The Science of Flipping - Novations are DEAD - This New Strategy Will Change Everything

Episode Date: November 1, 2024

To learn more about Reverse Flipping, go to https://scienceofreverseflipping.com/     In this episode, I introduce Reverse Flipping, a game-changing real estate strategy I believe will outshine novations and traditional methods in 2024. With Reverse Flipping, we focus on acquiring the deed first, even on complex, over-leveraged properties that most investors consider dead deals. By leveraging our specialized loss mitigation team, we can negotiate directly with banks, opening up profitable opportunities where novation, wholesaling, or standard flips don’t work. Whether you’re new or experienced, I invite you to explore this innovative approach through our community, as I’m confident Reverse Flipping is the ideal solution for navigating the economic challenges ahead.     The #1 training and coaching system to launch, grow, and scale your investing business! 𝐋𝐞𝐚𝐫𝐧 𝐌𝐨𝐫𝐞: http://www.thescienceofflipping.com Turn cold real estate leads into engaged motivated sellers on auto-pilot using the power of A.I! 𝐋𝐞𝐚𝐫𝐧 𝐌𝐨𝐫𝐞: https://www.rocketly.ai/ Have a question? Ask me anything at https://www.askjustin.ai/ 𝐀𝐛𝐨𝐮𝐭 𝐉𝐮𝐬𝐭𝐢𝐧: After investing in real estate for over 17 years and almost 3000 deals done, Justin has created a business that generates 7 figures in active income through wholesaling and fix and flipping as well as accumulating millions of dollars of rental properties including 5 apartment buildings, 50+ single family homes, and 1 storage facility Justins longevity in real estate is due to his ability to look around the corners, adapt to changing markets, perfecting Raising private capital, and focusing on lead generation which allows him to not just wholesale and fix & flip, but also accumulate wealth through long term holds. His success in real estate led him to start The Entrepreneur DNA podcast and The Science Of Flipping podcast and education company, where he has coached and mentored thousands of aspiring and active investors over the last decade. He is a nationally recognized speaker and is on a mission to educate as many people as possible on becoming a successful dynamic real estate investor. 𝑾𝒉𝒂𝒕 𝒕𝒉𝒆 𝑷𝒓𝒐𝒔 𝑯𝒂𝒗𝒆 𝑻𝒐 𝑺𝒂𝒚 𝑨𝒃𝒐𝒖𝒕 𝑱𝒖𝒔𝒕𝒊𝒏:  “Justin is one of the best trainers in this space. He really gives everything to his tribe.” – Brent Daniels (TTP) “Justin’s ability to connect with people and help them understand what he is teaching, is unparallelled” – Kent Clothier (REWW) “We have been in the trenches flipping homes in Phoenix for over a decade, he is one of the best to do it.” – Sean Terry (Flip2Freedom) Subscribe To Justin Colby: http://youtube.com/justincolby View All My Videos: https://www.youtube.com/c/JustinColby

This deal is a dead deal to every single other real estate investor out there. There is no novation, right? They just bought this six months ago. There's no higher list price you can give. There's no wholesale opportunity There's no sub 2 because the debt is at six point seven five The mortgage payment is more than what rents would go for in the area There's no deal unless you are doing reverse flipping. What is up my science of flipping family? I am back with a solo episode. That is right no guest on this episode. It is just yours truly and I'm gonna be giving you what I believe to be the hottest information you can ever imagine. If you've been in this space of real estate

over the last year or so, you know that one of the hottest subject matters, the newest strategy, the thing that's catching everyone's attention is novations. Well, I'm here to tell you guys, novations is dead. Novations are obsolete. Now, if you are doing Novatians, you know I'm being a little extreme right now. I'm being just a tad bit extreme guys.

But the reality is this. There's a strategy that we are currently using, me and my team and our JVs are using right now that in the last 30 days, we have done 130 deeds. That means we have done 130 deeds. That means we have purchased 130 homes in the last 30 days. How? We call it reverse flipping. Now, let me describe to you the difference

in why this model is gonna make so much sense going into 2024 and 2025. Literally, this model is gonna make so much sense going into 2024 and 2025. Literally this model is gonna last forever, but over the next 24 months for sure, we're gonna have a lot of pain in the streets. Now let me stop for a second. For those of you who are brand new, some of these concepts may be a little bit more advanced,

but bear with me. I'm gonna try to keep this as simple as possible for those of you that are active investors then you know exactly what I'm talking about about innovations and let me teach you what reverse flipping is but to start for the newbie a novation tends to give investors an ability to come in with a higher offer and the the you know easiest way to say that or the 30,000 foot view without going in depth on innovation is the ability to kind of sell a wholesale property on the MLS.

You're getting an agreement, an attorney in fact, with the homeowner that allows you to put it on the market. You get a power of attorney, or a power of attorney as well, but you can put it on the MLS and essentially wholesale that property at a higher dollar amount on the MLS. That is the simplicity of it. So what does that do for the traditional wholesaler?

It allows you to offer more. It also gives more of the money back to the seller, so it's a stronger negotiation tactic, but not all deals fit innovation. Let's use the example or the question what if you have a homeowner that is over leveraged? What if you have a homeowner that is behind on their mortgage by 30 or 40 thousand dollars? What if you have a homeowner that has a tax lien of 10, 15, 20, 30, 40, $50,000. Those examples exist today, right now.

Now as I'm recording this, we're about to go into an election week, literally next week we are gonna find out who the president will be. But with all that said, the next 12 to 24 months we are gonna have hardship in the economy regardless of who gets elected. And why that's important is because what I'm bringing to you on this episode is this concept

of reverse flipping. So if you want to learn more about science of reverse flipping just go to scienceofreverseflipping.com you can learn more. We're actually doing a lot of trainings. We have over 400 people in our community right now that are crushing it. That's actually why and how we're getting so many deeds because we can show people how to go get these deeds within the first week of being in business. Now, I'll get to that here shortly. So back to the economy, we are going to have some pain. We are going to have people lose their jobs. Now, statistically, these are true statistics, roughly 65% of the people that lose their jobs choose to go some sort of bankruptcy. Sometimes it's not by choice but they choose some sort of bankruptcy. 65%. From there, most

people try to go bankrupt so they can keep their home but the unfortunate statistic is 95% of those people who go bankrupt, they also lose their home. So the challenge that we have seen in the real estate investing community for a long time is what happens when someone has no equity. It doesn't matter if you're a wholesaler, fixing flipper, no vader, it doesn't matter. Sub 2, it's not gonna matter because you're really against a no equity deal but if you do understand what I understand about reverse flipping, you can actually make a deal that would be a dead deal.

Now for you active investors that have a CRM, these leads are already in your database. They're already in your CRM. You've probably deaded them, right? If you're watching this on YouTube, you've deaded them with bunny ears. You can't find a way to get the deal done because the homeowner is behind on their mortgage by 40 or 50 thousand dollars which leaves no more equity. There's a tax lien, there's an HOA lien, whatever the case may be, and it's likely going to go to foreclosure. Now a lot of people haven't seen or experienced foreclosure over the last decade of doing

business because the economy's been doing so well. However, in the last 12 to 18 months, you have seen a big change in the economy, inflation, unemployment, et cetera. So moving forward, there's this massive opportunity to go find homeowners and offer a massive amount of value to those homeowners. The way we get paid is by offering value to the homeowner and if we can stop the foreclosure process and help them get out from under that weight of the home we are gonna have a nice

payday. But it all starts with being able to offer value to the homeowner by stopping the foreclosure process. If you're like me in the real estate game, you know how wild things can get. Managing leads, marketing, sales, operation, it's a constant hustle. But let me tell you about something that has been a game changer for thousands of investors out there. ReSimply. It's an all-in-one software that truly is a lifesaver for anyone serious about the real estate investing game.

What's crazy about ReSimply is how much it packs into one platform. You've got absolutely everything you'll need from list stacking, driving for dollars, automated drip campaigns, a cold calling dialer, a full phone system, email management, speed to lead, buyer management, automated task systems, accounting features,

literally the whole nine yards. It's like they built the powerhouse software just for us investors. No more juggling different subscriptions and trying to integrate a million different tools. So if you're anything like me, and if you are ready to streamline your investing business and close more deals, you've got to check out ReSimply.

Head over to resimply.com forward slash pod. That is R-E-S-I-M-P-L-I dot com forward slash pod and get 50% off your first month. Oh and they're also throwing in a free 30-day trial so jump on while you can. Trust me you don't want to miss this. The reason why I'm saying ovations is dead, again being a little extreme, they're not dead but there's a better route, is because in the cases that these homeowners don't have any equity, that they are behind, Novatians don't do you any good. Wholesaling doesn't do you any good.

Sub 2 won't do you any good because you're really not being able to work with the bank. In reverse flipping, right, that's where science of reverseflipping.com can help you guys, you actually have a loss mitigation team that we can work with the bank to negotiate a deal for the seller that creates an opportunity as us investors now we can go buy that asset. Before we didn't have that.

Now let me speak to the realtors listening. There are realtors out there that call themselves short sale specialists. Well right now statistically we are seeing roughly 65% of short sales on the MLS with short sale specialist realtors are not getting approved. Not getting approved. Now why is that? Well we see most often that it is because the proper paperwork is not being done. And what we have been able to do is we ended up buying a company and that company is a loss mitigation company. That company is headed by two individuals who just spent the last eight years writing the Fannie Mae HUD guidelines on short sales, short sale approvals, and foreclosures. They wrote the laws. So why

are we more special than anything else out there is because we can actually work with the bank in a way that no one else can because we have our business partners actually wrote the laws to do it. Now what is a reverse flip? What does the name mean? What's the structure? Why is it different than anything else? Let me tell you a little bit more about that. Reverse flipping is exactly that.

We're doing the flipping part in reverse. What does that mean? Well, before we care about whether this is gonna be a fix and flip, a buy and hold, a wholesale, a sub to, before we care about the exit strategy, we first own the asset. We actually get the deed. We are buying the deed from the homeowner.

Now while this isn't brand new, this is not something no one has ever heard of, it's actually been around for quite some time, that allows us to get a power of attorney and negotiate on behalf of the homeowner and we can negotiate a price that could potentially, potentially it's not a hundred percent certain, create an opportunity for us to buy that property. Now what we need essentially is the deed, quick claim deed, power of attorney, assignment of surplus. Now what is an assignment of surplus? Now this is where it gets really good.

I had a conversation with a guy yesterday who's doing seven to ten of these a month. An assignment of surplus is when it does go to auction and it sells for more than what the bank is owed. That it means there is a surplus there. Well that surplus should be given to the deed owner because we have the deed or the estate owner because we have the deed. We are the deed owner. We are the estate owner. That surplus comes to us. There are banks are unwilling to move or negotiate. It happens. That's why I'm saying

we don't have a thousand percent batting average on these. We have a very good batting average. But even when it goes to auction and sells for over, we have an opportunity to create a deal. Now even more on top of that, there's insurance stuff that can go down. So for you Floridians who are dealing with the hurricane stuff. You can actually have insurance payout if you're doing this reverse flipping because it starts with owning the deed.

Then it goes into what can we do? What is the best potential of the property? Let me give you an example me and my team just underwrote this morning. There is a two acre piece of land that has a single family home on it in Redding, California. Our community member, we do JV deals with all of our members. Every deal is a JV deal. So if you're just getting started and you want the fastest way to go get your deal, it is reverse flipping, hands

down for sure. We're doing 130 of these a month, okay, with our JV partners. So two acres, little over two acres in Redding, California, me and my team underwrote the deed, the JV partner went and got the deed, got the power of attorney, we are locked and loaded. Well, there is a single family home sitting on that property and what the seller owes on that property is such a high level of debt

relative to what the home is worth. They literally bought the home six months ago. They literally just bought. They have never paid a mortgage payment. So now they are behind on all their mortgage payments. I don't know why people do this but it is something that happens. So there's no real value to be negotiated. This home just sold six months ago, right? We're not going to get some crazy deep discount. But then you got to take a look at what is the potential of the property. This is why it's called reverse flipping. You own the deed first, then you figure out the property's potential. So we said, okay, well, we like California because

price point, high price point. Is there anything there? So we actually just brought it up on our comping reileadmachine.com. Reileadmachine.com is what we call properties that. And we actually noticed in the maps that there was a couple new developments like blocks away, like up the street and to the left. Brand new development of about 10 homes and a development in the making. Literally it's been all the infrastructure's there, they're probably ready to go vertical on the development in the making.

So that's roughly 20 brand new homes that were built in the last 12 months, right? Well now we get the opportunity to say, hey, we have two acres here. Could we go create somewhere between six to 10 homes on those two acres? Could this become a play where we actually own the land and we do a development play on there

and let's just say we do, you know, six homes and we can make a hundred thousand dollar spread once we sell those six homes that's a six hundred thousand dollar profit scenario for us if we do this right the other play we could do is potentially wholesale it to the developer who's already doing this now you might ask yourself why wouldn't that developer go ahead and go around the neighborhood and make offers on all the properties so they could have bought out all the areas? Because it's literally, if you think about what a block looks like, the two new development areas are on the north side of the block. Our property is on the southeast side. It's the same block, right?

Well, guess what developers aren't specialists in? Going and finding these opportunities. They probably saw this as something that sold one year ago. The debt is really high. They probably couldn't figure out the land value. So they just, they, or they just didn't know about it, right? And so we did. And so could we just call this developer and say, hey, we have an opportunity for you. We are going to actually sell you this two acre lot at name the name. I think we have like they bought this property for give or take 400,000. So with this developer potentially want to buy two acres for 500,000 as an example, we would make a $100,000 assignment fee essentially from this developer.

They could take it the rest of the distance. They could go subdivide it and develop the lots. That is an easier play. I say all that to say, this deal is a dead deal to every single other real estate investor out there. There is no novation, right? They just bought this six months ago.

There's no higher list price you can give. There is no novation, right? They just bought this six months ago. There's no higher list price you can give. There's no wholesale opportunity. There's no sub two because the debt is at 6.75. The mortgage payment is more than what rents would go for in the area. There's no deal unless you are doing reverse flipping. I'll give you another great example of a deal that just got done that the homeowner has over leveraged,

over leveraged their home by over $200,000. The home's as is value is give or take $700,000 if it was livable, okay? As is means for Micah countertops, you know, funny colored, uh, uh, tile, right? Oak cabinets, but it's livable. It's a livable home, just not ARV. It's not after repair values as is value. So the as is value is 700,000.

These individuals, uh, I don't know why they do this, but they leverage themselves to 900,000 of bank loans on this property. They stop paying their mortgages. So the bank is owed $900,000 on a property that is worth right now $700,000. To make matters worse, the home's condition isn't worth $700,000. It's actually going to be worth closer to $500,000. The home is in terrible condition, okay? So our loss mitigating group, by the way, last factor to be aware of, if we did remodel this home, the value would be $1.3 million. So the bank is owed $900,000, the value $700,000, the real conditional value, meaning the condition of the home, brings it closer to 500,000, right?

So we make an argument to the bank because we own the deed and our last minute company is negotiating with the bank that the value is a lot closer to 450,000. Well, the bank doesn't want this asset. The bank approves a $440,000 payoff. That same bank is owed $900,000 on this property. The ARV is $1.3 million. Everyone in this listening to this or watching this on YouTube, go ahead and watch this on YouTube, you would not have created a deal

unless you knew how to do what we're talking about with reverse flip. There would be no equity because the condition of the home and what the bank is owed, you would have no play as a wholesale, you'd have no play as a fix and flip or a buy and hold. You would have to negotiate with the bank and that is the secret sauce,

is our company, our loss mitigating company, will negotiate these deals for you. So if you're an active investor today, go to Science of Flipping, scienceofreverseflipping.com, check it out and be a part of our community. Now our community, guys, is $297 a month. It is extremely affordable, but it gets you to JV partner with us. We will actually do all the heavy lifting. All you have to do is go get the deed and the power of attorney and the assignment of surplus.

You go get those and you guys are going to be able to do deals that no one else in the nation is going to be able to go do. Now there's more to it and I don't want to go into every single opportunity but probate deals that you can't find the heirs, tax liens where the government's going to come in and foreclose even though they have no bank liens they're still going to get foreclosed on. Senior HOA, senior states meaning the the state has the HOA in certain states has the senior lien above taxes and above banks and the HOA can foreclose. We can work with all of these. Some states have some nuance, right? New Mexico has some nuance, North Carolina has some nuance, Ohio has some nuance, but all of these we

can actually work with. Probate, inherited, divorce, I mean the ugly and the hairier, the better. So if you have a bunch of leads that are ugly and hairy and you don't know what to do with, you need to start using this model calling reverse flipping. If you're brand new, let me talk to you for a second. I have been coaching for 11 years,

wholesaling, fix and flipping, sub 2, I've done 3,000 deals and more. If you are brand new, this is by far the fastest way to go get a deal is to do reverse flipping. You go get a deed in a power of attorney. You don't need some algebraic equation that is gonna break your mind doing 70% of ARV minus a rehab budget minus a wholesale fee. You don't have to do that. You literally just have to understand what is the ARV minus a rehab budget minus a wholesale fee, you don't have to do that. You literally just have to understand what is the ARV of this. Let me go look on reileadmachine.com. Let me go look what is the actual ARV after repair value. Then let me go look what is the actual as-is values. Homes that have not been remodeled, what are they selling for? What are

they trading for? Is there a delta big enough to go get the deed and create an opportunity where no one else sees it? That is the key. Over leverage and debt is huge, but it's not the only way to get this done, right? They may just have a probate scenario that the heirs don't want anything to do with this. There's a tax issue, etc. We can work with the hairiest of all hairy deals.

So when I started this thing, I said novations are dead. They're not dead, but they're not always going to be useful. That is just the newest cool thing. Well, now I'm replacing the newest cool thing with reverse flipping. And if you guys want to learn how to do it, be a part of our community for just a measly $297 a month. You will get us to underwrite for you, you will get how to do it, be a part of our community for just a measly $297 a month. You will get us to underwrite for you, you will get our loss mitigation team, you will get us to JV to deal with you.

You have five coaching calls a week. It is the newest, the best thing to go get deals and it can go in any state, any city, anywhere. We're currently in 17 different states. We're bringing in, we're buying roughly 7 to 12 deeds each and every day and we want you to partner with us. So go to scienceofreverseflipping.com, join the community. It is the best thing you will do for your real estate career ever. All right, y'all. That is what I have on this episode. Hopefully that changed your frame.

Hopefully kind of made you think a lot about what you have and what you can be doing. If you like this, make sure you share this with the least two friends. I'd greatly appreciate that. I love you guys. Stay tuned to the next episode. We have an incredible guest coming. Peace.