All Forum Posts by: William Allen

@Trace J., I just stumbled across this post and thought I would respond. I put together the challenge and we have had a few hundred people go through it so far.  I have made 3 different adjustments to it so far based on feedback from people who have gone through it based on their success as well. You're right, it's only $100 so not much out of pocket but it is your time which is way more valuable. I try to keep each day to an hour or less so it doesn't feel so overwhelming. 

I've seen people raise a couple hundred thousand all the way to over $6M with it. But honestly, the concepts and tactics are the real value as it will help you with raising money forever, it did for me and I'm just packaging things I've been taught along the way in there. 

I just did a few podcast episodes with some folks who have done the challenge sharing their feedback and takeaways as well.  That may be a good place to hear more about it. If you have any questions about it let me know.

@Jason Yarusi, looking forward to this one!

Completely free event all about Multifamily investing. We are bringing the pros together to teach for free!

Sign up here:  https://mfvirtualsummit.com/

Here’s what we’re going to cover during this 2-day event…

• How multifamily deals are structured, from start to finish...
  
• ​How to fund multi-million dollar properties without using your own cash...
  
• ​Maximizing your income (by building multiple paydays into each deal)...
  
• ​Where the money actually comes from on a multifamily deal...
  
• ​How multifamily syndications work (and how to run your own)...
  
• ​Where the biggest opportunities are in multifamily real estate...
  
• ​Why multifamily is “safer” than other property classes...
  
• ​How to mitigate risk on your investments and projects...
  
• ​The #1 thing most investors get wrong about multifamily...
  
• ​The “mindset shift” you need before you start multifamily investing...
  
• ​Who you need on your team as you grow your multifamily business...
  
• ​Your path to active profits and passive income every month!

Very few in the industry (investors, realtors, appraisers, etc.), ever truly master this valuable skill. 

Believe it or not, after reading this post, you will probably understand this skill better than most appraisers!

You can “find” all the houses in the world but it won’t do you any good unless you properly evaluate them and make offers that ensure a House Flipping profit. In fact, if you don’t know how to properly evaluate and make offers on properties, you can run into A LOT of trouble.

There is a great deal of misinformation in sources such as house flipping shows on television. These shows often leave out expenses which can cost you BIG time if you don’t take them into account upon your initial property analysis.

Understanding how to accurately assess costs to ensure profit separates you from being a “speculator” — someone who is just buying a house in the hopes that it will go up in value — to a true “investor” — someone who understands expenses involved in real estate and doesn’t make wild guesses about the future.

The true investor takes calculated and accurate “risks” and understands precisely how to create a significant return on their investment.

We will cover these expenses and hidden costs in a series of blog posts. First and foremost, we are going to help you estimate the After Repair Value of your property with comparative properties by accurately estimating repair costs.

Let’s get down to it!

Determining the ARV (After Repaired Value)

ARV is an acronym commonly used amongst real estate investors. It stands for "After Repaired Value" and is what the property will be worth after repairs and upgrades have been completed.

Determining the amount of money the property will be worth once you finish rehabbing it, is always the first step in the deal evaluation process.

Once you know the amount people will pay for your property, you can determine all your other expenses, and calculate the optimal place to make a decent profit. If you don't know your ARV, you have no place to work back from.

Beginning with the End.

Think of the ARV as the finished picture for a jigsaw puzzle. When you know what the puzzle is supposed to look like you can put the pieces in the correct places which creates a picture of profit.

We’ve told you why it’s Important, here is how to do it.

In order to accurately determine the ARV you will need to look at Comparables or “Comps.” Comps are recently sold (or up for sale) houses similar to your subject property, in the same general area. These are used to determine the “going rate” for houses in that area and are a really good indication of what your house will sell for.

To access data for comparable properties you can use a paid or free service such as Zillow or Redfin, but for the most accurate and detailed information we recommend the Multiple Listing Service, or MLS — a service which provides extensive detail on properties up for sale or recently sold.

In order to access the MLS, you will either need to work with an agent, become an agent yourself, or work with someone who can get you access to the MLS.

The first step with the MLS is to look for rehabbed "standard" sold comps which are similar to what your home will be like when it is sale ready. These comps are easy to spot. They will have upgrades, nice pictures and shine above other homes. These comps are what you consider most when determining your ARV.

Next, depending on how many “standard” sold comps you find, you may also want to take into consideration other recently sold comps, such as short sales or bank-owned properties (REOs) which have been renovated or are in good condition.

As a general rule look for homes that have the following criteria:

• Sold in the last 90 – 120 days.
• Are within ½ mile to ¾ mile from your subject property
• Are close in size, square footage, bed/bath count and age.
• Are in a similar neighborhood.

After looking at recently sold comps, expand your search to comps which are listed (up for sale) or pending (under contract with a buyer but has yet to close).

Listed properties are your competition, so if you see rehabbed houses that are not selling you know not to value your home for more than those listed.

Pending properties can give an idea of future values, but keep watching them and keep in mind that they may not sell for the stated price.

You want to focus primarily on properties that have been fixed up, but also pay attention to those in a similar condition to your subject property. If there are several comparable properties which have recently sold or are listed for less than your calculated offer, this can indicate you are overpaying and you may want to reduce your offer.

Extra Tip: You can also check tax records to see what other investors paid for the homes they purchased in that area.

Reminder: Don’t cross the tracks! Avoid using comps from a different city, school district, or across a major barrier such as a freeway, river or railroad tracks.

Also take into consideration swimming pools, garage size, lot size, views and other upgrades so you can adjust your value accordingly.

Finally, consider current market trends and seasonal price changes for indications on both the resale value of your property, and the best time to buy or sell.

Keeping all these important pointers in mind, realize there is no exact formula for value determination, you have to take each property on a case by case basis.

Estimating Repair Costs

The next step in being able to determine an offer price is to accurately estimate the cost of repairs. In my company, we have become so good at this with pictures, a description and the age and size of the house, we can guess the repair costs within 1-2% without ever seeing the house!

The “$20 per sq. ft.” rule is a guideline we use to give us an idea of what it will cost us to fix up a house. This rule comes from our experience that most houses requiring a full “standard” cosmetic rehab will cost around $20 per square foot.

What is a ‘standard’ cosmetic rehab?

A “standard” cosmetic rehab usually includes all new flooring (carpet and hard surface floors), paint (inside and outside), baseboards, electrical and plumbing fixtures, new kitchen/bathrooms (including cabinets, granite, appliances), blinds and window treatments, new doors and a little bit of landscaping.

For example, if you are buying a house that is around 1,500 sq. ft., you can plan on spending $30,000 for the rehab (1,500 x $20 = $30,000).

This rule assumes you are rehabbing an entry or mid-entry house. If you are rehabbing a higher-end house and using higher quality materials and finishes, you are going to adjust the rate closer to $25 or $30 per square foot. For your standard basic rehab, the $20 per sq. ft. rule is a solid and reliable estimate.

From this baseline, you can adjust cost up or down based on additional needs (or things you don’t need). Over time you will develop a better understanding of these expenses and can easily calculate the rehab costs, up or down. We will continue to revisit this topic in more detail in future posts as we discuss rehabbing and working with contractors.

Pro-Tip: You will probably only use this $20 per sq. ft. formula when you are coming up with your initial offer price. Once you get an “acceptance” on an offer, go through the property with a licensed contractor and for a detailed “scope of work” and repair estimate to ensure you didn’t miss anything major with your first estimate.

Understanding what your property can potentially sell for and accurately assessing repair costs are fundamental first steps to successfully turning a profit.

Look out for upcoming blog posts where we will address Hidden Costs and Closing Expenses and give you the best formulas to determine your offer on a property!

We are the pawnshop of real estate.

Let me explain.

When you sell to a wholesaler, there is something going on in your world that makes you sell your property for less than full price. As the seller you know going into the sale you are not going to get full value for your item.

When people work with us they know we are in it to make money. They understand who we are. There is a transparency that we hold value as a middle man. When you go to the grocery store you are not buying eggs directly from the farmer, but the grocery store serves a purpose by transferring those eggs in volume to the public. Everyone plays a part in the ecosystem of an industry. Wholesaling is a part of the real estate ecosystem.

The problem is, people think of wholesaling with the same distrust they have for a pawnshop. They assume wholesalers are not acting in integrity and are ripping off the seller. I felt the same way when I started in real estate until I came across wholesalers with integrity. My goal now is to change this widespread misconception of wholesaling for all those wholesalers out there that do operate with integrity.

How can we do business and be honest and ethical?

Simply put, the people who we do business with know exactly what we are doing. They understand that we are negotiating the contract and selling it to a ‘larger seller.’ We are in essence the seller taking the eggs from the farmer and selling them to the grocery store. You operate with transparency in the part you are playing.

Now that we have cleared up the bad name of Wholesaling let’s talk about what you need to know to be a successful Wholesaler.

Marketing and Sales are the backbones of wholesaling as the major components of The Wholesale Cycle.

The Wholesale Cycle.

Step 1- Lead Generation = Marketing

If you're a flipper, you have to generate leads. If you're an apartment investor, you have to generate leads, if you’re raising money for a deal you have to generate leads. Every single thing we do is marketing and lead generation. In wholesaling, I have to generate leads for sellers and I have to generate leads for buyers.

Step 2- Lead Conversion = Sales

Quite simply, I have to be a good salesperson. I have to convert my leads into potential profit. This requires strategy and skill.

Step 3- Fulfillment = Marketing and Sales

The fulfillment side for us, is selling that contract to an end buyer.

As a wholesaler, I've got business to customer sales on the front end, and I've got business to business sales on the back end.

We have two different types of marketing and selling on the front and back end of these deals, but the bottom line is we're marketing and selling on a consistent basis.

Marketing and Sales operations drive all businesses and really all of life. People are always selling something. Everything you do is a negotiation and therefore Marketing and Sales. Have you ever seen kids negotiate? They are absolute beasts! Especially when they leverage tears!

Now that we have covered the backbone of wholesaling with Marketing and Sales, let’s talk pitfalls to avoid and pro tips on what to focus on in your early days of Wholesaling.

Pro Tips:

Customer Resource Management:

My biggest recommendation to you if you guys are just getting started, is a piece of paper and a pencil. You don't need to spend a ton of money on a team, or creating an official business when you aren’t making any revenue yet. Just get out there and do some deals. I did my first flips in my own name, I didn't go out and set up an LLC, create a fancy website, or make everything perfect before I went out and made a deal.

Taking action is the most important thing:

Making sure everything is perfect before you start can be a method of procrastination. You have to just go out there and make a deal. Make some money. It will feel great and motivate you to do it again and again. Before you do anything else, go take action, go do something.

Make the phone ring, and invest in expensive customer resource management only when you are so busy you can't keep track of all your leads! And of course to make money, you have to turn those leads into deals. I have 4 secrets to converting leads to deals.

The Secrets to Lead Conversion:

Secret #1: Answer Your Phone.

The market is so competitive right now, you've got to answer your phone, don't send them to voicemail. You’re wasting marketing money if you're not answering your phone. Answer your phone live every time, and when you can’t handle the volume, it’s time to hire a team.

Secret #2: Follow Up, Follow Up, Follow Up.

The money is in the follow up period in any business. If you allow a lead to go cold just find a way to become a direct response marketer again. Consistency and determination is key here.

Secret #3: How You Show Up

If you are going to an appointment, be on time, be professional. Put effort into making your best impression. Research and be prepared. You can Google this! This is the Advice I got from Google: Be 10 minutes early, be positive, relax, establish rapport quickly, be a great listener, reflect before answering, be enthusiastic, act confident not cocky. Take no longer than two minutes to answer questions. Take notes and send a personal thank you note by the US mail! Do all these things. When you show up at the appointment, mirror your seller. Ask yourself how do I become relatable? How can I ask sensitive questions in positive ways that will get answers? Listen to your sellers, find out their needs, put yourself in their shoes, and they'll tell you all their problems. Once you understand what they need, you are in the perfect position to offer them a solution within the deal.

Secret #4 Follow Up:

I said this above, but I can't say this enough. It is the key to closing deals. No matter how you feel a meeting went, follow up. The last impression you leave is as impactful as the first.

Misconceptions about Wholesaling lead many people to steer away from it, and the truth is, it is a valuable part of the real estate ecosystem. Sellers who need to move property fast, need you to help them with the marketing and selling. If you decide you want to try your hand at being a wholesaling middleman, I hope these tips and strategies give you the extra information you need to start off strong as a wholesaler.

As always, look out for more articles, podcasts, and workshops on all things real estate and if you have any questions drop them below!

10 Strategies to Slash Your Taxes this Year

If you have ever experienced being ‘caught out’ on your taxes and owing a huge amount, you know you don’t want to repeat that mistake again. We have gathered a few strategies to help you find write-offs with a little time to do what you need to do before the end of 2020.

Disclaimer: You will need to do your own research on these ideas to decide if they are right for you and your business. We always recommend consulting your CPA.

1. Putting money in your 401k every year.

There is a pre-tax bonus that can come from your company that matches your 401k plan and is a tax write off. This can allow you to write-off up to nearly $60,000!

2. Using a self-directed high deductible health insurance plan.

You can self-direct different insurance accounts and control the money that needs to go in and out of them using something called an HSA, Health Savings Account.

3. Capital Loss Harvesting is possible if you have invested in the stock market.

When you have losses in the stock market you can sell your stock at a loss and then buy something comparable around the same price.

4. Section 179 Deduction- buying heavy machines or equipment for your business.

You can do a bonus depreciation write off on a vehicle or equipment in service for your business. If you put the equipment or vehicle in service even on Dec. 31st, you can count it toward 2020. You can finance 100% of the vehicle and write it off in full!

5. Opportunity Zones 

If you are buying or holding residential or commercial real estate in an opportunity zone you have an opportunity for a write-off. This one definitely requires more research on your part, so google it!

6. Cost Segregation Study

With a commercial building or commercial property you can calculate bonus depreciation.

This is a method in which you can calculate the projected depreciation on a piece of real estate and write it all off in year one. KBKG.com is a company that does cost segregation studies at a great price just check in with your CPA to make sure this works for your business and taxes.

7. Put your company match into your traditional 401k and convert it to your ROTH.

Now your conversion is at your tax bracket. It is a free conversion to ROTH that you can now grow for free because you have strategically converted your savings money.

8. Move around some income, while keeping it in the family.

Are there other people in your family that can work for you? For example, your kids who are in a low tax bracket, can do all sorts of things for your business from running errands to cleaning new properties. You can pay them $10,000 a year which keeps them in a low tax bracket and it is a write-off for your company.

Note: For this to work, they have to legitimately work for you. Make sure it is official with contracts, W-2’s etc. in place, and you can even start a 401k for them.

9. Be smart about how you spend money toward the end of the year.

There are many sales at the end of the year, such as Black Friday, Cyber Monday etc.

It is ideal to spend money at the end of the year if you were going to spend it early next year anyway. Spend in 2020 and when you write it off you can move and shift your expenses into the previous year. This allows you to see the return benefit more quickly.

Pro-tip: Here are some more ways to spend money you would spend anyway! Call up vendors and request to buy credit for purchases or marketing expenses for next year to increase your expenditure for this year. Only do this with things you actually need. Training courses, hotel rooms, plan ahead!

10. Renew your investors and lenders annual notes.

If you have investors and lenders that are on an annual note and they are renewing their note but don’t want to get their interest paid, you can do a paper conversion. You can renew their note now, and use it as a deduction on your business.

Big write-offs allow you to reduce your active income. Do your research as some of these only work if you are a full-time real estate professional. To owe less money you must reduce your active income and these write-offs will allow you to have losses. I hope this helps as you prepare for taxes coming up right around the corner in the new year!

What is flipping houses?

Let’s start with the basics to make sure we are on the same page about what “house flipping” is.

Essentially “house flipping” or “flipping houses” means you are buying a house and selling it for profit. This usually requires some time and money (or someone else’s time and money) fixing up (or “rehabbing”) the home. This process of fixing up the home is how you add value.

There are four basic parts of the house flipping process from beginning to end. When putting together a house flipping business each of these can be separate “departments” in your organization. By breaking your business down into these areas you can focus on one aspect at a time making the entry process less overwhelming.

Flipping Houses – Pillar 1: Buying

Knowing how to find, analyze, and buy houses is the single most important skill you can have when it comes to flipping houses.

The process of “Buying” can be broken down into 4 areas.

Inventory: What kind of houses will you focus on buying?

Farm Area: Where (what location) will you focus your efforts in looking for these houses?

Deal Analysis: What will you offer for these Houses?

Acquisitions or Buying Methods: Which methods will you use to find and acquire these houses?

Inventory

If you are getting started, your best bet is to focus on a standard house with 3-4 bedrooms anywhere from 1,200-2,000 square feet with an “entry-level” price range. You want to buy a house that will be easy for you to sell. Match the market in size and price range in your early days to get a sale under your belt.

You want to focus on homes that are “distressed” or need work or updating but only to a certain extent for your early projects. Avoid anything that needs structural or major changes and focus on houses that need cosmetic or basic repairs. Along the same lines avoid older homes built before stricter regulation codes were in place.

Farm Area

The next step is choosing your “farm area” or the place you will focus your efforts on buying houses. This can be as small as a neighborhood or as large as several counties.

Pick one city or zip code to begin. The size of your farm area will depend on your level of experience and the buying strategie(s) you choose to implement. As you grow your business and adjust buying strategies you can increase the size of your farm area over time, but when you are first starting out focus in on a smaller location and become familiar with that area. Knowing your chosen area and what ‘rehab’ is expected of homes in that area will increase your chances of success as a new house-flipper.

Pro-tip:

Pick a farm area as close to you as possible. It could be the city where you live or a surrounding city or area if the inventory is more aligned. You want to minimize your travel time to maximize your time and energy on the project itself.

Deal Analysis – They Key to Flipping Houses!

If Buying is the first pillar, then Deal Analysis is the cement from which that pillar is made. It is the process by which you determine the amount you can pay for a property in order to cover all the required expenses and still ensure a profit.

The goal behind analyzing a deal is to come up with the ARV (After Repair Value) or the price the house will sell for once you have put in the work to bring it up to "retail" condition. Once you know what you can sell the property for, you can work backwards to subtract repair costs, closing costs, holding costs, and your desired profit to come up with your offer price.

Buying and Acquisition Methods for Flipping Houses

Last of all is the "buying" process. This pillar is learning and refining the methods you will use to acquire properties. These methods range from working with real estate agents and buying houses listed on the "MLS" (Multiple Listing Service) to buying at auctions (Online, Bank owned, and foreclosure or trustee sale), to marketing for and working directly with private sellers.

Especially in the early days, a commonly asked question is How do I Acquire properties at a Discounted Price?

In order to answer this you need to understand why someone would need to sell quickly. The reasons vary from inheritances to bad tenants, relocation, and wanting or needing to “cash out.”

Buying is created from the collaboration of all the above elements: finding properties (your inventory) by focusing on a location (farm area), deciding on your offer (analyze the deal), and knowing how you will buy the house (buying or acquisition methods).

Flipping Houses Pillar 2: Financing

The second fundamental pillar of flipping houses is financing. Financing means you have to come up with the capital (or “money”) to buy the property.

Two big myths with financing is that you either have to do it through a bank, or use your own cash to buy the property. This couldn’t be farther from the truth. Here are a few alternatives.

One popular way to finance a property when flipping houses is to use “private money.” A private money lender is someone seeking an alternative way to invest their money, beyond the stock market or low-yield savings accounts and CDs. Flipping houses can often provide individuals with an annualized return of 8-12% on their capital, which is far greater than the 0.05% return most banks provide.

Another option is ‘hard money.’ Hard money is more “institutionalized” than ‘private money’ and may require you to qualify for a loan. The benefit of this method over using a bank is the qualification process is less stringent. Although hard money lenders will look at qualifications, they mostly focus on the deal and the house you are buying, rather than your credit. The downsides are they may charge you points and fees that you don’t get with private lenders, their rates might be higher, and you usually won’t get the entire loan amount so you need a second source for additional capital.

A third method is an equity split, also called a Joint Venture or "JV" for short. If you know someone who has capital and wants to be "in on the action" but they don't have the time or know-how to do the leg work and oversee the project, they can put up the capital with you responsible for finding the house, rehabbing it and then selling it. Then you will split the profit at the sale. The split is usually 50/50, but you can work the deal on a case by case basis.

Another method is “creative financing” where you work with the seller to come up with terms for the purchase of the home. They can “carry the note,” which means you sign a note (an agreement which outlines the terms) to make payments directly to them for the property.

It is also possible to take over a seller’s payments. This allows you to save on financing costs and can make a deal worthwhile. In this case, you take title (ownership) to the property but the loan remains in their name. You agree to make the mortgage and other payments during the time you own the property, and when you sell the property, the loan is paid off from the proceeds and you are left with your profit.

It is also possible to combine various types of financing. For example, you might have a hard money loan on a house but still need $50,000 to cover the remaining cost of the purchase and repairs for the property. In this case you could work with a private money lender to cover the difference.

Financing is a lot more flexible, creative and ripe with possibilities than most people might realize.

Flipping Houses Pillar 3: Rehabbing

The 3rd pillar in operating a house flipping business is rehabbing.

Rehabbing is the process by which you fix and upgrade a house to bring it up to “retail” value, so you can sell it for a profit.

Many people believe they need to be “handy” or able to do repairs themselves in order to flip houses. In actuality, you don’t need to know anything about fixing up a house to be a pro at flipping houses, but you do need to know how to find, hire and manage the people who can do all of those things for you.

Pro tip:

Use a standard price list when working with contractors. It states exactly what we will pay per square foot for paint, flooring, etc., as well as a break down for any other expenses. This saves time in haggling and getting bids approved and allows both us and our contractors to focus on the work instead of the process to get the work.

Another way to add efficiency to the rehab process is to create systems that save time. For example, on 90% of our projects we basically use the same materials on every house. The same color, flooring, granite and fixtures. The contractors we work with know exactly what to get. It becomes like an assembly line. These systems are crucial for bringing your house flipping business to the next level.

Flipping Houses Pillar 4: Selling

Although there are many ways to sell a house, once you have gone through all the work of coming up with a great product, your best bet is to list the house on the open market with a Realtor.

If you are not a Real Estate agent yourself, it will cost you a commission, but you will probably make up for it with the price you are able to get as opposed to selling the house without listing it on the MLS (Multiple Listing Service).

If you are new to this business having a good agent to help you sell the house is huge. Not only can they help you get a great price, but they will help you understand the paperwork and closing process as well.

We hope this blog has given you some helpful information to get you off to a great start flipping houses!

Stay tuned for other blogs devoted to helping you be a successful house-flipper.

The Four Components of Direct Mail

There are four major components to using direct mail successfully, and those four parts all need to work together for direct mail to be a reliable and profitable business lead source.

Who you are mailing (your list of homeowners)

What you are mailing (the marketing piece you are sending)

Your salesmanship, or the “X-Factor” that determines success or failure.

Consistency, which often proves the most challenging for investors.

Let’s take a closer look at each of these four parts to better understand how to use them properly when sending out direct mail.

The List

This is the beginning of every direct mail campaign and without a solid list of potential sellers you have nothing.

The downfall to direct mail is that it is a more challenging strategy for many investors to use. Because of the difficulty, there is a small percentage of investors who use it to generate deals and an even smaller percentage of investors who are actually good at it.

Potential sellers in any given market get mail regularly from newbie investors that want to buy their house and are therefore almost immune to it. So your “we buy houses” postcard or letter most likely goes straight into the trash or you may get a voicemail telling you to never mail them again.

There are many different lists that you could potentially mail to, but the one talked about the most, and probably used by every new user of direct mail first, is Absentee Owners.

The key to creating a strong direct mailing list is to source the leads not everyone mails to. You want to source a list that gives every name and address a higher potential for real motivation.

Now that we covered what lists NOT to mail, here are a few that will give you the highest chance of success:

1. Probate and/or The Inherited Property List
2. Driving For Dollars (custom list created by you….this is the best list you can get)
3. Code Violations List
4. Tax Delinquent List
5. High Equity & Long Term Ownership
6. Homeowners over the age of 65 + High Equity (this and #5 can overlap a bit)
7. Entire Farm Area (saturation list)
8. Notice of Default List

This is a curated list chosen from the ones I had a great deal of success mailing within my own business over the past few years. But don’t simply rest on my opinion. Be sure to think outside the box and come up with your own lists to mail.

To start thinking outside of the box, make a list of reasons why someone would be motivated to sell and develop a list of people that would be in that same situation (i.e. behind on property taxes, hence the tax delinquent list; Inherited Mom or Dad’s house, hence probate).

Keep in mind that the harder a list is to generate or find, the better your response rate will likely be. Most other investors will not put in the work to get to this ‘outside of the box’ list. Keep this in mind when deciding on which list(s) to mail moving forward.

Your Marketing Piece

With your established Direct Mailing Lists, you then determine what marketing material to send to each list.There are 3 main types of marketing pieces that Real Estate Investors use on a regular basis:

• Postcard
• Printed letter
• Handwritten letter (often referred to as the Yellow Letter)

Generally speaking, the response rate is highest with handwritten letters, then printed letters, and lastly postcards.

After choosing your marketing material, carefully write your ‘sales copy.’ This is crucial.

If your sales copy and marketing materials are not on point, your direct mail will fail. You have a split second to grab their attention or the mail piece will go into the garbage. Once they open it you only have their attention for about another 3 – 5 seconds. This is why handwritten “yellow letters” work so well for investors. The envelope intrigues the person you mailed it to long enough for them to open it, and then the sales copy needs to be simple. For example, most handwritten letters state something like:

My name is Joe Smith and I am interested in purchasing your house located at 123 main street. Please call me at (xxx)-xxx-xxxx if you have thoughts about selling.

Utilize these principles when sending postcards and printed letters. Also, remember to make the letter about them and not about you! Nobody cares that you are the best “house buying company” around. They only care about what is going on with them, so write your sales copy to address their needs and specific situation.

Talking With Sellers — or Salesmanship

Once you have mastered the art of getting your phone to ring consistently with motivated sellers, the real work begins. At this point in the process, you sift through your incoming leads to determine which ones are a waste of time, and which ones could potentially be a deal.

(On a side note, if you don’t know values in your area like the back of your hand, then I suggest you figure them out ASAP. Otherwise, you will end up wasting a ton of time on leads that should go straight into the garbage).

Once you determine which leads are worth pursuing, it's time to go to work. Rarely do we get a seller that calls and tells us they want X for their property, and X is an amount we are happy to pay. With the majority of your “good” leads, you need to talk with the seller, build rapport, justify your price, and negotiate.

People often don’t take the time to evaluate and work on their salesmanship. This business is about real estate, but it’s also about people, and the better you are with people, the more successful you will be with real estate.

Now, with that said, the key to getting good at this part of the process is simply practice. You are not going to be perfect straight out the gate, but you can become successful if you continue to talk to sellers, improving with every interaction you have.

We have bought many houses ( for substantially less money than what our competition offered) because the seller wanted to do business with us.

Case in point, yesterday I talked with a seller on the phone that we are under contract with, and he told me he had an offer for $15K more but he decided to go with us because he really liked us and the way we do business.

This part of the process is the X-Factor that will ultimately determine your success in directly dealing with homeowners.

Consistency

You can’t just do one mailing one time, or two mailings 6 months apart. You have to set a consistent mailing schedule for your list(s) and make sure you meet that schedule.

Most investors are not consistent and give up after one round of failed mailers. I’ll be honest — the first big mailer I sent out cost me nearly $3,000 and I didn’t get a single deal. It wasn’t easy, but I kept going.

I then changed my list, changed my marketing materials, and sent out smaller rounds of mail until I began to see a decent response. I began to grow the number of pieces I sent out, the number of lists I was mailing to, and now here we are a few years later sending out thousands of mail pieces each month.

The best part is, those mail pieces bring in super-profitable deals like clockwork, month in and month out. You need to have faith not only in yourself but also in the fact that this strategy alone has made many many Real Estate investors incredibly rich. So why shouldn’t you be one of them?

Putting Direct Mail to Work for You

We covered the four major parts of direct mail that work together to create a successful marketing strategy and now it’s time for you to put direct mail to work in your business.

If you are wondering about the extra workload this adds to your business, yes, managing direct mail campaigns is additional work AND that is exactly why so few investors put in the work needed to master it.

Remember — if it was easy, it wouldn’t be worth doing. With practice (and the more you can systematize it) it will become easier, and I can say without a doubt, that mastering the art of direct mail to buy houses was the single most important skill that transformed me from being an average investor hoping to bring in six figures a year, to one that makes seven figures a year.

What is a double closing?

A double close involves purchasing a property wholesale and then “flipping” the property to an investor that same day; thus the double closing -- the wholesaler's closing is nearly simultaneous with the end buyer's closing. You only hold the title for a quick minute!

When deciding whether or not it is lucrative to do a double closing, there are multiple factors that come into play.

There are 3 key questions that can help inform your decision on whether or not to double close.

 1. What are the costs to double close?

According to the laws of your state, your location can vary the costs associated with double closing a deal. The major costs determined by location are:

1. Title fees
2. Taxes
3. Insurance policy

Title fees vary from state to state. I know wholesalers that have transferred titles for as little as $150 but that can go up into the thousands. As the costs rise you have to take into account, is double closing worth it?

2. Whose money am I using?

Do I have to bring my money to the table or can I use transactional funding? Best case scenario you can bring your buyer’s funds to the table to buy your contract and close the second one using the difference. In that case we use the buyer’s money to close the front end transaction and then close the second one we are selling to the end buyer.

In a recent double closing deal I did, I lent my money to the company and I only charged a half percent to use my money. That half percent interest, or any interest charged if a company is not using their own money, is a cost to consider when making the deal. Despite the higher cost for us and the need to borrow money outside of the company (my personal finances), my company thought it made sense to double close it because the buyer was a little skittish and there was a risk of losing the deal.

If you don’t have to borrow money and can use the buyer’s money, the price goes down significantly.

3. What is the issue you are trying to avoid?

Are you trying to avoid the buyer balking at the assignment fee, or are you trying to avoid the seller seeing how much you are making?

Generally, it comes down to having concern about the buyer or seller seeing how much you are making on the deal. Many people don’t want the buyer to know how much they are making on the deal. Say we are buying for $220,000 and selling for $250,000 and I don’t want the buyer to see that we are making 30,000 on the deal.

You have to ask yourself, Is that really an issue? Does the buyer really care? The buyer isn’t going to see what you make until they are at the closing table. If you have required a non-refundable deposit of say $5,000 are they really going to balk on that deal and lose $5,000?

Typically the buyer actually isn’t the issue, it’s the seller. Psychologically it seems to make more of an impact on the seller when they see that you are making $30,000 on an instant title handover. There are ways to get around this in how you construct the contracts and transparency of the assignment fee.

There are different ways to get around this.

We primarily use two methods: how we structure our contracts, and the transparency of the assignment fee.

Typically the seller doesn’t even look at the assignment fee because it is on the buyer’s side of the closing. You can ensure this by working with a title company or attorney to split the HUDs. I personally do this as much as possible. So the buyer only sees the buyer side and the assignment fee, and the seller only sees the seller side. We call this a blind HUD. Now I only have to worry about the buyer balking at the assignment fee.

I personally don’t have a set amount I need to make to decide to double close. I make a decision based on the cost-benefit to risk analysis using all the factors discussed here.

I also don’t default towards double closing deals. I push my team to assign contracts whenever possible because:

1. it is cheaper, we will net more money on that transaction

2. It’s better on our taxes.

When you get into the burden of having multiple HUDs for buying and selling properties, fees etc. it becomes a challenge come tax season. We do almost 200 deals a year and if I can assign all of those it becomes so much easier. It’s just a commission line.

There is risk that comes with double closing a deal. What happens if I close on the property and the buyer doesn’t close? I now own that property and the problems that inherently come with that. Because of the risk factor, I tend to assign contracts more frequently.

It generally costs me between $500 -$600 and $2,000 to assign. It can be up to $7,000 to close a deal today where you make $50,000. Is that ideal? No, but if you are risking not closing the deal, you sometimes make the choice based on your risk to cost benefit.

Think of all the above factors when deciding to double close and then make the best decision for your company and to close on the deal.

I find that decisions around double closing often come down to mindset.

If you are worried about the buyers, put yourself in their shoes as a cash buyer. I buy a lot of properties and I see the assignment fee. I usually think ‘wow good for them, or ‘I could have gotten a bit of a better deal on this’ but I don’t walk away from the deal. I said that I would buy it for that amount and I am good on my word. Make sure you are dealing with cash buyers. Actual cash buyers don’t care. They are here to forward their business profit and understand that you are as well.

Remind yourself, you are providing a service.

If they are working with you as cash buyers, they should love that you are making money on the deal and they can continue to work with you in the future.

@Eli Bellevue, email us at [email protected] and we will get them for you!