What I Have Learned So Far After 3 Deals

[John Hixon]

So, for those of you who missed my first post about my direct mail campaign here is a recap.  I am working with @Jerry Puckett on a direct mail campaign.  I am sending out about 1,800 letters a month to 3 areas around Dallas, Texas.  I am currently in the 5th month of my campaign and have closed 3 solid deals and have a 4th on its way, which if all goes as planned will be my biggest yet.  I know there are a ton of people on BP that are wanting to get into real estate and are stuck in the analysis paralysis phase.  So hopefully this post can help you overcome that and make the decision to jump in.

If I had to start from the very beginning and do this all over again what would I have changed or done differently?  Well, I would have started off with more letters and a call center.  What I didn't mention before was this is actually my second campaign, the first one I did was kind of a half-hearted effort you could say. I jumped in but only barely with 500 letters per month in one of the hottest and most competitive markets in the country.  I was also working a full time job and trying to take all of my own calls, so I was doing what 99% of all investors do is letting the sellers leave a message and then I would call them back.  That just was not working, most callers would not leave a message and the ones that did where either angry that I sent them a letter or angry that they were needing to leave a message.  So, this time around I did things completely different.  I increased my mailings from 500 to 1,800 per month and hooked up with @Ryan Dossey to set up my call center.  

To all newbies out there I can tell you this.  If doing this is truly what you want to do, then fully commit to it and make a real investment to start off with.  Sure you could throw a little money at it here and there and hope to get lucky but chances are you will only be throwing that money away.  And, this business is not like what all of those gurus say it is, it would be extremely difficult to become successful with just driving for dollars and mailing out 50 letters a month.  It always amazes me that people think real estate investing is somehow unlike all other business out there.  If you want to start a business and make that business a success you need capital.  And, you need to invest that capital into your business.  

If you are thinking about starting a direct mail campaign here is a key piece of advice. Find some buyers and learn what they are looking for and how much they are willing to pay for it. A lot of people will tell you just get a deal and if it is a good deal you will not have trouble finding buyers. Well, that is partially true, if the deal is a great deal then yes you will find a buyer but not all deals are great some just barely make the numbers. So, I would recommend finding some quality cash buyers in your area and talking to them about what they want and more importantly what they are will to pay. So, I know in advance that buyer X is willing to pay 78% of ARV for this property I am going to see. That is a huge advantage when speaking with a seller if you know that you have a buyer willing to pay X amount for this house you are looking at. I would have lost a couple of deals if I would not have known that my buyer (who has bought all 3 of my deals by the way) was not willing to pay X amount. For those of you who don't know, when you are speaking to a seller you can get a feel for how desperate they are or how much they are willing to sell for. Thanks to my call center I know before hand what they are looking to get and I have an idea of what the ARV is. So, if I know the seller will not except less then $130,000 under no circumstances and the ARV is $220,000 and it needs $25,000 in repairs but my buyer has already told me that if I can get that property for $135,000 he will take it then I am not going to risk insulting the seller or ruining this deal by offering some super low amount just because that is what the "flipping formula" tells me to offer. $5,000 assignment fee is not a home run but its $5,000 more then I had when I woke up that day. Here's another thing, get away from the rules of thumb, that is all the are, basic guidelines. Some wholesalers are so stuck on the 70% rule that they just throw away deals where they could have made four or five thousand real fast by just listening to what the seller is telling them.

Here is a tip on finding buyers for your properties. If you are meeting with a seller, jump on the MLS or find someone that has MLS access and look at all of the sales in that area for the last 6-9 months and see who is buying the properties in that area. More then likely you will have 1 or 2 LLC's buying up properties. Find them online and call them and let them know you have a property you might be putting under contract, I guarantee they will buy it from you. Especially if the listing shows less then 10 days on market, that means they are serious and have cash to move fast. If the house you are looking at is very similar in size and condition to the house they bought for $140,000 just 1 month ago then that tells you right there that if you can get it for under $140,000 you have a buyer. That is exactly what I did on my first deal and now the buyer I found on the MLS just so happens to be my buyer for all 3 of my properties and will take every single deal I get no questions asked. In fact, I just put a house under contract on Monday and it was sold to my buyer on Tuesday. It's just that simple and fast when you find a serious buyer who has cash to move.

So to conclude, for all of the newbies on BP that are just reading forums and listening to podcasts sooner or later you are going to have to make a decision to either fully commit or not.  You will never make your dreams come true by just reading the forums.  I have learned more in the last 5 months then the past 2 or 3 years on BP.  Jump in and you will either sink or swim but neither will happen if you don't jump.  It will be up to you what happens after that.