The Science of Flipping - Episode 11: How to create more Paychecks more often | Real Estate Investing Podcast

Episode Date: November 1, 2013

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Welcome to the Science of Flipping Podcast. I'm your host, Justin Colby. Welcome, welcome, welcome everybody to the Science of Flipping Podcast, Episode 11. I am your host, Justin Colby, and I'm excited today, guys. It is a beautiful day here in Phoenix, Arizona. The weather is incredible. It's like 82 degrees today. You do not get this kind of weather in Arizona, so I'm very, very excited about the weather today. It just puts me in a good mood. So again, this is the Science of Flipping Podcast, episode 11, guys. I am your host, Justin Colby. What we will be going over today is how the Fix and Flippers can stop having the paychecks coming in so few and far between.

As Fix and Flippers, you know these paychecks at times can come in two, three, four months away from each other and that's never any fun. So today I'm going to teach you guys how we in our business have stopped that cycle so we can make our paychecks more frequent at least two or three times a month. If you're new to the podcast guys, I encourage you to get over to our website, thescienceofflipping.com. You need to get to the website so you can get our number one e-book on the market today, guys. It is the 15 most costly mistakes a real estate investor can make in this market. It is the number one e-book you can get out there. Honestly,

if I and my business partner, Eddie Rosefield, if we were able to have that e-book before we got started, as the first thing we read, we would have made so many less mistakes. We would have made so much more money. The money would have come in a lot more frequent, a lot faster. This is the e-book. Get over to the website, thescienceofflipping.com. Get your free e-book. Today's lessons again, how to stop the paychecks from coming in so few and far between. But the podcast in and of itself, why I am here, why I'm giving you everything I got each and every podcast is because I want you to be able to live the life you dreamed of while being a fix and flipper. Now a lot of my students will complain that they're working too much in their business.

That they don't have the systems in place to fix and flip more than one or two homes at a time. And even when they do have those systems, they're still required too much in their business. And this podcast is to teach you all the systems that we use within our business. You know, we flipped 96 homes last year. We've done about 50 this year. We're doing a 79 unit town home development in Mesa, Arizona. This podcast is here to teach you how to systemize your business so you can fix and flip homes from the comfort of your own couch, from a different state while on vacation, from a different country. You know, I was in Ohio, as my friend John says, the number one vacation spot in the world. I was in Ohio this weekend and working, you know. I was away on

vacation with my girlfriend and we were having a great time and I was still getting deals done and I was not even here in the same state. And that's what it's all about, guys. Again, my name is Justin Colby. I'm your host. I am the co-founder and president of Phoenix Wealth Builders. My business partner, Eddie Rosefield, and I have been fixing and flipping homes for seven years now here in Phoenix, Arizona. And it didn't always start out so clean and so smooth. We've taken our lumps.

We've hit our speed bumps. We've made mistakes. And today, we are successful. And today, we have systemized our business in the manner of 50 to 100 deals a year, 79 unit development out of Mason, Arizona. But it wasn't always that way. We had to take our lumps. We had to learn. And because of that, I'm able to sit here today, guys, and show you and tell you exactly what not to do and exactly what to do so you don't make those same mistakes. So today, guys, let's get going on how to stop the paychecks from coming in so slow. You know, I laugh and I've been chuckling for the most part because I get it. You know, when you're a fixing flipper,

sometimes it can take three, four, five, six, seven, eight weeks to get a rehab completed. You know, and if you're doing additions and you need to go through the city and you're tearing down the home or, you know, there's times it could take two months, three months to get that all going through. Well, who has time to wait for that paycheck for two or three months, let alone now you got to put it up in the market and then you got to have the buyer

close on it and get their lender to approve it? Who has time to wait for that? Now again, you get into the fix and flipping world because when those paychecks come, for the most part, they're substantial. Those are big paychecks, guys. And if you do four, five, ten flips a year and you're making 20 grand a flip, that's a nice little chunk, right? Five of those is 100 grand. Ten of them is 200 grand you know you start making some good money and as a fix and flipper we get frustrated upset we start you know saying is it worth it because we don't get paid as quickly as other investors do well I'm here to tell you today what today's all about

is how to make your business a business that you start seeing more consistent paychecks and how you stop the fact that or start seeing more consistent paychecks i guess that's the best way to say it is how do you start seeing more consistent paychecks well why don't you start wholesaling while you're fixing flipping now wholesaling and a lot of my friends are great wholesalers, and I have wholesaling friends from across the nation, from New York to California to Oklahoma to Alabama, Texas. One of my best friends is a great wholesaler himself out in Memphis as well

as Dallas. That's how you're able to create these paychecks while you're fixing flipping so let's break down how to just do that it's great that I can come up here and say you know why don't you just go ahead and become a wholesaler while you're a fixing flipper well well how do you do that how do you systemize your business in a way well Well, let's start with the first thing. You already have the system finding deals, right? You're either finding deals on the auction steps. You're finding deals on the MLS. You're using marketing tactics to find deals. You're using direct mail, bandit signs, internet.

You're finding deals one way or another. Bird dogs. You're paying someone to find you deals. You already have that part down. Okay, well, what part do you need now? You're finding the deal. Now, how do you wholesale the deal? Well, you need the other component, your buyer's list.

Well, how do you build a buyer's list? Well, I have several different suggestions. One of the main suggestions that I use in my business is we use direct mail and we use it heavily and we have built a very nice buyer's list. When I say nice, I didn't want to use the word big and because a lot of wholesalers say, well, I have the biggest buyer's list. Well, that's fine, but how many of those buyers are active buyers? How many of those buyers are really buying your properties, pulling the trigger on your properties? That's the better part. That's why I use the word nice buyers list because we have real buyers on our buyers list. We don't just have the biggest buyers list. We

have buyers on our buyers list. So we use direct mails and there's a bunch of different softwares and there's a bunch of different list providers. So I encourage you, I'm not going to sit here and just rattle off names. I encourage you to email me, email me at info at the science of flipping.com. And I'm happy to tell you the systems and the list providers and the databases that we use to build a buyer's list. There's many, but we have a select few that we use here to build our buyer's list and it's a direct mail campaign. But then you also can build a buyer's list through bandit signs. You can build your buyer's list through internet, through Craigslist, through realtors, through going down to the auction, through going to REIA meetings. What are REIA meetings? For those who are new to real estate investing, REIA meetings are real

estate investing associations. It is chock full of investors. Most often they have a meeting, usually once a month, but REIA meetings are a great place to find buyers because they're all investors. So you want to find those buyers. You can go down to title companies. Agents represent buyers. Agents themselves at times are buyers. I just had an agent that put in an offer on one of my wholesale deals because she herself wanted to flip the home, right? And I met her through a title company. So the same place that you would typically network, whether it be the auction, the REIA meetings, title companies, real estate agents, get out there, network there to build a buyer's list. Again, I use direct mail mostly in my business.

And again, email me at info at thescienceofflipping.com. I'll tell you exactly who we use and why we use them. So the internet, Craigslist, Zillow, you name it. There's a bunch of ways to get out there to use websites to build your buyers list. You put up those ghost for sale ads and you're going to help build your buyers list. So you're already good at sourcing your inventory, right? So we started there. As a fix and flipper, you know how to find inventory.

Again, however you decide to do that. Now, what you're doing is building a buyer's list. So, once you build your buyer's list, well, now what? Well, you need to find them properties which you're currently finding. Now, let's say you're only finding one property every month or so on and so forth. So now you need to figure out, okay, what are the systems that I'm going to implement in my company, in my business, so that I'm finding more deals to send to these buyers? Because right now you're a one-man show, a two-man show. You can only do one, two,

three homes a month. Well, take it from me who's doing anywhere from five to ten homes a month. You need to have these systems. You can't just up that inventory, right? So you need to put in some systems about how to get more offers out on the MLS, how to get more deals from auction, how to get more bird dogs finding you more homes. You need to create these systems. So you may need to add to your current team. You may need to figure out, you know, how do I find more real estate agents that will work for me and work with me to put in more offers? How do I find bird dogs that will help me put out bandit signs or do some direct mail to find more of these properties? We do a lot of direct mail. I say

this episode over and over again. We do a lot of direct mail. Again, if you want me to tell you who we use to find motivated sellers, people who are selling homes, shoot me an email. Again, info at thescienceofflipping.com. But you need to add to your team and to your business to find more deals. Now, here's the reason you want to do that. Because you're able to wholesale them. You may not have the systems in place or the manpower to take on more fix and flips. That's not the intent of this episode. The intent is to say, I want to find more deals so I can start building a wholesale business so I can get more paychecks coming in more frequently. And it doesn't cost a lot of money. You're already doing half the battle.

Now you just need to increase how many of these deals you are getting. So again, if you are using direct mail, which I suggest, if you are using bandit signs, which I suggest, which if you are using online marketing like Craigslist or Zillow, I know investors that use eBay to find deals. If you are using these companies, if you are using realtors, if you're using the MLS and going after old listings or whatnot, you need to build a team to help you do that. You need it to be realtors or someone that has experience of finding these homes. So it kind of goes back, and I don't mean kind of, but it goes back to you not just doing

everything yourself. You need to find people to help you do these things. Bird dogs are a great example because they get paid when you find the deal, when you close on the deal. Agents are a great way to do it because they get paid when you find the deal, when you close on the deal. Agents are a great way to do it because they get paid when you close on the deal. So again, there's a lot of those people out there. And it goes back to networking. Where are you finding them? The auction steps are a great place. Title company meetings, realtors, loan broker meetings, REIA meetings, real estate investment association

meetings, getting out there. I use it on Facebook. Just simply saying, hey, is anyone looking for a home in 85258 zip code? I have a deal for you. Anyone who likes it or replies, I put them on my buyers list. I message them, hey, or replies, I put them on my buyers list. I message them, hey, you're interested in being put on our buyers list. We get deals all the time. I've already gone over where to find these deals as far as in other episodes and finding motivated sellers. Again, I use direct mail. But the key will be for you to build your team

so you can not have to do it yourself. So you don't have to do it yourself. Now, let me tell you another secret to being able to create more paychecks and create a wholesale business so you're not completely working in it 15 hours a day. Trust me, guys. When we first started, I remember flying into Arizona and sleeping at Ed's house and literally waking up, going into his office at home, and working all day long, nonstop.

Him and I would be in this small little five by eight room, and it would just be all day, every day. And what we are trying to do is implement systems in your business so that you don't have to be doing that. And the secret that I find to be so, you know, no one uses this, I'm thinking of the word, but it's not even a secret. But the key to this, if you don't currently have a buyer's list, or if you don't have enough inventory to say, you know, I'm going to start becoming a wholesaler. Well, why don't you co-wholesale deals? Co-wholesale deals. This isn't really a secret, but you know what? I got to say, I think we've probably co-wholesaled 10 to 15 homes this year simply because we met a wholesaler years ago that we would buy homes from. And we realized because of our students and some of the people that we had on our buyers list, people were hungry for inventory. So we had a very simple conversation. We had a document signing exactly what the terms were

that we would be able to send out their property and get a percentage of the wholesale fee. That's as simple as it is. They found the property. They did the direct mailing. They put the offer on the MLS. They found it at auction, wherever they found it. We had a one page document saying

they allow us to co-wholesale it, to co-market it to our buyers list. And if we bring a buyer, we get a percentage of the wholesale deal, of the wholesale profits. Let's just use 10 grand as an example. We get a percentage, agreed upon percentage of the wholesale profit of 10 grand. Now that percentage needs to be worked out between you and the other wholesaler. There's no right or wrong answer there. I always like to have a 50-50 deal. They bring the deal, I bring the buyer. It have a 50-50 deal. They bring the deal. I bring the buyer. It's a 50-50 deal.

Vice versa. Now, what if you're great at finding deals, but you don't really have a buyer's list yet? Well, after listening to this podcast, you're going to realize there's great ways to find buyers. Between direct mail for cash buyers, between Craigslist, between bandit signs, between the internet, Facebook. But let's say you're great at finding these deals. That's where you really excel. Well, why don't you go to these other wholesalers who have deals and say hey listen you've been a wholesaler here for 2, 4, 5, 6, 10 years

you have a good list why don't we set an agreement when I find a deal you co-wholesale it with me and I'll give you the percentage of my profit again I always think 50-50 is fair that always seems to be the fair deal you brought the property they brought the buyer I think it should be think 50-50 is fair. That always seems to be the fair deal. You brought the property, they brought the buyer. I think it should be split 50-50. Now, as that happens,

you're getting these deals done because you would have passed on these, right? So, the reason why you're doing this is because typically you wouldn't be able to do this home as a fix and flip. Or maybe there's not quite enough profit in this deal to fix and flip this. Or you don't have the systems to take it on. Or you have as many as you can do with these contractors and you haven't found the next contractor to bring on so you can't do this deal. Whatever reason that you can't fix and flip this deal, you need to be able to profit from that deal. There is a buyer out there that will buy your deal

and I say deal because it needs to be a deal. It can't be retail because you have buyers out there that will buy a home very close to retail And I say deal because it needs to be a deal. It can't be retail. Because you have buyers out there that will buy a home very close to retail because it cash flows. So as a fix and flipper, you know, you're not really too motivated to buy a deal that doesn't have any fat in it. And there's no margin. But you go and put five, ten grand into a home. Put a little lipstick on that home, and now it cash flows great. If you have a couple cash flow buyers on your list, you just hit a home run. You market up three, five, 10 grand, you sell it to them,

and they just want it to cash flow. Don't pass on those deals. Don't pass on a deal because it's too thin. See if you can wholesale it. If you can't find a deal, go network with another wholesaler who's finding deals so you can wholesale their deals. There's no need as a fix and flipper to have to wait to get the paychecks

that you want to be making. Guys, again, we're not huge wholesalers. Our business is fix and flipping, but we're going to be closing one again this Friday that we bought and a buyer just said, I need to have this deal and immediately wrote us an offer. We're going to make $10,000 on that deal. We didn't put any time or money into it and we're wholesaling it. I actually tend to call that wholetailing because we actually closed on it. But again, we'll have done before the year's over, we'll have done between 20 and 30 of these type of deals. Now again, the profit margin isn't that big that you're used to, which is your 20 to 50 to $100,000 a rip. But you go out there and you make three grand, five grand, 10 grand, and you're able to do that two to five times a month

while you are still running your fix and flip business, why wouldn't you do this? You're already sourcing properties. You're already going out there to find the properties for you to fix and flip. So if something comes your way that just doesn't really pencil or you have a bunch of people asking you for properties, make sure you have that wholesale component of your business. It is foolish for you to be passing up on these deals. It's foolish for you to be turning away paychecks

just because you don't have this component built in your property. So the two things, if you're an experienced investor, that you're going to need, you know, one of two things. You need to either create a buyer's list, because you don't have one yourself, and I've explained to you how to do that. You need to find more deals, because you've only been going after as many deals as you can do.

Well, now go after some more than deals you can do. We'll now go after some more than deals you can do so you can wholesale them to your buyers. That's the key to all of it. Building a buyers list and finding deals, I've mentioned time and time again, direct mail is the main way we do that. Using the MLS, going down to the auction, bandit signs, all of that will find deals. Building a buyer's list. Again, I mentioned I use direct mail. But again, Craigslist, direct mail, bandit signs, networking, all of that will help you build your buyer's list. And now you just got to create the systems so you're not doing it all

yourself. You got to be able to implement people and you got to bring people into your business and motivate them to bird dog for you. Motivate them to run your buyers list. Tell them that you will give them a percentage of the fee that you get because they're taking in the lead. They're dealing with the lead. They're the transactional manager, whatever that looks like, right? Someone needs to blast out the deal. You need to create a team. You need to create those systems in your business so you're not doing them yourself. Again, if you want to know the direct mail I use, we love direct mail here. We've raised millions of dollars in direct mail.'ve built a nice buyers list we've found several deals using direct mail this month alone um email me info at the science of flipping.com

i'll make sure to get you the information but uh you need to create these systems guys you know this is important. As fix and flippers, you might make 30, 40, 50 grand a flip, which is great. But if you're only doing that three times a year, that's not great. You can be doing more. You can make an extra 50 to 100 grand by wholesaling deals. And it's no skin off your back because it's what you're doing already. Get out there.

Build that pipeline of deals. Build your buyer's list and network with other wholesalers. Create a very simple one-page document saying that you have the authority to market their properties and that you will be making 50% of their profit. Or vice versa, that they will make 50% of your profit to market it to their buyers list. Very simple, guys. This is a no-brainer in your business. You're already doing this.

Now just pick it up a notch, build a team, and get more deals. Build a bigger buyers list. Guys, this is crucial for your business. Again, get out there and stop letting the market dictate how many times you get paid or how much you get paid. You need to go out there and work the market. Don't let the market dictate and work you. Alright guys, that's all I got today. This is a very, very important podcast.

It's a shorter podcast. It's only roughly about 30 minutes or so, but you need to listen to this podcast. Incredibly important. Go create a small wholesaling business to do two to five deals a month. Even if you do two at $3,000, that's an extra six grand a month. How liberating would an extra $6,000 a month be for your overhead,

for your mortgage, for your car payment, to put food on your table, if you have an office, to pay for your rent. If you have a business already, you need more consistent income. You can't just rely on these big paychecks, guys. All right, all right. That's it for today, guys. Again, I appreciate all you loyal listeners. I love the feedback that you guys give us. This is an incredibly important episode, episode 11, Stop the Paychecks from coming in so few and far between. I'm your host, Justin Colby. That's it for me, guys.

Peace.