BiggerPockets Podcast 071 with Phillip Vincent Transcript

Link to show: BP Podcast 071: Finding Great Deals and Getting Started as a Wholesaler with Phillip Vincent

Josh: This is the BiggerPockets Podcast, Show 71.

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Josh: What's going on, everybody? This is Josh Dorkin, host of the BiggerPockets Podcast here in the hail capital of the world -- Denver, Colorado with my good friend, Brandon Turner. What's up, Brandon?

Brandon: Not much, Josh. I saw that hailstorm earlier in your area, saw that, looked pretty exciting.

Josh: Yes. We were evacuated. Thanks to tornado warnings and wicked hail. It's been kind of a hairy afternoon, so to speak.

Brandon: Nice, nice. I miss those tornado warnings.

Josh: Yes. You could just get rain and misery everyday.

Brandon: There you go. There you go.

Josh: Yes. Nice, man. Nice. Today's pretty cool show, we've got with us Phillip Vincent, a wholesaler from the St. Louis area. He's got a lot of great tips for us. Before we get to Phillip, I want to do our Quick Tip. Yes, you sound like a dying bird. Maybe one of your birds that are on your wall just came out.

Brandon: No more birds. Patched up and done.

Josh: Fabulous. Fabulous. Today's Quick Tip is: if you've got any kind of deal, any kind of opportunity that you want other people to know about, put it on the BiggerPockets Marketplace. I think it might be obvious to us to do it, but to others it may not be as much.

Here's a quick story. Got an e-mail today from a guy. He's a commercial real estate broker, I believe. He said, "Listen. I just want to thank you guys. I was really hesitant to put something up on the Marketplace. I didn't think it was really worth it. I just did it on a whim, thought maybe I'd get a couple of people to check it out over a course of a month."

He said something like within a week, he had seven people reach out to him and contact him who want to work with him. I think that kind of speaks to the power of the Marketplace. It speaks to the power of the volume of people we've got on BiggerPockets.

If you have a service that you provide to real estate investors or if you've got deals or opportunities and you think, "Oh, why will I put it on BiggerPockets? Nobody's going to care," you might as well try because it would shock you how many people are on BiggerPockets.

There are lots and lots of folks and they're always looking for something. Get out there. Post on the Marketplace on BiggerPockets.com/marketplace. That's today's Quick Tip.

Brandon: Nice. Good job. Today's show; let's get on with it. Like Josh said, we have Phillip Vincent. He's a wholesaler and he's doing a lot of cool stuff. We want to get to that interview.

Before I do though, real quickly, ask questions if you have any in the show notes on BiggerPockets.com/Show71. You can talk to Phillip there and ask any clarification or you want more information, whatever; that's where you find it. Also, we have up a video of the hailstorm that Josh was in so check that out, too.

Josh: Yes. I don't know if that video actually ended up surviving the hailstorm. We'll try and get up. Without further ado, why don't we bring him in? Phillip, welcome to the show, man. Good to have you.

Phillip: Thank you, guys. Thank you, Brandon and Joshua. Look forward to being on the show with you guys.

Josh: Great.

Brandon: Yes, we look forward to hearing from you. Today we're going to talk a lot about finding good deals and you're kind of an expert at that. I know in today's market it's very difficult for a lot of people to find them. I'm excited to learn from you. Before we get to that, you know my first question I would ask. How did you get started in real estate?

Phillip: I have two cousins that are a little bit older than me. They both have been framers, house framers since the age of 15. They're now in their early 40's. Each one of them have over 25 years experience and they've graduated all the way up in to building multi-million dollar homes for custom builders here in St. Louis.

Brandon: Nice. You have construction background?

Phillip: I do.

Brandon: Interesting. Tell us more about that.

Phillip: I'll never forget a story my cousin told me. He said that he worked for a builder. He built a house and the builder had about a million dollars in the total project. That was acquisition of the lot and it was the complete build out of the house. He had $1 million in the total project.

He was going to list the house for about $1.4 million and about the time that he did it, the neighbor across the street listed their mid-century house albeit it was outdated, but he listed that house for $1.4 million as well. The builder said to himself, "If that old house is worth $1.4, I bet my house is worth more."

He decided to list it for $1.8 million. About a month later, he got $1.8 million for the house. I'll never forget what my cousin told me. He said, "Man, I'd hate to be that guy. He's got to pay taxes for making $800,000."

I'll never forget it. It hurt my brain when he said it. I was like, "That is exactly the kind of problem I'm looking for. I want to make $800,000 in one deal." I think ever since that time I realized that real estate's one of those businesses where you can make more than what some people make in their whole lifetime on one deal if you just do it right.

Josh: Yes. It's interesting because what your, was it your cousin or your friend or whomever it was that said that. We've heard that quite a few times. I know we hear that on the side. I've heard it in discussions and it baffles me. It really does. That's probably the best problem you can ever have is to have to pay a lot of money in taxes because you made a lot of money.

Phillip: Yes, especially considering he thought he was only going to try to make the attempted $400,000 so to make $800,000, your taxes are paid.

Josh: Yes.

BD: Yes.

Josh: Yes. Right on. You got this inspiration. How did you actually start getting into the business? What did you do?

Phillip: Because of my cousins and my father, he also built our homes growing up. He wasn't doing it for a living but I was always around it. Just talking with my cousins, they always have the plans of the builders that they built for. I got to see a lot of building plans. They said, "Hey, we build this one a lot. This sells a lot." They knew which ones were popular, which ones they were building more of in what styles, what sold.

At the age of 21, I actually built my first house for myself. That was my first real estate project was general contracting my own house for myself.

Brandon: 21? That's awesome. That's awesome.

Josh: Yes. I was, I don't know. I don't know what I was doing at 21. I definitely wasn't building a house.

Brandon: I was drinking a lot of beer and keg stands.

Josh: Whatever, man.

Brandon: Were you in a fraternity, Josh? That's what I though.

Josh: You know what? Let's just move on. This is not about me. This is about Phillip.

Brandon: All right, Phil.

Josh: We're not going to go there.

Brandon: You built your first house at 21 years old, which is impressive. Not many people...

Josh: Very impressive.

Brandon: Yes.

Josh: Not just impressive. I think it's more impressive than Brandon does. Just so you know.

Brandon: Thanks. How did you parlay that? Where did you go next? Did you go right in to real estate investing or did you live for a while?

Phillip: No. I lived in the house for a little bit over a year and I sold it. I think I made somewhere around $60,000. I remember thinking to myself, "Whoa. That was pretty easy. I'd like to do that again." At that time, I actually owned some cellular phone stores. That was my primary focus at the time. Then I said, "Hey, I'd like to get more in to this building." I started to build some spec homes in early 2000.

Josh: It sounds like you're an entrepreneur at heart obviously. You went out, got in to the mobile store business and all of a sudden you're popping in to real estate. I wonder. I think most successful investors tend to have that mentality. Would you agree?

Phillip: I totally agree.

Josh: Yes. You have to have something and I think that's it. You got in to spec building, which is pretty similar to what your uncle was doing and cousins. I can't keep up with your family. You got so many people going on here.

Phillip: It works. It works.

Josh: Oh, boy. Somebody's in there. You decide to get in to spec building. Tell us about the first spec that you did.

Phillip: Oh, you're going to love this story. I built a house. I believe it was 2003. I bought a lot from a friend of mine, found a plan that I liked, started building it and everything was going great. I even threw my cellular phone store.

I had a real estate agent, of all people come in to my store. He told me he was getting ready to buy a house. I said, "I happen to have a house that fits exactly what you're wanting." I sold it to him. I didn't have to pay a commission on either side. I sold it to a real estate agent and I finished it out the way he wanted from the rest of the way in.

Brandon: Nice.

Josh: Wow. It was a custom-build, not just a spec but it was a total custom...

Phillip: Yes. I'm a custom builder, I would consider myself.

Josh: Yes. Did that change how you kind of did things? Had you broken ground at that point?

Phillip: Yes.

Josh: You had. Okay.

Phillip: Oh, yes. We were framed up. We were just waiting for the dry walling.

Josh: Okay. Got you. Got you.

Phillip: When you think about that story, too is I've listened to all of your 70 podcasts, I've never hear anyone talk about this. I had a situation in St. Louis where the title company, the owner of the title company stole $11 million.

Brandon: Whoa!

Josh: Wow.

Phillip: $30,000 of which was my money.

Josh: Oh, boy.

Phillip: I'll never forget what had transpired a few days before the story broke was that when you build houses, you get draws from the title company. It's like a checkbook. You ask him to draw it from the bank.

I actually asked her to draw $50,000. She said, "Do you need that much right now?" I said, "I think so. I probably only need $30,000 but I just like to have it there." She says, "Let's just go ahead and do $30,000 and if you need it, we'll come back and do another one."

It turns out, had I taken the $50,000, I would actually have lost $50,000.

Brandon: Wow.

Josh: That's great. I've had quite a bit of money stolen from me in the land of St. Louis as well. I feel your pain.

Phillip: Who was it? I probably know him.

Josh: We'll talk about that another day.

Phillip: St. Louis is a small, small town.

Josh: It is. It is indeed, man. You did this spec build. You lost $30,000. Did that get recovered through insurance or anything like that?

Phillip: $6,483 of it did. I got the check and remember thinking to myself, "The only people who won in this deal are the lawyers."

Josh: Yes. That really sucks. That really sucks. You get this first spec. What were the final numbers in terms of profit and cost?

Phillip: I would have made $70,000. He added some numbers on the top. I would have made $70,000 I think. He added a commission on to the build price and gave it back to himself.

Brandon: Interesting.

Phillip: Yes.

Brandon: Yes, that is interesting.

Phillip: It is. The numbers were there...

Josh: Is that kosher?

Phillip: It worked. I ended up making about $40,000 instead of $70,000 on that deal.

Josh: Interesting. That's not a bad first deal, right?

Phillip: No. $70,000 would have been better though.

Josh: Yes. You knocked it out. Do you go in to another one? What's next?

Phillip: A lot in my life takes a little bit of a change. I owned a website, an automotive website to remain nameless. They used to put fish tanks in cars, if that helps you at all. I made my living actually through AdSense and AdWords, pay per click advertising. I was making a lot of money and I was parlaying it back to real estate.

Josh: Got you. Cool. Like buy and holds?

Phillip: No, actually new construction. I went with that cousin who told me the story of the $800,000-guy. We decided to do joint venture where he would put in his time and effort and I would put up my cash and we would build our first million-dollar spec. It was 2007.

Josh: It's a good year especially to build a first spec.

Phillip: Yes, first million-dollar spec. That's actually why I got my real estate license. I knew on a million-dollar house, you're going to pay $50,000 in commission and I wanted to not give $50,000 away. That's when I got my real estate license at that time

Josh: Nice. Good idea. How did that work out?

Phillip: Horribly.

Josh: Sorry to laugh. We laugh with you, not for you or for you, not with you.

Phillip: I drive by that house still. It's in Chesterfield.

Josh: Do you egg the house when you drive past it?

Phillip: No. I love that house. I'm proud of what I built there. My pocketbook doesn't reflect what happened.

Josh: Yes, yes.

Phillip: That's okay. You learn from those mistakes. I definitely learned from all of my mistakes.

Josh: Is the million-dollar house...I got to ask. How much did you lose?

Phillip: $200,000.

Brandon: Ooh, ouch.

Josh: All right. We're negative lots of cash at this point?

Phillip: Yes. Yes.

Josh: We're thinking, "Shoot! This real estate business might not be the right business?"

Phillip: For million-dollar spec builds in 2007 and 2008, yes. It's not the right time.

Josh: Obviously, you had to have transitioned your course?

Phillip: I did. Because I had my real estate license, I was able to fall back on that. I was out of the cellular phone business. I had sold those in 2002. The internet money had dried up as well. I had to look for something else. We started to buy, fix up, and sell; normal rehabs to retail.

Brandon: Okay. You became a basically a house flipper?

Phillip: Yes, with my father. I was actually listing his properties for him. My goal is always try to get in front of the deal wherever the deal's at. That led me on my course to find eventually wholesaling in the company I work for today.

Brandon: Okay. Why don't we walk through that transition real quick? You went from house flipping to working for a company who wholesales lots or you're wholesaling for a company that does a lot of flips or whatever. Walk us through that transition.

Phillip: 2007, 2008, 2009, there were a lot of foreclosures. We went online to your auction.com, your Hudson and Marshall, your auction site. We would go and buy them.

I'll never forget that feeling of when it was auction day because it used to be on site or in a big ballroom and it was so exciting because I had already done my due diligence. We've already been in the house. We've figured what the ARB was, what the fix up cost would be. We knew where we had to buy it. The adrenalin rush of going there that day and trying to bid on a house.

The problem was is that when retail buyers were there that day, you'd never get anything bought because they would always outbid you. There weren’t enough auctions in our town to keep us busy enough. It made me try to go out and find more, how to get in front of a deal. I thought, "I should go work for an REO company. They have all the bank loan listings. I should work for them."

It turned out it didn't work out that way. It was unfortunate because I would know about deals 90 days early but because of the owner occupancy period of 15 days or 20 days or 30 days where they had the first right to buy it, I would know about this deal 90 days before it's even listed but I still had to wait for day 31 sometimes to put my offer in. I wasn’t in front of the deals like I thought I would be.

Josh: There is no advantage.

Phillip: There is no advantage whatever. In fact, it was just more frustrating than anything

Josh: Yes. Got you. Okay.

Brandon: How did you get from that to the current job?

Phillip: I kept going. I knew that wasn't going to work. I reached out to my local REA here in St. Louis called the South Side Investment Club. They have about 2,300 members. I started going to the meetings. They have a very vibrant community where they post, "I'm looking for gutters. I'm looking for a lawyer," whatever it is; kind of like BiggerPockets, just on a smaller scale.

Because it was about 40 e-mails a day, I get them in one e-mail at 5:10 in the morning. I'll never forget. I woke up. The very first one was "Fasterhouse is looking for an investor." I read the job description of what they were looking for. I looked at my wife and I said, "This job is what I do best."

I called Brian who owns Fasterhouse and set up an interview. Within about three weeks, I had the job.

Josh: Okay. Cool.

Brandon: Nice. What were you hired to do exactly?

Phillip: My job is to take the leads. Go meet with the people. Figure what the rehab cost is going to be, what the ARB is going to be and get the house under contract. That's all I really need to do. The opposite side of it, once we buy a house then if I'm going to wholesale then I also need to find a buyer.

I do a lot of networking with other wholesalers, other investors, other rehab-ers.

Josh: Got you. Cool. Let's start with the leads then. How are you guys...now that your there and you've been working there it sounds like a number of years.

Phillip: A couple of years.

Josh: First step in the process, go to find the leads. Where are you guys finding them? What are you doing? What are your sources?

Phillip: I know you guys don't like bandit signs. I'm happy to say we don't do bandit signs. We do a lot of direct mail, yellow letter campaigns, probate leads, absentee owners, a lot of pay-per-click, online SEO, natural SEO. We create a lot of content. We try to do a lot of testimonials, a lot of video.

Brian and Debbie are very good at building the company right. As far as the little guys go, we're actually pretty big. Brian's bought over 60 houses a year for the past decade. Even through, if you think about through those dry periods, he was consistently buying that many houses with his marketing efforts.

Josh: Got you. Got you. Those are kind of the traditional methodologies. What are you guys finding? Are you focusing on the St. Louis area?

Phillip: I am. We bought 77 houses last year. When people ask me where do we buy it, it's almost easier for me to say where we don't buy it, which is North City but just about everywhere else in St. Louis area and St. Charles County. We buy in those areas.

Josh: Yes, got you. Do you guys focus on the A, the B, the C, like what neighborhood types? Are you focused on the high end, the lower end?

Phillip: We definitely focus on the high end. I've started to get myself into the lower end. There are a lot of REA’s in town there buying up houses and they're paying almost retail prices for them so there's money to be made. I try to find those deals as well.

Josh: Got you.

Brandon: You're saying you start with the high end. I feel like most wholesalers or investors, whatever, myself included, we all started with the cheapest, ugliest, dirtiest houses like here's a house for $5,000. That's what a lot of investors go for.

Phillip: Yes.

Brandon: How does that compare with what you're doing? Why do you guys do the higher end ones? What does that look like?

Phillip: With the higher end ones, we always look at the school district. If there are a lot of people looking at that school district, it's always easier to sell it.

Brandon: Yes.

Phillip: When I say higher end, I mean St. Louis prices are not like Washington's or Denver's prices.

Josh: Not even close.

Phillip: Not even close. I can almost say $300,000 plus is a higher end while in Denver it's about your median price.

Josh: Yes. I bought my first multi in St. Louis was $90,000 for four.

Phillip: What street?

Josh: It was South City. It wasn't good.

Phillip: Yes, yes, yes. That’s a tough area. A lot of people like South City. I think it's definitely going the right way. This was years ago that you're talking about.

Josh: Yes. I was there at the wrong time. You had a point on that.

Brandon: I just want to know. What does that mean? What are the conditions of these houses? What's an ideal property that you're looking for? Are they three-bedroom, two-bath nice houses?

Phillip: Sure. Ranches. We try to stay away from weird. The designs that don’t - functional obsolescence doesn't sell well. We like normal brick ranches that need the updates. We run a lot of time capsule house.

I think the generation that we buy from, they had the feeling that if it wasn't broke, they weren't going to fix it. We just bought a condo in a nice suburb and it still had lime green countertops, orange dishwasher. I can't believe a dishwasher made it since the 1970's but it did.

Josh: They don't make them like that anymore.

Phillip: No. Apparently not. The time capsule houses are great. We really try to buy houses that people took care of. We'll buy some junkie ones, too but we hardly ever rehab those. We like to rehab houses that were taken care of because of just the pride of ownership. People that took care of the house over their whole life of owning it, it always seems like those houses are easier to rehab versus the houses that they just neglected everything.

Brandon: Yes, that's for sure. I walked through a house yesterday that it was just a pit. They neglected everything. It wasn't just outdated. It was just terrible. We're not going to do anything with it because it's just far more than I think it's worth putting in to.

I wish I had done more when I was starting out with the good houses in good neighborhoods that were just ugly.

Phillip: Right.

Brandon: I wrote a post a while back called "How not to flip a house." I'll link to that in the show notes at BiggerPockets.com/Show71. In that, my largest mistake in that property...it wasn't a $200,000 spec build so you would take the cake on tragic stories.

I made no money on this deal after two years of work. The reason why is because I bought something that was functionally obsolescent? It was a duplex that I decided to turn into a single-family house. Terrible idea

Josh: Obsolete.

Brandon: Obsolete, is that right? Okay, fine. Thank you, Mom. I bought a house that was a duplex and I wanted to turn it into a single-family house. It was huge. I thought a big huge house was awesome but what's that quote you said a minute ago? "Don't buy weird."

Phillip: Yes. We don't buy weird.

Brandon: Yes. I should have learned that lesson at that point. That's a huge tip for anybody listening. Especially when you're starting out, don't buy weird.

Phillip: Right.

Josh: Making moves like that because I made a similar...I turned a four in to a three-one and that was a big mistake as well. I think if you've got the guts, if you've got the framework, if it's built for a specific purpose, you usually kind of want to keep to that because there's typically a reason.

Phillip: I totally agree.

Josh: Yes. Yes. Yes. Right on. You're picking up these properties and ultimately as part of this company that you're at, your goal is to wholesale them. Are you guys doing any flips or you're really just turning them?

Phillip: Out of the 77 last year, I'd say half of them we rehab-ed and sold retail but the other half we wholesale the properties. The way we do it is we have two full-time crews. When the crews are busy, we look in to wholesaling. When the crews are not busy, we move on to rehab.

Brandon: That's interesting. I've never really heard of that model before. Makes sense for a larger company to do that though.

Phillip: Sure.

Josh: Makes sense for somebody smaller, too.

Brandon: Yes, it really does.

Josh: If you've got the leads...

Phillip: Yes. We don't fall in love with any deal. It's almost like a "don't go against the stream if you can sell it and make a good dollar amount." Just get it going and move on to the next one.

Josh: I think the key is deal flow.

Phillip: Sure.

Josh: What you guys, it sounds like, are doing is you're pumping out a fair amount of deal flow and you're getting a lot of leads and you're going through and you're not tossing them. If you're tied up in one way, you're using another strategy.

I think that's something that not enough newer investors do is have the multiple eggs and know that "Okay. This doesn't mean my criteria for A so I can do B or C with it." Or, "I'm so tied up doing A and B that I got to let this deal go. I'm going to throw it in the trash." Why would you throw it in the trash? That's money.

Phillip: Yes. I don't ever let anything go in the trash. I bought a house a few weeks ago for $1,000. I sold it for $2,000.

Josh: There you go.

Phillip: I'd get as excited with those deals as I do the big ones because in this business I think I try to look at it backwards. I try to figure out what my buyers will pay and then I buy it for less.

Josh: A thousand-dollar house, are we buying in Detroit or what are we doing here, man?

Phillip: Oh, we've got some Detroit-esque areas in St. Louis.

Josh: Yes. St. Louis is way Detroit-esque, man.

Phillip: Yes, in certain parts, not where I live.

Josh: East St. Louis, come on.

Phillip: I bet you spent a lot of time there, didn't you?

Josh: I did not spend a lot of time there. If you're infirm or anything like strip clubs and gay bars...I don't do those things. Thank you very much. Thanks for playing, Phillip.

Brandon: I want to hear about this thousand-dollar house. What did it look like? How did you find it?

Phillip: Broke down, it was horrible. I think the person who was bought it put $10,000 in it and turned it into a rental.

Josh: Okay. Do you mind me asking? How did you get the lead for that? Do you remember how that came in? You don't have to. I was just curious.

Phillip: It was another wholesaler who brought it to me.

Josh: Okay.

Phillip: That's the other thing. You guys have asked me how do we find our deals. We work with wholesalers a lot, young wholesalers that don't know where to sell their house. They have the cojones to go out and put the sign out, go get it under contract. Then, they're like, "Now, what in the world am I going to do with it?"

At Fasterhouse, we have a reputation that's very, very good. If we say we're going to buy it, we're going to buy it from you. I think we helped solve that issue for a lot of people starting out. They don't know who's going to be their buyer. We buy just about every house as long as there's meat on the bone so people like to work with us so we have a lot of referral business.

Josh: Okay.

Brandon: I want to actually go back a little bit. I know we're talking about the deals and stuff. It occurs to me that we never really talked about you have a job. It's a position, a job at a company that does this stuff. That is something that we recommend people all the time. If they want to get started in real estate, they should pursue that kind of avenue.

Do you recommend other people start that way to go work for maybe a larger investor and learn the business that way? What are your thoughts on that?

Phillip: January 1st, I pulled my brother and my brother-in-law in to wholesaling from their corporate jobs. Both of them have aligned themselves with other people that have been in the business. They've come leaps and bounds in five months. Both of them last month made more in one month than they did their previous year at their secular job.

Aligning somebody with...doing it on your own is kind of like...you might be lost in the desert but if you go in a group, you might not make some of those mistakes like, you said, buying a $5,000 house in a bad neighborhood and put in $50,000. You probably won't do that if you're with somebody who's seasoned.

Brandon: Yes.

Phillip: I strongly suggest aligning yourself with somebody.

Josh: Nice. Let's talk about what your day looks like because to me I think it would be interesting for investors, new and experienced to kind of hear what's a day in the life like.

Phillip: I have a great life. About 9:00, 9:30, I show up at the office. I usually have my first appointment around 10:00. I hate to eat alone so I like to do a lot of networking for lunches. Usually, I have appointments at 1:00, 3:00, how ever many I can stack up in a day and I go meet with the families and try to get them under contract.

Josh: Okay. Your role is really, really exclusively...you're the guy who goes out and deals with the folks once somebody at the firm finds the good lead?

Phillip: Sure. I'll vet them a little bit. I'll get the lead through the office and I'll call them to make sure there is equity there, at least the chance at equity. Then, I'll try and set up a meeting. I like to go out. A lot of times I'm the first guy there. Sometimes it's bad because they want to get three or four prices and then they just use my number against me but I still like to be the first guy there.

We try to do a lot of value add. These people when they're selling their houses, a lot of times, its the first time they've every done it. They don't know what to do with the stuff or the car or the jewelry. We have people that we work with for all of those. I feel like even if I don't buy their house, I'm still giving them a value-add for being there.

I think people like to work with us because of that. We tell then that we're an option for them. We're not used cars salesman-y. We're a very positive company. We try to go in and say, "Hey, here's what we can do for you. This works great." We've had good success because of that.

Brandon: Cool. Cool. I think that's a good way to look at real estate in general. If you can just add value to somebody's life, you may not get every deal and that's okay. You're not going to get any deal anyway but if you can just build that reputation and help other people in the process, I think a lot of real estate investors will have not such a bad name. Anyway, kudos to you on that.

Can we walk through the conversations that you have with people, what motivates sellers? Let's say a lead comes in through yellow letter or whatever. You send out a mail. They call in. Do you take that initial phone call? Do they go to a voice mail? What do you say on that call with somebody?

Phillip: It goes in to the call center. They take the lead. It comes back to me text form, an e-mail form and then I call them back.

Brandon: Okay. What do you say to them?

Phillip: During business hours we do have a live; Heather answers the phones there at the office.

Brandon: Okay.

Josh: What information is actually given to you specifically?

Phillip: To be honest, I just need their number. I'll find out everything else on the phone call. I do know quite a bit. I usually know the address, why they're selling. Just from the address alone, I can know a lot because I try to know every zip code in my city. If I just have their name and number, I can usually take it from there.

Josh: Got you.

Brandon: Do you do a little bit of research ahead of time? Look at their county records or whatever? What do you look for beforehand?

Phillip: Equity. I'm looking for meat on the bone.

Josh: That's it. How do you do that?

Phillip: A lead that has potential is what we call it. When you say that sentence you think maybe it just means a willing seller. That's not what it means for us. A lead that has potential to me means that the person owes less on the house than what Fasterhouse is willing to pay for it. Plain and simple.

Josh: Okay.

Phillip: A lot of houses we buy have a hundred percent equity obviously but any house where they owe less than what we would buy it for, that's a lead that has potential. I would go out on that lead and I'll try to get it bought. I have a pretty good close ratio.

Brandon: Okay. I want to know this because I'm not good at this side of things. Two days ago, I talked to a lady who calls me up and says, "I want to sell my house. Can you come out and take a look at it?" What do I say to her? Do I say, "First of all, let's talk about how much equity you have." That would be a rude question to just throw in.

Phillip: No. You don't ask it that way. You got to be a little smoother than that, Brandon.

Josh: Yes, Brandon. Jeez, man. GQ-smooth over here. That is Fumble-ina.

Brandon: Teach me.

Phillip: I work in this business because they're selling me a product. They're selling me their house. They want my answer. They want to know how much I'm going to pay them for it. It's different than sales where you're trying to force it back on them. They want me to give them the number.

You get it in the conversation. How long have you owned the home? Why are you selling the home? One I've started to implement is: what style is the home? A lot of people have no idea what kind of houses they live in. Usually, it's the time for them to go, "Oh, it's an old piece of crap." It's not the style of the home but it tells me a little more about what they think their home is worth.

It gets them talking. We buy a lot of estate properties. I feel like a shrink half the time. When I go on these calls, I'm dealing with what I always call the most responsible child, the executor of the estate. It's an emotional time for them. They've got other kids. They have brothers and sisters that are usually out of town. They think it's worth a million dollars. They're fighting them off.

Everyday it's like, "Jerry lives in Chicago and he hasn't been down to help me." By that fourth weekend, their back is hurting and they've just now gotten over the hump of how much stuff that people have and they're just ready for some help. I think we do a good job at...selling that house might be the hardest part and we can make that easy on them. People love to work with us because of that.

Josh: That's great.

Brandon: Okay. You said earlier you have a good close rate. Do you happen to have a percentage? Do you say you close most of them?

Phillip: No, not most of them. I wish.

Brandon: That will be nice. What's good? What's a good close rate when you're meeting with somebody?

Phillip: How many leads I go on versus leads that actually had potential. Out of a given month, if I buy four houses myself out of 20 good leads.

Brandon: Okay. Do you happen to know good leads versus not good leads? Let's say a hundred calls come in. Out of them, what do you think would actually be meat on the bone lead that you're going to pursue?

Phillip: 30%.

Brandon: Okay.

Josh: Out of those you maybe close a few out of them.

Phillip: Yes, a few among them. Just because they have equity doesn't mean they see it your way. They're going to point you to the price.

Josh: Yes. I could talk to my parents all day about what their house is worth but they don't want to hear it.

Phillip: No. They have it in their head. I like it when people tell me what they want to sell their house for based on what their bills are. They say, "We owe this to the doctors. We need $64,000." I'm like, "Whoa. Your house isn't worth $64,000 just because you need it for a hospital bill."

Josh: Yes. You make a lot of these calls and you talk to a lot of these people. I wonder how much of this is a generation gap. How much of this is just pretty much...is it anybody who's got a house and they've been there for a few years and they don't have a clue? Are we talking the old generation, the 60-, 70-, 80-year old that are just kind of not all on the ball with what their properties are worth?

Phillip: It's their kids that we're dealing with; the boomers' parents whose houses we're buying in general. When you say the generation, the baby boomers still live in their mansions, still have debt and they're very busy. Their parents paid off their house in probably the 1960's or 1970's and they never moved. Those baby boomers don't want to move into Mom and Dad's house, at least in St. Louis.

They don't want to go back there. They have memories there but they're not trying...and honestly, if they were going to fix it up and put their kid in it or something, I would have never gotten that lead. I'm only dealing with houses of people that don't truly want the house anymore. It's a burden for them instead of an asset.

Josh: That makes sense.

Brandon: I'm jumping all over the place today. I'm sorry.

Josh: He's frantic, people.

Brandon: I have a lot of questions that I don't know whether to throw them on. My first question I guess is: the leads you talked about, SEO. You're getting them from yellow letters. You're getting them from a lot of different place like that. What is most effective for you? Do you know in your company what's driving the most leads?

Phillip: The most profitable or the most amount?

Josh: Good question.

Brandon: Either.

Phillip: There are a lot of low-hanging fruit in some of the lower end areas, cost-wise. We can buy houses for $15,000 and sell them for $30,000. We do that pretty consistently. Your bigger dollar houses are the ones that are in the higher end areas, the nicer areas.

Brandon: Got you. What leads do you think are best for the higher end areas? Is it estate sales?

Phillip: Estate sales, probate leads. Oh, yes. Probate leads.

Brandon: Okay.

Phillip: It's harder to find but when you do find them, they're usually more fruitful than to somebody who bought their house three years ago. You had said about are the young people calling in? Hardly ever are those houses that we buy. We're buying time capsule houses that have been in the family for 30, 40, 50. I went to a lead the other day. The mother lived in the house since 1931.

Brandon: Wow.

Josh: Oh.

Phillip: That's a long time.

Josh: That is a long time. Where do you find your probate leads? Is that through mailing lists?

Phillip: We've subscribed to two local...the St. Charles County paper and the St. Louis Business Journal, which is the St. Louis County. We got through there. Just because a probate's open does not mean that they own the property. They could have lived in an apartment or with somebody else.

We have to match it against the tax records to see if that person did in fact own that property. We need to look up to see if there was a loan taken against it recently. We're trying to look for equity plays. Once we realize that there is equity and there's probate. The house is going to be sold. That's when we start our marketing campaign to the probate.

Josh: What are you finding exactly in these papers? Are you finding a death notice? Does it say probate or estate sale or something like that? What information are you seeing there?

Phillip: What you just said, death notice.

Josh: You guys are literally going through whenever people pass away and you're trying to see if they have assets, a property in their name...

Phillip: If they want to sell.

Josh: How do you actually find out who's in charge of the estate at that point?

Phillip: Fortunately for us, in that information they also put who the attorney is.

Josh: Okay.

Phillip: We send letters to the attorneys as well.

Josh: Got you.

Brandon: This isn't the obituary, is it?

Phillip: No, no. These are open probate cases.

Brandon: Okay.

Phillip: If someone has passed away, you have to open probate. It's like a year. You're shouting from the rooftops, "Hey, did George owe any money? If he did, now is the time to come get it." During that time, that's when we start to market to them because most likely they're going to have a house that they want to sell.

Josh: What's the amount of time it typically takes between the beginning of marketing on one of these probate deals and the time at which you guys close on the ones you close on?

Phillip: That's a good question. We try to touch them about five to seven times including the attorney as well so that's 14 touches. I think because we'd cc the attorney, people take us a little bit more serious that they almost think that we're working with the attorney because our letters say, "Hey, we've also cc'd your lawyer about this if you guys want to sell it." I'm going to say five months, once they start getting it to closing.

I had one close the other day that it took us three months to get to the closing table for many, many reasons. Fortunately for us, when you buy as many houses as we do, it's okay if it takes that long because we're buying houses every single month in the year. It's not like we have a slow period. We're buying houses every month.

We go along on the ride with them. They have a goal to sell the house. We have a goal to buy the house. We work together. We're flexible.

Josh: I like the idea of copying the attorney. I think it extends some kind of level of professionalism because I think the property owners...if you were doing something that wasn't on the up and up and you're not then you wouldn't be cc'ing the lawyer. I think it actually probably gives them a little bit level of comfort to know that the lawyer is in on the picture, sees that you guys exactly what you're doing.

Phillip: Right. I agree.

Josh: That's great. That's great. You had talked about on the lead side. The website: you seem to have a pretty active website. How does that do as a traffic source for your leads? How long did it take you to get that to start working as a lead engine?

Phillip: I've been at Fasterhouse for a few years and I've noticed the change even in that short amount of time that we used to get a lot of Yellow Pages calls and all of those have gone away. Now, they're almost all internet marketing leads.

Josh: Interesting. Can you clarify that? What do you mean you're getting Yellow Pages calls?

Phillip: Yellow Pages, I don't know what you call it.

Josh: The phone book. Yes.

Phillip: The phone book, in the phone book. Those leads have dried up over time. We still get them every once in a while. It's still probably an effective marketing tool. It's just not our business. We only do probably five houses a year if we relied only on the Yellow Pages. With the internet, we probably get, I would say 70 or 80% of our leads through pay-per-click or just naturally just ranking high in keywords here in the St. Louis market.

Josh: You're also putting ads in the Yellow Pages is what you're saying?

Phillip: Sure. We've done it for years.

Josh: Okay. Okay.

Phillip: We've continued to do that. What I'm saying is in the two years, I've noticed the change, the switch from what used to work to what's working today.

Josh: That makes sense. That makes sense. You're doing pay-per-click and you're doing organic. What type of content are you guys producing that you would say is driving people? Because you said, "Go out and produce some content." What might be an example of that be for somebody who is not in the St. Louis area?

Phillip: Nothing's better than a good testimonial.

Josh: How does that look?

Phillip: Sometimes a personality is better than others so you know they have a little bit of character. I'll show up at the closing, say, "How was your experience with Fasterhouse?" I'll throw the camera on. I won't even tell them what's going to happen because if they have to think about it, people get nervous.

I'd rather it be natural. I say, "Hey, how was your experience with Fasterhouse?" They'll say, "It was great. You said what you were going to do." It's less than a minute long but it's some of the best content because it's not prompted or scripted. It's from the people that we're actually buying houses from.

Brandon: That's cool. Do you put that up on YouTube and then put it on your site? How does that work?

Phillip: Correct. That's correct. We do.

Brandon: Okay. That's a cool idea, very cool. Internet business in general, that's just kind of a common thing, not just internet business but all businesses. Testimonials are always...

Josh: When they're real.

Brandon: Yes, when they're real testimonials.

Phillip: When they're real. You can see through them when they're not because...

Josh: Oh, it's so easy. John P says this and there's no link and there's no picture and there's no video. You go to pretty much every guru's site and you'll see John R and Mike P. Yes, yes. Okay, I believe you.

Phillip: Ours is pretty funny because they're so natural. I remember a couple recently. When she was done talking, she elbowed her husband for him to start talking. You're just not going to get that...

Josh: Kind of how Brandon and I point to each other on the podcast here.

Phillip: Yes, exactly, a little ribbing going on.

Josh: That's pretty awesome.

Brandon: That's funny. You talk about pay-per-click ads. Is that Google or Facebook or Bing? What are you guys doing for pay-per-click?

Josh: What's Bing, Brandon?

Brandon: I hear it's a search engine people use.

Phillip: Correct on all three. For me Google IS the internet if you're going to do searching. They have most of the traffic. Facebook is a different animal. I'm already starting to see the shift there, too. If you think about the stickiness of Facebook, the average person spends 45 minutes a day on Facebook. That’s just a ridiculous number. The amount of eyeballs that they have there, it's a different type of marketing.

If you type in "Buy my St. Louis house for cash," in to Google, you're probably looking for me. When you're saying, "Hey, I need help selling my house," and then the ad shows up on the right side of Facebook, it's a different type of advertising but it's so much cheaper for those clicks.

I think Facebook has its place. In fact, I think Facebook is doing it right. They have so much data about who the people are. You can really, really get targeted on your marketing efforts with Facebook.

Brandon: Yes. I find that I get a lot of clicks...I advertise in Facebook. I don't much with Google at all right now. I get a lot of clicks on Facebook but I don't get a whole ton of good...

Phillip: Conversions?

Brandon: Yes. In the last month I've been doing Facebook Ads pretty heavily, I haven't gotten one single deal yet from it. It's hard to tell. It's only a month. It takes time. Obviously, you've got to build up a brand name and all that good stuff.

Phillip: Sure. Are you doing ad for your whole city or are you trying to get it broken down in to smaller campaigns?

Brandon: I'm doing one for my whole city because my area's really small. I don't live in a large area.

Josh: There are six people in his city.

Phillip: Okay, yes.

Brandon: I do like my county. Here's what I did. My ad just says...it has Aberdeen in the title of it. People are shocked there's a local ad people don't advertise on Facebook in my area. Yes, I'm getting a lot of clicks. I don't know if it's worthwhile. I think total in the past month, I spent $200 and I probably had a dozen phone calls or so.

Phillip: That's still pretty good actually.

Brandon: I think yes. If it takes me 50 phone calls to get my first deal out of Facebook and it cost me a total of $300 or $400 or $500, that's still worth it.

Phillip: Sure. Even for the whole year, if it's only $2,400, you're probably going to get one deal and make more than that.

Brandon: Yes, exactly. I won't stop it anytime soon. I think a lot of people stop their direct mail or their marketing or whatever way too soon. They think, "Oh, it didn't work this month I better quit it."

Phillip: That's good for me, by the way when people do that. I work with a printer and he says 90% of the time somebody will buy his list and mail to them and they'll never come back again.

Josh: Just send it once, yes.

Phillip: They complain. There are a lot of complainers out there and they just don't listen. The guy is saying, "Hey, you need to continually touch these people over and over." They just don't believe in it. You have to look at marketing as the...it's not costing you any money. It's actually making you your money if you do it correctly.

Brandon: Yes.

Josh: They say seven touches to get somebody. Let's go back to what Brandon was talking about with the ads. I think a lot of newer investors give up too soon. We've talked about that a lot; particularly with, "Hey, I've just spent $200 to acquire a lead and 20 lead, none of them have panned out. I should just stop. This method sucks."

Had you gone a thousand, you might have gotten three and the next thousand might have gotten you three, guess what? Those three leads that actually closed and you spend a grand on brought you a hell lot more money than it cost you. You really do need to be patient and just kind of buy yourself a little bit more time, I think.

Phillip: Yes. I think you should go in to it with a six-month strategy. If you're not going to do six-months worth of advertising, you probably shouldn't even start.

Josh: Yes, yes. What do you think would be a fair budget then for somebody who says...because I think a lot of people say, "I could get in to real estate for nothing. I don't need money to buy property. I don't need money to lock it in. I can wholesale it. It's not going to cost me anything." That's not true.

It's funny. When I started as a real estate agent, I kind of had that mindset. I was like, "I don't have a ton of cash that I want to spend on my marketing. It can't cost that much to be a real estate agent." I very quickly learned otherwise but I was fine.

I think most people find themselves in a position where they're not fine and they find themselves where they under budget the actual cost to get in and they under budget the cost to do some marketing. What would you say a new investor should have in pocket to be able to start getting those deals flowing in terms of marketing cash?

Phillip: I like the number of about $1,000 a month to really do it right. You can get started super cheap. I saw a guy the other day, took a cardboard paper and sticks and made "We buy houses" to hang them and stuck them on the side of the road. We see a lot of guys starting off with bandit signs. I don't know why that's the go-to for people it seems to be.

Josh: That's because the gurus like it.

Phillip: Sure. They honestly work. They really do work. We don't do it.

Josh: They just blight our streets.

Phillip: We think it's tacky but we do buy a lot of houses from people that do do it.

Josh: Guilty by association. You're awfully sure.

Phillip: Sure. Sure. Someone's got to do the dirty work. When you're getting started, reaching out to your local REA is obviously finding guys like us that want to buy your houses. I would say it's a marketing business and then it's a people business.

If you're going to go through the whole trouble of marketing, you need also the people behind you that want to buy the houses because then you might let deals go away because you didn't have someone to buy the house from you to take it down.

Josh: Yes. Yes. I think that's fair. I think a thousand bucks a month is probably...say, six grand, I assume six months is probably fair. I hate when I see somebody say, "I've got $500 in the bank," or whatever it is and they think they're going to be an active full-time real estate investor.

I always say it's probably not a great idea unless you have some kind of money sitting there in the bank. Five hundred bucks is just not enough to really get the ball moving at least to produce a living wage, in my estimation. What would you say?

Phillip: I totally agree. I look at people that...there's a dog grooming company in our town and they charge $11,900 for a month class to become a dog groomer. That might be a great profession but I don't know any dog groomers that make $300,000 a year. I think there are some wholesalers out there that can.

If you're going to invest in this business and do it right, if you can't at least put like we said a grand a month in to it and maybe give yourself at least six months, you probably shouldn't start. It doesn't mean you can't network.

It's funny, guys. I put a wholesale deal out to a group of wholesalers that are starting off. They marketed and then I get a phone call from somebody else saying, "Hey, I got a deal." It turns out it's actually my house. Because guys are getting started by just middle-ing deals which is fine. It's a big part of this business. It's a good way maybe to get started without any money.

You talked about having that nest egg before you do this on your own. It's a marketing business and then it's a people business. If you can team up with somebody that's already doing the marketing, you can take their lead and help them sell and still make some money to get started.

Josh: Are you talking about wholesalers who are promoting your deals back to you?

Phillip: Yes. It happens sometimes. I say, "That's funny because that's my house." It goes out to the small town of St. Louis and it comes back to me sometimes because it gets...it's even funnier when it's $11,000 more than I priced it. It's like the Telephone Game. I'll say, "I'll sell it for $40,00," and then somebody calls me back saying, "I got a deal at $51,000." I'm like, "Yes, that's my house."

Josh: These are guys who have no interest in the deal that are basically just trying to market a deal that they found and they'll pitch to you?

Phillip: Yes.

Josh: I think that's absolutely horrible. I think what they're doing gives a terrible name to investors. I've had a lot of people come to BiggerPockets and scream at me that somebody's promoting a deal that was theirs, that they had no right to do it. I get it. I get that they were mad. I would absolutely be livid. Granted, I understand that it's a business where it's all about the marketing but don't market something that you don't have a right to.

Phillip: Sure. The guys I've dealt with have usually asked me but then they push it out. Once the web starts to go out, you can't really control it from there.

Josh: No, no, no.

Phillip: I don't get mad about it. If you're going to be successful in any business, you need to hustle. These guys maybe have no other option or at least trying to get their fee wet in the business. I don't think they're doing anything wrong. It's just a matter of can you find a buyer for the property.

Brandon: Yes.

Josh: I think they're doing something wrong. I disagree on that. We're not here to debate it. I get your perspective and I respect that. I'm not bashing you, whatsoever. I'm just saying, the first guy you gave permission, cool. The next guy who jumps in who doesn't have the right to do it is...he's just making a mess of the whole picture.

Frankly, you don't know this guy from Adam. You don't know what tactics he's using. You don't know how he's promoting the message. You've now lost any and all control of the marketing of that property. I think it's potentially dangerous for you and your business when that happens as one piece of the picture.

I think there are other components as well. I think it's unethical. I think there is a lot of stuff that goes with it. That's, again my opinion.

Brandon: Yes. I actually do disagree with you on that. I agree that you could lose control but if I was selling my house and I was motivated to sell...I want to sell my property right now. Josh, you were to come to me and say, "Hey, my buddy Jim wants to buy your house." Of course, I would be like, "Great, Josh. Thanks for finding that buyer. Here's some money."

I don't care if you're marketing. I don't care if you market it to a guy who markets it to a guy who markets it to a guy. My house sold for what I wanted. I’m happy. Why would I care who's making a profit on it? You know what I mean?

Phillip: I agree with Brandon. Joshua, do you do a lot of wholesale deals?

Josh: I don't do any wholesale deals.

Phillip: That's what I figured. Is wholesaling wrong then? Do you think wholesaling is wrong?

Josh: I do not.

Phillip: I don't see how it's any different.

Josh: Somebody has an interest in the deal.

Phillip: Right.

Brandon: You mean actual like a contract?

Josh: Yes. I've had properties I've had to get rid of and I've told investors, "Go find somebody to buy it." If I'm giving them the right to do it and that point of contact...it's a semantic argument. I have an issue that somebody just out of the blue, "Hey, what's up? I got a piece of this property. You want to buy it?"

Dude, you don't have jack. Don't pretend that you do. You're misrepresenting yourself is what you're doing. That is just as bad to me as the whole bandit sign thing. You're lying. You're a liar. You're a big fat liar and I'll never do business with you. Straight up, "You're a liar. The first thing you're doing is lying to me. How can I possibly trust anything that you say to me from here forward?"

Phillip: You're right, Josh. I don't think that they should represent themselves wrong. They should say, "Hey, I've got this deal. Here's what we can sell it for." To be honest, these guys, I compete with these guys everyday in business. They're there two minutes after I'm there.

I love competing against them because my company is very unique. We don't do any weasel calls whatsoever. There's no more inspection. There's no 72-hours for somebody to come through.

When I write a cash offer, it is as clean as they're ever going to get. I'll just say to the people, "Hey, I know you got a guy offering you three grand more but does it have a 14-day or 21-day inspection period?"

Then, I just explain to them that they're just getting middle-d. I don't mind competing against those guys. I can't really stop them from what they're doing. We do our business. We control the deal with a contract.

Josh: Yes. I think that's great. That's a powerful thing to do. I think that puts you...you said it. That gives you a much better deal than somebody who's going to make a higher offer because they know your deal is going to close when you say it's going to close.

Phillip: People like that.

Josh: Yes, for sure. The whole argument on the as I call them, the weasel-y wholesalers, not all wholesalers but the guys who don't have the right to it in my estimation…it is what it is. We all have different opinions and I don't think that you're bad for having a different opinion.

Phillip: Just to be clear, we don't do that.

Josh: Yes. Oh, no. I know.

Phillip: I put them out and they come back. It's not something I'm doing.

Josh: I'm totally clear on that. Yes. I get that, man. I have an issue if there's...we've got a lot of people. We have 25,000 people who listen to our shows. If somebody sits and listens to this show and says, "Yes. That would be a great idea. Let me go do that."

Don't do it because you know what? You run in to somebody like me, I will blackball you to the end of time. If you do that to me, you will never do business with anyone I know.

Phillip: I think that they should partner with somebody that has a lot of deals and get their permission. They don't need to do it shady. They can do it in the up and up. No problem.

Josh: Absolutely. Absolutely.

Brandon: I think it comes down to two is what you're pretending. People come on the BiggerPockets forums all the time. They're like, "I've got deals in all 50 states and I've got $150 million." Crap like that is flat-out lying. They're saying that there are deals.

Phillip: Is that good?

Brandon: If I say, "Hey, Phillip, I got this lead on a house for $12,000. Are you interested in it? It's not my lead but I got a connection. Can I hook you guys up?" There’s nothing wrong with that if I don't have an under contract unless there's something legally wrong with not having a real estate license. I don't know.

If I get a lead on something from somebody who told me, of course that's how business is done. There's always a middleman in everything.

Phillip: Always.

Josh: Maybe it's in the presentation.

Brandon: I think heavily it is, yes.

Phillip: I work with a lot of the young wholesalers who are just getting started. Because they trust me, they bring me in super early. I know all the numbers of the deal. Sometimes they'll say, "Hey, I just want to make $3,000. Can you go ahead and just buy this house, too?"

They'll bring me the deals and kind of step aside because they're almost scared of pulling the trigger on any amount of money because they don't know if they can turn around and sell it. I like to work with the young wholesalers and go in and say, "Hey, here's what we're willing to pay."

I think the other reason why wholesalers like to work with us is because we do not get insulted over how much money they are making. We understand the game. As long as we're buying it at a number that we want to buy it at, I don't care if they make 15, 20 grand on the wholesale deal. It's only a matter of we look at the numbers. Do they work for us?

Josh: Yes. That makes sense. For anyone who's listening, what advice would you give to new wholesalers in terms of how to get the ball moving other than the "You'd probably want to have some cash for marketing?" What else would you have to say?

Phillip: You have to join your local REA's. You have to start networking. In any business that you start, there's going to be this learning curve. It's going to cost you a ton of money. With this business, it's kind of unique because you can get started with no money.

If you do your job well and you understand what it costs to rehab and understand what an ARB is, you can get involved in this business and make a lot of money. I think the more knowledge you can have, the more people that you can align yourself with that know what they're talking about versus just going at it on your own is very valuable.

I suggest joining your local REA. I also suggest finding someone. There are people in your town that have too many leads. You need to go out and find that person and try to work with them on their marketing and their efforts and try to learn the business.

Josh: That is probably one of my favorite pieces of advice that anybody has said on the BiggerPockets Podcast.

Phillip: Thank you.

Josh: I seriously love that; not just find experienced people but find the guys who have too many leads that they don't know how to deal with and help them deal with them. Brilliant. Brilliant.

Brandon: Yes. Very cool. Last question I have before we're going to move on and start wrapping things up: what is your plan? Wholesaling is not a 50-year strategy to retire on a beach. What's your goal with all this? Where are you planning on seeing yourself next?

Phillip: My company has 154 rentals right now. While I don't do anything with the rental side of the business, I'm around a pretty big...that's a lot of houses. I get to see the pros, the cons of all of that. Just like anybody that's read "Rich Dad Poor Dad," I want to put my asset column be large enough to where if I didn't wholesale anything for a year I'd be okay.

Josh: Cool. Cool.

Brandon: Why don't we move then to the Fire Round?

The Fire Round, these questions come straight out of the BiggestPockets forum. Let's see what you have to say. Number one, what is your take on the 70% rule that a lot of flippers and wholesalers use? Do you use that formula in your business?

Josh: Brandon, why don't you define it before...

Brandon: Sure. The 70% rule basically says that whatever the after-repair value is, if you multiply that times 0.7 and then subtract out your repairs and then if your wholesaler subtracts out your offer price, that's what you should pay for a property. What are your thoughts?

Phillip: I love that. We use it a little bit different. We actually have an 80% rule. When people hear that, their ears perk up because it's higher than the 70% rule obviously. What they don't know is that we're pretty conservative on our ARB's. You can kind of control the deal because yes, there might have been a comp for 149 but if you tell yourself it's 129, you're probably a little safer. It allows us to be on an 80% rule instead of a 70.

Brandon: That's smarter anyway.

Phillip: Yes. In areas we don't like, we definitely use 60%. The 70% rule, it's all a matter of school district and how much do we like a property.

Brandon: Yes. Makes sense. That's just smart to be conservative in your ARB anyway. That way it's better to have more upside later.

Phillip: It's not a hard fast rule is any of this. The young guys will come and say, "Phil, I got it for you at 70 cents on the dollar," but then their ARB's are way out of whack. Their repair numbers is actually where they're always the worst. They don't see, "Oh, it needs a new roof." We use an 80% rule but it's not a hard fast rule for any of it. It's just a good way to look at it.

Brandon: Okay.

Josh: Got you. Got you. Do you get mad at them for calling you Phil?

Phillip: No. I'm okay with it.

Josh: Just me, huh?

Phillip: Just you.

Josh: Nice. All right. Would you pay cash for your primary residence? Next question.

Phillip: I would but I will turn around and get a line of credit back against it and put it back in the market. It's just an arbitrage play based on what my interest rate and what can I get, return on my money.

Josh: Okay.

Brandon: Got it. That makes sense. This is kind of a cool question. I never asked this before. Do you think that driving luxury vehicles sends a negative message to renters or sellers?

Phillip: I love this question. When we get to the final, what my hobbies are, I'm going to kind of go in to that a little bit. Do you want me to do it now?

Josh: How do you know we're going to ask that question?

Phillip: You always do. That's what you're famous for.

Josh: All right. Fine. Somebody who actually listens, yehey!

Phillip: My hobbies, I consider myself a car guy. People always say, "What kind of car do you drive?" I drive a Toyota Camry that's white.

Josh: Nice

Phillip: I've recently been looking at some very, very nice cars and I can't bring myself to do it. I can't pull up in a $90,000 car to try to buy an $8,000 house. It just looks bad.

Josh: Yes.

Phillip: No. I think it could be a detriment. I think if you're going to have a nice car, that's great. Drive it on the weekends. In this business, at least...our area is very blue-collar. The showy vehicle probably won't help you overall.

Josh: Yes, pick-up truck or just kind of a down-to-earth average Joe car.

Phillip: Yes. A pick-up truck is great. I just drive 30,000 miles a year so I don't want 14 miles a gallon.

Josh: You should get that what's that little toy you picked up, Brandon? What’s that thing you plug in your car?

Brandon: The Automatic? Yes, it's kind of cool. There's a device called Automatic. You plug it in to your car, any car from 1993 and on. It will help you get better gas mileage. It's kind of cool. Yes, automatic.com.

Phillip: Really?

Josh: That is not a paid endorsement.

Brandon: I improved my gas mileage driving on my Prius from 42 to 47 just by having that device installed. It beeps when I stop or speed up too fast. That's the main use if it.

Phillip: Wow.

Brandon: Yes. It trains me to drive a little better without me even noticing.

Josh: Which is amazing because Brandon already drives like a grandma.

Brandon: Yes, me and my little putt-putt Prius. All right. Next question.

Josh: Good stuff. All right. Do you think traditional education is necessary for success in real estate? If so, what degree would you suggest?

Phillip: That's a great question. Me growing up, college was never championed in my home at all, not once ever. To say that higher education is what you're going to have to have to get to where you want to be, I don't believe that at all. It's your own drive.

Do I think it's beneficial? Sure. Josh, you went to Washington University; very, very good school. You’ve learned a lot from that. I think just about any person…we all learn from the experience that we've had in life.

For real estate, I think you just need to get in there and start doing deals whether they're good deals, bad deals. You just need to continually push on. A lot of people after they would have lost two hundred grand in 2007, 2008 might have quit and never even looked at real estate again but I just kept pushing on.

I don't think it's necessary but I'm very biased because I never went to one day of college.

Josh: Right. Right. I've learned how to do a keg stand at college.

Phillip: Yes. I know.

Josh: Everything that I've learned in my business, I've taught myself 100%. 100%. It's funny. I think it really is based upon your upbringing. College was pushed in my brain. You got to do college. You got to do college. I certainly learned a lot of things in school besides just doing a keg stand but in the end, was it valuable? Absolutely. Could I be where I am without it? Sure.

To your point, I think there's a lot of people skills and other skills that you do get. I think it's a good path for folks. It's not going to guarantee you a job. That's for sure.

Phillip: Sure. Sure. I've heard that really good wholesalers a lot of times have a sales background. For me, that has always just come naturally. I'm not afraid to talk to people. That really, really helps me with what I do everyday.

Josh: Nice. Awesome.

Brandon: I agree. A sales background does help. That’s probably why I struggle more with… I don't like talking to people who don't like sales. I need a job at, I don't know, Horizon or something.

All right. Final question in the Fire Round, this is actually my forum post. There's a baby bird in my wall. There are birds in my wall. What do I do? Do I clean it out?

Josh: Are they still there?

Brandon: No, no. They're gone now.

Phillip: Have they started to smell?

Brandon: No. They're alive. They built a nest and there are baby birds. What would you do in that case? There are baby birds in your wall because you had a hole in your siding because you were lazy and didn't patch it up. Would you wait till they fly away?

Phillip: When they die, they're going to smell really badly. Is it a rental house or is it a house that you're going to sell?

Brandon: No. It's actually my own personal residence.

Phillip: Oh, crap. You want to get around it.

Brandon: What if they're not dead? They built a nest and they're inside my wall nesting. Do I wait until after the birds are gone? Do I pick them up and take them out of there?

Phillip: Yes, I'll get them out.

Josh: You punch a hole in the wall. What the hell kind of question is that? Wait till they die? You cut a hole in the wall and you save the birds.

Phillip: Maybe it's time to rehab that wall or blow it out or something.

Brandon: What I did is I took the wall out of the outside. I took the siding off the outside. I kind of put a cedar shade siding, put it all back in place.

Phillip: Not to one up your story but I bought a house a few years back and the family had 13 raccoons living in the attic; did a lot of damage.

Brandon: Wow!

Josh: Were they aware?

Phillip: No. They were actually out of town and the house was vacant. They came back and found just a huge mess. It was about a $5,000 bill. They had to replace all the insulation and some drywall work. Fortunately, they stayed in one corner of the home. That really helped. You got to get critters out of there. There's a saying, "No good could come of it." You got to get them out.

Josh: All right. All right. Good advice. Good advice.

Brandon: Why don't we move on to the last segment of the show, which we like to call the Famous For? The Famous For, these questions are the ones we ask everyone. You've listened to every one of our shows, Phillip so you know what's coming. Number one, what is your favorite real estate book?

Phillip: Oh, guys. I have a confession to make. I might be the only person that hasn't read "Rich Dad Poor Dad." Knowing that I was going to be on this show, I read it last week.

Josh: Oh, jeez!

Phillip: It's a great book. I hate to be cliché and go with it. What I really, really liked about it is that I'm kind of already putting a lot of those things in my life in to place anyway. It was just more of an affirmation of "Hey, you're on the right path."

Josh: Yes.

Phillip: I do think anybody should read it.

Josh: Right on. Right on.

Brandon: That's what it was for me. When I read it, it wasn't so much that it's [Inaudible][01:10:48], it's more that it affirmed. That's a good way of saying it. It affirmed all those things that were swirling up around in my head somewhere and put them on paper. I was like, "Oh, somebody else gets what I'm trying to say." Then, I find out there's a whole community of 170,000 people who agree with what I was trying to say.

Josh: 175.

Phillip: We talked about education earlier. We've been taught so many things that have nothing to do with what life was like. I think that that book kind of made you look at life a little bit differently.

A good example is that we're getting ready to talk about the hobbies and the cars and expensive cars again, instead of me going out and paying cash for an expensive car, I'm looking at ways to how many assets do I need to buy to pay for that car. I just think that's the greatest part about it is that we have to change our brains a little bit.

Josh: Next question is: what is your favorite fantasy novel?

Phillip: I'm going to go with my favorite business book.

Josh: Oh, was that the question? Who changed my notes? Come on!

Phillip: No fiction for me.

Josh: I'm kidding. What's your favorite business book?

Phillip: For me, it's a book called "The Big Rich" by Bryan Burrough. It's about the history of the oil business, how it changed this country. It's just a great read. It has some huge arcs. The Hunt family, he decided he was going to buy all of the silver in the world and it backfired on him. These guys, these entrepreneurs said they tried to do things that couldn't be done. It's just a great read. It's one of my favorite books.

Brandon: Cool. I haven't read that one. I'll check it out. All right. Josh will take the next one.

Josh: Oh, yes, yes, yes. Sorry. I was sleeping at the wheel there. Whoa! All right.

Brandon: You forgot to unmute your mike?

Josh: I did. There's a wicked thunderstorm happening right now so I've got to mute it every time I'm not talking. Next question: hobbies other than your fancy, expensive cars? You showoff.

Phillip: No, I don't own...

Josh: I'm kidding.

Phillip: I like to look at them. Fortunately, I have a partner that I do some side deals with. His family actually hit oil down in Texas. He has an Audi R8, a Nissan GTR, and he's buying a Tesla. Any time I get the itch, he just throws me the keys. That's really, really helped me.

Josh: I need that friend.

Phillip: We all do. He's a great guy.

Josh: He's like the friend of anybody who wants a boat because the two best days of a boat owner's life is the day you buy and the day you sell. Yes. Right on.

Phillip: As far as hobbies...it's sick to say but I really like to look at real estate. My wife and I just went to Los Angeles. We spent half the time just looking at estates in Beverly Hills and Malibu, just looking at real estate. I saw a $20 million lot that was on the water. I really love real estate. It's what I do even for a hobby.

Josh: Yes. You said you have a son when I cut you off earlier in the show.

Phillip: I do.

Josh: I was a big fat jerk about it. Let's talk about your boy now.

Phillip: Sterling, he's 20 months old and my wife is pregnant. We'll have another baby in August.

Josh: Mazel tov.

Phillip: Two kids, yes.

Josh: Congratulations. That's great.

Phillip: It's great. I love being a dad.

Josh: Yes.

Brandon: Awesome. All right. Final question: what do you believe sets apart successful real estate investors from those who give up or fail?

Phillip: I have a couple. I'll just read them. I stopped blaming others for my failures. People don't do that. They blame everyone else for everything that's wrong. Once I stopped blaming anyone else for my failures or my shortcomings, it's really helped me be more successful.

The other big thing is I play Ping-Pong all day long. What I mean by that is in business, something comes my way, I try to hit that ball back as soon as I can and put whatever is needing to be done back in their court.

That way, when I go to bed at night, I don't think, "Oh man, I forgot to send that lead-based painter. I forgot to do whatever it was." I go to bed at night knowing that everything else has been pushed back that I can push back at the other side of the table, I guess you would say.

Brandon: Got you.

Josh: I think I've never heard it described as Ping-Pong but I think I do this same thing although that could lead to a frantic and very busy...I'm always having to get back to somebody type of feeling which Brandon's been yelling at me about. I'm trying to do less of that.

Phillip: Sure. My wife yells at me about it, too. I try to take some time in the evening where the phone's not on. It's kind of helps with that.

Josh: Yes. That's great. That's awesome.

Phillip: My other big thing is I'm never really satisfied with being mediocre. I look at life as...if there's a game to play, I want to win that game. That's just the drive that's inside of me. I think that sets me apart and a lot of other people as well.

Brandon: That's awesome.

Josh: Nice. Nice. Really quick, thank you so much. Where can people learn more about you? By the way, as I was telling you guys, there's a storm because I had it mute. We are now in a full-on hailstorm. It is wicked. The cars outside...there are almost golf ball-sized hail cranking around out here. You could hear it if I shut up for a second.

Brandon: Nice. Nice.

Phillip: Nice. Be careful.

Josh: I'm inside. You don't have to worry about it. Where can people learn more about you?

Phillip: You can find me at fasterhouse.com, just like run faster. You could also e-mail me at [email protected].

Josh: Cool.

Brandon: Very cool. Of course, you're on BiggerPockets all the time. I see you there on the forums.

Josh: Yes.

Brandon: We'll point to that in the show notes here, all those links at BiggerPockets.com/Show71. Josh is taking a video right now of the hail so we'll that up on the show notes as well.

Josh: I am video-ing the hail, yes. This is awesome.

Brandon: We're going to put that on the show notes. With that, Phillip, thank you very, very much. This show has been incredible. We've had a good time. I learned a ton from you.

Josh: As did I.

Brandon: Yes, yes. Watch this, Josh.

Josh: Despite our debate.

Brandon: Despite your debate.

Phillip: Okay.

Josh: Listen. I wasn't mad at you. I'm not mad at anybody. I'm mad at the people who are being shady. I hate that.

Brandon: Yes, yes, yes. I know what you mean.

Phillip: I agree.

Brandon: All right. I'm going to take us out then because Josh is busy making videos on his phone.

Josh: Oh, must be nice. Yes, take it out, Brandon. Let's do the whole tail end of the show right here. It's all yours.

Brandon: All right. Here we go. All right, everyone. Phillip, once again thank you. Everyone else, you can listen to the...oh, I screwed up already.

Josh: This is why I do it, folks!

Brandon: All right. Fine. Do it. Do it, Josh. Take it.

Josh: Oh, come on. I'll give you a shot there.

Brandon: All right.

Josh: Come on, slugger.

Brandon: Okay. Here I go. I can do it. For everyone else, everyone listening to the show can find the show notes at BiggerPockets.com/Show71. As always, we love reviews and ratings on iTunes. Please, if you've not done that yet, it really helps us stand out. It helps people learn more about us, to find us on iTunes, all that good stuff. Please do that.

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With that, this is Brandon Turner signing off.

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Josh: See? It wasn’t that easy. Is it, Brandon?