The Science of Flipping - Arbitrage Is The Name of The Game

Episode Date: November 30, 2020

One thing that I figured out very quickly as a real estate investor is that direct to seller marketing can eat up a lot of funds and do it very quickly. So I thought about how I could be more efficient with my marketing dollars without having to compromise my marketing channels.

Yo, yo, welcome back to the Science of Flipping. I am your host, Justin Colby. This podcast is all about teaching you the systems, the tools, the strategies to implement in your real estate investing business. I am excited just because it's a Friday as I'm recording this and it's a great day. It's beautiful, it's under 80 degrees.

So here is the key to these podcast episodes. If you are just new to these podcasts, I want you to pay attention. They're gonna be short, roughly 10 to 15 minutes, but they really will go over some level of a tool, a strategy, a technique, a system, a process that you can implement immediately. And hopefully that can be executable right away for you.

If you ever have any questions or want a deeper dive on your business, make sure to go to thescienceofflipping.com. I have a place where if you'd like a little bit more advice on your business specifically, you can sign up for a strategy session call with me, which would be short. Just go to thescienceofflipping.com. Great resources there. So with that said, guys, a lot of people have asked me what allows me to have a consistency within my business doing anywhere from 10 to 20 deals a month, every month consistently. And one of the major pivots I made during COVID was this idea that I had to be a direct-to-homeowner wholesaler, right?

Where I would spend a lot of money. I mean, north of 40 grand on marketing every month, right? And that would create the opportunities that I would be able to wholesale and obviously get a 3x return on my money. However, during COVID, I really had a shift that came to light, which was I have arguably one of the best buyers list in town. Obviously, there are certain people who would likely say that about themselves too. But regardless of that being 100% fact, it is by the way, I realized that if I could leverage that with other people's deals, I could arbitrage the middle, right. And have smaller profit margins, but be able to do a consistent volume. And what that could do for me is I could actually take that money and I actually can invest that into my marketing. So basically I'm, I'm arbitraging the money I make on these co-wholesale deals.

And that money finances my direct to homeowner marketing. So again, when people talk about, you know, you don't need money to get into wholesaling, they aren't lying. It's not a joke. If you've seen any of my YouTube videos, by the way, if you're not subscribed to my YouTube, make sure to go subscribe. Just go to youtube.com forward slash Justin Colbyby or just simply look me up in the search bar. When people talk about that, it is very real.

I'm telling you right now actively why that makes me money and how that makes me money. I'm using someone else's deal that they spent money, energy, time negotiating. I am bringing it to my buyers and I'm collecting a small fee in the middle. And that's how I do that. Now, you can mark it up if you so want, right? I could probably make a little bit more money if I marked it up. But otherwise, I can take a fee from the original wholesaler as long as they're willing to play ball. Now, first of all, if you want to take a fee from the original wholesaler as long as they're willing to play ball.

Now, first of all, if you want to take a fee from the wholesaler, they need to be willing to play ball with you. Some aren't, which is perfectly okay. And then the other side is you could also mark it up where you don't have to ask the wholesaler for a fee. And you can just mark it up for however much money that you want to make. And that's great too. And you could do a combination of both. And the other, the next thing, and I'm getting excited here, but the next thing is you can start to cherry pick some of those. I just bought a condo off of a wholesaler that instead of sending it out to my list, I thought it was a good potential either flip or buy and hold for my portfolio. So I said, know what?

I'm going to go ahead and buy this. The reason why I got that is because I've sold so many of this wholesaler's deals. He now text messages me before he sends it out or before anyone else sees it essentially and says, hey, do you want this before it goes out or before you send it out? So I'm essentially, because I did so well by them, by selling their deals, I'm essentially getting their first looks now. And now I get to be able to be, or to be the decision maker, right? Like now I get to cherry pick, right? But again, why this makes sense, regardless of you being a newbie and maybe not having much money to market, then you should be doing this no matter what, right? And or like

myself, I'm a 13 year veteran in this game, right? I've done this a long time. And it just took me, you know, to get out of my own way to realize I can actually make money here in the middle as a true wholesaler and go from there, right. And, and leverage my buyers list. Now, yeah, you need to go build a buyers list and there's going to be, you know, like I mentioned, make sure you're watching my YouTube videos. There's a lot of trainings on that. There will be future podcast episodes about that. You might be able to search through my podcast to find where to find buyers, et cetera. I'm actually doing a training today with my students about your buyers list and how important that is and where to find them so you can run this exact model. This is why I'm doing this podcast because my students, I'm training

this in depth with my students actually today about how I'm able to do 10 to 20 deals a month with this exact model. But that ultimately finances my budget to market. And then everything that I get from my marketing is obviously a cherry on top, right? So again, guys, this is really important. This is how I've become so consistent over the years is A, to some level, I do spend my way there. But the big pivot I made in COVID was I realized I could arbitrage someone else's deals in my buyers list, really be a co-wholesaler and collect smaller fees, but do a lot of them, which now will finance my 20 or 30 grand a month in, in, you know, cold calling, text messaging, direct mail, and PPC, which is the marketing I do.

And now those deals are free. And the other thing that I've done at, well, I do every year that really is, it highlights this as you want to look at your profitability. And this is probably for another episode, but you know, for those out there that are talking about how many deals are doing and how much revenue they're doing. One of the interesting things to me is like, let me see your profitability. Let me see your P&L. Because I've been there. I've been the big operation. I've been in the big office. I've had a lot of employees. I've spent, like I've told you, $40,000 a month consistently every month. But my P&L at the end of the day, I was netting single digits, single digit percentages. And that's just not a good way

to run a business. And so I had to change that about five years ago because that's not the game. The game is not to talk about how many deals and top line gross revenue. I know it's flashy. I know it looks great on Instagram and it looks great on social media, et cetera, but guys and gals, it's all about making your pocket fat. That's why we're doing it, right? So make sure to start implementing this right now. If you do have further questions, like I just mentioned, and you want to figure out how to implement this in your business, just go to thes of flipping.com. Feel free to fill out the 20 minute strategy session. I'll jump on a call with you, help you strategize and we can go from there.

Otherwise I will see you guys or I'll see you guys on the YouTube channel, but I'm here for you guys. I will see you on the next podcast. Peace.