference with bank owned properties. HUD houses, which are bank owned properties, on the MLS and doing direct to seller marketing is because there’s two different avenues and two different ways to close these deals, especially as a wholesaler. You can’t assign the deal which means I would just assign my rights, or my interest, to another buyer for a fee which would be the difference from the $25,000 to the $30,000 where if I’m doing it with my neighbor next door and buying his house I can just assign those rights, take that $5,000 difference and walk away and they can step in, but we might be getting ahead of ourselves there.
Brandon: Sure, yeah, and that gets a little bit confusing, I mean, the idea of assignment versus back to back closing. You know, there’s a lot of articles on BiggerPockets. In the show notes of the show I’ll put a link to a few articles about that so if people want to dive into that just go to BiggerPockets.com/show158 and I will link to a few really good articles on what that exactly means.
So when you’re saying that you did a back to back close with a HUD home, which is a home that you purchased from the housing, what is it? Housing and Urban Development or something like that, right?
Brandon: Yeah, you bought the repo from them. So you buy this house and then immediately resell it. I mean, within the same day, right?
Jeff: Within 5 minutes, yes.
Brandon: So you only own the property for a short time, but because you do that you then have to pay the transfer tax for the county, or the city, or whatever they have their tax, you have to pay that twice because you just bought it and then you sold it again.
Brandon: So that’s why you didn’t make the $5,000, that’s why you only made around $2,000 because of the extra charges of doing that.
Jeff: Right, exactly.
Brandon: Makes sense.
Jeff: And, you know, again that’s something that was tested and figured out. I had no clue that they were exempt or what the closing cost could be. You know, my sister has a friend that works for one of the large We Buy Houses companies. I’m sure everyone has them in their city. They had billboards and everything, and he was actually awesome. I mean, he was really helpful and I did have someone I could ask and that’s always a lot of questions people have on BiggerPockets is, “well, how do you find a mentor and what do you do?” And you’ve said it before too, you started going to lunch with everyone.
Jeff: And I tell people anyone who’s in the business who’s doing it right lunch isn’t really going to sell them, you know what I mean? I always tell people go find a property, get that first HUD house, get that first one under contract then take it to somebody who’s in the business and say, “hey, I’m willing to cut you in on this deal, can you help me? What do I need to do next?”
Jeff: A lot of people like to put the cart before the horse and they want to find the mentor first and then they want to go find the deal because it gives them the warm and fuzzy feeling, but I think it’s just a matter of get out there, get the deal, get it under contract and then, you know, if you don’t have a sister who has a friend with a big flipping business who ultimately I’m his competition. So it’s not necessarily, you know, he was just a good guy and he helped me out and I didn’t have to pay him but I would be willing to. You know, the experience is worth more than even making that big first check, but get out there, get the deal and then try to find someone.
I get a lot of people too. I’ve posted a few on BiggerPockets about HUD houses and answered a lot of questions and people come to me and say, “I have no money for marketing, I have no experience, how could I wholesale HUD houses?” And I try to actually point them in the direction of the BiggerPockets podcast and a few other ones to learn and to get there, but myself or anyone else is not going to be the savior for you. It’s taking that action, getting out there, talking to people and making some offers and getting them. Then once you get it make the mistakes like I did. Look stupid in front of people, you know? “Oh, we’ve never had a problem with the title,” yeah, sure, you know. He knew, but I didn’t know, you know? It’s still a joke today that we make, but again he turned out to be my biggest buyer.
That’s the other thing too. A lot of people say, “well, there’s a lot of competition in my area,” and what I’ve found is that the competition is going to be your buyers and your sellers. So instead of looking at them as there’s competition, I don’t know, I shouldn’t get started, how can you get to know them? How can you get to meet them? Go to the meetings and say to them, “hey, if you need someone to take some pictures of a property for you put a lockbox on it, I’m your guy,” you know? Not, “hey, can I buy a $10 Panera lunch and will you give me all your info?
Brandon: Yeah, I love that. Yep. I love that, Jeff.
Josh: I love the part where we talk about the competition being your allies as well. We always say that, but a lot of new investors are really fearful, you know, they’re afraid. Not just new investors, there’s old investors who’ve been around the block a long time who are like, “oh, well, if I start helping other people it’s going to hurt me because they’re going to get all my deals,” and that’s nonsense. You know, there’s always a limit. There’s always a cap on how much you can do, how much business your company can do. Frankly, like you said, the other folks in the market they’re your buyers. They’re the folks who are going to be doing deals and doing business with you so, yeah, it absolutely makes sense to get out there and get to know your “competition” because your competition is going to be your partners as well.
Jeff: Exactly. That’s what I found out, you know? I mean, the guys who have the signs out who are doing it they’re the ones who are doing business, you know? So if you want to go with myself four years ago who could talk the talk but never bought a property you could do that all day and there’s a lot of them out there. I was one so I’m not bashing it, but you’ve gotta get out there with the guys who are doing deals and, again, offer to bring them in. If somebody comes to me with a deal and says, “hey, I’ll pay half the fee $3,000, $4,000, $5,000, can you help me walk this through title?” heck yeah we’re going to do it, you know? I’ll do it all day.
Brandon: Yeah, it makes so much sense because I go to out to lunch with people occasionally and we’ll talk and that’s great. I like eating lunch and I like getting free dinner, but somebody comes to me and they say, I mean, they did a couple weeks ago. A friend of mine who wants to get into real estate came to me and said, “hey, I’ve got this deal, do you want to partner on it? If I can get it would you partner with me in exchange for showing me how it’s done?” of course I will! I would be happy to do that because I don’t have to do any work, like physical work, and you brought a deal to me. It shows that you’re enthusiastic, it shows that you have what it takes to succeed and yeah, I think it’s a fantastic way.
Okay, so these people they should bring a deal if they want to get a mentor, but they don’t have any money or they don’t have any experience. How do they find that deal? So maybe we can shift focus and talk about that a little bit, but before we do what kind of, I mean, let’s give a broader view of who you are and what you do today.
Brandon: In terms of what’s your main focus? How many are you doing? What kind of stuff are you working on today?
Jeff: Right. Yeah, I mean, probably 85% of my business is wholesaling. I did start doing rehabs in the last year and a half and coming from a wholesaling perspective it’s a lot more work, you know? I enjoy doing it and people ask, “well, you have this wholesaling why even rehab?” But even to back up, that’s another question about someone getting into wholesaling is well, why would these rehabbers buy a property from you? What’s the point of it? Why wouldn’t they just buy it themselves? Why are you getting such a good deal? The real answer of it is because these guys are out rehabbing properties 8, 9 hours a day. They’re not spending hours putting in HUD bids, taking postcard letters, sending out 5,000 postcards to get 200 phone calls to get 5 meetings, 2 deals, you know? That’s even a question that I have myself and everyone says you tell people, “oh, yeah, I’m going to go find a property on the MLS and sell it to someone for $5,000 more who’s A, more experienced than me and B, has more money than me,” they’re going to say, “well, why would they do it?” You know? But those guys are out there and they rely on good wholesalers.
You also get the question too, “well, if it’s such a good deal then why are you selling it to me? Why are you not keeping it?” and I’m like, “well, cause I’m a wholesaler. I don’t have contractors. I don’t have private money. I don’t have everything on that back end lined up. I dig up the deals and I bring them to guys like you”. That’s a valid question that a lot of people have is, “well, why would they buy it from you? What do you bring to it?” and, again, most times when you’re starting you’re going to sell it to guys who are more experienced and have more money than you. No, I’m not saying you pretend you’re Donald Trump and have been in the game forever, but learn the lingo from BiggerPockets, from books, from other places and just try to fumble your way through the first deal or two.
So right now we probably wholesale about, you know, anywhere from 4 deals per month and then we have about 2 to 3 rehabs going on per 6 months’ time.
Jeff: You know, just this morning I was out. We had an inspection for one and the pipe froze so I’m out there with a heat gun trying to get it unfrozen, you know, and that’s not something I would prefer to do.
Brandon: Wait a second. So you’re saying you’re in real estate but you’re not sitting on a beach, you’re not just relaxing and doing nothing, you’re actually out there with a torch.
Josh: Despite what the courses would say.
Jeff: Right. Exactly. I’m out there with a heat gun trying to unfreeze a pipe so my property can pass inspection and close for $310,000 next week. Yeah, you know, I’m out there. You’re right, you’re not on a beach. Again, a lot of those ones, especially with the HUD ones, “oh, I do it from the beach. I do it from the other country,” there’s guys that do do it, but it’s not me. Maybe someday, but you’re going to have to get in there, you’re going to have to work and learn.
You know, you have to have a passion for it. You have to like it, and we’re lucky in this business as real estate investors to have this opportunity, you know? My sister-in-law is a doctor and probably makes $300,000 a year, but she went to school for how many years? 25.
Jeff: She can’t believe that anyone can make as much money as she can and we have the ability to do that if not more. If not 4 times as much more. So, you know, we’re fortunate. I can’t say I want to be a doctor tomorrow, I want to be a lawyer, and be able to go out and do that and make the kind of money they can if not more, but real estate does give you that opportunity but you’ve gotta work at it, you know? Those guys sell courses from the shiny objects end. Hey, if that’s what they do, they do it and there’s good information, you know, don’t get me wrong. That course really helped me and walked me through step A to Z, but it didn’t give me every piece of the puzzle. You had to take the action. It wasn’t going to make the calls for me, it wasn’t going to make the bids for me, I had to get out there, do it and take action, you know? And you guys asked that question at the end what’s the difference? It has me screaming at my iPod all the time, it’s action. Action is what’s going to do it. Taking action, making mistakes, and solving problems.
Brandon: I love that, and I love that you’ve said multiple times in this show now just get out there and do it. I mean, I’m telling people that all the time. I’ve used this analogy before on the podcast but I’ll say it again in case you haven’t heard it. It’s like driving through fog, you know? You can’t always see a mile ahead of you, but if you just keep driving forward in that fog you can always see 50 feet in front of you and when you get to that 50-foot mark you’ll see 50 more feet. Just keep pushing through and you might get 70% through the first deal and then it’ll all fall apart then the next time you’ll get 80% through and it’ll all fall apart.
Josh: You might hit a deer in the road.
Brandon: You might hit a deer in the road, but you know what? Eventually you’ll get there and then from then on it just becomes so much easier once you get that first deal, first couple deals, and it kind of snowballs. So I love that you take that approach to it. I think that’s fantastic.
Jeff: Right, and it’s always learning. I mean, the same deal that I’m de-freezing the pipe on had a lot in the back that somehow, someway, the deed didn’t get transferred correctly and it was still on the owner’s name from 1950 and if a house that was bought in 1950, we’re now in 2016, most likely they’re not alive, and they’re not. So we had to figure out who owns this lot, who the heirs are, and I couldn’t just, again, sit on some beach and do it. I had to go out and get these people to sign it and get them to sign it over to me not just in general but for $1 and say, “hey, there was a little mistake here. Your parents owned this lot in 1950, the bank took it away, but they messed the deed up and they’re still attached to it,” and the lady called me on Friday and she said, “what do you mean I’m attached to it?” and I said, “well, you know, it just kind of,” and she said, “I own it, right?” and I was like, “yes, you own it,” cause you’re not going to lie to them and she said, “and why is nobody paying me for this?” and, you know, it’s a lot more complicated than that. They’d been paying the taxes for 10 years blah, blah, but you’re always going to learn. You have to be a problem solver and that’s really what this business is about.
I’ve had wholesale deals where we’ve closed them in 5, 6 days and that counted me picking these people up and driving me to the vital records to get the death certificate of their Aunt or Uncle.
Jeff: You have to be willing to do it, you know?
Josh: Let’s rewind. I want to hear how that story closes. Well, where you are with that story with the old lady with the dollar.
Jeff: With the lot?
Josh: Yeah, why? I mean, how is she going to give it to you for a buck if she thinks she owns it? How does that work?
Jeff: Well, she does own it. Well, what it is is it’s the property that, you know, we have under contract to sell for $310,000. I bought it for $73,000, we put about $120,000 into it so I have a lot of money and time tied up in this property and we bought 3 properties at once. I wholesaled 2 of them and I kept the best one, if you will, for myself to rehab. We closed it and the guy said, “oh, yeah, this lot comes behind it, and it’s an up and coming part of the city, town, where parking is at a premium,” so I was like, “great. We’re going to turn it into parking, it’s going to make us that much greater than everyone else,” and they closed the deal. They didn’t have the—they missed the lot. The title company miss the lot. Again, there was 2 wholesale deals, me closing on the rehab, there was a lot going on.
So we noticed, “hey, that lot didn’t transfer,” actually the guy who sold it to me did and I went to the title company and said, “hey, this didn’t transfer,” and they’re kind of like contractors sometimes. You know, they’ll tell you what you want to hear, you know? “Oh, yeah, it’s just a simple sign here and there,” so I was like, “okay, great,” we’re going along with this and I’m thinking he’s working on this lot the whole time and 6 months later we’re now at the point where we’re putting it on the market and I’m like, “hey, what’s up with this lot? Do you have this done yet? We’re putting this on the market,” and he’s like, “well, there’s a little mistake”.
What it is is that the front of the property was owned by the people from 1950 and they lost it to foreclosure. They had bought the lot three years later and when they lost the front to foreclosure they assumed the lot went with it as well and so did the county. So when Wachovia bank sold it to my seller, the guy before me, they gave him the paperwork and said, “here, this lot comes with this,” he’s been paying taxes for 10 years on the lot. He thought the lot was his, you know? So he said it comes with it.
So little did we know that when push comes to shove and the title guy actually did the work he was supposed to do he doesn’t own it. He has no right to it. He’s been paying the taxes for 10 years.
Brandon: Oh, man.
Jeff: Again, we can sit there and say, “oh boo-hoo me. What am I gonna do?” no, I had to figure it out, you know? We needed to find who owned it, who the heirs were and I had to call them. That’s an awkward call, you know? Hey, this lot was supposed to be transferred from your mother and father’s name, it wasn’t. I have this whole list from my attorney of your heirs and your Aunts and Uncles who’s still alive, who’s not and you’ve technically been responsible for the taxes for 10 years. We don’t want any of that, we’re not gonna come for that, we just want you to sign it over and get it taken care of so you’re not longer on the deed.
I think the biggest part of this business is how you word things, you know? If I were to have said, “hey, it’s your lot and I need you to give it to me for a dollar,” they’d be like, “well, you really need it to sell this property for $310,000 give us $20,000 for it,” but, you know, approaching it from the avenue of, “hey, this was a mix up, you’re still on the title. You’ve been responsible for 10 years, we don’t want anything from you, we’ll pay your inheritance tax for transfer,” and I’m still dealing with it. The Aunt is difficult; you know? It’s an Aunt and then her niece and nephew who are 30, the niece and nephew and the Aunt is, you know, 50 or 60 I think. I haven’t met her yet actually cause I’m still dealing with it.
She called and said, “well, why is no one paying me for this?” and we got over that and she said, “well, I’m not going to find a notary, and I have to drive all around and pay,” and I said, “no, I’ll bring a mobile notary to you. We’ll make it as easy as possible,” and they were all supposed to meet me at a notary right up the street and she was waiting for a refrigerator to come that didn’t come and was having a bad day. The brother and sister met and the sister says, “she’s having a bad day, I’d maybe just call her tomorrow,” so I still need her signature at this point.
Jeff: But I’ve talked to her. She’s willing to, but it’s a touchy subject and technically they could—and hopefully they’re not listening to this because they could charge what they wanted for it, but it’s all part of being a problem solver and figuring it out. You know, 3 years later and I’ve done over 75 wholesale deals and still figuring it out. How do I do it? What do I need to do? I can’t just sit back and hope somebody’s going to take care of that problem for me while I’m sitting on the beach. I have to go out and I can’t just say, “well, they’re going to take it to a notary and sign it,” I have to take the bull by the horns and go drive to that notary. I had to drive there twice and meet the brother and sister at different times and the Aunt is obviously going to be another time too, but that’s what needs done and to make the deal close then that’s what you’ve gotta do. That’s why. We’re the problem solver.
Jeff: That’s why people sell it to us because not everyone is in a position to do the marketing. People say, “well, how much are you going to give me? You’re in this business. Tell me now, tell me now,” and it’s back to, I think you guys have mentioned, the book Pitch Anything, you know? Whoa, slow down. We’re the prize here. You don’t have somebody laying around in your pocket with cash in their hand willing to buy your piece of junk property, you know? Let’s find out if it’s even something we want to buy and then we’ll cross that bridge. People are going to try to push you around and, “you tell me what you’re going to do,” and just dealing with people and solving the problems is basically what the business is, you know?
Brandon: I like that.
Josh: Great plug on Pitch Anything. Awesome book for anybody who’s wholesaling or any kind of sales stuff.
Jeff: It’s a great book. It is, and it really changes your mindset because you can get beat up taking these calls all day and having these people tell you, “go pound salt,” or I’ve had people call the police on me for sending them a postcard with their name on it. Do they call Papa John’s? No, but why are they calling and yelling and screaming at me and trying to ruin my day? You don’t want to sell your house? Great, throw it in the trash, but people do get defensive. That’s, again, it’s not all sunshine and roses like they do make it sound in the books, “hey, buy this and you’re going to sit back and collect $15,000 checks,” but if you have a passion for it and you enjoy doing it it’s a great business. It’s something that you can mold your lifestyle around. We have a baby that was born 4 weeks ago and I’m able to be home in the mornings and stay with him and help my wife out for the first few weeks of it where I’ve had desk jobs that sucked, you know? And I couldn’t and I hated going to work and no matter if you made 100 phone calls or 10 you made the same money and it’s just not rewarding.
Josh: Jeff? I totally appreciate that, man. Alright, let’s get to this because we are ticking away here and we have a whole lot of questions to ask and you like to talk so this is going to be a bit of a challenge.
Jeff: I do. I’m passionate about it.
Josh: I can tell. I love it, man.
Jeff: I told you, real estate fever.
Josh: No, it’s great.
Jeff: People at the parties would go the other way because he’s going to talk about real estate.
Josh: “Oh, boy, here he comes again”.
Jeff: Yep, there’s that guy.
Josh: So where are you finding your deals? What’s your strategy? Are you doing just one thing? Do you have multiple sources? What’s the low and dirty on that?
Jeff: Right, and so I was doing the HUD deals and about 3 months into it I actually got four HUD deals under contract in one month and had ‘em all sold and I was like, “hey, great, look, this is it,” you know? Life is set. I’m going to be sitting on a beach. I figured it out, but you’re really at the mercy of what’s out there. Like Brandon said, you make bids on it, there’s a more.
There’s a lot less bank owned properties out there so we had to transition and try to find a way to dig our own deals and to base your business on bank owned properties is tough to do because it’s not predictable. Direct mail is predictable. You can say, well, my numbers and testing have shown that if I send X amount, 5,000 postcards I think I mentioned briefly before, I should get 200 calls, 20 meetings and 3 deals out of that. So we had to really find a different way to get a more predictable business and find a way to do that and direct mail has been that way for us.
Brandon: Alright. So let’s go back and talk about basics. For those who don’t know, what is direct mail marketing? What does that mean?
Jeff: Sure, and direct mail marketing is basically sending the home owner a postcard that just says, “hey, how are you doing? We buy houses in your area and would you be interested in selling your house for cash in as is condition?” What we do is we basically send a lot, and people have said that on BiggerPockets on the podcast, to absentee owners. We like out of state absentee owners, especially in my area. My sister and brother in law own a few properties and moved, got relocated, to North Carolina and I said, “hey, are you guys getting postcards from anyone on those properties you have saying we’ll buy it?” and they said no so I kind of knew that there was a lag in my area in that.
So we focus a lot on out of state absentee owners and what that is is someone who owns a property, like my sister and brother-in-law, and maybe live out of state, got transferred out of state, but they still have those rentals in this area so their name is going to show on the tax record as the owner, but if you look under the tax record for the property owner’s address it’s going to be something other than that property and that’s how you know they’re either absentee or out of state.
Josh: Okay, so you mail to these guys. What’s the approach? Is it, “hey, are you tired of owning your property?” I mean, how do you know kind of hit them?
Jeff: Yeah, and that’s where the difference can make a difference in direct mail because everyone goes back and forth, “do you get the big vanity number? Do you play the small guy?” and I’ve done both and I’ve found myself, and I’m sure there’s people who will debate me on BiggerPockets all day about it, but the small guy has worked better for me. Just saying, “hey, we buy properties in the area for our own rental portfolio. If you’d be interested in selling it as is for cash on the day of your choice give us a call,” you know? And it’s not for everyone. Direct mail no matter what you’re doing you will make people angry. It’s just the name of the game. I don’t know why. Just let it roll off your back.
Jeff: Anyone who has sent any amount of direct mail and hasn’t made somebody angry then they’re trying to sell you a book and they’re a guru or something cause people are gonna get mad for whatever reason. They get angry that you know their name, that you have their address, that you know they own a property. You know, people aren’t as aware of public records as we are and they can really get defensive about it, but, again, it’s all part of it. If it was easy everyone would be doing it. It’s digging through that, getting those leads, and getting it to the end buyer or yourself if you’re going to keep it.
Brandon: So why a postcard and not a letter? Or do you do both?
Jeff: I do both, but most times, and I think someone talked about it briefly on one of your recent shows, is we’ll send a postcard first cause they’re a lot cheaper. Yellow letters are more expensive. The envelopes, the stamps, the whole process is and you’re going to get a lot of them back; bad addresses, which is a whole other subject, but there’s a gold mine in those ones that come back because that’s where a lot of people stop and they don’t dig and try to find those owners, but we’ll send that first and it’s an inexpensive way. The difference could be anywhere from 50 cents a postcard to $1.50 for a yellow letter.
Jeff: Which, you know, the letters work well, but it just depends on who you’re going for and if you’re going for a more mass approach or a smaller more targeted approach we would probably use the letter, but if we’re going to send 5,000 to just general absentee we’ll use the postcard to try to weed out who’s there, who’s not and you know.
Josh: Hey, Jeff, you opened the door man, I’ve gotta go there. Bad addresses. What are we doing with the bad addresses?
Jeff: Well, you know, it’s—what we do is we actually subscribe to a couple different sites and you can kind of skip trace these people and try to find if they have addresses or phone numbers that are for them and there’s guys out there that make, you know, their only business is just trying to call these people and it costs a few dollars per name, but it could be worth a $3,000 to $5,000 deal. So once those bad addresses come back then we’ll work on those, set them to the side and we’ll try to find just doing the basic research. Go on white pages, see if their address wasn’t updated on the county website and if it’s not then you can move on to some of the more high-tech Intelius and some of these other programs. TLO, pretty expensive, but again if that’s your business model it’s gold because a lot of people just throw them away and say, “aw, nobody’s there. Forget it”.
Josh: Too much work, yeah.
Jeff: Yeah. Those are the people that nobody’s talking to and you’re getting through to them because nobody else is, you know?
Josh: What percentage— are you having a higher success rate with those bad addresses than with your typical mail?
Jeff: Well, you know, I think it’s just there’s less competition, you know? If we get ahold of them and we talk to them there’s not many other people. If you’re marketing the hot areas of town most people are going to say, “well, I’ve got two other guys coming,” and that’s fine and it’s not going to stop me from going, it’s not going to change what I may offer on the property, but a lot of times when we do get through to them they haven’t talked and they’re kind of surprised. You know, “hey, how did you find me there?” and it can be kind of awkward giving that cold call sometimes of, “hey, you own a property here,” some people may be your best friend, “hey, you wanna give me $30,000, this is great,” or, “don’t ever call me again,” you’ve gotta be willing to roll those dice, you know?
Brandon: Yep. Well, let me go back a step. I was going to ask you this, where do you find a list? How do you get a list of people? I mean, you talk about public records. How do you get that?
Jeff: Right, and there’s a lot of list service providers out there. US Lead List, and no affiliation with them that’s just where we pull ours and you can pull anything from absentee owners, out of state absentee owners, free and clear properties, you could have mortgage values if they’re in foreclosure, starting in default, there’s also some monthly subscriptions to vacant properties and things that we’ve actually joined and have found to have been pretty useful and have worked for us. Usually they’re anything from about 9 to 15 cents per name, but we’ll continue to hit that list 3 to 4 times. You know, we’ll find out who’s on there, take them off so we’re not wasting the money on them like we talked about, the ones that aren’t getting the correct address, and then we’ll continue to hit that list 3 to 4 times and most times we’ll have people even that keep postcards for a year or two.
I mean, we’ll get a deal we just closed in 7 days that the guy got my postcard a year and a half ago, set it to the side, needed money, was ready to sell, called and we went out, saw it, and they had two other people who they had postcards from and we just got out there first. You know, some of these bigger companies they just don’t have the time, they can’t get there, sometimes being the smaller guy, you know, I was out there that next afternoon, made the deal with them. She said, “well, should I tell those other guys not to come?” and I said, “well, probably,” and we closed it in 7 days, you know? We solved their problem.
Josh: Oh, send your competition, c’mon.
Jeff: Yeah, and she’s one of my best referral sources now. I mean, she was so happy that we closed it. We paid her $55,000 which was a ton of money for a house that they were going to fix up, they were going to fix up and they just never did. There’s a lot of people like that that think, “oh, these shows make it look easy. A half hour plus commercials, $90,000 time to find another house to flip,” and then they realize it’s not that easy and they’re like, “well, we were gonna fix it and we just realized it was too much for us,” you know?
Brandon: Yeah. You mentioned this a couple times and I want to kind of dive into it because I love funnels. If listeners have ever been on a BiggerPockets webinar I talk about them on every webinar we do every week. You can sign up at BiggerPockets.com/Webinar for the next one, but I love the idea of a funnel where you get a certain number of—you reach a certain number of people, a certain percentage of them are going to call you, a certain percentage of those are going to show you their property, like invite you to look at it or whatever, and then a certain percentage of those are going to accept an offer.
So can we kind of talk about that funnel of yours in percentage wise or ratios? Is there an average that you typically see? Is it always different? Or what do your averages look like?
Jeff: Well, you know, we have found averages just from testing and sending them. We find that if we send 1,000 postcards we’re probably going to get somewhere in the nature of 40 calls, 40 to 50. That doesn’t sound like great numbers, but again that’s right off the bat. That’s 2 or 3 days after that postcard hits then there’s still going to be the people that set it aside. It’s important to keep the phone numbers.
If I could back up quickly, what we use is called Vumber. It’s a virtual phone number that we have. Our calls go to a 24 hour recorded message and our postcards say 24 hour recorded message. It’s a little less threatening for people to call and hear our message rather than think, “well, I’m going to talk to this shifty guy who’s going to talk me into selling my house for nothing very quickly,” it’s a little bit less aggressive so we send all of ours to a 24 hour recorded message.
Then we actually have Hodio set up, and I know some people have mentioned that, but it’s a data base system where you can actually put your Vumber in there and it’s awesome. It will come to my phone, my computer, my email and say, “you have a new phone call, a new voicemail,” and then if you have other team members you can send back and forth between there. That’s how it all starts and we find it’s probably not a high percentage that you’re going to get the calls on, but the ones that do call listen to your voicemail and leave a message are going to be a lot more motivated.
We do call the hang-ups too. The deal I mentioned that we got 3 houses, I wholesaled 2 and rehabbed 1, it was a hang up. They just, “oh, we don’t want to call,” and it was just talking to them, “hey, we saw you called,” and they said, “well, I thought it was gonna be this or that,” and just, “what’s your issue? What’s your house?” and those people had section 8 people in there and wanted to get rid of it. You have to call them back. If you’re spending the money to buy the name to send the list to have the system you’ve gotta do the work and you can’t be afraid and that’s the first thing to answer the phone when they call.
Brandon: That’s so true.
Josh: I love how persistent you are. You’ll follow up with those bad addresses, you’re calling the hang ups. I mean, I think that’s the kind of thing where that’s separating the wheat from the chaff, right? That’s the successful guy versus the unsuccessful guy. That’s the newbie saying, “oh, this doesn’t work. I just spent all this money and I got nothing,” “well, did you do all this? Did you do everything that you possibly could do with the list that you got?” and you’re doing that and that’s awesome.
Jeff: Right, and I think it does. That’s the difference from the low hanging fruit where there’s going to be 2 or 3 guys coming in after me to I’m the only one there to solve their problem and have found it. Somebody else said it before too, you start a real estate business and all these books and gurus make it sound like you should be making tens of thousands immediately, but if you opened a hair salon or even a bowling alley, whatever, you wouldn’t expect to make money for one or two years. If somebody starts this and puts the money into it and doesn’t make it in 2 to 3 months, “oh, this doesn’t work. My area doesn’t work,” you wouldn’t give up on your hair salon, your bowling alley, in 2 to 3 months. You would expect not to make money.
Josh: I love that, man.
Jeff: It’s gonna take some work and some time and you can see how passionate I am about it. I don’t shut up. I talk a lot, but it’s because I enjoy it and I like it and that’s part of it too.
Josh: Hey, Jeff, so 40 to 50 calls for every 1,000. How many of those calls end up in appointments? How many of those appointments end up in actual sales? Can you kind of walk us through the rest?
Jeff: Yeah, well and we try to—there’s a couple different ways that you can do it. We found that if you just ask them, “hey, what’s your lowest and best cash price?” it’s a little different than sometimes if you go and see the house and talk with them and meet them, but you could sometimes waste your time doing that.
I’ve had ones where the guy tells me he wants $150,000 and I think, “he’s just being a tough guy with me and he’ll take less,” and I’ve gone and he’s stuck on it. I’ve had other ones that I’ve gone on it, looked at the house, didn’t work, but the neighbor was out and was like, “oh, who’s this?” and she said, “oh, he buys houses,” and he’s like, “well, come look at my house. I’m selling mine,” and I actually got a deal that way from a neighbor. The lady was not really realistic and we bought the neighbor’s house for $15,000 less which was identical to what hers was but you never know unless you go out there.
I’ve found deals in the newspaper. It was an older couple that doesn’t use Craigslist and have I found one since? No, but do I still look every week? Absolutely. Because I made $9,000 on that wholesale deal out of the newspaper. That’s what I tell some of these guys, “how do I make money?” well, drive around. Look for vacant. Especially right now here it’s snowed 4 inches today. You can tell if houses are vacant. In the summer the grass is high. Write the address. I keep a notepad in my car right next to me. Every time I see something my wife will almost be like, “oh,” and roll her eyes, “again? We’re backing up? We’re going in there? You’re going to talk to the neighbors?” yeah, I am. I’m going to go there. Ask the neighbors, “hey, what’s up with this house?” they don’t want it as vacant as much as I want to buy it.
Brandon: That’s a good point.
Jeff: So they’re going to help you to find them. They’re going to know. They might say, “oh, I don’t know anything,” and once you lighten them up you’ll find they know everything. They know if it was foreclosed, or there was a divorce, what the case is, but keep your eye out. Once you’re looking for properties you’ll find them.
Brandon: So this is one of my fears in doing a lot of direct mail marketing is that I don’t have the systems yet set up to be able to go out and do 40 or 50 phone calls. I mean, not phone calls, 40 or 50 appointments. So, how many do you think out of the, let’s say you got 40 phone calls in a month, how many of those would you actually go to their house and make them an offer do you think?
Jeff: I probably go to, I’d say, 5 or 10 out of that 40 or 50 that called, listened to my voicemail, left a message, you know, I’d probably say about 5 to 10. Then once you go out there and you look at it you might find that it’s not what you’re looking for and you don’t have a buyer for it or you might find that it’s not—they’re not realistic, but they might be realistic.
That’s another thing too is we always send an offer to them in the mail and we’ve had people call us back and say, “hey, is that offer still good? Will you still take it?” and that has really been the difference that we started doing that last year. Sending that offer in the mail even if they say, “no, you’re crazy. Don’t even call me again,” six months down the road they really need money, their situation changed, now they don’t hate me as bad and they’re willing to take my ask price offer or at least talk to me about it.
Brandon: Yeah. So you’re saying you make an offer to them in person and later on you send them a letter no matter what, correct? If they turn you down.
Brandon: I love that. I think that’s fantastic.
Josh: Oh, man.
Brandon: That’s really good.
Josh: Again, this follows up with everything else that we talked about.
Brandon: You do the extra things, yeah.
Josh: Go the extra mile.
Brandon: I love that.
Josh: Go ahead.
Jeff: Yeah, I was just gonna say briefly it does add an extra couple minutes a week but we’ve got multiple deals from it and people have said, “hey, we forgot about the guy who left, but your offer was here and will you still take it?” so it is that little extra step that sometimes separates you from the guy who does one or two deals a year to doing three to five times more than that.
Josh: Wow, and that was brief which was even more awesome.
Jeff: I know. I can do brief.
Brandon: So, okay, last question, not last question, but so let’s say you get 5 people to go out and look at their property, 5 to 10 people you went and actually showed up. Do you have an estimate of how many of those are going to say yes to your offer and how many of those are going to laugh you off?
Jeff: You know, it’s just gonna depend on the house, the area, and who these people are. That’s part of the game too is you may go on 5 duds where they all tell you you’re crazy it’s too low and you might go on 5 or 4 of them that say yes. It’s a numbers game. It’s gonna be a numbers game. If you’re going to wholesale and you’re going to market, it’s a numbers game.
Jeff: Other people have said it too. Once you start doing that you really can look at it as you’re in the marketing business because you need to be continuous, you need to be sending them out. We used to send out 5,000, we’d get deals, run around, and then we’d get a few, wouldn’t send anything out and we’d say, “oh, shoot, we don’t have anything coming in,” and start the cycle again. If you can keep your foot on that and keep it consistent that’s how you’re going to get that funnel and keep it.
Brandon: Yeah, I love that. Love it.
Josh: Hey, Jeff, how many—so how much mail do you send a month?
Jeff: We send probably about 5,000 postcards a month on average and we’ll switch it up. We’ll do absentees, we’ll do the out of state absentees. To rewind quickly here, if I do find a, driving for dollars, a vacant house I’ll always send them a yellow letter. I’ll try to get that more than the mass market. I’ll try to say, “hey, I noticed you have a property at 123 Main Street. We buy in that area, would you be interested in paying cash?” and I get a lot of calls from those. I mean, if you can find a good address on that our numbers are different. It’s not like when we’re doing the mass spread marketing, it’s more targeted. You know that person needs or wants or has to sell that house. It’s vacant. People just don’t like tens of thousands of dollars laying around. There’s a reason it’s vacant, there’s a reason they haven’t sold it, and it’s my job to get a hold of them and find out why.
Josh: That’s a great point.
Brandon: Yeah, I love that.
Brandon: Alright. Yeah, this is awesome.
Josh: Chock full of wisdom here, huh?
Brandon: Yeah, I love it. So I have a couple more things that have popped up here just thinking about, you know, the 40 or 50 phone calls you get, just hypothetically a number, do you have any good tips on how I can weed out so I don’t have to go do 50 appointments and I can reduce that to the ones that are really actually going to work out?
Jeff: I think having a recorded message will do that.
Jeff: Having that recorded message saying, “we buy for cash, we buy it as is,” and we even have, and we varied it to where we say, “we’re not realtors, we’re not looking for properties in pristine shape that you fixed up, is in the nicest on the block. We’re looking for properties that need some work, need some love, and if you have the one that’s nicer than all 10 of your neighbors, which most people will tell you is, we’re not going to be your guys,” and that kind of weeds them out. Or they might tell you on the voicemail, “hey, I’m looking to sell this with a realtor, please take me off your list,” and we get a lot of voicemails saying please take me off your list and that’s fine. I’d rather them tell me that than send the money sending to them again and again.
Josh: Yep. That’s great.
Brandon: Yeah, I like that. Then lastly, one thing that a lot of wholesalers, flippers, everyone struggles with is this idea of estimating the repair costs when they get there. I mean, you’re going to go there and look at a property, you’re going to run the numbers basically right there and there possibly, or maybe you’ll go back to your office and run a more in depth, but that’s—most people wouldn’t know the difference between a $20,000 and a $50,000 rehab project. That’s a wide number to be able to make an offer to somebody when you meet them. Do you have any tips on estimating repairs?
Jeff: You know, that’s just part of doing it and going there and getting that experience. Honestly, I’ve found the BiggerPockets Book On Estimating Repairs, I read it and I used it when I first started to give you a basis of doing that and that’s not something we talked about or you said to do, but it really helps because you’re never going to have the exact repair.
What I found too is these rehabbers are going to have their own number too. I’m just trying to give them a base for it. I’m trying to say, “estimated repairs you’re looking in this neighborhood,” but it is difficult. Get some pictures, get some photos of it and it’s okay to tell them, “hey, I need to do some more research on this, let me get back to you,” you don’t need to give them an offer there. Take some photos and, again, go to someone that is experienced and say, “hey, I got this, I think it’s a deal. Here’s the photos, here’s the numbers, here’s the research I did. I think it’s a deal, do you think it is? Can you A, help me close this deal and B, do you have a buyer that could help me sell it?” I partner up with other wholesalers all the time that maybe have more buy and hold in this area or renovated that doesn’t work for my top 5 guys.
That’s another thing too is that a lot of these other places it’s, “you need to build your buyers list. Build your buyers list,” and everyone’s so worried, “ah, I need to build it,” you’re really going to have probably 5 to 10 guys who buy from you, you know what I mean? You’re going to have 5 to 10 serious guys. There’s a lot of tire kickers out there, but you’re only going to have a couple guys who are serious in buying and they’re going to continue to buy from you.
Jeff: They buy, make money, they’re coming back, “what do you have? What do you have?” they’re calling you, “what do you have? What do you have?” you know?
Josh: I will charge you $25,000 to teach you how to buy the biggest and best buyers list in the world, Jeff. So don’t listen to Jeff, listen to me. Alright, really quick, you mentioned the book, the book is The Book On Estimating Rehab Costs. You can find it at www.BiggerPockets.com/FlippingBook, it’s also on Amazon and yeah, it’s fantastic. I’ve got one last question before we move on to the next segment of the show which is, what are you doing, man? I mean, you’re wholesaling, you’re kind of doing some of this flipping stuff. You’ve been at it for a couple years, where are you going to be in 10 years? What’s the plan?
Jeff: Well, 10 years, you know, we’re trying to start buying some of our own rentals for long term. Taking the wholesale fees, the rehab cash out, and buy $30,000-$40,000 rentals. We can in our area. We’re lucky to be in the market.
Josh: Are you in Detroit?
Jeff: No, we’re in Pittsburg, PA number one market for flipping houses.
Josh: Oh, that sounds like Detroit.
Jeff: Send you the link after, but that’s the best part about it. You can buy a $30,000 house, you can be in a blue collar working neighborhood and it will bring it $700 or $800 a month. So we’re trying to just buy 6 rentals, 5 to 8 is actually our goal. I know you said, Brandon, you and your wife made your goals and done the same and I would like to buy 6 rentals and then just start stocking away so 10 years from now I have 100 of them and that way I can be on the beach or I can be sick or on vacation or dead and my family has income coming in and is being taken care of. You know, even if I hit the Powerball tomorrow, the 1.5 billion, you know, still buy the houses and still keep them as cause I enjoy doing it.
I really think that’s the best retirement method especially with what the stock market and everything is doing real estate is always going to be there. It’s a physical asset. You can always improve it so we’re just looking to really put systems in place. Systems in place for our marketing, systems in place to handle the leads when they come in and systems in place to get these deals out to our buyers. It’s like starting all over again when you need to learn the rehab because it’s a whole different game.
I said it before, these guys, the contractors, will tell you what you want to hear. Can you do it for $10,000 in two weeks? “Yeah, sure,” and then $10,000 and two weeks comes and you’re already that far into them that is one of the hardest things. You’re never going to have all the rehab numbers. I’ve done a bunch of projects and I still don’t know all the rehab numbers. We estimate and hope what it’s going to be but it’s part of the learning and solving the problems because it’s always going to change and something’s going to come up.
Josh: Yep, awesome.
Brandon: I love it.
Josh: And I only busted your chops about the town where the penguins play because yeah, well, you asked me to, man.
Jeff: Yeah. Hey, I know they’re not.
Brandon: Well, let’s shift gears. We’ve got a few more questions before we get out of here today. This show has been amazing. I mean, just chock full of actionable stuff. I mean, this is going to change people’s lives.
Josh: Show 158 on the BiggerPockets podcast. Check out the show notes at BiggerPockets.com/show158.
Brandon: That you should. So let’s move over to the world famous Fire Round.
It’s Time For The Fire Round
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Alright, big thanks to our sponsor of the Fire Round and now let’s get to it. These questions come direct out of the BiggerPockets forums and we’re going to throw them at ya. Number one, what are some clever ways to really get your phone ringing when you’re trying to start a lucrative wholesaling business?
Jeff: Well, you know, I think there’s always the best way is to just send some mail. It doesn’t have to be 5,000 pieces. You know, you can start by sending 500. If they’re going to cost you 40 cents apiece that’s $200. It’s the same as a latte every day. Set it to the side, send it out there, start taking those calls. I wouldn’t recommend if you’re starting tomorrow to send 5,000 postcards. Send 100. Send 200. Get used to on the phone and drive for dollars. That is always going to be a way that is out there and find the owner, do a little leg work and you’ll get your phone ringing.
Josh: Perfect. Alright, as a beginner in wholesaling what do you recommend are my first steps? It maybe what you just said.
Jeff: Well, back to the HUD deals, I think they’re still there. It’s changed a little bit since I started 3 years ago but I’d always be looking there. To be brief, you can just throw in bids. You don’t have to sign a 20-page contract, find an agent or someone who is, and just do the research. If it looks like it could possibly be a deal put the bids in. It’s not going to cost you a dollar to bid on it, you only have to pay any deposits when you get it under contract and then you can try to find your buyers. Or start trying to drive around, find vacant houses and if you have some money buy some lists, buy some absentees, some out of state owners and send them some postcards.
Brandon: Cool. Alright. I’m new to rehabbing and I’m looking for a 100% hard money loan or a private money loan, is that realistic for me?
Jeff: It is realistic. You know, there are the lenders out there that will do it. It’s going to be expensive. You’re probably going to pay 15 points, 15% I’m sorry, and 3 points which is another percent of the deal, but it is realistic. If you have an actual deal and the numbers work they’re most times only gonna lend, especially on your first deal, 50% to 60% of what they think the after repair value, but it’s out there. There’s money and there’s hard money lenders who will fund them.
Josh: Yeah, and those rates are going to differ depending on where you are, who you’re dealing with, what your experience is so on and so forth.
Jeff: Absolutely. Yeah.
Josh: Alright. So how do I know if a location is a good location to flip a house?
Jeff: Well, I think everyone needs to have an agent on their end or have their own license because you have to look at what’s selling, you have to look at the multi list system, and that’s what’s going to tell you what areas are hot and what are selling. There’s also a lot of the areas out there too, and some of the sites that we mentioned, that you can find a lot of the cash buyers in. You don’t have to necessarily build your list but it’s going to show you where a lot of those guys are paying for cash deals; just like you can find an out of state owner those ten sites will allow you to find cash transactions.
So another tip is I would have people go there, pull the cash transaction areas. You don’t even have to buy the list, but it’s going to show you the zip codes where the highest cash transactions are and then now you know what areas that are the highest for buying cash deals. Those are going to be your rehabbers and your wholesalers.
Josh: Nice. Great tip.
Brandon: Yeah, very cool. Well, hey, let’s begin to wrap this thing up by transitioning to the world famous
Brandon: Alright, these questions are asked of every guest, every week and I know you’ve listened to our show for a while now so you know what’s coming. So let’s start out with question number one, what is your favorite real estate book?
Jeff: Millionaire Real Estate Investor is a great book and I think you always need to continue learning. I have a lot of ‘em, but that’s probably one of the top favorite ones.
Josh: Right on.
Brandon: Okay, cool. That’s a great book. Gary Keller, Jay Papazan. Bunch of good stuff, good stuff. Alright. Next.
Josh: Alright, favorite business book non-real estate?
Jeff: Non-real estate, and you had him on your show and you talked about the book, Grant Cardone TenX. Grant Cardone killer sales stuff. All his books are great. TenX is great. Pitch Anything is great. You know, I think listen to those two books and they’ll point you in the right direction for sales that’s for sure.
Josh: Right on.
Josh: Alright, hobbies. What do you do for fun?
Jeff: For fun, like I mentioned, I just had a son four weeks ago so that takes a lot of our time, but I have a couple dogs and we have a county park up here that has about 700 acres and we love taking them hiking all through the woods up there and just hanging out relaxing.
Brandon: Cool. Alright. My final question of the day, Jeff, what do you believe sets apart successful real estate investors from those who give up, fail, or never get started?
Jeff: Action. Action, action, action. I think you have to be passionate about it, you have to enjoy it, you know, someone could tell me you can make a billion dollars in the stock market tomorrow and I wouldn’t care. I don’t enjoy it. Real estate you’ve gotta be passionate about it. It’s going to pull you through the long days, the no’s, and take the action. It’s the only way to get out there and learn. You’re not going to learn everything in a book, you’re going to learn from doing it and making those mistakes and tripping and that’s how you’re going to build the confidence. Getting out there, meeting sellers and making the mistakes. It’s going to happen. You can’t avoid it.
Brandon: Yeah, there you go.
Josh: I’m shocked by that answer.
Jeff: Different. Yeah, I know. I’m sure you’ve heard read all the books you can and sit back and wait for checks to come in.
Brandon: There you go.
Jeff: But you’ve gotta take action, man. To avoid looking silly you just have to take action. We’re all going to make mistakes, but that’s how you’re going to learn.
Brandon: Alright, alright, cool.
Josh: Jeff, where can people find out more about you?
Jeff: Well, I’m on BiggerPockets. You can get a hold of me there, a lot of people do, about HUD questions and then you can also email me directly at [email protected] We’re also working on some stuff to help people with direct mail marketing. If you’re interested send me an email there and I’ll explain more about it.
Josh: Alright, Jeff, thanks so much for coming on, man. We really do appreciate it and I think you’re going to get a lot of email and I think you’re going to be very busy responding to folks also on the show notes. Again, everybody at BiggerPockets.com/show158. That’s BiggerPockets.com/show158. Jeff, thanks so much for coming on, man. We really appreciate it.
Jeff: Appreciate it guys. Talk to you.
Brandon: Alright, thanks.
Josh: Alright, Jeff, thanks so much for coming on the show. That was awesome. I know you’re drooling, wipe the drool off.
Brandon: I know, no, seriously I was taking notes while he was talking of things that I need to do in my planning.
Josh: Which is rare.
Josh: Which is rare because you and I sit here—
Brandon: You take more notes than I usually do.
Brandon: Yeah, but I was taking notes like, “I’ve gotta do this, I’ve gotta do this,” like little things that he said. There was one that I thought was just great where he said, let me see if he can find it, obviously—oh, yeah! He said, “what’s your lowest and best cash price?” so just that phrase I wrote that down. I’m like, “oh, that’s really good, I really like that,” and then to send mail even if they say no, send that offer. That’s so easy, but I just love that.
Josh: Yeah, that’s one of those clever little things. Well, that’s why I talked about it in the beginning. It’s like these are the little things across the board that the average guy’s not doing and that’s how you win.
Brandon: And because I’m a funnel guy. I love funnels and the beauty of what he does is you do these little things and they’re not going to necessarily make a massive difference. It’s not like just by sending that card you’re going to get twice as many people to say yes, necessarily, but when you improve every point of that funnel just a little bit, a little bit here, a little bit there, you might TenX your final result at the end of the day. Just by improving and doing the little things throughout the funnel that just give you that little edge in every part of it and you can just, yeah, see that in Jeff’s business how well it did that for him.
Josh: Awesome, perfect. I love it, I love it, I love it. Alright, guys, great show. Thanks for listening. Again, please get out there. Spread the word about BiggerPockets podcast whether you tell a friend or share the show on social media or whether it be this particular show go to BiggerPockets.com/show158 and share that link with your friends. Share it with the people that you know, spread the podcast. Spread the word. The more people that we can get to improve the better we all do as a community so get out there.
Otherwise of course jump on BiggerPockets.com, join the community, interact, engage with other folks just like Jeff and yourselves and we’ll look forward to seeing you there. So, again, make moves, guys. Make it happen. I’m Josh Dorkin signing off.
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