A popular investment saying goes like this: “The profit in a deal is created when you buy, not when you sell”. In other words, the buying price that you negotiate with the seller is the moment that you lock in the potential profit.
This module will help you to properly research and valuate deals so that you can create your profit on the front end.
Jack: Hello, my name is Jack Bosch, and welcome to the myOpenPath training call on wholesaling houses. We’re going to talk about property research, inspection, determining the value, the true value of a house today. And I’m very excited to do this.
And again, my name is Jack Bosch. I’m the co-founder of myOpenPath.com, the largest training platform for real estate investing, financial education, online marketing, and financial independence on the planet. Today, I have a guest with me again, and you have seen him once before, a few weeks ago, about two weeks, three weeks ago, from two or three sessions ago, and his name is Mike McKenzie.
Mike Mackenzie is a contributor to myOpenPath, he’s one of our mentors in myOpenPath, and he is from Carolina. Mike, are you there?
Mike: I’m here. It’s nice to be on again.
Jack: All right, wonderful. So, let’s get started right away. I’m going to lead you to the program, and Mike’s going to give his expert expertise in not only, let me quickly go back, not only is Mike an expert in wholesaling, rehabbing, flipping houses, he has already done over 400 such deals.
So, you know me, Jack Bosch, often as the land person, I also have flipped a whole bunch of houses and rehabbed them and I have rental houses, and things like that. So we’re both very qualified to talk about it.
But in terms of rehabbing houses, Mike is an even bigger expert than I am. Because you know what? The houses that I usually rehab are the ones that I keep as rental properties. And obviously there’s different levels of rehab that happens when you rehab them for landlord purposes, versus rehabbing them for end user purposes.
And Mike has extensive experience in the rehabbing it for end user purposes, in basically what’s called the “fix and flip” world. And I asked him to be on the call today, again, to add to, from his experience and his wisdom, to the slides and to the process that we are describing here.
So today, what will you learn? Number one, we want to talk about a little bit more still about no lead left behind. We want to talk about, again, leads, about how the pieces to make sure that a little bit of the marketing. We’re also going to talk about returned mail and what you do about that.
And we’re also going to talk about some preliminary research on how to find the value of the properties to just, right on the phone call with the seller, knowing whether or not this even has a potential of a deal. So basically if the seller says he wants $300,000 for a house.
Well, if you know the area already, you can tell right away if that’s a deal or not. But if you don’t know the area, what’s some preliminary research that you can do to make sure that you know the property is even in the ballpark, that’s a price or a valuation that’s even in the ballpark of making that a deal. If you know that this neighborhood is all $600,000 houses, you don’t need to do much more research at this point before diving in there because you know this has a potential of being a great deal.
Number four, we’re talking about on-site research, exactly how to basically walk through the house, how to identify what needs to be fixed. And also how to utilize some of that to get a better deal from the seller. And we’re literally going to go deal, like room by room, through the house, and identify the different pieces of what needs to get fixed.
Plus, we’re going to help you out with estimates of how much that actually is going to cost you retail, or as a wholesaler, how much that’s going to cost you to fix. So this is where a lot of value’s going to be spent, and we’re going to be spending a little bit of time on today, because this is really where you design more profit into your deal. It’s a great way.
The next thing we’re going to talk about, off-site research. What is a comp, what is a like-kind property, and the difference between listed, sold, and pending sales. And also estimating and averaging, again, the values of these properties.
And we’ve got to do this, these items, five, six, seven, and eight, and nine, are basically areas where we want to make sure that when you run a comparable, when you really find the value of that property, that’s where you can also make, or very often destroy your deal.
You can do the best negotiating in the world, but if you’ve got the baseline value of this house wrong, then you might be negotiating yourself a dead deal. Because just as a quick example, we’ll talk about that in detail, is if you have a property that you could get for $140,000 after negotiating, and you figured out that the property is worth $250,000, and you negotiated hard, and you got it down to $160,000, it sounds like an amazing deal.
But what if your value analysis was wrong in the first place, and the property’s not worth $250,000? What if it’s only worth $200,000? In that case, even though you negotiated really hard, you are out of a deal. Because after repairs and things like that. And realtor commission, and hard money, and all this kind of stuff, there’s no money in that deal. It’s a dead deal. So you have to go back, and now negotiate it again with the seller. Or just write off that deal.
So, the comp, and what a like-kind property is, and the difference between listed, sold and pending sales, they all play into that same area, and that’s just a crucial area to make sure you understand before you even go and make an offer to the seller. And last but not least, we’re talking keep the end in sight. Again, depending what you want out of the deal, some of these strategies change.
Okay, so module number one. We’re going to talk about no lead left behind. So here’s the thing. Again, when we send out direct mail campaigns, obviously the motivated seller is free to call you.
Now, if they already pick up the phone, they interrupt what you’re doing in the day, they’re picking up the phone and they’re calling you, it is important to not waste any of these opportunities. It’s important to make sure that anyone basically, that these are being followed up. More precisely you want to put a system in place that prevents you from missing an opportunity. All right.
So also, without a good system in place, it’s very easy to get overwhelmed and for leads to fall through the cracks. I mean, it’s very simple also without a good system, you can easily fall behind. And in the wholesaling space, time is usually of the essence. Right? So, we’re using for that a CRM system, but I want to quickly check in with Mike to see if Mike wants to add something to that.
Mike: I just want to emphasize the importance of putting whatever system in place you have to get that. I know in the beginning, I lost some leads by not being organized. I don’t care if it’s on a spreadsheet, a CRM system, whatever. The importance of tracking every one of your leads and where you are is vitally important in being successful.
Jack: Absolutely. So tracking your leads is very important, and calling them, and all those things around there. Good. So then again, as I mentioned, we use a CRM system. And CRM stands for customer relationship management system. And we use that to manage all of our prospects, mailing campaigns, offer requests, presented offers, accepted offers, and so on.
And in the myOpenPath in the next couple of weeks, or in the next two to four weeks, we’re going to show you how to use some of these CRM systems, especially the ones that we have created, and how to get access to it, and so on. But that’s just something that, a timing thing here that I wanted to mention.
So now, in the meantime, I want to share with you this one. By the time that you get this all started, our system will be ready, and there’s a good possibility that you can get access to it. So but now, use the CRM system for mailing campaigns, offer requests, presenting offers, and so on and so forth.
And the one of the things that’s there, our system, we follow a list of different statuses that these properties have. And the status that I mean here is, for example we have a prospect. If some of you lovely new people that we want to send a direct mail to, we call them prospect. Then it goes to mailed letter one. Different kinds of letters that we use.
And then the different kind of things, we open the escrow, we find the escrow, we completed the transactions. And then whether or not we sold the property, or we purchased the property, or if the offer that we make got rejected, then we need to follow up and see, “Hey, what’s going on? What can we work on this?” Or if we close the file, or if we need to skiptrace the file, and so on and so forth.
So there’s the different kind of pieces, different kind of record statuses that we use for this file. And it’s a great way to make sure no lead is left behind. Because people that you mail, but they have not called you back, they should get an additional letter from you.
Now at the same time, the people that you mailed and that did call back, they actually do not need another letter. Instead they need to get an offer, right? They should get the offer submitted, that the entire process of analyzing the property, that we’ll talk about in just a little bit, should get started.
Also, people that you make offers to, and they should either accept or reject your offer. So if you send out an offer to somebody, you get no response, you also want to follow up on these, until they either tell you that they don’t want to accept the deal, or until they tell you, “Oh, my god. Yeah, I totally forgot about it. And here it is.” Or until they tell you that they sold the property already to somebody else, and you can verify that.
And then also people that accept your offers, well, that should go to closing. So there’s all these different kind of paths that are opening, and when you do that on enough volume, you don’t want to lose track of people, or fail to communicate with them on what’s the next step should be.
If you do lose track on those things, if you do fall behind, if you do get confused about all of this, then you actually lose out on deals. And again, Mike, if you want to jump in for a couple of words here?
Mike: I think you summed it up really good. It’s all about making sure that you follow up on those leads you haven’t heard back from. And again, it’s all about tracking that so you know which leads those are.
Jack: All right. Yes, wonderful. Exactly. So then, no lead be left behind means that you need a definite answer on every lead that you go after. Now, not necessarily a written answer or anything like that, but it needs to have a definite end point.
And the end point could be that the deal is dead, by you getting an answer from the seller saying like, “No way, I’m not going to accept that ever.” Or that the deal is dead because you found out that the owner has died, and you couldn’t find any heirs of it, whatsoever. Or whichever other ways that you find that that deal, that there is an ending, there is an exclamation point or finish to the deal.
So again, also, when you send out letters, some people won’t open them, won’t get the letters because they moved already or so. Some people will get them, but not read them. They will throw them right away, out. And some people will get them, read them, but for whatever reason not call you. Right? And some people will also get them, read them, and then call you.
So these are again four different paths that what could happen with your letter. So therefore, what no lead be left behind means, that you want to identify the people that you want to do business with, and the people that you don’t. Anyone in between needs to be followed up with. Right?
So if they give you a clear no, great. If they give you a clear yes, also great. But bottom line is, if you don’t know what the deal is, those are the ones that you want to follow up some more. And it’s particularly if you haven’t made an offer to them, and if they just haven’t accepted your offer, you want to keep going at them.
All right. So that’s one. So this concept should be applying literally to every step of your mailing campaigns, all the way to the closing. And one of the biggest realizations of the years that both Mike and I, when we put together slides here had, is that the fortune is in the follow-up.
And while in the land area, sometimes you can get away with sending only one letter in the housing area, you’ve got to follow up, follow up, follow up, follow up. That’s why, for example, we use a set of three different mailings that we use. And some people already experimenting four or five different mailings.
And once they call you, you want to have a follow up. You want to call them ideally again and again and again and again. Even like every month, until you have evidence that they have sold the property already, literally, or that they have come to the money to fix it up, or whatever it is, but that they’re no longer interested in ever selling, or in selling that property, period. So, the fortune is in the follow up.
And that’s, by the way, is true for every business that I’ve ever owned. And every business that I’m sure that Mike has ever owned. And every business that does any kind of sales, right?
So like just the other day, I wanted to switch, they called me from Cox cable, which is the big cable company here in Arizona where I live. And they asked me if I wanted to switch over to the new mega terabyte, super fast internet. And I said yes, but the timing was bad to talk to them because I was literally just about to step into a meeting, so I told them to call me back on Thursday.
And on Thursday, they called me back, but it was again a bad time for that. And guess what? They called me back two more times, when I was at dinner or something like that, where I don’t just plainly, out of principle, don’t pick up the phone because it’s family time. And guess what happens? The phone hasn’t rung ever since.
All they need to do is call me one more time, when I’m not super busy, or when I’m not right in the middle of a meeting, or at dinner or so, and they get my business. But they have just not done that. The follow up has been there, that they followed up four or five times, but then they give up. So if you want to get the deal, you’ve got to follow up as often as it takes. And Mike, I’m sure you have lots of experience on that end.
Mike: We do. And like you said, houses, really, really, you have to do a lot of follow-up. And we even, on our offers that are rejected initially, we set up different callback times that, and we’ve had them finally respond, and us finally make a deal.
We had one a year out. It took a year of us continuously following up, touching base every four to six weeks with them, just to see how things were. And they finally came to the point that they realized they’d get their own, and we agreed to a price. It helped them out, and it helped us out as well.
