Barrier Busting today with Dave and Mike. Today the Discount Property Investors jump into answers questions they are getting. We wanted to find out the biggest challenges you are facing and answer as many of you as we can. One of our goals this year is to help as many new people get started investing as possible.
David: Alright guys, welcome back to the Discount Property Investor podcast. This is your host David Dodge, joined by co-host Mike Slane. Hey, Mike, how are you, buddy?
Mike: Hey Dave I am doing great today, doing great. How are you doing?
David: I am doing good, man. It's beautiful outside, up early, got a workout in this morning.
Mike: Oh yeah me too, every morning lately.
David: Feeling good, man. Feeling good.
Mike: You have been going to the gym pretty often lately.
David: Trying to, trying to get back in the swing of things. After I got married I took about a month off.
Mike: Did you?
David: It was terrible, don't do that. It's hard to get back to it after a month. But it's been a few week since then.
Mike: I took about ten years off. It's really hard to get started again.
David: That's right. Well what are we talking about today, Mike?
Mike: That's a good question. So recently we sent out some questions, just asking what is the biggest barrier to entry?
David: We did, we sent an e-mail out about that, that's right. I asked all of our viewers and listeners. I think the list we sent it out to was the people who have done the free course.
Mike: Oh yeah.
David: So we sent an e-mail out, asking what is the single biggest, challenge, frustration or problem that you have been struggling with? That was the question I asked. We had quite a few responses from that e-mail that went out. We had about 30 people respond. So we had good feedback. I think today I would like to dive into the questions they are having, and address, and give them answers and just flow through and do it like that.
Mike: Yeah let's try and answer a few. Let's shoot for three or four questions, keep it--
David: I think we can get through more than that, but let's just go for it.
Mike: You are ambitious, sir.
David: That's alright. The first response back was, 'The real estate step to begin with real estate investments. I am afraid until I see an actual deal, or I see one live. A step by step and the actual amount to start.' So I think that is kind of a loaded question. But that is the single biggest problem we had from one of our responses that they are facing. So I think the answer to that is, they need a mentor, they need a coach. They are looking for someone to give them the step by step process, and they want to see an actual deal happen.
Mike: Yeah, that's really difficult without actually shadowing someone I think.
Mike: You are never going to see a deal happen, it's not-- I don't know. I would just say you have to face your fears and get out of your comfort zone. Again, to actually see a deal happen, quite frankly you are going to fail, increase the level of failing. We fail more now than we did before. I think we fail in this company about ten times as hard as we failed prior to working together. Quite frankly that's a good thing.
Mike: It means we are succeeding in other areas, or succeeding that much more often as well.
Mike: So again, I think that question is really; where do I begin? I'm afraid until I see an actual deal. I think you are actually afraid of failure. My solution to that would be to just jump in. Put a property under contract, get your marketing going.
David: Get your marketing going.
Mike: Look at the free course, one of the things we emphasize is is, no matter the business frame, you just have to start marketing. So get some marketing going, figure out where you are going to find leads from, figure out your niche. But again, just start marketing, don't be afraid to put a property under contract. If you are trying to wholesale, that's your number one play. Go out and put a property under contract, then try and start to find someone who is interested in that property.
David: You can't make money in this business without an inventory. We have said it a million times, especially on our online courses, this is the marketing business when we are talking about wholesaling. So you need to market to get properties, then you got to get this properties under contract so you can control them, and sell that contract or property. So I agree with you 100%, Mike. I hate walking away from deals, or not being able to close those deals. It still happens to me to this day. I have been doing this full time for over three years at this point. I had to back out of deal just last week. It's one of those things where you get it under contract so you can do your due diligence. I do due diligence prior to that. But really the due diligence starts when you get that under contract.
Mike: The real due diligence. I think I will back peddle a little bit. I would say make offers, not get something under contract.
David: Make offers.
Mike: And someone who is asking this, what is the first step? I want to see the first step, I want to do the first step. I would say call a real estate agent for goodness sakes. Say, I saw this property listed on Zillow, I am wondering if the owner would take 50% of what it's listed for? Don't say it like that, but if they say it is a $100,000 house, would they take $50,000 for this house? I am a cash buyer and can close it real quick if they are interested in $50,000. Again, see where it goes. The agent may laugh, but so what? Get on the phone, start getting out your comfort zone, break through that fear, being afraid of doing it is not a good reason to live like you have been living. You have to get out of your comfort zone, you have to stop being afraid to do a real estate deal. Again, that's what I would say to that person and that question. Again, I think we will call this episode Barrier Busters.
David: Barrier Busters, Boom!
Mike: What's your biggest barrier to getting started?
David: So let's keep moving here, I think we can get through a bunch of these. So finding and acquiring properties from motivated sellers, simple, one word; marketing.
David: I mean come on, guys. Finding and acquiring properties; there is two ways going about doing this. You can market which is usually going to cost money. Your phone will start ringing, so you are putting the message out into the world that this is the solution I can provide to those who have this problem, it doesn't matter what business you're in. But you are going to market it and they call you. The other way to go about getting deals is time. That basically means you are going out and you are reaching out to the individuals that may have that problem, so you can-- Mike you said it really well in the past, hunting or fishing. So marketing is fishing. The more marketing you do the more lines you have in the water, the more chance you have of catching a fish or that big fish. Hunting is going out on Craigslist, Zillow, wherever, seeing people who have properties for sale or for rent, and making offers. So love it. But marketing is the answer to that question.
Mike: Finding and acquiring properties from motivated sellers was the issue this person's having. The solution is you have to start marketing.
David: You have to.
Mike: Another thing that I would say is that no one is going to raise their hand for you and say, hey I'm am motivated seller. That just doesn't happen. So you have to learn to listen to people, and find out their real motivation for the action they are taking. So again, ask that question why, why are you selling? Multiple times when you are speaking with a seller on the phone. Figure out what their real motivation is.
David: Yep, love it. Okay next question, 'I am having difficult times setting up a system to find solid motivated seller leads in my market. A lot of wholesalers are marketing to the same people day in and day out in the market where I live. It appears to be saturated with wholesalers shopping deals.' Mike, I am curious to see what your answer to this question is, but my answer would be, if you are having difficulty setting up a system to find motivated seller leads in your market, I would flip the script completely. I would say, do reverse wholesaling. If you already have all these people marketing to individuals in your market, then my solution if I was you; I would go to the REIA'S and work with anybody that I know is looking to buy. I would become a specialist with all of the buyers. I wouldn't worry so much about the sellers, because it sounds to me like you have a ton of wholesalers who are providing inventory you already. So if you know what people are looking for, reverse wholesale. Go out and find what people are looking for, then network with those other wholesalers. Just be a transaction engineer and put them together.
Mike: That's a great solution. My thought would be a little bit different.
David: Let's hear it.
Mike: I would say there are a lot of people. We are in St Louis too and there are entering into wholesaling and it is a competitive thing. But you are talking about a lot of people that are doing the same thing. So what's the easiest solution? To do something different.
David: That's so true I love.
Mike: If they want to zig you want to zag. It is difficult to be creative, or come up with a creative campaign to set yourself apart. But that is the solution, is to figure out a way to reach a seller, or to reach a property owner rather-- that someone else hasn't thought of. The one example of that is you say there is probably a lot of people mailing the same seller leads. I assume that's kind of what you're talking about.
David: Uh huh.
Mike: Well you know what happens? A lot of people mail them, they get a ton of letters in the mail, that's true. But you know what else happens? A lot of that mail gets returned. So if you get returned mail, you hang on to that, you skip trace it, and you find the seller that nobody else has been able to find.
David: Yeah, skip trace it. Great solution.
Mike: Finding the seller that other people have not been able to get a hold of. Finding that property owner that other people haven't got a hold of. It is a challenge, but it is something that is going to be valuable.
David: Love it.
Mike: Creating value, that's your whole objective.
David: Zig wherever else zags or vice versa. Or do some reverse wholesaling. But I love it. Do something different. We have tons of competition in our marketplace, but it doesn't stop us. We don't look at our competitors as competitors per say, more strategic partners.
Mike: We do deals with them all the time.
David: 20% of our deals are joint ventures. We are doing 10-15 deals a month, some months more, some months less. But we are consistently doing a done of deals. It is very rare that a week goes by when we are not buying or selling real estate.
Mike: We should probably close the doors if we don't sell anything that week.
David: Get out there guys, do some marketing. Zig where everyone else is zaggin, vice versa and-- maybe try and do some reverse wholesalings. So that is just one of the questions we received, let's keep going here.
Talking to people, and getting people to open up about their paying points. This is also kind of a loaded question in my opinion. I take the approach that if you just try and become a really good listener when your on appointments with people, they are going to tell you about their pain points, you don't need to ask. Or if you are asking questions, don't ask questions that have a yes or no. Ask a question that can lead into a conversation. So why are you selling? When do you need to sell? What would you like to see happen in the even me and you can work together? Ask questions like that where they are going to give you answers to their own solutions. You then just fulfil that answer, fulfil that solution.
Mike: That's good. So talking to people and getting them to open up about their pain points. That's the question again. My solution is, I'm not real good at that first off. I will get that out there. I'm not great at that, and I think it's empathy. Empathy is one of the things that you need to have with people. It's not a strength of mine to really--
David: He's cold blooded.
Mike: David is laughing but it's true. In our meetings I just kind of-- what's the solution? What's the logic?
David: I'm here to make money.
Mike: I logic through everything. I don't empathize well. But when I'm on appointments I am good at mirroring people.
David: I love that, mirroring is so important.
Mike: Again, this is just the simplest explanation I can give you. If someone says, oh well I am really down and out. You don't want to be, ha ha ha this is great. You want to be, oh I am really sorry to hear that, that really sucks. You want to try and mirror the speed of their speech. If their shoulders are down you might wanna hunch down. Again, you want to mirror that person. Sympathize and empathize with them about their situation. Again, you have to listen, you actually have to listen. When they say something that could be more for them to open up about, you have to be ready to listen, you have to hear it.
David: That's right.
Mike: Mirror, that's the simplest way I can say. I don't know, that's always been my kind of sales technique; be like the person I am going on the appointment with. Because people like people like themselves.
David: That's so true, they do.
Mike: Again, people like people like themselves. Again, try to be like that person. Again, I think that's going to be your best bet on that one.
David: Yeah okay. Next question, leads. Let's fly through some of these easier ones here. How to approach sellers and what to say. So really in my opinion that is-- that's very simple, especially if you're doing marketing or a lot of marketing. If you are not getting leads, and you not able to approach sellers and even say anything to them at all, up your market, do more marketing. That will get you leads. When approaching sellers and what to say, we kind of covered this in the last question really. But basically ask questions that will give them the floor, give them the ability to start talking. They are going to tell you their problem. All you have to do is offer them a solution. Everyone is going to have a little bit of a different problem. But at the end of the day they need to sell a piece of property most likely. That's why you are marketing to them, that's why you are there. Just be that solution. So what to say? That's something you kind of need to build rapport with somebody. But don't worry-- I could talk for hours as you guys know at this point. But don't worry about being the one that's always talking. Just ask simple questions and shut up. Let them talk and they will give you the problem.
Mike: 100%. I agree on that, that's where people ask about scripts and stuff as well. Do you have a motivated seller script? Well first off like I said, no one raised their hand and says they are a motivated seller.
David: So true. I'm motivated!
Mike: You are just talking to another person who might have a problem, and maybe that property is part of the problem. So your goal is just to say, hey I'm a real estate investor, I'm a buyer, I would be happy to buy that house if we can reach an agreement, find something that works for both of us. I really want that property, let's talk, so what's going on? What's going on with your property.
David: I love it.
Mike: Why are you selling?
David: Right, next question. Finding a contractor to handle the rehab start to finish. Networking, networking, networking.
Mike: And trial and error.
David: And trial and error, that's great.
Mike: Contractors, we go through them as well. Just like everything else they come and go. Some of them do their top work for one or two projects, then they burn out.
David: That is so true.
Mike: So you are always looking for a new one.If you find a good one, you may end up paying for them, but hey they are worth it, pay them.
David: That's right.
Mike: Pay the man his money.
David: Pay the man his money, that's right. But networking with other real estate investors often times they will share their contractors with you. But as Mike said-- there is a good saying that I really like, 'Cost, quality and time, pick two'. That's really what it comes down to with contractors. You can't really get all three, you can't get a cheap one that is going to do high quality quickly, it doesn't work that way. So in that scenario, you are picking time and quality, but it's not going to be cheap, so the cost is going to be high. Cost, quality and time, pick two. Because it is very rare you are going to have three. So it kind of depends on the rehab project. If it's a rental and needs rental grade wall, that quality might not be great, it might not need great quality. But if it is a $500,000 to a million dollar house, in a nice neighbourhood; quality might be the biggest thing that's needed in that scenario. Depending on cost or time, if you are not in a huge hurry, you might be able to get a guy to do it for less. But if you are in a hurry and has to be high quality, it is going to cost you, period. So networking and trial and error. That pretty much sums up that question of finding a contractor to handle the repair, the rehab start to finish is the question. So love it, love it. Anything else that jumps out at you from these questions here, Mike? We got through about six or seven so far.
Mike: What do you say we go through a couple more, then maybe we will continue this? I think this is kind of interesting ,it's kind of fun to answer these questions. Hopefully you guys enjoy listening to us just kind of give quick summaries on these answers. Why don't we do another one or two. What time are we at here, Dave?
David: About 15 minutes.
Mike: Why don't we answer a few more, then we will wrap this episode and do a continuation.
David: The next one we had is three words; finding the deal. That was the question they sent back to us, finding the deal. I want to reiterate what we said earlier on marketing, you can hunt or you can fish. Those are the two ways to go about finding the deal. If you are nothing getting enough leads, then you need to hunt harder or fish more, which just basically means spend more time or money on your efforts.
Mike: I don't watch the show that often so someone is going to correct me, I may be out of line here. I am thinking of like the Deadliest catch in Alaska. They throw in these gigantic nets, they got these buoys on them--
David: Like metal cages, but they could be nets.
Mike: That one, yeah the metal cages. So they throw in tons of these things. The but is going for miles and miles, and they are throwing in all these cages.
David: Sometimes they pull them up and there's none in there, sometimes they pull them up and they are loaded.
Mike: Exactly, but think about this though; they are not putting one net in there and saying, I hope that one fills up. They are putting 100 in a row a mile long.
David: Pretty similar in our business.
Mike: That's exactly my point. You can put out 10 pieces of mail and say I am not finding a deal, or you can put out 10,000 pieces of mail and the deal is going to find you.
David: It's going to find you. That is so true.
Mike: People are going to call you. Again, put out a bigger net, think of that Deadliest catch analogy, you got to put out a whole bunch of these friggin little baskets to catch some of them lobsters. It's been a long time since I watched that show. But again, that just popped into my head, so put out a lot of mail.
David: So with that being said, it's a number's game, folks. Me and Mike go on 20-30 appointments before we find a property we want to buy that the seller is willing to sell at the price that makes sense to us. So let's reverse these numbers out. We may go on 20-30 combined, I would say 10-15 is a pretty good average for me, appointments before I can get a property locked up. But we are also getting maybe 50-60 leads to then set those 20-30 appointments, maybe 1 in 3 I would say give or take that calls in is even worth us going out and looking at it. Their motivation is not there, an area of town we don't want to buy in, so on and so forth. But then to work those numbers out even further, we are probably sending out anywhere from 500-2000 mail pieces to get those leads. In the case of this scenario it's probably closer to 5000 mail pieces to get 60-80 people calling us.
Mike: Yeah and we are doing other things too.
David: It's not just mail, but marketing efforts I should say. Absolutely, 5000 impressions. It could be a mail piece, it could be an online add, could be anything and everything. But yeah, so you got to work these numbers out. It's a lot like fishing on that show, you're right. It's a numbers game, so you got to do a ton of marketing to get a ton of leads, then you are going to narrow those down to appointments. You are going to narrow those down to actual properties under contract. If you are new in the game you may not have a good ratio of properties under contract to sellings. So that might even be 1 in 3 to 1 in 10 that you lock up under contract that actually get sold.
Mike: Right, so then we could spin this in another direction, so the question again was finding the deal. One way to spin that would be, okay what is the deal? Maybe you are having trouble actually figuring out if that's a deal or not. So that's another thing that is kind of running comps. There are ways to do that if you don't have access to a friendly agent. You can't access your local MLS, you can run comps with Zillow. Well I am not talking about using the estimate, again I think they are getting better, but again, I am not using the estimate, you can go into Zillow and you can filter it and look for sold properties. So Zillow pulls a lot of data just like your local MLS will. They pull a bunch of data, and they are going to show you the sold properties in a certain area. So you can find decent comps. Again, they are not the ones an agent is going to pull, but you can find decent comps out there.
David: That's true.
Mike: So then what is a deal? Well you have to-- like Dave said earlier, you have to network, you have to figure out what buyers are buying, what cash buyers are buying, and figure out what that is. So the comps, again you are going to look at-- those are probably the retail sales. So those are your high or ARV's. So you want to buy at least at a discount low enough to sell it to somebody else, who is then going to spend money to rehab it. So again, those comps-- again it gives you an idea of what it will sell for after it's fixed up. So again, you can figure out what you would spend on repair costs, then what your wholesale fee is.
David: I want to make a point to piggy back on what you said there, Mike. Some of the biggest lessons that I have learned, not only in real estate but in my life have been mistakes I have made. Trial and error, or trial by error. But basically-- if you don't know how to run comps, the best way to learn is go out and meet with other investors or sellers, and get a property under contract and make a mistake. Screw up, but you will not make that mistake again. Some of the best lessons I have learned about running comps, and talking to sellers, running appointments, getting properties under contracts; have basically been me screwing up, then saying I am not doing that again. So there is only so much you can be taught. A lot of it is just getting out there and making mistakes. So do not be afraid to make mistakes. Another one of my favourite quotes is, "Fail a lot and fail fast". Fail forward is another one. Fail fast, fail forward, and the people that are not out there, putting themselves out there and even having the opportunity to make mistakes, are never going to be successful in this business or any business. Get out there, make mistakes, you will learn from those mistakes. It will make you a better person, a better investor, and hopefully richer in the process. More money too. Let's wrap up, man. We are 22 minutes into this episode, it was a great episode. We got through about eight or nine questions, almost a third of the total that came in. I think these summaries are really helpful. I love talking about them, and hopefully, the listeners and the viewers are getting value out of this too. Well thanks for listening, guys. Come back and listen to the next episode, we will see you then.