Intro:   Welcome, this is the Real Estate Investing Mastery Podcast.

Joe:      Hey, everybody welcome to the Real Estate Investing Mastery Podcast and for the second episode in a row, I am releasing an interview with another podcaster. His name is Justin Colby and we are excited about this interview. I've know Justin for a little while now and we have a lot in common, one of them being we love podcasting and we love real estate and so love doing deals.

I'm excited to interview him and introduce him to you guys, he's got a great show at The Science of Flipping Podcast, you got to check that out, but first I want to tell you, go to RealEstateInvestingMastery.com, RealEstateInvestingMastery.com. If my sequence or my order of episodes is correct the last episode we just released was with another podcaster named Matt Theriault, great guy and in fact a lot of these, a lot of these guys I mean we are in the same mastermind together and I talked a little bit about it on the last episode about the importance of mastermind, so I encourage you again if you are not a part of a mastermind, sign up, get one start one, they are amazing, they are awesome, but go to RealEstateInvestingMastery.com.

We got a lot of great shows in the past that are available for you to download and listen to. Also I want to ask you to leave a review in iTunes. iTunes is a great place to go to get some pretty fantastic information on real estate. If you go to iTunes and just do a search for real estate investing or real estate you are going to find at least a dozen or more of really-really good podcast out there on real estate investing and if you look at ours, if you go to real estate and you look at Real Estate Investing Mastery you will find us near the top– we are getting there, we are getting close, but we have a lot of really good reviews from folks and I'm just opening up right now, I want to read a recent review.

This is from Matt JB, Matt JB, five stars, great podcast, he says, “This podcast has been amazing for someone wanting to get into the wholesaling houses business, Joe and Alex are super knowledgeable and have a heart to help people in this industry, it's an expansive resource of high level insight from people who are actually thriving in their markets and want to share their journey. They really hold nothing back; I'm always excited to hear what they come out with next.” We appreciate that, thank you Matt.

Another one from Kay Frank I two, awesome content, five stars, “Joe, Alex and all your guests, you all provide amazing content in these podcasts. I have more episodes to listen to and every episodes takes my– makes my business better, thanks for all you hard work.” Well, we appreciate that. There is a lot of good in here, so if you leave us a review on iTunes, I don’t know 10 or 15 episodes ago I had a podcast called leave us a review get free stuff, and if you leave us a review positive or negative and then you email my office, we'll go ahead and send you some books, like electronic e-books that we've written and some videos, I did. I think I'm including in there also a Saturday workshop that I did on wholesaling lease options, and I'd love to send that stuff to you.

 

 

So we appreciate the reviews, it helps us in the rankings in iTunes; it helps us spread the word. Okay, so enough of that good introductory stuff. Justin how are you my man?

Justin: What's up dude? I love that introductory stuff. It is good stuff.

Joe:      It is fun and Alex is normally with me on these episodes, he couldn’t make this one, but sometimes our introductions get too long and I can hear people rolling their eyes over the– over my head phones because…

Justin: Yeah.

Joe:      So I try to condense them down as short as I can, but Justin what is your podcast called?

Justin:  It's called ‘The Science of Flipping' so the Science of Flipping on iTunes just like yours, in fact I think we are you know, both on the, what is it? New note worthy for sometime together pretty much side by side and yeah, you know, we've known each other for a while now. And so the Science of Flipping is my podcast and TheScienceofFlipping.com is the website that you can find my episodes on.

Joe:      Justin has a really good podcast guys you got to go subscribe to it, like I said before there is a good 10, 12, 15 really good podcasts out there, but Justin's is one of the best, next to ours you know, one of the best out there.

Justin:  Of course.

Joe:      One of the best out there.

Justin:  Of course next to yours, absolutely.

Joe:      Anyway, so Justin what– talk a little bit about yourself real briefly, how did you get started in real estate? What were you doing before you got in real estate?

Justin: In 2005, well I'll make it very brief, but in collage my buddy and I decided we wanted to go into real estate, we were both going to UCLA, and we wanted to go into real estate. His father was a developer, so he said let me go learn the business, you know, you go do whatever you need to do for the next year or two and then let's start a real estate brokerage. It happened exactly like that. I graduated in 2003; in 2005 we started real estate brokerage. In 2007 I left the real estate brokerage to become a full time real estate investor with my still business partner and best friend Eddy Rosefield, and we have been pounding the streets ever since and rocking and rolling, and our business has grown each and every year.

Joe:      That's awesome, now so you got started in about 2005?

Justin: Technically yes, but not as an investor. As an investor I got started in 2007.

Joe:      Okay, so you got started maybe one of the worst times in history.

Justin: Unbelievable, it was incredibly horrible timing. It was really bad but you know, again I'm still here almost eight years later you know, I don’t know if there is either the right or best time to do it ever, but we found a way to get it done and progressed to where we are today in 2015.

Joe:      Nice, nice okay so when the market crashed, were you owning any real estate at that time?

Justin: Just personal and I lost it.

Joe:      Okay.

Justin:  I owned a $500,000 condo, two bed room condo and I lost that. My business partner owned a four bed roomed house, he lost that so we definitely have gone all the way down personally, and we have build it all the way back up to now running a seven-figure real estate business and we are a statistic as far as that is concerned. We went through that same troubles and heartaches as many of your listeners and many of my listeners went through. We just had the mentality we would never give up and never quit and here we are.

Joe:      I love it and the people that had that attitude are thriving. In fact I was reading somebody else's email and he was talking about Sam Walton, the amazing thing about Sam Walton– and I read his book maybe 15-20 years ago, a long time ago. The guy declared bankruptcy like three times, I don’t know if you knew that or not. But Sam Walton, the conservative guy from Atkinson, who drove a track you know, that everybody loves the model of a capitalism you know because he tried really hard to keep jobs in the Untied States and build this huge company and he is probably more than any person in American history has created more jobs, whether you agree with Wal-Mart hiring practices or their compensation or whatever, I mean the guy has, he's an amazing story.

But he failed many times before getting to where he was and when he was growing Wal-Mart, his credit stunk you know, he had like three bankruptcies in his credit reports and still able to pick himself up and succeed in business. In fact I was also reading somewhere that he claimed, and I wish I could remember the exact quote so I'm paraphrasing here, but when it came to dealing with people in business he didn’t– he had a harder time trusting them if they had never failed.

So sometimes it was a pre-requisite to have a bankruptcy or a failure in business because nobody has a string of 100% success if that makes sense.

Justin:  Yeah, it's very similar to you know, I have a lot of students, I do a lot of high-end coaching and I know you do some yourself and I have lot students who you know, say, I spoke to this investor, they've never lost money on a deal and you know, blah ,blah, blah. And I just sit there and I say listen, you know I've done well over 300 deals, I'm probably getting close to 400 if I had to count exactly, and you know I can sit here and say we've done very well and I can show you our bank account, but at the end of the day we still have done deals that lost us money, and if someone ever tells they haven’t, to all you listeners out there, just don’t believe them.

You don’t do– here is the reality is if they have never lost money it's because they have never done a deal and or they've done one deal, they made money and they don’t have anything more than that one deal to say they've never lost money. It's just, it would be crazy to have any business person who is successful and who has been in business for several years to sit there and tell you they've never lost a deal or they've never gone through hardships. So I'm right there with Sam Walton. My bank account isn’t right there with Sam Walton, but I'm right there with that same belief.

Joe:      Well good, All right you've seen the highs and the lows of real estate and you lived to survive, you lived to tell the story which I love. I love hearing those stories of redemption because I imagine when you are going through that and in 2008-2009 the market was tanking, you know you were losing the house to that, you were living and I did, I did a short sale, I had to do a short sale on the house that I was living in 2008-2009, I think. So yeah, I totally understand, I get it. It's tough, it's hard, and you look at that, you look at your circumstances and you think, could it get any worse, right?

Justin: Right.

Joe:      But it does, it get's a lot better anyway so Justin, right now you are doing a lot of deals all the over the country and we just saw each other in Dallas. I was speaking at a real estate investment club and we were talking about what you were doing there and you are actually now, you've done a lot of deals in California, but now you are starting to do more and more deals in different parts of the country, is that right?

Justin: Yeah, you know, we really focused primarily in Phoenix Arizona over the last eight years. I always kind of always had the opportunity to jump in to other markets, but right now our next market coming is Dallas, Dallas Texas and…

Joe:      I though you were in California for some reason, but you are in Phoenix.

Justin:  California, I started real estate in California, but we started real estate investing here in Phoenix.

Joe:      Okay, what year did you start in phoenix?

Justin:  07.

Joe:      07, okay and then so you are in Phoenix now and you've done most of your deals in Phoenix, but now you are starting to look at doing more deals in different parts of the country and Dallas is one of the Markets you are focusing on now, right?

Justin:  Correct. Right now we are actively in Dallas; we are looking at Houston and Chicago as the next markets we will be jumping into.

Joe:      Good.

Justin:  The focus there is we have associates there, we have boots on the ground you know, we have people that we can utilize and we would feel comfortable to be able to rely on copping properties, you know, taking pictures of properties and quite frankly we have buyers there. And you know as a wholesaler that's going to be your biggest keys, making sure you can get a property under contract anywhere in the country, but are you going to be able to unload it and so our focus really is to have those real solid buyers in each and every area that we are in.

Joe:      One of the reasons why you are in Dallas is to network and meet some buyers and I thought it was so cool because we were there, there was a lot of investors, a lot of big players and you actually hustled and you found some pretty serious deep pocketed buyers, is that right? Will you talk a little bit about how you found these-buyers?

Justin: Yeah, you know the way I always look at our business is that there is only one of two ways to find a seller or find a buyer. You either can market for them, send mail, billboards, radio, and market for them or you can network. Very similar to you, I know you speak at a lot of rears across the nation, REIA meetings, you know that you know, that– you and I were just at was the real estate investing expo, you name it, I'm networking, right?

Because at the end of the day, you can spend one of two things, you can spend your money, or you can spend time. We have the luxury of being able to spend both, so you know, I think I hustled, I'm always going to be a hustler, it's who I am. I'm not afraid to go into a market, go to some networking area and start talking about what we do, what we are looking for and how we can put deals together, because we are all on this game together, and if we can play together everyone is going to make a lot more money.

It's the individual who don’t have an abundant mindset and it's all about me-me-me, those are the ones that I don’t work well with. You know, we need to have an abundant mindset because we are going to do more deals, which means we are going to make more money, so you know, I didn’t do anything, you don’t teach yourself. I went in there, shook some hands, introduced myself, enquired about what people were looking for, how I could be of help, and by the time I left I had six fund buyers in my pocket on top of which probably about four or five fix and flip buyers. And so by now I'm ready to go drop ten thousand mailers and do what we do best which is drive leads in, and send them over to our buyers.

Joe:      And that's one thing I want to talk to you about because you made an interesting comment wile we were talking about how you are taking what is working for you in phoenix that you were doing in your backyard and you are just replicating it. It's a formula and I like the science of flipping, right, it is a repeatable formula that if you plug in this variable, you are going to get this out of it, and that could be potentially become a deal, right?

Justin: 100%, I'm a systems guy right? And even more so than me my business partner is a systems guy, and there is a system in an organization to everything we do. And it’s a– we can take this and we can do it you know, we've talked slightly about franchising and licensing our business and we could do that, but we could literally do that because of the systems we have behind us. In fact I'm likely going to license a avenue to get more sellers here shortly because it's a proven system. And it doesn't take anything besides following the system just like in McDonalds, and so we are going to probably license that across the nation to those who are looking to find more sellers because the system works. It's all about your systems, I know you know that.

Joe:      Well, let's talk about some of those systems if that's all right. What are the systems that you can copy and do in other markets, like you are not obviously looking at these houses before you send them a contract, so you are able to do this in your own backyard in anywhere in the country, and I've talked a lot about this in the show.

Let's start with the marketing okay. You've already gotten the buyers figured out which I think is really important for people to recognize, you went out and found the buyers, you found out what they are looking for and what are the best places to market, and you found out what their needs were, now how do you start marketing for sellers? What do you– how do you get your list?

Justin: What I'm going to do, I'm a direct mail fanatic, okay on top of that, I, what I was talking about licensing is finding leads online. No one has perfected it, and we are getting very-very close to doing it. But let's just, let's start with direct mail marketing. Like you said there needs to be a list, and there are several providers. My good friend Ken, he and I run a coaching program together. He has a software that will provide me with as many sellers, high equity free and clear vacant sellers that I can handle, instate, out of state owners it doesn’t matter.

So that's one list provider, there is another resource that can be used, listsource.com is another provider, and so there is a lot of you know, title companies can provide you with lists and title companies typically are free if you build a good relationship with them. So there is a lot of different list source providers out there and we kind of combined all of those to find our list. In fact we have a very ninja way of kind of working the MLS to pull certain lists as well. So you know, between the three or four avenues that we use you know, we are sending anywhere from 10 to 20,000 mailers a month, just direct mail. Now again I told you we have a marketing budget.

I mean we are, we are you know, very real in business in making money and some people don’t you know, and so you have to be a little bit more organic right? Bang the craigslist, for sale by owner, for rent by owner, back page you know. You can start door knocking in certain areas, you can start working with whole sellers and doing JV wholesale deals and finding wholesales on craigslist and so on and so forth.

So you know depending on you know, your marketing budget, there is a lot of different ways to find those sellers you know, and specifically if the title company gives you a list of, let's just say people who bought their homes from 1970 to 2003 in the zip codes that you want, well if you don’t have a lot of money throw some rocks in the bag, tie it to one of your fliers and throw it on their drive way, because guess what get's picket up every single time, a bag of rocks in the drive way.

Joe:      That's good; I've seen people do that to my drive way before.

Justin:  Right and you picked it up every time.

Joe:      It gets your attention; you are like, what is this? Now you do a lot of marketing, obviously you have a budget and that's how you understood the importance of lead flow and it does take money to do marketing like that. What do you– how do you handle the volume because you get a lot of calls coming in? How do you set up your call center or your negotiators, the guys who are on the phone taking the calls? Walk through that part, would you?

Justin: Yeah, we have a lead manager, his name is Anthony. He is the one that takes in the call; in fact we use Podio just like you do. I think it's the greatest invention to a real estate industry for long time and I know you are a big advocator yourself and so when the lead comes in we have the number, we have the voice mail, he reaches out to the seller and in takes all of the info at that point if it get to a point where they are interested and motivated.

He will hand that lead off to the acquisition manager, Danny and Danny will then go out and meet with the seller with our property renter David who David will be taking pictures for us and Anthony will start to kind of negotiate with the sellers and Danny has– I'm sorry, Danny starts negotiation with the seller and Danny has full autonomy to submit the offer right then and there because before he goes out my partner Eddy does underwriting on what we would buy it for.

Joe:      Okay, well, let's rewind a little bit. The calls on your, the phone numbers on your post cards, do they go to a live operator, voicemail? How do you do that?

Justin:  Voicemail, we use rang central, it goes to a voicemail.

Joe:      Okay.

Justin: We never pick up live and I know some people don’t agree with that, but we rather it be a calm environment. Too often you find yourself picking up the phone when you are driving or you are in the store or whatever because you think it's a seller but we'd rather just call them back.

Joe:      So does your post card, say caller 24 hour recorded message hotline, or whatever?

Justin: No, you know we actually send a letter and it says something general like you know, we are a local investor, we see you on one two three main street, we are interested in purchasing your home, if you are interested to speak with us further and or know more about what your home is worth please give us a call at any time, look forward to speaking to you soon, something generic like that, very close to that and we get a very good return on that letter.

Joe:      Nice.

Justin:  And so you know, they call whenever they want to call, we never answer and it just goes straight to voicemail and even if they don’t leave a voicemail, Ring central will capture their phone number, so we can always call them back.

Joe:      And how quickly do you call them back?

Justin: You know, like ASAP unless they call at 8 PM.

Joe:      Right.

Justin: But you know, like today I think we had a caller like 11 or something, about 11:02 Anthony was on the phone calling him back.

Joe:      And how important is it to call them as quickly as possible?

Justin: Very-very, I mean we give very little excuse on you know why someone wasn’t called immediately. So I'm all over this guys about you know– because I get a message every time someone calls.

Joe:      Yeah.

Justin: So within five minutes I'd like you to call them back yet and they have to have a pretty damn good excuse for not doing it. You know if its 8 PM they are not going to worry about it but if it's within you know, till 6PM let's call it they got to be on that phone.

Joe:      The– it is super critical and I've seen studies– I don’t remember the numbers but it's about you know, 80-90% your chances are about 80-90% better if you call them back within five minutes unlike every minutes after that it just dramatically drops down.

Justin:  Right.

Joe:      Your chances of getting them, and that goes too if they visit your website and fill out a form and they put in their phone number or something on the website, you better have somebody call them within a couple of minutes. Really important I totally agree one thing I want to suggest that you test, Justin is trying this in your letters, maybe you have tested this, but I found to be pretty successful instead of just having a phone number called. Sometimes I'll stay on there caller 24 hours recorded message I've recorded a special message for you about our program or whatever. Call this 24 hour recorded voice mail. I find I get two to three times the call when I do that.

Justin:  Really.

Joe:      Yes.

Justin:  Okay.

Joe:      Just test it.

Justin:  Because they know they are not going to answer so they don’t feel intimated about calling.

Joe:      Right, but then don’t give them any other options. Don’t give them a website.

Justin:  What do you say on your recorded message?

Joe:      It like a two minute three minute long message that kind of just basically reiterates what a standard post card says.

Justin: Got it.

Joe:      Benefit, benefit, benefit, you know can help you sell your property fast so you don’t have pay any closing cost and we'll take care of whatever your problems are or whatever. It's just simple out going message. Now I've tested different things and I don’t have any measurable result but sometimes I'll have them out outgoing message you know if at any time during this message press pound to go right to the voicemail. But it's a simple 24 hours recorded message about two minutes long and then every call that comes init gets captured and put into the system.

We use Call Real and Vumber and those calls get sent immediately to Podio and my VA gets tasked, he calls them back. We are not as good as you are with calling them back but I'm working on it. The– some of my wholesalers we do marketing for, but that's another story. The thing that's powerful though is your– if your post card or your letter says call this 24 hour recorded message you get more calls. The other thing I'll mentioned is I have a friend and I won't mention his name on the podcast but all of his direct mail he puts on there caller 24 hour recorded voicemail but he still has people answer live and I though what? Why on earth would you do that? He said well nobody really ever complains, nobody really ever gets upset about it.

He does know it gets more call number one and he's found that it's the chances of getting a hold of it and talking to somebody is that much higher when you answer the phone live so it's better but anyway something that you want. Now you have somebody that intakes the calls, that initial call back. What are some of the question they ask, Justin?

Justin:  Yeah, your typical question right, you know, thank you for calling, you know, I want to know a little bit more about you. They kind of go through who we are right? So the first is because I get to your home would like to know a little bit, I would like to tell you a little bit about us. We are local cash investor investing obviously your neighborhood that why you obviously received the letter. We are you know cash investors that do very similar to what you see on TV. We buy we fix it up, make it look new and we resale it. You've watched that, those shows to right?

Of course everyone says yes. Okay, well just so you know, working with us there is not commissions, there is not cost, there is no repairs blah, blah, blah. Well now that you know what we do can I ask you a little bit about yourself and why you have any interest in selling, right? Oh, well I'm not sure I want to sell but you know, whatever the reason is and we say okay can I know a little bit more about your home? You know, square footage, bed, bath, how old, what year you know and then some of the key questions I like to have them ask is to make this home in mint condition, how much do you think would need to spent? And it just starts to make the seller realize it would take a lot of money to make their home mint condition and that they don’t have it. Most often they don’t have it or they simply don’t even want to handle it.

So then I say you know, what was one of the other questions that’s the key question would be, when was the last time you updated the kitchen? You know, have you done new cabinet or new granite? What was the last thing that you actually had to replace? Have you had to replace the air conditioning or the roof? Right, and so I ask those specific things to know what exactly I'm walking into, so we already know that the home needs a lot of work, right?

The home is going to need a lot of money and then we will play on the fact that the seller is most often are calling because they don’t have the money to do it you know, they lost their job, someone passed away, someone is I'll. They are down grading, they are upgrading. They need the money for a new home whatever that would and we come in there and we solve their issue.

Joe:      Simple.

Justin:  Yep.

Joe:      Okay, now your first guy takes basic information, does he make an offer or does he send the lead then to– I think you mentioned Danny.

Justin: Yep.

Joe:      So it goes to– if the seller–how does that work though? I mean does he take the basic information and put in Podio and then your acquisition manger gets all of those leads and calls them back himself or what happens them?

Justin: So Anthony who's our lead manager vets them out to a certain point, right?

Joe:      Okay.

Justin: Because as you know a lot of these people say, ” Oh well, I just wanted to know the value of my home” or whatever right? They are not really motivated. Once there is a sense of motivation then my lead manager Anthony will task and assign that property to our acquisition manager Danny. I mean he does that through Podio, and then it's up to Danny to call that seller back and set a time to meet.

Joe:      Okay, now is Danny in Dallas or is he in Phoenix?

Justin: He's in Phoenix.

Joe:      Okay, so Danny gets motivated seller lead that Anthony has vetted and by the way is Anthony in Phoenix too?

Justin: Yes he is.

Joe:      Okay, have you tried doing this with VAs in the Philippines?

Justin: You know I haven’t, I know a lot people who have.

Joe:      Okay, then so Anthony puts the information in Podio, he assigns a task to Danny. Danny gets notified, hey, there is a hot lead here. Danny calls them and his job is to what? Try to make and offer?

Justin: Negotiate the deal, Yeah, like for example, we are not going to change anything in our system, reason being is it works here. So obviously we are going to be making a virtual offer and just you know– we obviously know what we are buying and what we are buying as long as the number makes sense for you Mr. Seller we are happy to give you this offer.

So yes, Danny then is in charge of negotiating that deal with the seller and submitting an offer. Obviously in Phoenix he can do that face to face but starting in February it will be virtual so at that point you need a very good relationship. You need to build a ton or rapport, make them love you, make them understand who we are, that we are here to be a service to them, someone and so forth.

Joe:      Okay, how do you play the game, how do you train your guys to play the game of–what do you want to walk away with for your house or how much cash do you want or how will you ask it? And they say I don’t know just make an offer, how do you dance that game where you are trying to get a number from them; they don’t give it to you, how do you do that?

Justin: Yeah, and I think it's like a dance, right you keep saying it's like a tango or salsa right?

Joe:      Right?

Justin:  It's like that, whose turn is it, how do you spin that turn and so it kind of depends on the person's personality. I mean as you know there is those, there is those men in general would be like, no, I'm not saying anything till you give me a number. Nope, I'm not saying, you know and it's just fine, I'm not going to play this game with you.

Joe:      Yeah.

Justin: We'll give you a number, but what we'll do in those cases is we'll say listen, you know I haven’t officially run our number. I don’t have any of my contractors in here giving me an official budget you know, so I can be close to what I think but at the same time you have to give me some leniency on you know being able to work some numbers you know here is the offer that I think we can give you today are we around your numbers? Right and that's when people, and we come across them as investor and we get that stubborn guy that literally just, or female, hey, I'm not giving you my number, you give it to me.

Well, fine but you are giving excuse on why the number comes in where it needs to be you know and there is a lot of different ways that you could do that to say listen you know I know I'm going to need to put about $60,000 into this. Mr. or Mrs. Seller, I would love to be able to give you a number but if my number is not even close to where you are at or whatever then let's just not waste each others time. I am the one that's going to buy your home and then put money into it, if you could just give me the respect to giving me a number that you would at least I know where we can be starting, right? Because everything is a negotiation right Mr. and Mrs. Seller?

Joe:      Yeah.

Justin: So I kind of play on the fact that I'm the one spending all this money and they start to realize that right? They start to say, okay, I get it; you are going to have to come here and redo our home so.

Joe:      I like sometimes saying, listen I know your time is valuable; I don’t want to waste anymore but just come on, give me a number that would make you happy? I like that kind of a question as well because it takes a little bit of the pressure of, make it light joke out of it and a lot of times believe it or not for me in my experience when I say just give me a number that will make you happy, that opens up the door a little bit more and they'll give me a range after that or give me a ball pack.

Justin: Yep, there is another– there is another thing I'll say which is very similar which is what I teach my guys to say now at this point is you know, Joe in your ideal world what would be the number that you'd want or you know, what would be number that you would be able to sign today? In your ideal world if this was a perfect world what's that number look like? We all know it's not a perfect world Joe, but hey, let's pretend it is, what is that number, perfect world? Same idea, right? It gives– it lets their guard go down a little bit.

Joe:      Yeah, it's real simple, just keep it conversational and the key to this all is just listen, listen, listen, and stop talking so much.

Justin: Amen to that, that's the key.

Joe:      And I need to remind myself of that a lot. Okay so you've got Anthony then who get's a number from a guys and you find out you know, there is an equity motivated, do you, you send them the offer online or do you schedule a time for your acquisitions guys, your boots on he ground guy to go and look at the house and make an offer in person?

Justin: Yeah, I mean obviously here in Phoenix in person is always better.

Joe:      Right.

Justin: But obviously as you did this virtually that's not necessarily going to be the case. Not until you build a team at least on person who can at least go meet with the seller, but you know we understand that that's not going to be the case as we do that in Dallas. So it will get assigned over to Danny and then in Phoenix he'll book and appointment to go meet the seller and in Dallas he will simply build rapport, build rapport, build rapport, negotiate, negotiate, negotiate seller, what you ideal world? What's the ideal number? Let me see if I can get somewhere close and then we can kind of open up discussion you know, and send over the offer.

Joe:      Nice.

Justin: And you can say, hey, review the number, review the offer it's very simple, clear cut, the number on there is the number that goes into your pocket, no fees, commissions, closing cost or otherwise and let's just set and appointment to discuss tomorrow about where we stand.

Joe:      Nice, you know our mutual friend Tod Toback, You know Tod, don’t you?

Justin: Of course.

Joe:      He does something really ingenious, he actually send a notary to the house. So if he's got the seller that says yeah, okay and they kind of verbally accept the offer, he say all right well, I can get the notary there in about two or three hours, is that okay? And if you go to onetwothreenotery.com you can actually find notaries that are willing to travel and go to homes but it does a couple of things, it gives that seller some urgency a sense of urgency. Okay, somebody is going is going to be in my house in like two hours or three hours to sign the contract.

It also what it does is once that seller signs the contract it removes the, it lessens the chance that they are going to start calling other whole seller to get more pricing on it. You know what I'm saying? It gives them a more finality, this is a real contract, this is a real deal, and also because it's a notary you know the seller can't really negotiate or try to negotiate a lower or higher price with the notary. The notary is just there to get the paperwork signed.

Justin:  Right.

Joe:      But it gives the sense of urgency, seriousness about the matter. You get that contract signed as quickly and possible and the notary is not going to be able to answer any questions about the contract just like ding dong, they knock on the door, okay, here is the contract, sign it, just giving it to the seller to sign and that's it, it gets done. That's, I know for– and I'm not doing that in any of my markets right now. I have my whole sellers on the ground actually going to meet the person and meet the person, meet the person at the house. You will close more deals if you can meet the seller face to face but until then don’t think like you can't close a ton of deals and do a ton of deals with just virtually.

It's too easy sometimes for that contract to just get lost in the mail or if you are doing it online sometimes they don’t understand how to use a Hello sign or a Doci sign. So for those of you out there thinking about dong something like this just consider something like onetwothreenotary.com finding some local Notary in that market that you are in and just having a notary go to the house, it's not that expensive depending on the are that you are in it could be anywhere from 20 to 50 bucks.

The other thing that I was thinking while you were talking Justin is–and we were talking with Mat on my previous podcast about this, there is a service that we golook.com that you can actually hire companies or people to go look at houses for you and take picture and fill out a report on the property. That's something else if you are doing deals in another market you can have people do for you.

Justin: Nice.

Joe:      So obviously Podio was managing all of these for you.

Justin: Correct.

Joe:      And you are calling these leads back immediately and I'm assuming Danny as soon as he gets tasked in Podio he is also calling them back pretty quickly right?

Justin: This is correct.

Joe:      I can't overstate the importance of that, so important. I can't tell you how many deals I've lost because my team hasn't called the seller back right away and then it's been a day or two days and I can look in the notes and I can see five times in a row left message, left message, left message, you know, they are just for some reason really hard to get hold of.

Justin: Correct.

Joe:      What we just started doing recently is with my VA now who so making these calls, he'll send a text message every time he leaves a voicemail. He'll text, send a text message to that same phone number and that's been increasing and helping some of our response rate as well. I wanted to ask you about your boots on the ground Justin.

Justin: Yeah.

Joe:      Are you partnering with other whole seller, are you, who your boots in the ground in these markets that are going to look at the properties?

Justin: Yeah, we are going to work with other whole Sellers. We have a pretty good network; we know you do as well. So it's not really hard to find the right people to get the boots on the ground for us and so Yeah we are going to– whether they are just beginning or you know, maybe even a couple of our student who want to kind of get in the game and get paid anywhere from you know, a 1,000 to $5,000 depending on own deal you know.

We definitely will have those boots on the ground but working with other whole sellers, other investors, realtors out good options as well especially hungry realtors they can also fit the bill you know, because realtors have the same struggle we do when we are starting. It takes a lot of money and you have to build a name and kind of get good at the territory in an area and you know why you are doing all that is you are working on a 100% commission. So they'll be happy to help you out and try to get a deal and then get money in their pockets.

Joe:      Nice, Can you talk a little bit about follow up Justin. Are you sending offers to this seller after you talk to them?

Justin: Yeah, you know for Dallas, it's pretty immediate obviously we have to be somewhat at the same page. We have probably to disclose to them a number around about that number on the phone obviously and so at that point we got to do a little more virtual.

Joe:      But I mean if you are, let's say they say no or you are miles part, they want 300,000 and you are only willing to offer 30.

Justin: Okay.

Joe:      Do you still send something to the mail to them? Do you still follow up with those folks?

Justin: Of course, 100%.

Joe:      Okay.

Justin: Here is what we have found and I can tell because it literally has pissed me off towards the need of last year. So in June or July of last year we had a deal that I think we offered $80,000 for the seller said no, I wont taking anything less for like 120, like we were off like Right? We were no where near.

Joe:      Right.

Justin: And so we considered it dead, right? So we tried to do what we could do, they won't take les than 120 well, we are $40,000 off, we are not even getting any close, marked it dead. Just by chance I went in and started reviewing some of the dead deals, this property that I'm speaking about ended up selling in November for $40,000.

Joe:      What? To somebody else?

Justin: To somebody else and it killed me to know that if we were just a little better on our follow up we could have gotten that property at even $60,000 right?

Joe:      Wow!

Justin: If we were just a little bit faster, a little bit better and so now I'm stickler about follow up. I don’t care about how far off we are, deals do not go dead until literally the person is cursing us out saying go to hell.

Joe:      Yeah.

Justin:  I mean, they don’t go dead. You need to have a follow at very minimum once a month for every single lead that comes through our pipeline. I don't care how it starts, it's all about how it finishes, and the you know, how does the saying go? The fortune is the follow up.

Joe:      Yeah, your follow up is your best list ever. There is no more list more valuable, there is not list whether valuable that your follow up list.

Justin: Correct.

Joe:      And the longer I've been doing this, I'd say 30-50% of our deals are from the follow up, people who said no at one time. So what is your follow up look like Justin? What do you send them?

Justin: Well, if it its virtual we obviously would send them an offer immediately just because we want them to know that we are serious, that we aren’t just giving them limp service.

Joe:      Yeah.

Justin: Then our follow is more phone calls at this point. We will send them you know, a letter every two months to let them that we are still around and we still want to be you know– I'm a big stickler on, I kind of grew up in sales worked before real estate. When I left collage I went into sales and it's all about that human connection in all about that rapport. I know there is a lot of people that do email drips, and a lot of people the follow up with letters. I am more concerned with building that rapport and physically being someone that they can call or answer their phone to. So our follow up primarily is on the phone and over the phone until we get so many leads near that it's physically unable to happen we are sticklers to keeping it over the phone.

Joe:      Nice, we do that as well. Our follow up consists more of just the sending letter. We also try to well– I leave it up to my VA because my VA put a lot of time we'll set up reminders for him to call them back in three weeks and three months and so he's constantly–and that's the beautiful thing about Podio is you set up tasks and it reminds you later on when it's supposed to happen. It's all about no leads left behind or not letting any…

Justin:  That brother there should be you know what, that should be our podcast. Joe and Justin do no leads left behind.

Joe:      No leads left behind, I like it.

Justin:  I like that a lot.

Joe:      And I wish I could say I came up with that, but that was again Ted Toback, that's his big mantra.

Justin: Hey, give credit where credit is due. He's a great guy, great investor, great guy as well.

Joe:      Yeah, I was just talking to him last night about a suburban finally. I've been bugging him about that because he needs a bigger car because he's been driving this minivan with his kids, so finally he bought one in fact he said, he texted me a picture of the car and behind the car was a big parking garage and he asked me and he said– he said in his text, “Hey, look what I bought,” and I replied back, the parking garage? And that was kind of funny he said “No, I should have actually bought the parking garage because it gets ROY financially with the parking garage.

Justin: Of course.

Joe:      But anyway he gets better memories with his kids in the suburban. All right, I digress, sorry about that one. So okay I love the follow because that's so important and I talk about it a lot and I hope everybody listening to this gets a clue how important the follow up is. One more thing I want to ask you Justin because you are doing all these offers, you know, virtually you are in Phoenix and you are making offers on properties a hundred or thousands miles away, how are you coming up– how do you calculating the offers? Do you have a simple formula? Is it complicated? How are you calculating the offers?

Justin:  Yeah so, so specifically we are dealing with the Hedge funds which are a lot of our buyers in Dallas, it's going to fit in their box. Okay, so I'm looking more cooperate or the yield that they will be getting on an annual basis.

Joe:      Can you give as an example?

Justin: So one of the-

Joe:      I'm sorry to interrupt I just, I think it's so key because and I learned a lot of these from Ken, you talked about him, he's the one that– I can't tell you how much I've learned from him, the guy is awesome. But I've read and devoured his reverse wholesaling book and his stuff on cash buyers, and it's all about reverse engineering, the process, right? You find out what your buyers want, it's simple as that, it's not hard, it's not rocket science.

Justin: Absolutely.

Joe:      So you found out the numbers that your buyers will buy these properties for, that’s how you come up with your numbers, so give us an example please.

Justin:  Yeah, so for the hedge funds a lot of them will work on like about a six percent yield may be a little bit less. What that really means is, when they invest their money, acquisition, and any repair cost, how much return on investment are they getting? And because the hedge funds have millions and billions of dollars, six percent of $10 billion is $600,000.

Joe:      Well six hundred million– no wait.

Justin:  Ten billion will be six million I'm sorry.

Joe:      Yeah, yeah something like that.

[crosstalk]

Justin:  Something like that.

Joe:      It's a big number I get your point.

Justin:  It's a huge number, and so they can work off very skinny margin relative to you and I, okay. So I just need to know there six– what their yield needs to be, and what they're calculating, meaning how much are they looking to spend in rehab budget? What are they looking to spend in acquisition cost and in what zip codes? And at that point I can do exactly what Ken has taught hundreds of thousands of people is reverse engineer it, I know exactly what they want and I go find it and I go find it. Now that’s how I work with the hedge fund, I know exactly what the numbers need to be, I know how much money they need to make on their investment. The home needs to be built because they only buy newer they don’t really buy anything older than 1990.

Joe:      Yeah.

Justin:  I know all that and I just go find it for them fulfill it. Obviously the deeper discount I can get the better, so let's say the hedge fund would buy it at $200,000 and it gives then their six percent yield, and I can negotiate with the seller for 180 well I'm going to make 20 grand. But at the same token if I can negotiate to 197 and I make three grand and just to sign it to him, but they want 20 of those a month what's three grand times 20?

Joe:      Yeah.

Justin:  Sixty grand, right? So working with the funds has been very profitable for me, because it's very easy to reverse engineer it or reverse wholesale it, where I know exactly what they want? Where they want? And how much they'll spend?

Joe:      And you're basing these yields six percent cash on cash return or whatever ROI. The rent, so that’s kind of where you start from right, you figure if this house will rent for 1,200 a month, you work backwards from there, is that right?

Justin:  Oh yeah we have the three things that we have is acquisition budget, rehab budget, and the rent of that area, and we work of that.

Joe:      Okay.

Justin:  In places like Dallas it can vary, Phoenix is pretty standard, but Dallas can vary from like 80 cents a square foot all the way to like a dollar twenty five a square foot, in a very specific neighborhood.

Joe:      But these properties that these hedge funds are buying, they're buying them to rent they're not buying them to fix and flip isn’t that right?

Justin:  That is correct.

Joe:      Okay, so when you're calculating six percent yield that’s what they want to be all in, they want to be making at least six percent on their money. So like you're taking the annual rent, you're taking out property management, you're taking out vacancies, repairs, maintenance, things like that right?

Justin:  Yep.

Joe:      Then you're taking out rehab cost, and acquisition cost, and you're also taking out whatever wholesale fee, you want to make on the deal?

Justin:  There you go.

Joe:      And then that’s– then you divide that number by six percent or something like that, and that's how you come up with your offer for that house, right?

Justin:  Yeah you look at how much money they've put into it, which will be acquisition and rehab.

Joe:      Right.

Justin:  You multiply how much money in rent that they'll get times 10, because mostly they always allow for two months of vacancy a year.

Joe:      Okay.

Justin:  Right and then you're going to be able to get your cap rate.

Joe:      Right.

Justin:  Because you divide how much rent their making a year, towards– divided by how much money they put into it. Now that’s the easy way to do it. Some funds want you to adjust for taxes and blah-blah-blah, some don’t care some just say give us two months of vacancy and that will be good enough.

Joe:      And they manage their own properties though?

Justin:  They manage their own properties.

Joe:      There you go nice, obviously you don’t know that unless you ask them, and you talk to them right?

Justin:  Correct- correct you need to know a lot about them. Like I say I'm like their personal shopper, you tell me what you want I'd go get it for you.

Joe:      Nice.

Justin:  That’s who we are, right? If you're finding deals for a wholesaler, oh I'm sorry a fix and flipper my formula is very quite simple. I take the ARV which is after repair value and multiply it times 75%, I subtract my estimated rehab, and then I subtract what I want to make as a wholesaler, and that its. And I know there's part of California I'm sure you have plenty of people listening to you in California and New York, and 75% is just too low and I get that. So it's not going to be a complete blanket but its' a foundation. If you're in California, I'll say you're in Northern California I know it's an incredibly hot market you might need to be at 85% of ARV.

Joe:      Yeah.

Justin:  But for me in Phoenix and in Dallas it's 75%.

Joe:      And then how do you quickly calculate repairs? Do you have a magic formula for that?

Justin:  Yes I would say anything older than 1980 you're looking at about $20 a square foot for Dallas and Phoenix, anything 1980-2000 you're probably talking $15 about a square foot, anything 2000 or newer you're probably talking about $10 a square foot. Now that’s because our markets are similar in price, but if you're going to do this virtually and you're going to Chicago. The only real way to do that is to start calling contactors– and you might have some other ways Joe, but if I were you I'd suggest you start calling contractors in that area, and start talking numbers.

How much is for you to redo a complete kitchen, that’s 500 square feet– start talking numbers and start learning the area, and learning what contractors charge. How much do you charge an hour to install cabinets? How much do you charge and hour to paint? How much do you charge and hour for this? And start writing those down and documenting it, and so you can have a general jest of number that will work for those areas, because even in Phoenix you might buy $100,000 homes, spend $100,000 on rehab if you really wanted to, right? And tile and Italian Mable, I mean you can do whatever you really wanted right?

But the reality is there's a basic look for every region, there's a basic model, and you're just going to learn that through your contractors.

Joe:      I think the point we need to make clear to people especially, if you're new and getting started it's easy to get overwhelmed with all these stuff you got to figure but it's really– I tell people look, “If it's close just get it under contract, because you can always renegotiate it later,” and you shouldn’t be spending a ton of time trying to calculate the ARV, trying to figure out what the rent would be and looking at ton of combs, and then doing detailed rehab estimates, when you don’t even have it under contract yet.

And a lot of the times investors I think you'd agree Justin use that as a crutch or an excuse not to call the seller, right? Or to wait to two or three days before you call the seller back with an offer. I was just talking to Matt Terrio when I really liked how does it, when he's estimating repairs depending on the market that he's in, and the price range that he's targeting, he just a simple five/ ten dollars– five dollars a square foot if it's no rehab and these are only rentals, so this is rental rehab, okay.

Five dollars a square foot for no rehab, $10 a square foot for little rehab, and maybe $15-$20 for major rehab just to get it rent ready, and that’s a simple little calculation that takes 30 seconds to do. My point is don’t over think it, don’t over analyze it, if you have a hard time getting combs just use the zero value, right?

Justin:  Right.

Joe:      Just use the zero value and throw a number 70 maybe 75/80% of that depending on where you are and subtract your wholesaling fee, subtract a basic $5/$10/$15 per square foot price for repairs, and make the offer, just make the offer you– your success in this business is determined by a couple of things. One of them how many leads you have coming in, so how much marketing you do. And then almost equally as important how many offers you make, and you've got to be making offers. I love how you've just systemized this, and you've formulated– you've created formula so that it gets done automatically, and it's just so easy to duplicate.

Justin:  Yeah that exactly the cloth I was cut from.

Joe:      It's awesome.

Joe:      Okay hey, Justin how can people get a hold of you, they know how to look for your podcast The Science of Flipping; is it thescienceofflipping.com is that your podcast website?

Justin:  Yeah they can go to thescienceofflipping.com, but they can also give me an email– the direct email info@thescienceofflipping.com, and just because I know how loyal your listeners are, and how great it is, I wanted to be able to give them a free gift today.

Joe:      Nice.

Justin:  You've already told them where to go to get that free gift. I have a book on Amazon that is currently selling each and every day for 12.99.

Joe:      Wow.

Justin:  It's called The Science of Flipping, how strange, and everyday people are buying on Amazon, and because you're Joe McCall the master wholesaler, I wanted to give that book to your listeners for free.

Joe:      Nice.

Justin:  So put in your info and I'll give you that $12.99 book for free, it's The Science of Flipping, and this is the book that I get my students just talking about how its changed their game, I get people who aren’t even my students saying, “I bought your book, it's incredible, the golden nuggets in each and every chapter.” This is what I put together after about six/seven years of running this business. And so again I'm going to give that to your loyal listeners for free at thescienceofflipping.com.

Joe:      Thescienceofflipping.com, I'm looking at Amazon here and did you know there's– you know how you can sell used books on Amazon, the cheapest price for a used book is $33.51. People are selling your book used– plus four bucks in shipping, so they're selling them used for like $38.

Justin:  Yeah I'm– that’s crazy they're making money off of me, maybe I should be selling at $35 or whatever but…

Joe:      Maybe you should be selling your books as used books, not as new.

Justin:  That’s right, that’s right I'm selling them too cheap, I'm discounting myself but– I can't get enough– there so many emails that come in each and every day and just saying, “Thank you and the books had been amazing,” I just want to make sure your listeners get it for free even if they get one gold nugget out of it, it's worth it, Joe.

Joe:      Okay cool you gave the email address, would you them email you or just go to your website?

Justin:  Just go to my website thescienceofflipping.com, and put in your info and I'm happy to get that book to you.

Joe:      Awesome, well thank you Justin I sure appreciate it. Guys go to realestateinvestingmastery.com if you've liked this show, leave us a review on iTunes, and we'll talk to you guys next time, all right, thanks a lot. Thank you Justin.

Justin:  See you bud.

Joe:      Bye, bye.