Podcast 109: Where I Find Houses to Flip in 2017

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I have had up to 20 flips going at once this year, which can be a lot to handle. I have a great team who helps me, and I have systems to get them repaired and sold. Before my team can do anything with the properties, we have to find properties to buy! In the past, I bought most of my flips from the foreclosure sale then had to change strategies and buy from the MLS. In the last year, I have bought many flips from wholesalers, and I am adding additional ways to buy. I have had good luck buying flips from the MLS and wholesalers, but I have not been buying as many houses as I thought I would. Last week, I bought my first flip since the middle of May. I have a goal to buy three flips every month, so that was a pretty long spell without buying any houses. I now have three more houses under contract and am getting back on track. On this episode of the InvestFourMore Real Estate Podcast, I talk all about how I find deals in today's real estate market.

How many flips have I bought and sold in 2017?

It's hard to believe it's already July. In fact, when this podcast is published, my family and I will be in Disneyland. I have bought 12 flips so far this year, which is a little behind where I hoped to be. To meet my goals for the year, I should be at 18 bought and 18 sold. I tend to not reach most of my goals, which is okay with me because I feel goals are meant to push us, and sometimes that means we do not accomplish them. I have three potential flips under contract, and hopefully I will get many more under contract and purchased by the end of the year.

I have sold 13 flips this year, which is also behind my goal of 3 per month. However, I have six flips scheduled to sell in July. I will be really close to my sales goal once this month is done. I have 16 flips in my inventory and 3 under contract, and all of those should sell in 2017. That means I will sell 32 flips in 2017 if I don't sell any more properties.

You learn all about how I flip houses, including how to find them, finance them, repair them, and sell them in my book: Fix and Flip Your Way to Financial Freedom. I completely re-wrote the current edition, which was released earlier this month.

How am I finding houses cheap enough to flip?

When I flipped houses with my father, we bought almost all of the properties from the foreclosure sale. Competition at the foreclosure sale grew and grew, so I convinced my dad to start buying from the MLS. For the last five or so years, I have bought most of my flips from the MLS. Last year, I was able to find a few wholesalers in the area who I started buying properties from. I will still occasionally buy from the foreclosure, and I have bought a few off-market properties as well. This year I made another goal to start my own direct marketing campaign.

I started sending letters earlier in 2017 with pretty poor results. A few months ago, someone approached me about doing a direct-marketing campaign for me. They offered to create my list, create the letter, create the envelope, and even take calls. The biggest issue for me is finding enough time to do everything, so I was very willing to try outsourcing a campaign. We sent our first batch of letters, and one of the houses I have under contract is from that campaign. I also have another off-market property under contract, which was a referral from someone I bought a house from earlier this year. It takes a lot of time and money to market with direct mail, but it can be a great source of leads if done right.

It is a good thing I have added a new source for finding deals because I have not seen nearly as many deals on the MLS or from wholesalers over the last couple of months.

What is the best way to find deals to flip?

I do not think there is one best way to find deals. You never know when one source that may have worked great for years will dry up. I think the best approach is to have multiple ways to find deals and focus on the ones that produce the best results. I am excited about my direct-marketing campaign because it could be a constant source of deals. If anyone is interested in getting in touch with the person who is running my campaign, send an email to: Mark@InvestFourMore.com. We are also thinking of putting together a coaching group to teach people exactly how to buy off-market properties.

EPISODE 109

[INTRODUCTION]

[0:00:13.9] MF: Welcome to the Invest Four More Real Estate Podcast. My name is Mark Ferguson and I am your host. I am a house flipper. I flip 10 to 15 houses a year, I own 13 rental properties with a goal to buy 100 by 2023. I’m also a real estate agent. I’ve been licensed since ’01, I run a team of nine and we sell close to 200 houses a year.

So on this show, we’d like to interview house flippers, landlords and the best real estate agents in the business. So stay tuned for some great shows, if you want more information on my rentals, on the numbers, on how I buy properties, check out investfourmore.com.

[INTERVIEW]

[0:00:58.9] MF: Hey everyone, Mark Ferguson with Invest Four More, welcome to another episode of the Invest Four More real estate podcast. Today, I’m going to be talking about a number of things going on in my real estate world. Mostly the fix and flip business, how I’m finding deals right now.

I’ve had to change strategies a little bit this year and how things are going overall. It’s been a really cool year, done a lot of the things I want to do, flip’s been going great, books have been going great, blog’s been going well, I’m still working on rental properties but nothing too substantial’s happened yet this year and it’s been a lot of fun.

Just a reminder, my fix and flip book, I just completely rewrote that. It is all edited, brand new, added a ton of information in it, it’s available on Amazon as a paperback or as a kindle ebook. Check that out and I’m working on turning that into an audio book as well and hopefully by the time this podcast comes out or if not, just after, the book Jay Scott and I did, How to Negotiate Real Estate, that will be available as an audio book by the time this podcast is out, we’ll see.

That’s all been completed, all the audio is done, just in the reviewing stage and then have to wait for audible to publish it and get it live. Lots of stuff going on, I want to talk about the way I’m sourcing deals because this year has been much different than the last year.

If I look at my flip board, I think I have 16 flips going on right now and about I’d say 60% of them, I bought from the MLS and 40% I bought from wholesalers about that ratio. In the past, in 2016, I would estimate 85% of the properties I bought from the MLS, 15% were from wholesalers, maybe one was from the foreclosure sale. It’s really changed or I’m buying my properties.

I’ve never had a problem buying from the MLS, the start of this year I’ve still been buying from the MLS but the last few months, it’s really started to slow down where I’m buying properties, finding those deals on the MLS system.

And our market is still super-hot in Greeley Colorado, I buy kind of a 40 mile radius around where I’m at so in Greeley, we have about 100,000 people, there are something like 80 houses for sale in the entire town. Last five or six years, every year, we’ve had record low inventory each year.

In 2012 is record low, 2011, broke that record, or sorry, 2013 broke that record, 2014, broke that record, 2015, broke that record until now we’re at just super low inventory, very few houses for sale. Still, I am finding some deals in MLS but just not as many as I have been at the start of 2017 and all through 2016.

It’s been nice where in the last year I found some wholesalers I’ve bought properties from in the past. I have bought almost no properties from wholesalers so it’s been really cool to find some good wholesalers, buy properties from them but they’ve slowed down recently as well. In the last couple of months, I haven’t really seen any really good deals from the wholesalers, maybe one.

I didn’t get that one, they sold to another investor who is willing to pay more money than me. The wholesaler’s kind of slowed down as well. While I have bought I think 12 properties now, fix and flip properties in 2017. I was hoping I would have bought a few more.

For the last month or so, I didn’t have any properties under contract either. But, that has changed, I’ve got three properties under contract now and actually just bought another property yesterday. Things are picking up, I have a lot of other leads coming in too of properties that I might buy.

They’re not from wholesalers, They’re not really from the MLS, they’re from a number of different sources which I’m going to talk about today, I’ve had to expand how I’m buying properties and that’s really helped me find more deals and then hopefully in the future, you know, if MLS comes back, the wholesalers come back, I’ll just have even more deals coming in, even more sources where I can pick and choose the best properties or just keep expanding and building bigger and bigger.

Alright, what I’ve been doing lately, let me go through and tell you, it’s kind of weird how you put your mind to something and things just happen but I decided this year I was going to definitely do more direct marketing. Buy more off market properties, not just focus on the MLS or wholesalers because the MLS, yes, I have lots of control over it, I can get good deals from the MLS but I’m still limited somewhat to what’s listed, what other investors will pay, a lot of houses lately I’ve made offers on.

Were other investors were just paying way more than I was willing to pay. I think people are starting to assume things will appreciate. They’re paying more than what I think should pay to flip a house. Our market has appreciated like crazy. Like I said, the inventory is super low and with that, our average price is over at $280,000 now where last year I think it was 250, the year before that it was like 220.

It’s been going up like 10% every year. That’s great for flipping, it’s great for my rentals but I never want to count on that. I don’t want to count on prices going up to make my profit because things can change, you don’t know what’s going to happen with the economy, with the nation as a whole, with our local area, so many things can change, stop the real estate market, affordability issues, I never want to count on appreciation.

That’s made it tougher on the MLS. Like I said, I still got a couple of deals from there, just not as many as I have before. The MLS is not completely in my control, I’m kind of limited to what I can get.

With wholesalers it’s been great, I bought a lot of deals from wholesalers lately but again, I’m kind of limited to what deals they have, if they have other investors willing to pay more than me, like I said, for an appreciating market, that means I’m not going to get as many deals.

I’m kind of limited by what the market will pay the wholesaler, how they sell their properties, how many investors they’re working with, that can also limit things as well. Like I said, I made a goal to do more direct marketing so I can find deals myself, not have as much competition and not be limited by what supply is out there, kind of make my own supply.

This year we started on our own, we did it a few small campaigns with almost no results, I was trying some different things, not the typical direct marketing you do and it didn’t work very well. I kind of put it on the back burner, was focusing on that thing, at one point we had 20 flips going this year.

That took a lot of time managing contractors, managing the few employees we have, working on houses and getting things sold ready to go. Then we sold a few properties, things calmed down a little bit, if you call 15 or 16 flips at one-time calm, it actually seems kind of calm compared to 20 and we really decided to ramp up our direct marketing. Ironically, someone contacted me to help with my direct marketing. I wasn’t really looking for anybody, I kind of thought I would do it myself.

Someone emailed me and said hey, I’ve got this direct marketing campaigns I do, I was referred to you by another investor, are you interested in talking with me? I thought, sure, you know, it doesn’t hurt to talk to people and what we ended up doing is they set up our campaign for us, they setup a list for absentee owners, elderly people who we send our list to.

They created the mailers, they created the envelopes, they mail them to us, all they have to do is send them and they even take phone calls for us so it’s been pretty awesome, that’s one thing I always dread about the direct marketing is how may calls am I going to have to take, how many people I have to talk to, talking on the phone is not my favorite thing plus it can be very time consuming but they’ll take the initial calls.

I get a list of who the interested buyers are, I can call them, setup appointments, talk to them, makes my life super easy and I did get my first deal under contract from that campaign yesterday which when this comes out will be a week or two beforehand as of me doing this actual recording.

It’s really cool to have that happen, got that property under contract from I think we sent out 4,000 letters but just one mailer, we haven’t done a follow-up or anything, got that property under contract, have a number of other leads that may turn out eventually as well, getting that one deal was kind of really nice to see, great boost of confidence and usually you’ll see more action as you mail more pieces to the same people over and over again.

That’s been really cool to see the direct marketing take off and work and ironically, right before I got that property under contract, I got another off-market property under contract, not from direct mail but from a referral from someone else I bought a house from.

There’s a wholesale deal that I bought earlier this year and the wholesaler who gave it to me is his first deal he had ever done, it’s a good price for me, he made a lot of money but him and the sellers did not get along. They had some issues and for whatever reason, the seller of that house said I don’t want to work with this wholesaler anymore, I want to talk directly to you, he’s talking about me as the buyer.

I don’t want to deal with him. Of course we paid the wholesaler, he got his fee but I took over the communications with the seller, the title company and all that, we worked out everything, it went well, they sold the property to me, we ended up renting it back to them for a month so they had a place to live while they bought another house or actually buying another house after they sold their house to me.

They’re super happy with me when they moved out. They left the property a little dirty and we had a deposit, a rental deposit but we never were clear on how they had to leave the property, what shape it had to be in to get their deposit back. That’s kind of handled with the wholesaler, it’s kind of messy.

I thought, well, I could take their deposit if I wanted to but since it wasn’t very clear, we weren’t really on the same page about what happened, I would give them their deposit back anyway, I tend to try and be overly cautious, protect my reputation if I can in any way possible.

Especially helping people out when you’re buying houses, I know I’m going to make a decent amount of money on it so it wasn’t a big deal to me to pay them back their deposit. I gave those sellers back their deposit after they moved out and then like a couple of months later, they referred another seller to me.

So the seller texted me and said hey, I’ve got a house, such and such referred me to you, I’m thinking about selling it, would you want to buy it? We went out with the house, gave them the option of listing it for them since I’m a real estate agent or buying it directly from them, we gave them a couple of prices, they wanted to sell quick, they wanted to buy another house, ends up, they decided just to sell it to me instead of list it.

I got that house under contract as an off-market property as well even though it wasn’t from the direct mail campaign we just started, it was from a referral. Because I did the right thing, because I treated people right, kind of went above and beyond, they referred someone to me and it made me a lot more money in the end by getting this other deal than it would have just to keep their deposit.

Legally, I probably could have kept the deposit if I wanted to but it would cause a lot of hard feelings instead, I’m going to have the deal, it’s going to make me a lot more money and it worked out a lot better in the end.

There’s another property I got, it was off-market and yesterday I mentioned I bought another house at the local trustee sale. I have not bought hardly any properties there because prices just seem crazy high, a lot of competition but yesterday was the fifth of July so as you know, I’m recording this. July 6th.

The foreclosure sale in Colorado came out, they published a list a few days before the sale, with the holidays, I just thought hey, maybe there’s a chance I’ll get a property because other investors won’t want to mess around the day after the fourth, they won’t be paying attention, they’ll just let it slide.

And I end up doing all my research, figuring everything out Wednesday morning, the day after the 4th of July and texted one other investor I know that I borrow money from. Sometimes he bids at the sales that’s why I texted him before I bid just to see what he’s doing. I don’t want to provide a huge amount of competition for each other since we’re friends and work together sometimes and he said, “Oh yeah with the holidays and everything, I just don’t even looked at the list. I don’t know what’s going on”.

So hey, that was a good sign. I showed up at the sale and ended up getting a property there much less competition than normal, still a few people showed up but that’s nice to see, getting a property from the foreclosure sale. I might have been able to get two but I ended up just getting one. So that is another way. I got a property that wasn’t listed on the MLS still. The competition on the foreclosure sales but once in a while, I get a good deal there.

I bought one property in 2016 from the foreclosure sale, one so far in 2017. So those are how I’ve been getting my deals lately. I still have another one under contract that was MLS. So like I said there’s still opportunity out there to get MLS deals but I’m really trying to expand how I find deals, the sources I get them from, how many wholesalers I know. Just the more I have available, the better off I’ll be if one source dries up.

If MLS dries up maybe I’ll still have wholesalers. If wholesalers dry up maybe I have direct marketing. If direct marketing isn’t doing well, maybe one of the others will be okay but there are so many ways to find deals out there. I think in most markets if you’re willing to work hard, you are willing to set up systems to find those deals, you can find a deal and even with investor competition out there, there is going to be ways to find deals no matter where you’re at.

Alright, so more on the direct marketing. I know this is something that’s very interesting to a lot of people. What the basic idea is you send postcards, you send letters, you send some kind of mailer to people who are maybe absentee owners. They don’t live in the state, they have rental properties, elderly sometimes you can find inherited property list where people inherit a property. You’re just trying to market to people.

Who may not be willing to list on the MLS, they don’t want to list on the MLS or you are trying to find properties that are not in great shape, maybe they’ve got renters in them for 10 years. They inherited a property that has been sitting around for a year or two and they still don’t know what to do it. You are trying to target people who might be motivated to sell but for whatever reason they don’t want to put it on the MLS. They want to sell with a regular agent.

And like I said, find those lists, you can use list source, there is a number of ways to find those lists. It can be tricky creating them. It can get a little bit expensive and keeping track of everybody you’re sending it to can be tricky as well. That’s why it’s so nice to find this company that helped me out, helped me really create a direct marketing campaign without doing all the work because that is really my biggest constraint is having the time to do it all.

So once you send out those postcards, you have them call you, check out your website, whatever you want to do and then just talk to them really it’s scary at first talking to these people who are wondering why you called, what kind of deal you want to give them. Some don’t like it, some will be flat out nasty to you, hopefully not too many. I mean you just have to understand that some people have nothing better to do.

You know the people who are calling being nasty like they could have just as easily ignored the letter and thrown it away. That’s what most people would do but some people they like to complain, they like to cause problems and so they do but you have to have a thick skin and just ignore them and the people who do call who are interested in selling it’s really just about building rapport, talking to them, listening to them, hearing them out.

Trying to figure out if they are a good fit for you or not. Some people will call wanting full retail value, they just don’t want to pay real estate commission. That doesn’t really work very well but other people they realize you know, “Hey I could list it on the MLS. I don’t want to do any work. I don’t want to pay the real estate commission, I want to sell it fast” maybe they are embarrassed of the way the house looks or they are out of state.

They don’t know an agent. They just want to sell it. They’d rather sell it fast for a little less money than worry about other stuff and those are the people you’re targeting. When I got this deal, that’s who I targeted. The guy was savvy, knew about real estate prices, knew what his house is worth but he also knew it needed some work and he also knew that he wanted to sell it. He didn’t have time to do the work, he didn’t want to mess around with showings or with an agent.

So he ended up selling it to me first. I am not out there trying to trick him, trying to tell them their house is way less than it is. I am honest with them and the people I target are people who realize the value in selling it to me for their particular situation. So it took some time, I had to talk to the person probably for a couple of weeks before we got a deal struck. I’ve got a couple other people who I have been talking to who I might get a deal done as well from this first mailer.

I have been talking to him for a couple of weeks and a lot of it is building trust, knowing your values, knowing what you can offer them, knowing what the repairs are going to be and being able to explain to them what you’re going to do, why you have to pay the price you have to pay and getting a deal done. Like I said, it’s really nice too that this company takes the first calls for me because they can talk to the people trying to get a value in mind for what the people want.

If they are going to be nasty or mean, they can weed those people out for me, pretty good, pretty cool system. So my direct hit marketing campaign is going very well. I’m going to continue to send out mailers every month. We’ll probably be sending out 4,000 or so letters every month now for quite a while and like I said, the more you send out snowballs. So you get more and more leads hopefully more serious people.

Sometimes the people who aren’t willing to go out and find an agent to be proactive to sell a house, you’ve got to send them letters, mailers quite a few times before they go, “Maybe I should sell that house” you know there is a reason why they’re not motivated to sell with an agent but if you send them enough mailers then hopefully they will call you and you can work something out. So that’s one of the exciting things going on with my flipping.

Like I said, I’ve got 16 flips going right now, three more under contract to buy and I actually have six flips under contract to sell right now. So it’s going to be a busy July because all of those are set to sell in July. That will be a nice month to have those off the books. So at one point I might no – I won’t – I was going to say I might get it down under 10 flips but I will be buying a couple of more before I sell all of those.

So it’s gotten to a point now where I’m able to buy houses, get them repaired, turned for the most part in under six months with every house. That was a goal of mine, there has been a couple that’s been longer than that. Finding new contractors and hiring more people has been the key to that. I have hired another fulltime employee, kind of handy man type to work on my flips last week. That has been a huge help.

I’ve really dialed into contractors I have worked with. I have been very clear with what we expect. They have been doing a good job. Some of the houses we bought lately haven’t been huge repair jobs that’s helped speed up the process, one house that I sold or I’m going to sell soon, we didn’t repair the entire thing. We did the basics, the furnace, the roof, some electrical work but we didn’t paint the whole house so we didn’t replace the kitchen.

We didn’t replace the baths, we left those and it worked really well. Just extremely well. Ironically that house has been under contract for $250,000. The appraisal came in at 230 and it’s like, “Oh” that is a $20,000 hit. That is a lot of money. I had two houses earlier this year that had low appraisals that cost me 14,000 on one and 18,000 on another. We challenged both of those. I think one of the appraisals came up $4,000.

So on this appraisal, it came in low. We challenged it, the appraiser came back at $250,000 it was so nice. I wasn’t expecting it but once in a while you get an appraiser to raise their value when they come in low so that was nice to see on that house. The appraisal to come back up to full value. It saved me $20,000. So we’ve done a number of things this year different with how we repair houses, contractors, how we buy houses, just constantly improving.

Even though I have been doing this for 15 years, it’s never cut and dry what to do all the time, easy job. Always learning, always changing, always evolving and hopefully adding this direct marketing will result in a number of new deals. I’m at a point now where I think we can easily handle 15 flips at once. We were doing okay at 20. It kind of caused a little bit of stress in the system but we got through it.

I think we can do 20 now with the new people we are hiring our new systems and who knows? Maybe we’ll push that envelope a little bit, maybe not. We’ll see what happens. I think doing 15 to 20 at one time is a good number. So if you are selling them all on six months, that gets you to about that 30, maybe 30 plus number you are doing a year where if I am averaging $30,000 or more flip we are getting close to a million dollars of income coming in from the flipping business which is pretty cool.

I wrote an article a few years ago about what it would take to make a million dollars a year flipping. Never thinking I’d come close to doing it myself and then here we are, getting close to doing that and the cool thing too is I think our profit margin is up higher than that $30,000 per flip because the market has been doing better and some of the new strategies we’ve been using.

Alright, so that about sums up this podcast. I just wanted to give a quick update on our direct marketing, the way we are sourcing deals. Like I said there’s still MLS deals out there. Not easy but they’re there. Still wholesale deals out there, again, they are not always easy to get but they’re there. Direct marketing is not easy either, real estate, flipping houses is not an easy business. It takes some work, some time, some systems in place to do it.

A direct marketing, you can’t really have a way go through it. You’ve got to put your all in to it, really focus on it that’s why this company I am working with has been so nice and if you are interested in working with them shoot me an email, mark@investfourmore.com. They are not a big company. They are pretty small. They don’t handle a lot of people but I can make an introduction. We also might be starting a Facebook mastermind group on direct marketing with them.

Going through the processes, how to do it all, really how to source deals in general. So that is something else that we’re putting into place slowly. It hasn’t really started yet but you might be on the lookout in the future again. You can email me at mark@investfourmore.com for more information on those programs or that company. I would not expect I will get too many houses from the foreclosure sale in the future but once in a while maybe one will pop up and I will get one.

And yeah, thanks for listening. I hope everyone has a great rest of the summer. I may or may not be in Disney Land when this goes live. I am going here in a few days and I am not sure if I am going to publish this next week or the week after but we’ll see what happens and yeah, thanks for listening and of course, be sure to leave us a rating, a review on iTunes if you like the podcast. Take care.

[END]

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