The Science of Flipping - I've Been Flipping Homes For Over 14 Years!

Starting point is 00:00:00 The main way I've been able to stay in this business for over 14 years, one word, diversify. Now, for many of you, you might think of diversifying your portfolio, whether it be stocks or real estate or crypto or whatnot. What I mean by diversify is I never became just a one trick pony. I didn't only rehab. I didn't only wholesale. I didn't only do novations. I didn't only do one single thing. And because of that, as the markets would ebb and flow over the last 14 years, I was able to stay flexible enough to actually stay in the game and to stay massively profitable through that time. Now, I say that, and yes, I have made my fair share of mistakes. Yes, I have taken my losses and my lumps, but to be in

Starting point is 00:00:53 business for 14 years and to be able to move with the market is the one reason I can tell you has kept me in this game for over 14 years. Welcome back to the Science of Flipping Podcast. I am your host, Justin Colby, and I have been asked a couple times recently about how I've been able to maintain a business over the last 14 years with some of the volatility that we have seen. My answer is that I've stayed diversified. I want to break that down for you here during this podcast, because I think it's really impactful for many of you who are trying to get into this space or even trying to become

Starting point is 00:01:49 more profitable. You see, wholesaling is such an incredible business. It's probably my favorite business and favorite strategy, if you will. The reason being you have very little risk, but that's not to say I haven't done my fair share of remodels. I've done my fair share of novation in a different way than what's becoming so popular. I've done my fair share of creative finance deals. I've bought my own rentals, etc. And what I will say is the key to any of you right now who are either getting into this space or trying to really scale or grow your business, the key for you would be diversify. So let's do a little deeper dive here in this episode. First of all, if you are listening to this on iTunes, make sure you give me a five-star review.

Starting point is 00:02:38 I would greatly appreciate it. And as always, if you have not yet, jump over to YouTube. Go to YouTube.com forward slash Justin Colby. Find me, subscribe to my channel, and make sure any and all videos that you're watching, make sure you're giving me a like right there on those videos. The YouTube gods really appreciate that, so I appreciate you for doing it. Okay, so let's take a step into why people are asking that question, and then also my answers and why I answer the way I do. Well, the main reason people are asking me right now

Starting point is 00:03:11 how I've been able to sustain for 14 years is because most, if not all, sellers aren't motivated right now, right? And so a lot of people are saying, okay, well, what do we do? What are you doing, Justin? How do you overcome these hurdles when 99.5% of the people we are talking to don't have motivation to take a discounted offer? And that's the reality right now. And it has been the reality for the last

Starting point is 00:03:39 about two years, including this time with COVID. COVID, again, if I had a crystal ball, which I used to, I would have told everyone in the world. And at some point I kind of did like, this is it. This is where the market shifts. This is where it changes. This is where it rolls back. I did not think it was gonna crash. I would have said that was gonna be March of 2020.

Starting point is 00:04:00 Here we are January of 2022 and it's still done the exact opposite. We are still appreciating. There is still low inventory. There are still interest rates are still low. Although many people are talking about the interest rates raising, we'll get there. And so, you know, the one thing I reply to them is I say, I stay diversified in how I'm going to exit the property. Meaning when I'm talking to a seller, I'm not just thinking about cash offer, cash offer, cash offer, you know, discount or a formula, you know, 80% of ARV minus rehab minus a wholesale fee. That's my offer. I'm not just

Starting point is 00:04:39 thinking about that every deal that we go into every seller. And it's because they may not be anywhere near the number I come up with. And that's 99.5% of the people that you are encountering, that I'm encountering. But I diversify in how I exit the property. So I look at the property and say, hey, could this be a good rental? Could this be a good short-term Airbnb rental? Could this be a good novation? Could this be a good wrap deal or a creative finance deal or a sub two deal? Could this be a good novation? Could this be a good wrap deal or a creative finance deal or sub two deal? Could this be a good hotel? Could it be a rehab? Could it be a wholesale? So I'm looking at all these exit strategies every time I'm going into a property, right? And this has really helped over the last about two years. I've done more mobile homes, more transactions with

Starting point is 00:05:23 mobile homes, whether I've wholesaled them or flipped them or whatnot, than I've ever done in the other 12 years of my owning this real estate investing company, right? I've done more in the last two years. And it goes to this point. I analyze it for the exit strategy first, not the acquisition strategy. What that does for me is it helps me analyze it for the acquisition strategy. It helps me for me is it helps me analyze it for the acquisition strategy. It helps me structure, how am I going to make this offer to provide value to the seller? Now, again, many people will say, well, Justin, I don't have money for a rehab. I don't have money for a rental. I'm not going to go over that right now on this episode. However, I will because all of the rentals I've bought, I have not used a single dollar of my own, not one. All of the flips I have done, well, I have used some of my own money on the flips, but many, like the vast majority,

Starting point is 00:06:16 95% of the flips that I've done, I have not used my own money. So that is all very, very doable. So if you're thinking about that, stop right now. That's your own thinking. It's the lack of experience. You absolutely can flip properties, buy homes, buy rentals without any of your own cash. Okay? So I always will look at the exit strategy first, diversify how I'm looking at it. So that way I can come up with the best valuable offer to the seller that I possibly can. So many people in our space of real estate investing go to the traditional wholesale model, which is a cash offer at a certain formula, and we're getting denied. My team's getting denied. You guys are getting denied. I hear it. So that is my answer of why I'm still being able to do so many deals when 99.5% of people that we talk to aren't

Starting point is 00:07:06 motivated to take a discounted offer, right? So when people ask me, how have I stayed in the game for 14 years? It's a very similar answer, okay? The answer is I was buying homes at the county courthouse auctions was the first way I started buying homes. Well, guess what? The hedge funds started coming in. Well, hedge funds can pay a whole lot more than me. And this is years ago. In Phoenix, the hedge funds had been buying for, shoot, I mean, at least nine years now,

Starting point is 00:07:40 eight, nine years. So we were buying, it was about 2012, and all of a sudden we couldn't buy any more flips at the auction. And it was because the hedge funds were pricing us out by a drastic amount. Well, I had to maneuver. I had to now start looking at different ways to acquire properties. I then found wholesalers in my area. We started buying from wholesalers. And from there, we saw the value of creating such quick capital from wholesaling that flipping didn't get you. Flipping got you the bigger paydays. It just took 90 to 120 days to get the dollars. So all of a sudden, we transitioned into wholesaling and rehabbing. And it was all an impetus. Big word right there. It was all created because at the time, I was a one-trick

Starting point is 00:08:26 pony. I was quite literally only buying homes from auction. And that one-trick pony style really limited me, right? So I learned right there we couldn't be a one-trick pony. The other time was the big learning lesson was in marketing. I was a one trick pony when it came to direct mail. The only marketing strategy I was doing back in 2013, 14 was direct mail. And when 2015 started hitting in the callback ratios were going way down. I realized I'm spending the same, but I'm getting less leads, total lead volume, which means I'm not going to be able to convert as many deals because I have less deals to convert. And so then we realized we had to diversify our marketing. We had to do cold calling. We had to do text messaging. We had to do driving for dollars. We had to do bandit signs, door hangers. We've done it all. And so those are the two big examples I can teach you or at least use for this episode that really helped me diversify and

Starting point is 00:09:26 realize like if you are just a one trick pony, it's all you do forever. I'm not, I'm not going to say and be extreme, say you'll never make it. You absolutely can. But are you going to have the amount of longevity that you really want? Are you going to be able to stay in the game long enough to win the game? Are you going to be able to create enough revenue to make this worth it? I'm probably the first person, well, I don't know if I'm the first, but I would make the argument us entrepreneurs are nuts, right? The amount of stress and chaos that we deal with between starting a company, running a company, hiring, training, firing, recruiting, becoming profitable, P&Ls, taxes, all of this stuff versus just being a W-2 employee. It's insane what we go through, right? And so for me, it's always like,

Starting point is 00:10:14 are you going to make enough money to make this whole thing worth it, right? And my argument and my point, I should say, to all of the people that have been asking me recently, like, how have you done this for so long? This is pretty, pretty impressive. It's because I really thought about the diversification of how I, you know, market, how I acquire, how I exit. And because of that, I've been able to really hone in on the four pillars that have made my business. The four pillars are this. my network is the first pillar the amount of people that I've done deals with again Realtors agents hard money lenders you know title companies you name it right my network is incredible the next thing is understanding the market right where are

Starting point is 00:11:02 we at in the market where we at if you're talking about a singular market like Phoenix, what's the singular market doing? Where are we at nationally? Like now I'm looking at all the markets. What's hot? What's not? Where should we be? What still has appreciation value, right? Like Oklahoma. The third would be is understanding the exit strategy, understanding that there's, you know, more than just wholesaling. Right. Um, and that's really the, the crux of the whole thing is understanding that there's more than just, you know, wholesaling. And then the last would be simply how you're going to be acquiring all these properties, right? If you can diversify how you acquire all these properties, you're going to win the game. Okay. So I don't want you to

Starting point is 00:11:51 get caught up on, I don't have money to flip. I don't have money to buy and hold. I don't have money to do innovation. I don't stop. Okay. I've been there. I've done that. I I'm literally buying rentals actively without any of my own money. So I will be able to teach you guys that. I'm literally buying rentals actively without any of my own money. So I will be able to teach you guys that. But what I need you to realize is my longevity in this space is because I diversified, right? I was able to look at a marketing strategy and acquisition strategy and exit strategy and keep it diversified enough that regardless of the scenario, I was able to make it, I was able to maximize my opportunity. And if you guys can do the same going into 2022, you guys are going to have an awesome, awesome year, right? So that's the answer.

Starting point is 00:12:35 It was really condensed. Usually it's a little bit longer. Hopefully you guys can take a little something from that. Again, if you're not there, go subscribe to my YouTube channel. Make sure you're checking these out. Make sure you're liking this video. Throw me a comment in the comment section also. And I will see you guys on the next episode. Peace.

The Science of Flipping - I've Been Flipping Homes For Over 14 Years!

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