Danny was casually watching YouTube and found a video of the growth and collapse of civilizations in Europe. What he found especially interesting was the huge expanse of the Roman Empire and its eventual decline. Similarly, Dan Sullivan’s program called “Pure Genius” talks about self improvement and growth. In the last CD, Sullivan talked about how great civilizations started on top of the world but still fell apart. Why is that?
Sullivan puts it like this: take something like the Roman Empire and and scale it down to you and your business. When an individual is at the top of their game at some point, inevitably, something is going to happen that makes you take a tumble. Whether this tumble will cause a downward spiral or not is entirely up to how you manage the situation. Sullivan says, “Progress stops when people stop being grateful. People come to a point when there’s so much success that they start losing touch with what got them there.”
That’s such an important lesson for anyone, let alone a real estate investor. When you’re so used to looking far in the future and achieving huge goals that you’re not noticing what you’ve accomplished, you’re going to start getting overwhelmed and fall apart. Celebrate your wins more! After you close a deal, celebrate it. After you covert a lead, celebrate it! Take a second to see how hard you worked to get to this point. Look at all of the effort you put into a deal that you profited off of. See how far you’ve come and know that it took you time and effort to do it. You didn’t get where you are now overnight.
The most important thing to keep in mine is that you’re doing well. You have a successful business that you built. Don’t always look so far ahead that you lose sight of where you came from. You did it, and you’re going to keep on doing it.
What’s your best win? Let us know in the comments, or in the Flip Pilot group on Facebook! Join for free by following the link in the section below :)
Learn how to get unstuck. Move from dreams, ideas, hopes to fulfillment and action.
Melissa Johnson has been on the Flipping Junkie Podcast multiple times (she and Danny run the business together and are married, so it goes without saying she’s an important member of the REI community). She runs the house flipping side of their business and does a great job doing it!
After years of running their real estate investing business, Melissa made the decision to cut out direct mail marketing at the start of 2018. Their yearly goal was to stop direct mail marketing all together. But why?? Hasn’t direct mail been working for so many investors?
The truth is…direct mail is dead. Real estate investing direct mail marketing has been declining for years, so much so that Melissa said it’s time to stop. In it’s place, Danny and Melissa are going to be focusing on online lead generation.
Melissa didn’t make the decision to cut out direct mail overnight, though. At the beginning of 2017 she had noticed that their direct mail wasn’t consistent and wasn’t performing well. Instead of cutting it off then, she decided to go all in and get that marketing strategy back up and running.
“We started a bunch of mailing campaigns and the year went on, and we were getting some deals, but it wasn’t performing the way I hoped it would when I looked at what we were spending on it,” Melissa tells. “I started looking at the numbers half way through the year and was pretty disappointed.”
Melissa’s direct mail plan started by mailing to high equity for most of the year, then they started adding in unknown equity. The unknown equity didn’t produce any leads at all, so they quickly stopped that campaign.
“We had about 30k addresses in our mailing list, based on our criteria,” Melissa explains, “We were had them separated by zip codes so that it wouldn’t be so much at one time. Every mailing was between $2400 - $2500 per week.”
The criteria for the high equity lists was anything under $250k with more than 50% equity, at people over age 40. The criteria for the unknown equity lists was just not stated how much equity the homeowners had. The equity could be unknown, unstated, they could have some, they could have none; it just means that the equity field wasn’t filled in. This list did not produce leads, so Melissa stopped that campaign.
“About half way through the year I took a look at the numbers,” Melissa says, “In September I said ‘look we’ve been spending a lot of money on this and it’s not getting us leads. We need to stop what we’re doing and reevaluate all of it’.”
The mailing lists were the same addresses, but it was all sent in a cycle. Each address would get a piece of mail from them every 4 - 6 weeks. With 30,000 addresses, that adds up.
Once Melissa looked deeper into the process and the direct mail findings, she learned that direct mail just isn’t enough to keep a business at this scale going. There’s a huge difference between a high quality lead and just another throw-away lead.
Melissa sat down and took about 8 hours just looking over every single lead from 2017 to see which ones were high quality and which ones weren’t. She read all of the notes on every property to see where that lead went, how far it got, and if it turned into a deal or not. And if it did turn into a deal, how profitable was the deal?
Overall, Melissa found that the cost of direct mail wasn’t worth the kinds of leads that they were getting. Their higher quality leads were coming from online marketing strategies and their website. The leads that came in through direct mail either weren’t quality leads or weren’t leads that converted to deals.
So when the question is asked: is direct mail dead? Melissa’s answer is, “For us, direct mail died about a year ago. We dropped it and moved to online lead generation.”
Ryan Robson has been helping sellers sell their homes for the last 8 years. He has averaged 100 plus flips since that time. He has experienced a lot of ups and a lot more downs on his journey a long the way. From these experiences he has built a real restate empire flipping houses in 3 different markets.
Ryan didn’t start in real estate right away. Right out of college his father suggested he go into accounting and let the real estate knowledge come to him. So, he did that. Ryan quickly realized that sitting at a shared desk with 6 other people was not his idea of a perfect job, so he decided to get his feet wet in the real estate investing market.
First Ryan started working other real estate investors, using his experience and knowledge he had gained from his previous accounting job. All was going well for a while, but on his return from a trip to Europe the investor he was working for had to let him go because of the housing market crash. This devastated Ryan. He spent two weeks spending his time doing what he had thought was fun, watching TV, playing video games, and so on. Ryan quickly got restless and though, “This isn’t fun. I need to do something!”
That’s when Ryan started his solo real estate investing journey. With the housing market the way it was in the early 2000’s, Ryan had to buy and sell fast. “I had to be careful about what I bought the houses for,” he says, “because tomorrow it’s not going to be worth as much, you know?” As time progressed and Ryan started getting comfortable with short sales and flipping houses. As a result. Ryan began to grow his team. For a long time everything was working smoothly. “I had about 10 or so acquisitions managers, or sales reps,” Ryan remembers, “I had a good sized team.”
Things were running smoothly, that is, until one of his employees turned out to be a bad seed. Ryan describes it like this:
“Most people are trusting. I’m a trusting person. I want to believe that everyone is doing the right thing all the time, but that’s not always the case. This person…he ended up taking 6 of my people with him, then after I had to end up firing 2 more because I didn’t know where they stood on the issue. I’m not mad that it happened, I’m mad because I let it get to that point. I mean, we ended up shouting at each other in the office, right in front of everyone. It was a big blow out. It should never have gotten there. That was my mistake, but I learned from it.”
This caused Ryan to need to transition his business. Because of the way short sales were going at this point in the housing market, Ryan admits he was needing to let a few people go anyway. They had gone from closing about 100 deals a year to a slower decline. In the end this shift wasn’t all terrible.
“I really enjoy investing in people,” Ryan says, “I’m at that stage where I like to see them grow. It’s fulfilling.”
Now Ryan is a very successful real estate investor with a wife and three children. He has been able to keep his business alive despite getting it started in a very volatile time for buying and selling houses. In fact, Ryan has transitioned again to online marketing to make sure his real estate investing business is bringing in high quality leads.
“I use LeadPropeller PPC,” Ryan tells us, “I know I’m not on here to give you guys a plug, but it’s great and what you and Josh are doing is amazing. It was in 2016 that I made the dive into PPC and it’s been great!”
It’s awesome to hear from Ryan Robson and see the success of his real estate investing business!
Danny spoke at this year’s Flip Hacking Live event! His presentation covers lead generation for real estate investors and how the market is shifting. Are you staying on top of it? This is the audio from the presentation, but you can watch the video on Flipping Junkie’s YouTube channel, check it out in the link section of the show notes.
How many people are sending direct mail? When that potential seller gets your postcard or letter, what do they do? They go online. The next thing they know, they can’t find you online. If you’re not online, you’ve just missed a lead. If you are online, but not optimized, then they’re seeing you beside your competition. You competition has more reviews than you, and looks more accessible to the seller. If you were in the seller’s position, who would you pick? It’s pretty obvious you’d go with the one that has the better reviews.
That’s why you can’t just have a website anymore. You have to have a fully optimized, built out, lead generation machine. There’s no way you can compete with your competition if you get a website, set it up, and then do nothing with it. It’s an on-going thing.
You need a website online that’s credible, trustworthy, and that builds you recognition. Danny and Melissa have generated thousands of leads and deals through their website, but it didn’t happen over night. It was a long road to building their website and grow their ranking. Search engine optimization takes time and practice.
If you’re not at the top of page 1, you’re missing leads. But how can you get it to rank that high? Keyword research is the first step. As a real estate investor, it’s obvious you need to rank for keywords like “sell house fast”, or “sell my house for cash”. Those keywords are what all of your competitors are using as well. So how can you beat the competition when it comes to ranking?
You have to set realistic expectations for yourself. You’re not going to rank for these keywords in the first month. You’re just not. You have to constantly keep working on your website, you have to be adding content that’s going to keep helping you rank, and you have to be patient. SEO can take 6 months to a year to start showing progress in Google. That’s a long time, but it’s worth it. Why?
SEO is the cheapest was to generate leads. How much does it cost to optimize your website? Time. That’s it. You have to invest the time into building it right, but once it starts ranking you’re going to start getting in organic traffic that converts.
The next step, after you have your SEO set up to start getting you organic leads, is marketing. PPC, or Pay Per Click, is a pay to play marketing strategy but it works. Danny uses a combination of PPC platforms, but the one that performs the best is Google AdWords.
Google AdWords places your ad, website, or landing page as a search result that appears above organic results. So if a seller is searching the phrase “sell my house for cash in San Antonio” and your AdWords campaign matches that search, you’re going to appear as 1 of the top 3 results on page 1. Why? Because you paid for that spot.
Now, yes, PPC can get expensive. But the cost per deal is worth it. If you’re spending a few thousand running an ad and it gets you a deal that nets you tens of thousands, is it worth it? Yes! Because you put yourself above the competition who doesn’t have the time or the money to run ads.
Starting to get a taste for online marketing? We don’t blame you. It’s worked for Danny and Melissa, and it can work for you too. That’s why Danny hosts weekly webinars to teach you about the latest online marketing strategies that work. You can get your free seat by following the links in the section below!
Hillary and Marco got married and became pregnant in 2015. In an effort to build the future they both wanted their family, they both quit their jobs that same year. Since then, they have built their real estate portfolio and build a wholesaling company that closes numerous transactions each month. With a team of six people in Hilco Homes, they look to grow strong in the new year of 2018!
Marco and Hillary got their start like most investors do. They were looking for a way to generate an income for their growing family and needed something that worked. Having already known the business, they decided to go for it and start their real estate investing journey. Hillary started studying up on everything she could. She read all of the books she could find on real estate investing and dove in. Marco helped her with some concepts, and together their wholesaling team was born. Now the two are unstoppable!
“I’m learning the best that I can,” Hillary says, “But Marco has 10 years on me.”
They had two major focuses.
1 - Marco and Hillary wanted to generate cash flow, or a passive income. This consisted of getting houses to rent. Marco points out that, even though the rent is paying for the house, that’s not a huge passive income for a family to live off of.
2 - Marco and Hillary needed an active income. This came to them through wholesaling houses. While they were building up their rental properties business, the two focused on finding wholesale deals to keep their lifestyle afloat.
Their wholesaling houses team started when a gentleman named Juan contacted Marco and asked for guidance in the real estate investing market. He was let go of a previous position and was looking for a job in the real estate market. Marco taught him how to bring in wholesaling deals with the profits being split between the two 50/50. The rest is history! Juan became a part of their team, and everything grew from there.
“We refined all of our systems and processes,” Hillary says, “It’s all about finding the people who work best with us.”
Their wholesaling houses team is up to 7, including their virtual assistant, and is still looking to grow. “We’re bringing on an eighth next week,” Marco says, “It’s a constantly evolving thing. Some people work out, and some people don’t.”
What are some of the lessons learned from hiring and letting people go?
Marco and Hillary have the idea of not hiring good people, but hiring great people. “We don’t just want to hire to fill a seat,” says Hillary.
Hiring high quality team members will only strengthen your wholesaling houses team over the long run. In the past, they required that applicants submit a resume, but have recently changed that policy. Seeing the pen and paper resume as an “out-dated system”, Hillary has decided to do video resumes instead. Marco and Hillary ask that applicants answer 3 questions in their 2 - 3 minute video submissions.
“I feel we’re a pretty good judge of character,” she replies.
If an applicant makes it past the pre-screening questions and video application, then they move on to a full interview with Juan. At that point, if Juan thinks this person is qualified and a good fit for the company, then they get moved on to Hillary for the final interview. This process has taken Marco and Hillary a few years to work out, but they’ve found it’s the most successful for finding people to add to their wholesaling houses team.
After meeting his mentor Josh Rudin started buying and flipping houses 6 years ago when he was 19 years old. He went through a lot of negative experiences and learned from them and grew in the process. Now he’s making positive cash flow and doing flips. He primarily focuses his flips in 4 cities near Victorville, Ca. He hired a project manager double his age to handle all his deals and having the help has given him the time to focus his efforts on finding deals and even traveling the world.
My name is Josh Rudin, I am 25 years old, and I grew up in a small city called Agoura Hills, CA in the suburbs of Los Angeles. The way I got started in real estate is my dad introduced me to a mentor he had heard about through a friend. Every Tuesday my mentor was holding meetings at Red Robin. He would bring a board game every day called the millionaire maker by Laurel Langemeier. The point of the game was to grow your balance sheet. I learned about assets, liabilities, income, and expenses and how to account for every dollar. The game really opened my eyes to a whole new way of thinking. One day I told my mentor I want to start doing this in real life. He let me know I am ready and that I need to be up at 4 am Saturday because he is picking me up and taking me to an area he’s been intrigued with the growth. That Saturday morning after driving for 2 hours we had made it to the “High Desert”. We would drove around all day asking questions to locals and writing down addresses of vacant properties, so we can really understand the market and the area. After a few months of driving out there almost every weekend I decided I feel comfortable with the area enough to make my first offer. It was accepted and at age 19 I owned my first home. It was one of the best feelings I have ever felt. Ever since then, I have slowly grown my business to where I am now, buying over 10 houses a year for the past couple years.
Scott Smith is an Asset Protection attorney and real estate investor with experience in everything to flipping houses to buying notes. Scott specializes on how to make sure you never lose money from lawsuits.
Scott wanted to focus his business on giving people the top level of protection possible, without complicating anything or increasing taxes. “Is it possible to have the best of all worlds?” He asked himself. Turns out it is. And that’s how his business was formed. The types of protections offered, and the way people can scale infinitely with their help makes Scott’s law firm the most competitive in the country.
Scott has been a real estate investor for 8 years, which is why he exclusively works with real estate investors. Now you don’t have to hunt down a lawyer who might know some things about real estate investing. Because Scott’s law firm is so specialized, not only can he help with any of your real estate investing needs, but his team can help anyone in all 50 states. Don’t worry, we’ll have contact information further down in the show notes.
One of the biggest ways to lose money as a real estate investor is holding property in your personal name. Scott explains it like this:
“If you’re holding property in your personal name, what you’re really saying is that if anything goes wrong anywhere in your life, you’re ok with someone being able to attack anything and everything that you own.”
What Scott focuses on in his law firm is separating the assets from the operations. You should have 2 companies. One that holds your assets, cash, stocks, personal investments, etc. Then the second one is what Scott calls your “Operating Company”. That company handles the actual “business”. It’s the company that manages the hiring of new employees, dealing with contracts, handling your leases, etc.
“Lawsuits work because there has to be a connection,” Scott tells us, “between the thing people are complaining about, and the business people are complaining about.”
So if all of your operations are going through one company and someone has a problem with it, they can only sue that company. They wouldn’t be able to attack your assets because their relationship is only with the operating company you have. It’s a way to protect what you’ve worked so hard to get.
Let’s say you’re flipping in your personal name and you’re hiring all of the contractors yourself, basically acting as the GC. That means that if anyone has a complaint against you, or the property, or anything that extends to insurance liability, that whole property gets locked up if they decide to sue you. Once that property is locked like that, you won’t be able to do anything to it until the law suite is settled.
The way to get around that is by setting up your asset company as an LLC. the best place to set it up is in Texas, but there are about 10 other states that make it easy to set up. You can use that company anywhere in the US, just like any other LLC. This is your asset company. Then, from there, you would set up a local LLC for your operations company. This one has to be local because it’s where you’re doing your day to day operations of your real estate investing business.
So let’s say you get a contractor and he makes some terrible cabinets for you and you tell him that they’re not good and you’re not going to pay for them. Of course he’s going to be upset, so he decides to sue you. Well, since you hired him through your local shell LLC, he’s not able to attack your personal name or your asset holding company. That means that while the lawsuit is going on, you can still work on that property and get it sold, and all of your assets are safe in the process. Again, this is a great way to protect yourself, your assets, and your business.
In your worst case scenario, you wind the LLC down that got sued and then open up another one to act as your operations company. In the end, you might be out court fees and a settlement, but your properties are all protected. Plus, you were still able to conduct business while the court case was happening, meaning you still made money. This is a really efficient way of getting rid of issues like that.
Hey Flip Pilots! You know that book Danny wrote a few years back called “Flipping Houses Exposed”? It’s been a free kindle e-book for the longest time, but now it’s finally coming into print! How cool, right?
A lot of investors have told Danny that this book has helped them with their real estate investing business. This isn’t just any book that tells you the basics of flipping houses. No. What Danny and Melissa did was document every single lead and deal that they had so that you can see what they did, what they planned, what worked, and what didn’t.
And when we say everything, we mean everything. See, Danny had taken some time off of the flipping business so he could get his private pilot’s license. When he came back he knew he would have to wear a lot of hats to get his real estate investing business back on track. Keeping documents of every aspect of their business helped him to be able to plan better in the future. When these documents became a book, Danny saw that they were helping other real estate investors grow their business too.
In no time it was obvious to everyone reading the book that the majority of Danny and Melissa’s leads came from their real estate investing website. If you’re struggling to get the deals in your area, it’s because you’re doing the same thing that every other investor in your area is doing.
Now it’s no secret that online leads are better leads. I mean, c’mon, it’s 2018. You have to be online so that when people go to search for someone to buy their house they find you instead of your competition.
Now, this isn’t to try and promote LeadPropeller websites (even though they are the best), this is to let you all know that Danny will be hosting coaching calls to answer any and all questions that you guys might have. So many investors see that it’s possible to get leads online, but have no idea how to do it. Having a website just isn’t enough anymore.
If you want to dominate your local market, come to Danny’s coaching call. He’s going to be going over the best strategy to get online motivated seller leads. Don’t get lost in direct mail, don’t let your competition beat you in Google searches. Come make your real estate investing business stronger with Danny’s help.
No one thought Mark Evans would graduate from high school. Even his teachers thought he should probably just try to pass and then get a minimum wage job.
But Mark had different plans for his life! He did his first two real estate deals before he turned 19… and that changed everything.
Whether he’s sipping an ice cold beer on a Caribbean beach or walking the famous Camino de Santiago or riding on the back of an elephant in India, he’s also doing real estate deals.
In today’s episode, I’m sharing my favorite 11 books that I read in 2017. I read more but, these are the books that ended up with tons of dog-eared pages. Melissa also shares a bonus book she wanted me to recommend for the ladies.
Learn a little about each book and why it is recommended. At the end of the episode you will learn a process for getting the most out of these books. Find out how to take notes you can later find easily based on author and topic. This is a great way to make sure you revisit the key points from each book you read.
The Advantage -
This book is awesome for organization. If you need to focus on organizational health, this is definitely one of those books for real estate investors that you need to add to your list. Stop struggling with managing everything and focusing on processes but not actually getting anything done. Get organized, get working, build your team, and become the Flip Pilot you know you can be.
The Obstacle is The Way -
This is a book that's based on the ideas of stoicism philosophy. If you're trying to achieve change in your life, you're going to face obstacles. When you face them, face them. Embrace the obstacle to be able to overcome it so that you can grow and become a better person.
Bigger, Leaner, Stronger -
This book is more for the health and fitness crowd. Why is this on the list of books for real estate investors, you might ask? Strong mental health starts with strong physical health. Now we're not saying to become a body builder, we're simply saying that you need to be healthy. What's the point in growing old as a successful real estate investor if you've got poor health? This book is awesome because it breaks everything down into the science of healthy living. Definitely a great read to get you motivated and off the couch!
I've already talked about this book in another podcast episode. If you haven't listened to it, the link will be in the link section of the show notes. This is a must read for real estate investors. The tips in this book will help you eliminate what you don't need to focus on so that only the essential parts of your business remain.
We had a recent podcast episode where Steve Cook came on and talked about his book. Check it out in the link section of the show notes! This book is written as a story, so it's easier to process all of the lessons from it. I love this book because it helps you understand that the life that you want isn't always about getting the most money. As far as one of the books for real estate investors, this one is one of my favorites. This is an eye opening message about living the best life right now instead of always focusing on the future.
As a Man Thinketh -
This is a super short book (so it's easy to re-read). This is taken from some Biblical text and really helps you connect with yourself. A quote from the back reads: "As a man thinketh in his heart, so is he". This is a great book for keeping yourself motivated. If you think you're going to fail, you will. If you think you're going to succeed, then you will too. This book is all about keeping yourself in a positive train of though to accomplish your goals.
Leadership Axioms -
If you're struggling with leadership strategies then this is the book for you. In fact, Melissa has suggested this one to Danny and it really stuck. Every 3 or so pages of this book have an axiom on them so that you keep yourself going through the books. This is one of the great books for real estate investors because you can go back to it when you have a leadership problem that you need to address. Each axiom will help you accomplish your leadership goals and keep your team moving forward.
How to Win Friends and Influence People -
This is a classic. If you've heard of it, read it. If you've already read it, read it again! This book will help you to build relationships that are perfect for networking your real estate investing business. Definitely a must read.
How to Stop Worrying and Start Living -
Often times as real estate investors, we find ourselves worrying a lot. Didn't you become a real estate investor so that you could have the freedom your old job wasn't giving you? What good is that freedom if you're always worrying? Stop that! This is one of the great books for real estate investors because it will help you to take the stress out of your life so you can actually enjoy your financial freedom.
Mastery: The Keys to Success and Long-Term Fulfillment -
In the beginning of this book there's a passage that tells you to focus on practicing for the sake of practicing. That's such a great lesson for real estate investors to implement in their business, but also in their lives. Everything you do you need to practice at in order to become better. Beyond that, though, you need to practice for the sake of practicing because it will make you appreciate the work that goes into mastering something.
Seneca: Letters From a Stoic -
This book is included because a lot of the problems that people face these days are basically the same problems that people were facing hundreds and hundreds of years ago. Things at their core don't change that much. That's why Danny has been so in to stoicism, because that philosophy keeps everything in perspective. The letters in this book survived thousands of years that are jam packed with philosophy. It's an engaging read, which is why it's one of the books for real estate investors on this list.
(Bonus) You Are a Badass -
Melissa specifically wanted all of the ladies out there to read this book. This is a great book for identifying and eliminating the self sabotaging behavior that a lot of people tend to have these days. If you're keeping yourself down, definitely check out this book to give yourself a boost. You're a badass real estate investor. Go be a badass!
Paul Del Pozo is an ex competitive bodybuilder turned real estate investor and entrepreneur. The last 2 years for him have been about personal and business evolution. He has learned to use his unique ability, his gym mindset, to drive and push forward through business failures to success. Listen in to hear about his journey flipping houses.
When Paul got his first deal from knocking on doors, he realized that real estate investing was a great opportunity for him. He made his own luck by starting with knocking on preforeclosures and hunting them down. When he landed his first wholesale deal, Paul started going after the next steps to call himself a real estate investor.
"I always had this idea of a rich guy buying buildings," Paul says, "so it was difficult to picture myself as that guy."
This seems to be a struggle that a lot of investors have when they're first starting out. When is it ok to call yourself a real estate investor? When do you start introducing yourself as one in networking events, or to potential clients? After Paul's first deal, he had the confidence to go to local REIA meetings and call himself an investor.
Paul got into real estate investing out of a need to make money. Originally doing wholesaling deals, Paul has continued down that path with the types of properties he has in his inventory. Now that he's more stable in real estate investing, he is hungry to learn more and build his business.
"Staying excited is what drives you. If you're not excited then what are you doing?" Paul tells us, "No matter what I'm doing in the business, I find it all exciting."
Staying excited is great, but staying focused is better. Knowing where to go and what's important for building your business is key to making your real estate investing business a success. Everything you do when running your business is about being intentional with what you want to work toward.
It's just like in the book "Essentialism". If you haven't heard Danny's response to that book, definitely check out that podcast episodes further down in the link section.
Steve is the author and founder of Lifeonaire. Teaching thousands of people how to live and experience abundant lives. He has flipped over 500 houses in his investing career and helps investors to transform their businesses from life sucking to life giving ventures.
As a teenager, Steve was building his own businesses. At the age of 21, Steve bought a restaurant and bar as his first real estate investment. Without going into detail, it didn’t end up being a long-term success. But he was able to get started in this highly competitive industry at a young age and set a great foundation for his future!
When Steve turned 25 he bought another bar that ended up working much better for him. He used creative real estate investing techniques to get it. Once the bar was his, he thought he would be on easy street raking in the wealth.
It should come as no surprise to anyone who’s run a business that what he thought was not the case. “Turns out,” Steve says, “all I did was buy myself two jobs. I was lucky if I could pay myself for one!”
When the second bar went under, Steve found himself deep in debt with terrible credit. Not knowing what to do, he started working a day job with a steady paycheck. While getting paid for his work felt good, having someone working over him did not. “When someone else was dictating my life, that entrepreneurial spirit was starting to fire up again,” Steve mentions.
That was when he made the decision to becoming a successful real estate investor. However, Steve barely had an income, was deep in debt, and terrible credit. What was he going to do?
With everything going against him, Steve started doing his homework. He studied successful methods and researched different types of investing. Wholesaling appealed to Steve because you didn’t need good credit to start, you didn’t need a lot of money, and you didn’t need the means to flip a house. It took him about 8 months to get his first deal closed, but he didn’t give up.
That first deal was it for Steve. Real estate investing is mostly a mind game, and he understood that now. When the first deal was closed, Steve started getting offers within the first 48 hours. The man he ended up selling to took him on as an acquisitions manager, finding 7 houses in 6 weeks for his new partner.
Steve came back with an eighth property that got rejected. Instead of letting it go, Steve flipped that property to someone else and made a profit off of it himself.
When he made the full profit from that sale, Steve knew what he was going to do with the rest of his life. He was going to become a successful real estate investor. In his first 2 years of real estate investing, Steve flipped 105 houses!
At the end of the day, taking action is about being motivated. Steve was motivated to reach financial freedom, he never stopped, and he made it happen. There’s nothing more important in real estate investing than that.
After 2 years, Steve realized that working with a partner wasn’t for him. In Jan 2001, he made $40,000 with his partner. “At that time I only needed $25,000 to get by,” Steve explains, “My lifestyle was very lean.”
When he began working on his own, Steve easily made more than that in the first few months. One month made $60,000, then the next month he made $70,000. He didn’t know what to do with all of this money, so he decided to give back.
Steve found people in the community who offered to help him organize his income to live comfortably and to give back. Since he was making a great living now, they suggested for him to buy his own home. Steve bought a 5 bedroom, 4.5 bath house on a 5 acre lot in Baltimore as a single guy in his mid to late twenties. That’s amazing!
After that, Steve put together his rental portfolio, bought himself a vacation home, and went from having zero assets to over 7 million dollars in assets in just 3 short years.
Seeing his success, Steve started getting people coming to him for training. People were flying across the country to be coached by Steve. “In the back of my mind,” he tells, “I’m thinking ‘they don’t really want what I’ve got’. I don’t feel successful yet.”
Realizing he was happier before getting all of his properties and assets and worth, Steve was at a loss. He finally figured out that, although he had all of these things now, he didn’t have a life. Real estate investing is time consuming. Steve quickly saw that he was spending all of his time running his real estate investing business and not doing much else for himself.
One week there were 2 gentlemen who approached Steve asking him to teach them how to become a millionaire. He responded simply with, “Why do you want to be a millionaire?” To which both men replied: “So I can be a better father and husband.”
Steve told them a piece of great advice. He said, “You don’t need to be a millionaire to be a good father or husband. That’s done in the choices you make. Do the things that good fathers and husbands do, and you’ll be that.”
Needless to say, they didn’t like that answer. Steve was contemplating why these men thought they needed to be millionaires to be good people and heard the word “Lifeionaire” come to him. That’s what those men wanted to be, not millionaires. They wanted to experience an abundant life and they believed that money would get them there.
Money is just a vehicle. Having lots of money wasn’t the goal, having a great life is. Once Steve understood that, he was able to become a successful Lifeionaire, instead of just a real estate investor.
We'll be hosting a webinar about online lead generation once a week! Reserve your free seat to discover the secret to online lead generation at LeadPropeller.com/webinar!
Joni has an extensive career in administration working with Fortune 500 companies and small businesses alike. Her career has spanned sectors including retail, automotive, and the legal field. She has been working with Quickbooks for 7 years. Joni has helped several companies start their Quickbooks bookkeeping accounts from the ground up. Joni holds a Bachelor’s degree in Counseling Psychology from Rochester College.
Kirk has worked for Fortune 500 companies and run small businesses. His expertise includes sales management, the automotive aftermarket, mortgages, and banking. He first worked with Quickbooks in 2001 and prior to that worked with Peachtree Accounting software. Kirk is skilled in P&L and financial projections. He holds a Bachelor’s degree in Advertising from Bradley University and a MBA from Walsh College.
Joni and Kirk live in Rochester Hills, MI with their two children. Together they have owned rental properties and know all too well, the ups and downs of being landlords.
Together, Joni and Kirk got in to bookkeeping for real estate investors when Joni did consulting work for Mike Simmons and his partner. When they were looking over the books, Joni and Kirk noticed that there was a hole in market because there weren't many people doing bookkeeping for real estate investors.
The biggest mistakes Joni and Kirk see when it comes to bookkeeping for real estate investors are:
The reason Joni and Kirk use Quick Books is because it helps keep everything organized for their clients. Quick Books makes it easy to see every aspect of bookkeeping for real estate investors. Which is why they say that not having any type of system is the worst thing to do for your business. Not tracking every single expense will end up costing your business lots of money in the long run.
If you're in the need of a good bookkeeper, Joni and Kirk are the way to go. The first step is building up a report for your real estate investing business that's broken down by property so that you know where your money was spent.
"You're not going to send us too much paper," Kirk says, half jokingly. The more a real estate investor can provide for them, the better. 6 or so months down the road of working with Joni and Kirk, there won't be as many questions. The more you two work together, the better their understanding of your business will be, and the more streamline the process will become.
Because clients want specific reports, Joni and Kirk keep everything categorized and organized. Want to know where your marketing expenses are? They have reports for that! Knowing where your money is going and what's being spent will help keep your real estate investing business out of bookkeeping trouble.
Justin Williams had a conference, Flip Hacking Live 2017, that Danny spoke at that got him thinking about the kind of growth he needed to take for his business to grow too. In 2016, Justin asked Danny to speak at this year’s event, so this was a long time coming. Between doing the Flipping Junkie podcast, and the videos, and being in front of people online, speaking in front of people in live events has always been a bit difficult for Danny. Never the less, Danny commit to it, overcame it that stage fright, and presented in front of 600 - 800 people.
In preparation for the talk coming up, Danny went to public speaking classes every Wednesday evening. After Flip Hack Live was finished, Danny was talking to the instructor who said something profound. He said:
“I didn’t think you would have any trouble at all. You know why? Because you are humble and hungry. You’re hungry because you’re willing to put in the work, and do what it takes, to make something you want happen. But you’re also humble. You’re willing to accept criticism and knowledge from others, and not go into it thinking you know more than you do.”
Those words stuck with Danny. When you’re willing to be humble enough to be open to learn something from anyone, you will be a success. When you’re hungry enough to drive yourself forward, you will be a success. When it comes to success for real estate investors, you need to be hungry enough to always keep going, but humble enough to take every opportunity as a learning experience.
You can learn how to do this from anybody, no matter how new they are in the business. The more open you are to getting knowledge on things that you’re struggling with, the better your real estate investing business will be. The number one key when it comes to success for real estate investors is knowing when to ask for help. That’s not a bad thing. That shows that you are both hungry for the opportunity, and humble enough to know you can’t do it alone. Saying “I don’t know how to do this and I need help” is a way to grow your business and make it a success.
You’re already taking a big step forward by listening to the Flipping Junkie podcast! The more you learn in these episodes, the stronger you’re making your real estate investing business. If you haven’t subscribed yet, please do, so that you can keep learning how to make your real estate investing business a success. And don’t forget to check out this video, and others like it, on the Flipping Junkie YouTube page!
This is basically just a review of a book that I re-read for the second time. Grayson (on our house flipping team) suggested this book to me, and it’s really been helping me deal with feeling overwhelmed with everything.
Sometimes you read a book at one point in your life, but don’t get all of the advice and actionable material. This book is called “Essentialism” by Greg Mckeown, and it’s just great. There are so many visual representations of how you get overwhelmed. The circle with all of the short arrows are definitely where I was at. Then, there’s another circle with a single long arrow that shows where the most essential things are, and should be going. This is where we should all be, and this is where I want to take Flip Pilot and LeadPropeller.
I’ve been spending a lot of time thinking about what’s the most essential part the business, taking time to look at the big picture, to get a clear idea of what we really should be doing. What’s most important to us so that we can get rid of those little arrows. So many of us as real estate investors can tend to feel really overwhelming. If you burn yourself out, you’re not going to be running a successful business.
One story in this book is about journalism, but can definitely be applied to other aspects. When Greg was in a journalism class, the professor said to come up with a lead for a story about faculty meetings. Every student was coming up with stories about the different departments, and the goals from those meetings, and the overall impact on the university. The lead that the students didn’t take into account was that there wouldn’t be class on this day. The important take away was thinking about the audience’s point of view. The people reading this journal were the students - they didn’t care what the meetings were going to be about. The students reading just cared about if there was going to be class or not. So, thinking about things from the audience’s point of view helped to shape the best possible story about a subject that the students would have otherwise not cared about.
Seeing the bigger picture and coming up with a strategy that’s intentional is the best thing you can do for your business. The trade off should never be a detriment to your business. If you’re giving something up to do something else, make sure that something else is worth it.
Another clear point in this book is taking time to play. That’s so true. If you’re not taking time for yourself, then you’re going to burn out and give up. If you keep running forward, you’ll die. Taking time for yourself will help you get more creative in your real estate investing business.
I take my time on Sunday to plan my week, but I always start with scheduling the fun things to do with my family. Then, when I’ve put time aside for that, I add in the work stuff. If you’re not giving yourself time to have fun, you’re not going to be running a successful real estate investing business. Do it to get recharged.
If you guys haven’t read this book, do. It’s a great game changer for running the best business possible. Knowing what’s important and what’s not is difficult, but essential (hah, get it?). It’s like cleaning out your closet. If you see a shirt and think “I don’t wear this, but I might”, you end up keeping all of the close instead of clearing things out.
If something you need to make essential isn’t a clear “yes”, then it’s a “no”. Think about it like a scale of 1 - 10. If it’s not a 10, then it has to go. Plane and simple. That will keep you on the right track that your real estate investing business needs.
You can get this book in the link below! I highly recommend it if you need help with finding out what’s essential and what’s not. And don’t forget to join the Flip Pilot group on Facebook to network with other active real estate investors who have a 30k foot view of their business!
Kyle Burnett asks:
I've been full time in the flipping business for about a year and I feel like I need to get over the hump. I've done 4 deals in the last year and am behind on my goals. My wife and I have our first kid due in December and I have to ramp this business up to support our family.
Danny Johnson replies:
I've thought about this a lot and recently gave it more thought as I moved offices. Melissa and I switched offices in our suite and I went through a lot of my old training courses and meeting notes from years ago. What struck me was how many different things I got interested in and tried to learn.
I had books on land investing. Books on real estate taxes. Books on investing in IRAs. Books on raising private money. Granted all have been helpful but I realized that the success came from when we had focus. Focus on marketing. Focus on working the hell out of just 3 or 4 lead sources. Putting out bandit signs religiously. Driving for dollars religiously. Making the effort to get the phone ringing. Making a plan and sticking to it. Not constantly thinking about new ways to get leads. Just ways to being consistent and working the sources that have worked for decades for successful investors. Investors that struggle almost always do so because they didn't master a handful of marketing strategies that the stayed consistent with.
If you can't be consistent with your marketing and focused each week and thinking about what to tweak WITHIN that same marketing channel, you've got to hire someone even if just part time to do it.
Mike is brand new in the investing world but brings a construction engineering degree, and 10+ years of construction background, knowledge and business sense. Alongside him is his beautiful wife, Sarah, and loving father, Jim, who have helped get their real estate investing company, Newbyginnings, off the ground and now full steam ahead. They have big dreams for the company and hope to help thousands of families create their new beginning. Mike is also currently a full time construction consultant and his wife is a full time cardiac ICU nurse at a local Children's hospital.
When Mike started studying real estate investing, it only took him about 6 - 8 months for him to make the decision to jump into the industry. Mike found a wholesaler and got his first deal done. With a good foundation and knowledge base, he was confident in working his first deal for his real estate investing business. Where so many people give up before they hit this point, Mike kept going and is working everyday at making his business a success.
As soon as he decided to get into real estate investing, Mike found a wholesaler posting houses on Instagram. He sent a message, got into communication with someone on this wholesaler’s team, and started communication. This group has a wide range of buyers, so they were eager to talk to Mike. They walked through a few houses, and on the third property Mike made a bid and got it. It took 2 or 3 weeks staying in communication with this wholesaler before the property was Mike’s. What a great first deal!
For more connections, Mike has been networking in the Flip Pilot group on FaceBook. Finding other wholesalers is the key to starting up a successful real estate investing business. With both Mike and his wife still working full time jobs, and being full time parents, wholesaling felt like an easy way into real estate investing. As long as the numbers make sense, there’s no reason not to jump into it.
There’s a perception that wholesale deals don’t have much meat on their bones, but that’s just not true. Mike’s rule is 70% is the golden number. In his market, that’s tough to get, but you can expect to be around 80% - 85% ARV minus repairs. BiggerPockets has an ARV calculator, but Mike made his own in a spreadsheet to keep track of his numbers. With his spreadsheet, he determines if the numbers work for his marketing and business. This is the spreadsheet Mike uses, so if you decide to use this method, be aware that your numbers need to reflect your market.
For Mike’s first deal, Mike went through 2 wholesalers. Despite them both taking their cuts, there was still meat left on the deal. The property was a little rough, though. The property was supposed to be vacant, but it wasn’t. The sellers were there for 3 or 4 days after Mike closed on the house, which they weren’t supposed to be. Mike was still working on the plan for the property, but everything went well in the end. When the sellers eventually left, they left behind much more stuff than Mike was expecting.
Despite the unforeseen difficulties with this first property, Mike’s ultimate concern in with helping people like the sellers of this property. That’s where the name of his business, Newbyginnings comes from (in addition to it being a play on his last name). “You never know where your next deal is going to come from,” Mike said.
The sister of the seller had been waiting for someone like Mike to buy her sister’s house. After seeing the amazing success with her sister’s property, she mentioned that she’s going to be selling her house next year and wants to go through Mike. She even offered to make a testimonial, and took a picture with Mike, and wrote an awesome review for him. Her property will, hopefully, be Mike’s 5th deal for his business.
When it comes to actually rehabbing your property, communication is always key. Mike’s GC had brought in someone from other projects to help with the rehab, but staying in communication was a bit of an issue. Mike would talk with his GC, and thought that word was getting passed down to the other contractors, but with the mix up it didn’t. The plan in the future is to sit down over dinner with their GC and other contractors to get to know each other better, and keep the communication channels open. Making sure you know who’s responsible for what is important for keeping a real estate investing business organized.
Chance started getting serious about real estate around 2 years ago. He did 16 flips last year and has been doing 2-3 a month this year. He gets around 30% of his deals through wholesalers and market for the others.
Chance and Danny were talking at the Mastermind class about deal sources and where their deals come from. Chance had mentioned to Danny that about 30% of his deals were coming from other wholesalers, which is amazing! Let’s see how he’s working these relationships to keep that percentage up.
Chance got started in real estate investing when he bought a house from his mother in 2008 / 2009. A subject 2 property (even though he didn’t know what that meant at the time), turned into his first house he took over. It needed the work to get it to market value, but Chance lived in it for a few years. When he decided to sell it in 20013, he ended up making a profit for roughly $50k with little work put into the house. When he moved, he told his wife, “We have to get into real estate!” And that’s how it started!
The benefit of working with wholesalers came around by networking as much as possible. Meeting anyone in the business opened doors and opportunities to connect with active investors who have profitable deals for flippers and rehabbers. There were always wholesalers who were more reliable than others, but it’s all about making quick decisions to get the deals done. Chance spent his time networking with other investors to grow his business.
Other than just networking with other investors, you can talk to homeowners and business owners to get your name out. When it comes to bandit signs, as long as you’re in communication with them, they tend to be ok with you posting your sign in their yard. For example, offer to pay their water bill for the month to keep your sign in their yard if it’s near a busy road. It’s something simple to get your business’s name out there and expose you to other investors.
The deals that are coming to Chance, as of now, are coming from Facebook groups (Mastermind, Flip Pilot, etc), mailing lists, and networking. Mailing lists tend to be for lower experienced buyers who are willing to spend more and make a little less. As far as the work that Chance does, the majority of mailing lists that come to him tend to not have the deals he’s looking for, but there’s always the occasional solid lead.
IFTTT.com (If This Then That) is a great place to look for the best keywords to search on sites like Craigslist and Backpage. Chance looks for “fixer upper”, “rehab”, “ARV”, “vacant house”, “motivated seller”, and finds a good amount of leads. IFTTT.com is a great place to set up ‘recipes’ to look for Craigslist queries to see which keywords you should be searching to find the best leads online. If you’re interested in hunting for leads from your desk, this is definitely a place to start.
Chance’s focus for the future is leaning toward sourcing their own deals. Their ability to source their own has grown, and in order to turn the dial up and flip more properties, the best option is to work for themselves and find more deals. As long as there’s someone to do the busy work and go to those properties, it’s very manageable.
Kyle is a founder and managing partner at H L Homes, a Houston based real estate investment company, founded in 2011.
He and his partner, Eric, formed their LLC to start flipping houses as a side gig. In 2014, though, the business expanded into a larger business to grow it and make it official. When Kyle first quit his job, the situation became “how do I monetize this and start making money quickly?” He started heavy marketing and going to appointments, but their buyers list was growing from the start. His first move became to network with other investors throughout the Houston area to meet other wholesalers. He would ask for their biggest problem and be there to fill their issues. Buying houses from wholesalers that no other investors wanted became their niche area, and generated lots of revenue in their first year.
The tactics depend on the wholesaler or the other investor. Sometimes, they’re just looking for exposure. At that point, Kyle and his partner just look for a percentage of the fee. As long as the other investors are happy and continue sending deals to them, they want to make it as equitable as possible. There are also a few investors who are just looking to entirely wholesale the property, in which case Kyle and Eric take it on and become the assignees for the property.
What contracts in place do you have? Is it just trust built?
It depends on the individuals. When Kyle first started marketing deals to people, it was exclusively a trust thing. The majority of people are honest, that’s just how business works. If you’re helpful, you will get help in return. The few people who were either dishonest, or didn’t close the deals, ended up parting ways with Kyle.
A few years in, the title company gets invoiced for either a set amount or percentage depending on what got negotiated. If H L Homes took it, it would be a standard assignment. Because of the invoice to the title company, you know you’ll be paid at the closing. Definitely something to keep in mind. No title company will close a property without fulfilling the invoice. “Shout out to Allegiance Title Sugar Land!” We know the title company wouldn’t turn their backs on an invoice.
Why are you transitioning away from wholesaling?
There are several things that lead up to that transition.
H L Homes started taking feedback from their sellers. “Of course, we thought we were great,” Kyle said, “but how can we make it better?” What they found is that what a seller wants more than anything is to be respected and be told the truth, and to have as few inconveniences as possible.
Start off being honest with intentions when it comes to price, and if it doesn’t work then we can market to other investors with different buy criteria. There are other wholesalers saying they would close on a property, and then not come through. Kyle found that they were losing deals by being honest when others were closing by not being honest. Going on a private money raise and tweaking the buy model helped them to be able to buy fast to help the sellers.
Being able to take properties down to wholesale gives Kyle more time with the properties. Because of this, Kyle is able to access different buyers because of the time allowed to advertise the market to.
Have there been times when you’ve lost money for taking down the prices?
Short answer: yes. It’s going to happen, but not frequently. Usually, money isn’t lost on “short take downs”. Typically, it’s on rehabs where estimates are done wrong, or a contracting issue comes up. Most of the time, the worst case scenario is already known. There are the buyers who have bought from us in the past, so we know what to sell to them. Because Kyle knows his buyers, the confidence in closing is significant.
What’s the process after closing?
As long as they have access to the property before hand, they try to do pre-market, however, most things are done at the same time. Listing, blasting to the buyers list, etc. Whatever the property will be sold for at open market value is what Kyle and his business sell for, which makes great deals for the end buyers and his business.
As far as listing, H L Homes does it themselves. There are 7 people in-office who all have different jobs to do. Eric, Kyle’s business partner, is on the sales side. Most of what happens in the business is done in-house. “Except our online marketing,” Kyle says, “LeadPropeller does that for us.”
All of the property management, construction management, etc. is all done in-house. The long answer is: they manage sales, closing, and acquisitions in house.
This is the answer to a Flipping Junkie Podcast #Just Ask question. Erik Drentlaw asked what my exact direct mail strategy is.
While I think it’s true that you need to become an expert at one thing before moving on to another is a great strategy, with highly specific things like online marketing, it’s best to let the experts take over. If you need to focus on becoming the expert at direct mail, do it! But allow the people who are already experts at SEO and PPC to manage that side for you. That way, you’re getting the benefit of both online and off-line marketing without wasting your time trying to learn strategies for both.
Erik, I see that you mentioned you have a competitor website but would have liked to switch. You still can! In fact, we have a team of professional PPC and SEO experts here who would gladly manage your online marketing so that you can focus on direct mail. That way, your business will benefit from marketing on two fronts. These guys manage my PPC marketing, so I can promise you they’re great.
As far direct mail goes, we’ve done something like $80k+ on direct mail in the last 12 months. I have absolutely no problem sharing my direct mail strategies. There seems to be some level of secrecy when it comes to asking about direct mail strategies, as if some investors are doing things that no one else would think about. The truth is, direct mail strategies doesn’t vary that much.
What is rare is people actually doing it and sticking to it. It’s difficult to keep it up, but as long as you do it and stay consistent, it’ll pay off in the end. Just stick to what’s being taught, and actually do it
The biggest list we mail to is the high equity list. This is key. Mail to owner-occupied, and absentee-owner high equity direct mail list, targeting ages 45+ of the household. That demographic has been the highest converting as far as direct mail is concerned.
The next question becomes, “Where do you get that list?” You can get this information from ListSource.com, you can get your rates down by calling and asking. Definitely do that. You go into the site, and specify the types of properties you’re looking for in your target area. Look in your farm area, the spot where you expect most of your leads to come from. Choose the property value next. Don’t go high-end properties; you should limit the appraised value to just above medium home price to avoid the crazy expensive ones. After that, you target equity.
There are two ways to do equity targeting:
1. Mortgage Amount
2. Equity percentage.
Stick with equity percentage. We tend to go with 50% equity because you want the seller to have enough equity to actually be able to sell to you instead of needing to go through a 3rd party. This helps you to weed out any bad leads before you start pooling.
What it takes in direct mail is money. The people who are succeeding are spending lots of money. Just from this list that we have, and sending direct mail, we’ve got about 12 leads this year from direct mail. To make direct mail a success, you need to get a large enough number of calls to justify the amount you’re spending on it.
We’re sending out roughly 10k - 20k postcards a month, spending about $5k per deal (which is a little more than I would like to be spending). But we want the deal volume, so we’re spending it to get it.
The key to success with direct mail is to keep your list decent enough, but not too big. If it’s too big, you’re going to not be able to mail enough because it’s going to be too expensive. As far as what to put on your postcard, you need to include:
Branding is super important, and not enough investors know about it. You need to make sure your postcard is unique to your business and stands out to your motivated sellers. The reality is, you’re not the only one in your market mailing, so you’re probably not the only piece of mail that they get. Avoid looking like spam by making your postcards individualized.
On that same note, you need to have a large pool to mail to. Don’t just be sending out 200 letters a month and wonder why you haven’t heard anything. The minimum you should be mailing is 1,000/month, but even that’s a little low depending on your city and market size.
It’s very easy to make your own postcards. That helps your business stand out from all of the others that are just using templates. You don’t need fancy software, goto Canva.com and design your own for free. What we do to get them mailed out is we go to a local print and mail house, tell them how many we want, and negotiate prices from there. As long as you get it out and in front of people, you’ll be in the clear. Make sure you give them variable printing so that each postcard is individualized so that your leads feel like you mailed personally to them.
We mail roughly 45 days apart to the different lists. Remember, you have to spend money to make money. Direct mail is an investment, just like everything else. Work on your acquisitions skills to get them under contract. My friend, John Martinez, has a lot of sales training on that sort of thing. Check out his stuff in the links.
Don’t neglect online leads, either. If you want, reach out to us at Sales@LeadPropeller.com so that you can let our experts manage it for you. Or, call (210) 999 5187. Our pros here would be more than happy to help manage your PPC to get you quality leads online.
If you have a question that you want answered, post it in the group with the hashtag #JustAsk, and tag me @DannyJohnson. I’ll make a podcast episode to answer your question for you!
Thank you again for the question, Erik. Hope this helped!
I'm the youngest of 4 daughters and I grew up in rural Pennsylvania. Being the favorite child has given me an overabundance of confidence, which I use to my advantage quite often. (My sisters will kill me for saying that, but only because it's true. :)). I've always been an exuberantly tenacious person, setting stretch goals and moving on to the next one.
Looking back at my life I find certain experiences really stand out. I spent my junior year of high school as a congressional Page, working and living in DC running errands for Congress. It was a truly amazing experience and I'm sad the program doesn't exist anymore. (But the fiscally conservative side of me totally gets it.)
I went to WPI for mechanical engineering on an ROTC scholarship, where I met my husband and some of my amazing best friends. When I graduated I became a US Naval Officer. My dream was to be a pilot, but unfortunately my eyes disagreed; instead I served on an Aircraft Carrier. It was a great consolation prize, and even though it was incredibly tough at times, I will treasure it.
After about 4 years in the Navy, I got a job as an engineer working in the energy arena, helping to build a power plant to support aircraft carriers stationed in Japan, and then a bunch of other awesome projects. I felt way out of my league and also incredibly excited to be a part of something so massively cool. I worked with that company for 7 years, and again was fortunate to be around some seriously amazing people.
When my 3rd daughter was born, I decided to spend less time traveling and more time at home. We bought our first rehab, which was a hoarder house that we essentially gutted, and I was hooked. Making ugly things pretty is my favorite. The first year I flipped 3 houses, the second year I flipped 6, and then I moved up to one a month and started building out a team to support that. This year we're on track to do 20+ flips and a few wholesales, as well as venturing into the rental arena.
As an aside - It's crazy that I always feel like the little fish because I keep moving to bigger ponds. If you had told me 3 years ago where I would be now, I would not believe it. But here I am, and it still doesn't feel like "enough"!
Getting the Money - Susan Lassiter-Lyons
12 Week Year
This is the answer to a Flipping Junkie Podcast ‘Just Ask’ question. Steve L. asked: How do you avoid offending motivated sellers when making an offer.
Great question! The biggest issue with real estate is that it’s such an emotional thing for the sellers to be going through. It’s a difficult thing to deal with.
My first thought was, you’ve got the wrong mindset. If you think you’re going into a deal, or talking to a lead, with the idea that you’re offending them, you need to change your approach. You should always be presented as a problem solver, as an investor who is there to help them out of their situation. Helping them out of those problems with a genuine interest in helping the sellers out.
If you go into talking with the leads only thinking about the price points, then you probably will offend them. Some people will get offended with a low offer on their house, but at the end of the day you’re there to help them.
There was something from Brian Buffini’s podcast about listening. It boiled down to 2 things:
1. People do things for logical reasons
2. People do things for emotional reasons - the reason they typically won’t say.
When you’re helping a seller, you need to get to the core of the reason for why they’re selling their house. And, like we said above, selling a house is an emotional thing. So the more you can present yourself as someone who’s there to help them through their situation, the more likely they are to work with you, and the less likely they are to get offended.
Not every seller wants the most money they can get for the property. There have been lots of sellers who have sold to us for lower than what someone else was offering because we got down to the emotional reason for their sell and were there to help them out of it. If you can learn this, then you’re golden.
You need to go into each deal with this in mind:
1. You’re there to genuinely help them through their problem.
2. Find the emotional core reason for why they’re selling their house.
Bonus tip if you’re wondering “well how the heck do I get to that?!”
Ask them what they’re most worried about with the selling of this property. Ask what’s on their mind. If you don’t ask questions then you won’t understand why they want to sell, and what problems their having with selling.
The question, “How do I not offend a seller?” is a misunderstanding of how the process should work. You need to go into leads without any assumptions on why they’re selling. The amount of money the house is worth isn’t always the core reason for selling.
When you walk into a property, don’t assume who’s in charge. Listen to everyone attached to the house, they’re sharing the same concerns. It’s your job to be there to help them. Often times, the spouse not saying anything is the one who’s in charge, so be sure you’re talking to everyone.
If you understand these core ideas and game changers, then you won’t offend anyone.
Thanks for the question, Steve!
If you have question you want answered, post it in the Flip Pilot Group on FaceBook with the hashtag #JustAsk. Stay tuned for more answers!
Craig S. Cody is an ex-NYC cop and certified public accountant of 17 years, he's a certified tax coach and business owner in his own right. Here's a few things he can speak on (one sheet also attached).
Cody has worked with a lot of businesses through out his life. The best practices he has seen, and the 3 practices that don’t tend to be done right, are here. So let’s take a look at the 3 Proactive Tax Practices:
People go out and buy a car and spend time researching it, but not looking at the tax codes on it. The average person doesn’t plan.
Are you holding your business in your name? Real Estate is best held in an LLC, but you need to talk to your own attorney to see. If it’s in a corporation, there could be tax issues when or if you go to sell.
This could be as simple as having your kids go to the properties to mow the lawn, or clean. If you’re paying them a reasonable amount, they don’t have to pay taxes on it. Their pay comes out of your income, which lowers your taxes, and they don’t have to pay taxes. It’s a win-win!
- What is the biggest mistake real estate investors make regarding taxes?
Typically, most real estate is held in a LLC. The reason for this is because as a real estate investor you fall under “ordinary income”. Basically, it’s short-term capital gain. If you’ve been in for a while, it’s just ordinary income
Some investors treat it all like it’s short-term capital gains. The problem with this thinking is the expenses of operating a business are subject to 2% threshold on schedule 8 of your tax return. They’re also subject to alternative minimum tax. This is a problem because, if you make too much money, they get added in without you getting the benefit of them.
If you do it properly, and actually in the business, then you don’t deal with those itemized deduction. The lesson is to ALWAYS document what you’re doing. This is something where we saved a client almost $80k because they were reporting their income incorrectly. More often than not, you’re in a better position by having your real estate investing business as an LLC instead of a corporation.
-Why not be a part of a C-Corporation?
A C-Corporation has the first $15k taxed at 15%. Getting that money out when you sell the property is double taxation. It’s just not efficient for a real estate investor to be a part of a C-Corporation. I just doesn’t help this kind of business.
However, if you’re using a C-Corp to manage your properties, it could work better. The best practice is having multiple LLC.
Here’s a story: There was a client who was a private business, not even an LLC, who was sued for mold injuries. The house was valued at $25k, and the verdict was $155k+ with interest. She had a pretty significant portfolio, and everything was attacked. If you umbrella it under one large LLC, you’d be safer.
- What are the tax write-offs real estate investors miss?
As a flipper, you can write off a lot of things since you’re being run as a normal business.
For example, if you have a home gym or a pool, that can be written off as a work rec area. The space you work in at your home is your home office. The gas you spend going to and from properties and locations can be written off as work expenses. Medical bills that are paid out of pocket can be written off as well.
Let’s talk about the home office for a bit, though. Take the space that you use to work in, in square feet, and compare it to the rest of the house. Let’s say your home office is 8% of your houses’s square footage. That means that 8% all of your utilities can be deducted in your taxes as a work expense: electricity, water, air conditioning, internet, etc. Your real estate taxes can be written off with that 8% as well. As long as there’s an office used exclusive to your business, it can be written off. Retirement plans can be worked in as well. If you’re working on your own, you can make a self appointed retirement plan. Food and entertainment can also be deducted.
Just keep track of your expenses. Make sure you’re keeping your receipts and keeping track of everything. Do it as you go instead of trying to pull things up at the end of the year.
-What are the limitations of the arms length transaction and self directed IRA.
The whole thing can be contributed to the LLC. Which means, the LLC owns that property. You cannot, yourself, do work on that property or it becomes an issue. You can, however, act as a lender in your own LLC. As long as you don’t have active involvement in the property, then it won’t be an issue.
Active involvement means that you, yourself, cannot be doing repairs with your hands. If there’s something you can pay someone else to do, get them to do it. IF you’re working on your own properties, you’re jeopardizing your involvement in the IRA. You can lend to other investors, as long as their not family. Tend to stay away from family!
The interests rates are subject to typical rules, 8 - 10% + a piece of gain, secure by real estate. However, this all depends on the investor. The better the track record, the less you’ll have to give and visa versa.
- What is Cross Segregation?
Let’s use a rental property worth $100k as an example. Typically, you would depreciate that building over 27.5 years. Let’s say your depreciate expenses are roughly $4k a year.
When you do a cross segregation strategy, the building gets broken up into parts. Take the property that would be depreciated over 3 years, 5 years, and so on, and depreciate it faster. Which means, over 27.5 years you’re still getting the $100k worth, but in the first few years you would 20% more expense from depreciation because it’s accelerating. From a tax perspective, that’s money that isn’t being taxed. That’s the smarter way to go for the best gains in your business.
Focus, focus, focus. That’s the key to success.
You don’t want to be distracted by your first ideas. You need to stay focused when it comes to growing your business so that you’re on top of your game.
The steps to staying focused isn’t that difficult. Here’s what we do to stay focused:
Hunting leads can be difficult to find, we know. Searching on the MLS can be exhausting. The biggest mistake an investor can make is staying in their comfort zone. If you only ever do bandit signs, how are you going to generate consistent deals?
That was just an example, there’s nothing fundamentally wrong with bandit signs. But you need to focus in on at least one method - direct mail, bandit signs, PPC, SEO, online marketing, driving for dollars, etc. - and become an expert at that.
Send out as much as you can, be active. The more you do, the more you’ll learn. Stay hyper focused, gather data, find a way to turn it into a system, become the master at it. Only then should you move on to the next thing. In no time, you’ll be an expert at every aspect of real estate investing. At the end of the day, you need to be making progress.
In these podcast episodes coming up, we’re going to be having an open Q & A with you guys. Your questions are important to us. It’ll help you learn, but it will also help us to know what it is you’re struggling with so that we can make content that’s helpful for growing your business.
Have a burning question to build your business? Just ask! The steps are easy:
There’s no such thing as a bad question. Anything that you’re curious about, we’ll help you through it. Let’s stay focused, let’s become experts, and let’s make progress in building our businesses!