This is the second article in our blog post series on how to start your house flipping business from the ground up! After releasing the first article we got a lot of feedback from newer investors who said they really enjoyed the information and found it extremely helpful in giving them actionable steps to take when first starting out! So in this 2nd of a 3 part series we are going to go even deeper and deliver you some of the best “free” information you can get your hands on when it comes to real estate investing. We are on a mission to help as many investors as we can to achieve a life of financial freedom through real estate investing…..and this series of articles will give you simple step by steps instructions on how to do just that!
Now that we have gone through what you need to do in order to start your House Flipping business, now its time to start making some major decisions on how you are actually going to make money! What I mean by this is what is going to be your property acquisitions niche or where are you going to find your deals? Because eventually you will actually have to buy (or assign) properties if you want to make money! Eventually you want to diversify so that you can constantly acquire properties through a variety of different niches, but when you are first getting started the only way to assure success is to FOCUS on one niche at a time. So here’s the deal…..most new investors start out trying to wholesale REO’s because they are the easiest to get access to since they are almost always listed for sale on the RMLS. The problem is most of them have no clue what they are doing and end up wasting A LOT of peoples time. Here is an example of a recent phone call I had with a newbie investor who called my office to try and sell us a deal:
Newbie Investor: Hi there the guys at TTM Development Company……I have a great deal for you!
Me: OK…..well tell me a little about it.
Newbie Investor: Its a solid house that needs about 10K in rehab. I am selling it for 120K.
Me: OK…..well can you give me the address and I’ll do some research?
Newbie Investor: Its 123 main street
After doing about 2 minutes of research I come up with the following information: The newbies house is an REO that has been listed for 95 days, the listing price is 115K, its a complete gut rehab, the house is in a sub-par area and sits on a busy road right across from a bus stop (public transportation). So what does this say to you? Well to me it says that this investor has no idea what they are doing and have just ruined their reputation if they decide to shop this deal around to every other investor in town they can find. You see wholesaling can be a very easy business if people know you sell a good product (its pretty much like legal drug dealing), however if you are pushing crappy houses at dumb prices this business is going to be really really hard on you……and most newbie investors fall into the 2nd category of pushing crappy overpriced houses to anyone who will listen…..so don’t be that guy and keep on reading this article to learn how not to be!
I always tell people to start off by building their direct mail marketing machine to find deals, but at the same time look at all of the REO’s on the market just to gain experience. Even if you don’t find an REO deal you will be forced to analisys potential deals which will make you a better investor much faster. Now within the direct to homeowner niche (as in properties not listed on the MLS), you should use direct mail to start out generating seller leads for your business. And when starting out using direct mail its my opinion that you should start out by targeting probate leads. The reason I say this is because you will get the highest response rate of any potential motivated sellers you can mail to on the smallest budget. The only challenge is going to be figuring out how you can get probate leads in your market. You won’t have to mail out thousands of pieces of mail in order to get a deal with probate, and the reality is you can likely handle sending out all the letters yourself, since the number of new probates leads in any given month is relatively small. In my market they actual probate filings are published in a business newspaper which makes them relatively easy to find, but I know in other markets that also happens or they are published online by the county (which makes it even easy to find probate leads).
In addition to probate mailings, I would also suggest that you implement a driving for dollars campaign at the same time, in order to really get your business cranking out motivated seller leads quickly…..that and driving for dollar leads are basically free except for the gas it takes to find them! Now just to clarify when you are driving for dollars you are looking for run down crappy looking houses and then just write down the address. Then once you get back to your computer research who owns the property and send them a letter asking if they are interested in selling the property. I know this sounds way too simple for it to actually work, but the reality is that it works great. I use this strategy (in addition to probate marketing) in my business all the time, and we have made tons of money with them…..so there you go. All you have to do is copy what I have been doing and you will likely achieve the same results.
So lets circle back around and make sure you I didn’t loose anyone with what your next steps should be in building your house flipping business. You need to start building your direct mail marketing machine…..and the main reason I suggest direct mail is because its extremely powerful and very cost effective. It will also set you apart from 99% of your competition who is only offering on listed properties because they are either too lazy to market for deals, or they are afraid to talk with sellers (yes this really does hold a lot of people back). The market is heating up and competition is increasing, so you need to do what your competition is not, that way you are getting the deals they want! If you take my advise and start marketing for deals….and stick with it…..you will soon realize it was the best decision you ever made for your business.
Keep an eye out for the third part of this series where we will go into expanding your marketing strategies and scaling your business into a market domination cash machine! Also make sure to listen to the latest episode of The Real Dealz Podcast for more great tips on growing your House Flipping business!