How to keep the supply line full

Question

Hello all, I just finished my first fix and flip in Roebuck, SC and am having trouble getting another flip lined up. The market in upstate SC is insane right now so it's perfect for flips (had 4 offers on this last flip after 2 days on the market). But because it's so crazy that means the inventory for other flips is really competitive or, from what I've seen, nearly non-existent.

So, my question to you is, how do you go about keeping your supply line full so you can pop from flip to flip in a limited supply market? Granted, there are properties in the not-so-great part of town that would do well as a rental or possibly as a BRRRR type, but not good enough for a pure flip. Plus I'd like to stick with flips in this strong of a market and to build capital quickly with my business being so new.

Any and all ideas/recommendations are appreciated! Thanks in advance!

Account Closed · Answer

Build new.

Ray Lai · Answer

@Cale Snyder

You're welcome. Make sure you get the training on forms/docs to use before you start you campaign. Worst thing you can do is spend the money on a campaign but be unable to close a deal. Or a minimum find a trustworthy wholesaling partner to walk you through the first one and split the profit with them. So many things you can do! Also, when you are ready to start you campaign, shoot me a message and we'll talk details and strategies.

Cale Snyder · Answer

@Ray Lai

Thank you very much for the detailed reply! Really great info and I appreciate it very much.

You're absolutely right in that I haven't done much research into the basics of direct mail or much else as far as finding deals is concerned. It's an area I didn't necessarily want to get into right away and have a realtor helping me instead, because I would rather save money on the rehab by managing it and doing some of the work myself as it's my area of knowledge. But it's becoming more apparent that I need to be doing more on the supply side than expected because even my realtor is having a hard time finding deals. Not to say we aren't finding places that are good candidates, but that they disappear before I can move on them (had a townhouse that had been on the market for 1.25 years lined up, but the weekend before I was going to make an offer it had 4 offers come in over asking; just a crazy market like I was saying).

I contacted my county assessor and they are making a list of properties that have absentee owners for me. I'll also start driving for dollars too at your and Bob's recommendation. Hopefully that will give me a good list to start with.

Thank you both for your info and I'll get moving on this area right away! Hopefully it'll prevent this lull in work from happening again.

Ray Lai · Answer

@Cale Snyder

Direct Mail is a strategy that typically involves postcards and yellow-letters or other types of printed mail. It's an easy strategy to understand the concept of, but hard to master. I think you need to examine whether it's worth your effort to vertically integrate into sourcing your own deals. The questions you are asking show that you haven't done the research into the basics of it. Driving for dollars is a strategy where you drive around looking for properties that look abandoned or in disrepair and then you send them direct mail. Good question about the direct mail service, yes there are many companies that offer this but some are better than others and there are very different costs. If you want to pursue that, feel free to send me a message. You may also have luck going to your local REIA and meeting wholesalers if you don't want to vertically integrate into the world of sourcing deals.

If you do want to get into direct mail, here's a sample game plan:

1) Attend your local REIAs and network. You will need to gain some training on contracts and other documents to use if you are buying directly from homeowners. Also, training on how to close deals (what to say, what not to say, laws in your area).

2) Next develop your strategy, build a list of at least 200 properties to mail to. Response rates are typically 0.5-2% so the bigger the list the better. Options include driving for dollars, absentee, probate, using listsource if you're not in a competitive market, buying lists that are exclusive for your market type (we partnered with a guy that does this) 3) Start a sustained direct mail campaign. First batch with postcards, then follow-up with yellow-letters. There’s no point in starting if you can’t sustain because statistical data shows that responses typically occur after at least 3+ mailings. You want to use postcards first since they are cheaper and some may bounce so you can remove the bad ones off your list so you don’t waste money mailing to bad addresses. If you wanted to, you can even skiptrace the bad addresses to find where the owner moved to and target the right address. For fulfillment you can do it yourself to save money if you're broke, but ultimately if you want better response rates and focusing your time on value-add, then you'll want to outsource fulfillment to a shop that has economies of scale and can offer you great rates (see attached). Remember, a campaign usually doesn't get a response until 3+ mailings. A lot of newbies quit after 1 or 2 letters without realizing that people don't open the first letter they see. Focus and sustainment is the key. I'd recommend a different marketing piece every 4 weeks for 5-7 months from data analysis, but you should test this out for your market and see what works best response rate wise.

Also, when you become more advanced you'll want to do split testing and other methods. You should always be tracking your response rates and seeing what lists work bests. It’s always best to include a website and a local phone number on the postcards as well to maximize your responses.

Cale Snyder · Answer

Sorry, kind of new to this. I'm assuming driving for dollars is just driving around looking for for sale signs or FSBO signs, right? As far as direct mail, 9 chances out of 10 there's a bunch of other wholesalers, flippers, etc already papering the hell out of this area with this market. Not trying to make excuses, just don't imagine that I wouldn't have much of an edge. Are there ways to be "better" than others in direct mail? Like using some direct mail service or advertising company? And good point with wholesalers. I only have one right now.

Thanks for the reply!

Bob Okenwa · Answer

You're going to have to look for off-market deals either from wholesalers, by direct mail marketing, driving for dollars, leads from RE agents, etc. There are many ways to source deals, it all comes down to hustle and networking to get the in your pipe line.