The Science of Flipping - Episode 43 – What To Do First | Real Estate Investing Podcast

Episode Date: August 22, 2014

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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 43. I'm so grateful that you guys are all back this week to listen to this incredible podcast. I am your host, Justin Kolbe, and if this is your first time listening to this podcast, be sure to get over to thescienceofflipping.com. It's thescienceofflipping.com and download your free e-book. That is the e-book that is the 15 most costly mistakes a real estate investor can make in today's market. So this is the e-book I wish I had.

So what I did is I went out and created this e-book. It is the 15 most costly mistakes you can make as a real estate investor in today's market. Go over, get your free e-book so you don't make the same mistakes that me and countless other people have made over the last seven or eight years. If this is your first time to the podcast, welcome. I'm excited for you guys to be here. This podcast is all about is to be able to be on vacation, to be able to work from your couch and not have a boss and not have a nine to five. I want to be able to help you create that through real estate investing with a focus on fix and flipping as well as wholesaling. For the past 42 episodes,

I've really been focusing on fix and flipping. But over the last five or six months here, we've really gotten into wholesaling. So now we are doing both. We have two sides of our business. And if you've been listening to my podcast, you've heard that we created that about four or five, six months ago. We created the two sides of our business and we are rocking and rolling and it's an exciting time in real estate.

This is your time to become an investor. There's no better time than right now to choose your future, to start living your life by design. I can't tell you how many students I have. I have a student right now. And actually on that, if you're interested in possibly becoming a student or a mentee or me mentoring you, go over to the scienceofflipping.com. There is a coaching tab there.

Fill that out and I will personally be in contact with you. But I do have a student right now who works two jobs. They have very little time, but they will not make excuses and they want this to happen. And so they are working their tail off night and day to be able to fire their bosses, to be able to get rid of their jobs so they can be full-time real estate investors. And I'm just so proud of him for doing this. It's completely motivating and I love to see that vision and he's just ready to take on whatever happens. He understands it's going to be a process because he does work two jobs, so his time is incredibly limited.

But that's why we have this podcast. He found me through this podcast. He reached out to me and said, I need a coach. I need someone to help me here. I'm stuck. I'm drowning. I have two jobs. I want to have my own time back.

And so we were able to put it together so I could coach him and help him get to the next level. So that is what this podcast is about. So he could fire his boss and be a real estate investor full time, living the life he really truly wants to be living. Okay, so now let's get right into the meat and potatoes of what I want this episode to be about is what comes first. That's the main question about what comes first in your real estate business. I get this question from students time and time again. Do I want to find the deal first? Do I want to raise money first? Or do I want to find buyers first? A lot of people will argue one way

or another. And so, you know, at the end of the day, there's probably no right or wrong way to do this. It all just comes down to opinion, okay? And my opinion tends to land on, they're all incredibly important, right? So there's not a huge discrepancy here. However, I would say finding buyers first would be one of my preferable first things that you should do that I did along with also finding sellers. But I really put a value on finding buyers and let me tell you why.

And I know there's other educators out there. There's other podcasts that are out there. There's other just gurus in general that may say, go out and find the deal first. Once you find the deal, everything else will land where it may. And I can appreciate that quite frankly because sometimes it does. And so I'm not saying they're wrong at all. I'm saying my opinion in my preference would be go find some buyers first in the reason why I tend to prefer that is think about a hedge fund for a second you know I hear time and time again from students from California and

Florida and Texas and Phoenix in wherever my students may be though the hedge funds are here we're just getting beaten up and we can't find any deals. I myself went through that here in Phoenix. I get it. I understand. There was a time where we went from buying three, four homes a week to we couldn't buy a home for two months because the hedge funds were just crushing us. But I bring this up because what do the hedge funds have? Money. Okay. So they have money and they know exactly what type of home they need. They need rental style homes, right? So they don't want to buy a home older than let's say 1990. They don't want to buy a home, two bed, one bath. They don't want to buy condos or townhomes. They don't want to buy a home, two bed, one bath. They don't want to buy condos or townhomes. They don't want to buy homes with pools. They're very decisive with what they want

to buy. So imagine if you were looking to find your buyer first and you ran into a hedge fund and you said, hey, Mr. Hedge Fund, what type of homes do you want? Well, I don't want anything built older than 1990. I want to have a minimum square footage of 1200 square feet. I want it to be at least three bedroom, two baths. I do not want a pool. I want to have a garage. And they give you this laundry list of things that they will buy. And you say, okay, how many homes are you looking to buy? I would like to buy 10 homes a week. So the hedge fund or your buyer is saying, I would like to buy 10 homes a week.

Now, here's what happens. The reason why the hedge funds have been so successful is they run into a market yelling, I have $10 billion to spend. Who can find me deals? And everyone and their mother real estate agents realtors everybody is trying to feed the monster because they know they'll buy the home well what if you became that person where you went out okay follow me here you go out and you find a buyer it might not be a hedge fund let's just say it's an investor who's looking for rental

properties and you did some direct marketing direct mail marketing to find this investor and you went through the questionnaire and he said what are you looking for how much do you have to spend he says i about i have about five hundred thousand dollars i'd like to buy you know five rentals in the next four or five months okay great, great. What market, what area was zip code square footage? You go through that, right? You find out exactly what he wants. You fill all that out and guess what? Now you get to become similar to the hedge funds. You get on top of that mountain and you shout out, hey, I got $500,000 to spend right now in the next four months. I need to be buying homes that are 1,200 square feet, three bedroom, two bath, with a pool,

so and so and so on. Because now you know your buyer wants that. So now you get to go out and act like the hedge fund. You get to go out and say, I have $500,000 to spend. I need houses today and Realtors wholesalers investors alike will all be coming to you saying oh I want to sell this home or I have this wholesale deal or I have this listing and next thing you know

you actually have people trying to feed you the deal okay so I'm hoping that all made sense for you guys, right? So if you go find a buyer and you find out their buying criteria, you know exactly what they're looking for. You can then go shop for that buyer, represent to the sellers that you have the $500,000 that your buyer has to spend because you're going to just simply wholesale them the deal, right? You don't need your own money. You have your buyer's money that you're going to wholesale the deal off to.

So you say, hey, everybody, you're on top of your mountain. Hey, I'm looking for homes that are built from 1950 and newer. I'm looking for three bedroom, two baths, no HOAs. You have this shopping list of exactly what your buyer's looking for. You have a dollar amount that he has to spend and you can go find him the property. Get on top of that mountain and shout out exactly what you're looking for. Jump on Craigslist. Jump on LinkedIn. Jump on Facebook. Put an ad in the paper.

Put a pay-per-click ad on Facebook or Google. I mean, there's a lot of ways to go out there to advertise you're looking for homes. So the reason why I tend to say it's important to have a good buyers list and go after buyers first is buyers will give you the money that you're looking for to represent yourself. Make sense? You get to say you have 500 grand that you want to spend because your buyer does and you're going to simply wholesale them the deal. Either you're going to do a double close with them or you're going to do an assignment of contract. And you get your fee in the middle, right?

You walk away and you have your fee. The buyer gets what they want. They got exactly what they're looking for. The seller got to sell their home. Everyone wins. So I personally put a strong importance on building a good buyer's list first. That's not to say you shouldn't also be actively looking for the deals. However, I would put a strong importance on building and finding solid buyers. And that is my true opinion

on what should you be doing first. Finding those buyers is crucial. All right? All right, guys. Well, that's it. Thank you for listening to another episode of the science of flipping again if you are interested in coaching or mentoring get over to the website the science of flipping dot com there's a coaching tab that you can simply just fill out um and i personally will get back to you um as well as you will be able to see each and every episode of the podcast there so thanks again for listening guys i have been your host, Justin Colby, and I'm out of here. Peace.