The Science of Flipping - Episode 16: Situation Real Estate | Real Estate Investing Podcast

Episode Date: December 6, 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 16. I am your host, Justin Colby, and today, guys, we are going to be talking about what I term situational real estate. If you have never heard me or the Science of Flipping podcast, I truly recommend you get over to our website, thescienceofflipping.com. The reason you want to get to that website is primarily for our e-book, our number one e-book, the 15 most costly mistakes a real estate investor can make in this real estate market, guys. We all know that this market is crazy. Over the last couple

years, we've had an incredible increase in values and plenty of buyers in the market going after homes. Most recently, over the last several months, we've had a softening of the market and we can't get things sold. Guys, you need to make sure to pick up this e-book on our website, thescienceofflipping.com. Download the e-book, The 15 Most Costly Mistakes You Can Make in This Real Estate Market. I wish I had the e-book myself. This e-book would have made it so much easier for us not to step in as many potholes as we did going through over the last six or seven years or so. Today's lesson is going to be situational real estate. I actually don't want to take credit for the term.

A buddy of mine I was on the phone with today, Jason, and I were talking about it, and he kind of deemed it situational real estate, and I took it. I think it's a great term for what I'm going to be talking about today on this podcast. So we are going to go over situational real estate, which is the type of real estate that we are in right now in this market. What we are going through right now in the holiday season, when the market has softened, where are we getting the deals? And it is called situational real estate. Now guys, again, if this is your first time to this podcast, I want to welcome you all. This podcast primarily deals with fix and flip real estate. Now we all know that fix and flip real estate a lot of times can take a ton of time. If there are systems in your business, you find yourself doing everything in the business.

And what this podcast is set up for is so it can give you the systems in your fix and flip business so that you no longer need to be involved in your fix and flip business. You have the systems running so that you can be sitting at the comfort of your own couch, or you can be on vacation, or like myself, I'm heading to San Diego for a mastermind on Thursday. Today's Tuesday, and then I'm going from San Diego to San Francisco to spend time with friends and family. The whole while, our business is consistently running. It does not stop because I am leaving. It keeps running because I have the systems in place for it to keep running. Even though I'm in San Diego and then I'll be in San Francisco. This is all about a lifestyle that you want to create with real estate investing. And a lot of us fix and flippers tend to not be able to

systemize their business to be able to live that lifestyle. They feel like they're too ingrained in their business so that they're swinging the hammer. They're finding the home. They're sending out their marketing. They're finding the buyer. They're getting it in a contract. They do everything. The podcast is about systemizing your business so you can create the lifestyle that you want to lead that you see all over the TV or you see all over the internet. That is what this podcast is all about, systemizing your business to live the lifestyle that you want to live.

Now guys, I'm your host, Justin Colby. If you have not heard of me, if you have not seen me on stage, if you have not shaken my hand, I am a normal guy. My business partner, Eddie Rosefield, and I started real estate investing back in 2007 here in the Phoenix market. To date, we have done over 300 fix and flips here in Phoenix. Last year alone, we did 96 flips here in Phoenix. This year, we have cracked the 50 mark. We've also become developers and builders here in Phoenix. we are building a 79 unit townhome project in Mesa, Arizona. So life is pretty good. In most people's eyes, we'd be considered an overnight success. However, it's not

always been this pretty. A lot of what people miss is the fact that we've had to lose our homes, we've lost our cars, we've slept on couches. We've gone through a lot of hurdles to get to where we are today. But it's all about the four right through it and to systemize your business so that you can rely on others to get you to your goals. So yes, today we would be considered very successful by most anyone's terms. But we've taken our bumps. We've taken our hits. And this podcast is here today, guys, so you guys don't have to take those same hits.

So you don't have to wait for nine months until you get your first deal done. I was just on the phone with a student today who was talking about how it's been six months already and she still has not got her first deal done. Now she went out and spent a bunch of money and I mean a bunch of money on several different coaching programs. And finally she has reached me and I am now helping her get her first deal done. Now the key to that, guys, is I am a huge advocate of always investing in yourself. Meaning, buying education. Buying books, buying CDs, buying coaching programs. Investing in yourself, just like you did when you went to college.

But you need to be able to take action behind all of that education. And for those of you out there probably resonating a little bit saying, you know, I could be taking more action. I spent a bunch of money on coaching. I've done all this stuff. I read all these books. But I'm still not getting anywhere. It rests largely on your shoulders. You need to be taking action to produce the results. When we started,

it was nonstop. Coal calling real estate agents, having marketing meetings set up with title companies. This is before any deals were ever done. Networking with wholesalers, finding other investors in the area to network with. Never got a deal done for the first nine months, but it was nonstop action taking. So anyways, guys, that's about us. Let's get right into the meat and potatoes about what we have for you today. Today comes from actually, again, a conversation I was having with a good friend of mine, Jason, great investor. He's in a great position in life. He's out there in Florida. But anyways, him and I were talking about what's going on in position in life he's out there in Florida but anyways him and I were talking about what's going on in this market

and he knows several other investors here in Phoenix and he knows a bunch of investors across the nation and he simply asked me what's going on in Phoenix I've heard it's been a little difficult out there and I told him you know a couple months ago it's almost like the

faucet just was turned off. And I told them that not only is this happening here in Phoenix, but people are also experiencing it heavily on the West Coast, specifically California and Colorado. And I know that primarily because I have a bunch of students out there. And we started just talking about, you know, the good old days and grassroots marketing and what's been going on. And he brought up kind of a term that I'll give him the credit for. The situational real estate is a lot of people got so comfortable over the last couple years about utilizing what we call kind of like lead gen services.

One of those is the MLS. The MLS provides us real estate investors with leads. They're sitting right there as listings. Or another would be considered the auction houses. Those are leads. They provide us with leads that are going to auction every single day. Now, a lot of real estate investors have gotten too comfortable relying on those sources. And there's many others, but I'm just using those as the example. Well, what happens when those dry

up? Meaning you can't find good deals anymore and you need to find deals elsewhere. Well, what happens then is you need to start relying on direct mail. Direct mail will always produce results and will always, no matter what real estate activity or economic challenges are having, direct mail should always be a part of your marketing strategy to find deals. Even if you are a wholesale flipper, meaning you do not even fix the homes, you need to be utilizing direct mail to find properties to wholesale. If you are like me, where you also wholesale homes, but your main business is fix and flipping, you really need to be utilizing direct mail to be wholesaling homes. See, a lot of people don't go after what we call situational real estate. Now, there was a whole situation several years ago with short sales. That is what we call situational real estate.

People are in a situation that they must sell their home because they can no longer afford it. That is the situation that they are in. Well, now as most investors and most realtors would also agree, the short sales are going away because there was such a spike in the value of homes over the last year, year and a half. So now that the homes have equity again. Well, now that the homes have equity again are now putting people in another position or another situation. And that situation is getting out from under your home so that it is not a short sale, meaning they still may not be

employed, but all of a sudden their home is no longer in a position of a short sale. They actually have equity in it and they could probably sell the home to a buyer without having a short sale situation. So they will be pretty desperate to sell that home. So utilizing direct mail will go out and reach what we call those high equity homeowners homeowners, that they have equity in them. So utilizing direct mail will find those people. Utilizing direct mail will also find a bunch of different other people. There are a lot of lists that you can gather, that you can utilize direct mail to. Probate would be one of them.

Divorce would be another one. High equity, free and clear, vacant, absentee owners, meaning they have rental homes. All those can be lists that you purchase to send direct mail to. So direct mail, no matter what economic situation is happening in real estate, you need to be utilizing direct mail, even if you're a wholesale flipper, or even if you're looking only to tie it up and sell it, you need to be utilizing direct mail to find those leads. So that being said, what other situations are people going through in today's economy? Well, no matter what economy is happening, people are going through divorces. So you may need to start researching and meeting up with and networking with divorce lawyers. Now, a lot of that has to do with the fact that they're on a hardship.

They're going through something that they will need to divide their assets and sell them off and then divide the money. So, when you do contact divorce lawyers, you may need to position it as you are helping them and their clients fulfill what they need to do. You are actually an asset to that lawyer because all need to know me because I can help unload that asset of your clients and help them in their position. I am an asset to you because you can provide my services to them without making it ugly and having to go through real estate agents, so on and so forth. Divorce lawyers are a great asset for you to network with.

What about probate lawyers? They would also be a great asset. When homes are going through probate, someone dies, you need to go through probate. So you want to go find the lawyers that deal with it. Another great individual or businessman you would want to network with would maybe be a financial planner. A lot of times they know their clients need to liquidate some assets. Assets being their real estate portfolio. That is not out of the realm of what happens on a day-to-day basis as a financial advisor or financial planner.

They may need to liquidate their assets or they may want to liquidate their assets. Either way, that financial planner or financial advisor should be coming to you to say, hey, listen, my client needs to liquidate 123 Main Street. What would you pay for it? Again, you're an asset to that financial planner. You're an asset to that financial advisor. They need to put you in their portfolio of what they can do to help their clients. It's all a change of thinking there.

It's all how you position it. Now, most of these individuals are going to say, well, what's in it for me? Well then, in that case, you need to figure out what's in it for them. Why are they willing to put you in their portfolio to help their clients? That you need to structure with them. Some people will simply say, you need to cut me a check for marketing. I know as lawyers, there's a lot of different red tape that they cannot do. So when you are dealing with lawyers, you need to simply ask them what type of compensation would work for you for these deals. And some lawyers will tell you, nothing at all.

You're helping me by helping my clients, so they want no compensation. Others will tell you otherwise. You will need to negotiate that with them and how that gets paid out. But again, guys, you need to go back to situational real estate. What problems are occurring for those that need to sell their home?

Think outside the box. The deals are no longer going to be coming from what we call lead generation, meaning MLS or auction. You need to find them elsewhere. And you need to use direct mail to do it. You need to network with individuals that have the pulse on people's assets. Divorce lawyers, probate lawyers, financial planners. Get out there and network with them. Position yourself as an asset to them so that when they're talking to their client, they can say they have an investment group that will most likely be willing to buy your home.

You are an asset to them. So, get out there and network with them. Guys, that's what it's all about today in this market. If you're not utilizing direct mail, and there are so many lists out there that you can buy from list providers. I use a database of motivated sellers that use high equity and free and clear and absentee. I use that database. There are lists upon lists that you can go out and buy.

A company that you can buy lists from is called ListSource. I should be in affiliate form. I mentioned them enough. But you can buy any type of list. Again, a probate list, a free and clear, a high equity and absentee, an inheritance list, which is different than probate because it's going through a trust. There are lists upon lists, but you need to also use a letter company, like a Yellow Letters Complete, to mail to them. So there's mailing houses that you need to look for. Now again, I'm not an affiliate for all these companies,

so I can tell you a couple, but there's a ton of them. You can just look up direct mail companies. Yellow Letters Complete is one out there. There's plenty of mailing houses out there. Be sure to contact them once you get your list. Give them the list. Write a little blurb about how you are interested in buying their home and send it off. Start using direct mail. 500 pieces a month minimum. 300 is very, very, very minimum. Anything less than that, it's not even worth doing.

300, very, very minimum. 500 is minimum. You should be getting closer to 1,000 units a month minimum. All right, guys. That's what we got today for situational real estate. I am your host, Justin Colby. This has been podcast 16, the science of flipping. I've enjoyed today, guys. You guys got to get out there. Use direct mail. That has been Podcast 16, The Science of Flipping. I've enjoyed today, guys. You guys got to get out there. Use direct mail. Create the relationships with the lawyers and financial planners and get out there and start getting deals done.

Don't tell me it can't be done. It absolutely can be done. I'm your host, Justin Colby. This has been The Science of Flipping. Peace. Colby. This has been the Science of Flipping. Peace!