Scaling a REI business and finding deals with the right lists – Interview with Flip Nerd Mike Hambright

Stuck moving forward and always looking for the next deal? A chat with Flips Nerd Mike Hambright reveals how an experienced investor can start scaling toward financial freedom. Mike started REI with no job to support his family so he had to make it happen. So in a short period of time, he’s flipped over 400 properties and held over 800 in his rental portfolio. Because of his background in corporate America, he’s mastered building systems and placing the right people into place.

In the interview, you’ll hear:

  • The most common characteristics of successful investors
  • How to build a highly responsive list’
  • his story of how he got started and how he was forced to make REI work for him with no job to back him and his family up
  • How to transition from a one-man-show to a small team.
  • The first person you should start hiring and how
  • How to shift when markets change
  • How to lower the costs of marketing – using the right data and lists
  • How much volume you need to start hiring
  • Predictions for REI in the next upcoming months
  • And much more

You learn more about Mike at www.investorfuel.com

Transcript

Mike:

We just give every house and every seller a score, and the more things you have wrong with it, the higher the score, the more likely they’re going to need to sell.

Paul:

All right. Welcome to another interview at the Deals Today Podcast, and I’m your hose Paul at realestateaudios.com. And we’re going to be interviewing a giant in the REI word. His name is Mike Hambright, the blogger, creator at FlipNerd.com. Now Mike’s a serial entrepreneur. He’s built many businesses within real estate. He has that background of business building, of being a manager in the corporate world, and building and scaling up businesses. So we’re going to talk about that in this interview. He’s flipped over 400 properties. He now holds a portfolio of over 800 rentals. So he definitely knows how to scale up to a financial freedom number, and he helps hundreds of other investors through his mastermind find their financial freedom.

Paul:

So that is him. That is his expertise is business building, and I want to bring that into this interview. And we’re going to talk about a few other things. We’re talking about the most common characteristics of successful investors. He lays that out for you. We’re going to talk about how to build a highly responsive list, his story of how he got started, and how he was actually forced to make real estate work for him with no job to back him and his family up, how to transition from a one-man show to a small team, and the first person you should start hiring and how you should do it.

Paul:

All right. So of course you can check him out at investorfuel.com. I highly recommend going over there. That’s his mastermind. He’s helped hundreds of investors. I have no affiliate to that. That’s his straight website, investorfuel.com. And let’s get to the interview.

Mike:

My wife and I started in the summer of 2008. So about 12 years I guess. For the first couple of years, all we did was real estate investing. I had a job that I loved. I played the traditional game of… I really was the first person in my family to go to college. So I just found my way there, and I was one that did it. So anyway, ended up finding a really cool job. It ended up being like I can’t imagine a better job. I was the apprentice for at the time a president, he became a CEO of a $5 billion company.

Paul:

Wow.

Mike:

So it was just amazing, flying around in private jets, and having really cool meetings and dinner meetings with some of the biggest CEOs that the world’s known. Really cool stuff. But that company ultimately is gone. Literally is gone now. And when I worked there, when I worked for this guy, I was a made-man. I could do anything I wanted inside of this company. I thought I would spend my entire career there, and then out of nowhere one day, he got caught up in some corporate political BS. And he ended up getting fired. And then I had no protection at that point. I was his guy. So I was next.

Mike:

But it was just a big slap in the face. I went from probably being a little egocentric that I’m like, “Hey, I’m untouchable, and I can do whatever I want in this company.” Not that I said that, but it was just comforting knowing whatever I want to do, I can just go ask and if it’s aligned with his goals, he’ll say yes. And then literally next thing I know some HR guy is wheeling a box of my crap to my car and taking my badge. It was just this huge slap in the face, this ego. Really didn’t know how to think about that. It took a while to figure out.

Mike:

So then it took a little while to find another job. I ended up getting another really cool job, but we had to move. We live in the Dallas area now, and so I went to run a division of the company that was flying high. But it was the tail compared to the whole dog. So the rest of the company wasn’t doing well. It was a startup making a lot of… Revenue-wise, had a lot of revenue, wasn’t that profitable. Wasn’t profitable really at all, and had a couple bad things happen. And next thing you know, they’re filing for bankruptcy. We had been there for 18 months, and the truth is when we moved to DC, my wife looked for a job for a little bit but then we ended up getting pregnant with our first son, which our only son. He’s about to turn 13 actually here. At the time though, so she just didn’t get a job. She just supported us. She was pregnant and everything. But my son was two months old when I left that company.

Mike:

I left. I could’ve stuck around, but they filed for bankruptcy. The writing was on the wall. The best part of this is over. So I just remember it’s like I didn’t get fired the second time. I left on my own. But it was still this feeling of defeat, and it’s like this is the second time now in a two year period. And we have a baby at home. We don’t know how to be parents, and like I said, my son’s about to turn 13. We still don’t know how to be parents. But when he was two months old, we had no idea. We had no family in Washington DC. We had actually kept our house in the Dallas area and rented it out so we could… We were just waiting out the tenants to move back. But it was this time period of… And it was 2008 too so the market was a little soft. And the real estate market was starting to trend down. Although in hindsight, we thought we were smart, but we didn’t time the market. It just ended up being a great time to get in.

Mike:

But I was faced with this decision of gosh, I’m fairly newly married. We’d been married for maybe three years at that point. And I’d been beat up a little bit by going to these jobs, and I’ve always been a hard worker. I go all in on anything I do, and I have nothing to show for it. And now I’m a father, and we have to worry about things like insurance and all these things. I never had to worry about these things before. There was just this moment of shit just go real. So I was faced with a decision. We’re going to move back to Dallas, but what are we going to do? Are we going to go back and get jobs again? Am I going to continue to play this game because I’ve seen how it ends the last couple times.

Mike:

I’d always been entrepreneurial, always been interested in real estate oddly enough even though I’ve never done anything. And I didn’t really have a lot of reason to have an interest in that. It’s just even back then there weren’t really… The house flipping shows I don’t think had really started at that point, but it just ended up being this time of like, “Hey, am I going to go all in on another company, or am I going to better myself?” And we just decided to benefit ourselves. And that was the summer of 2008.

Mike:

So we ended up screwing around for a couple months looking on the MLS, talking to realtors that were always not helpful, just the type of people we were talking to. “Hey, we want to look at a house.” “Well, sure. How about in six days we’ll schedule a time to look at it?” It was like, “Well, what are we suppose to do for six days? We need to go do this now.”

Paul:

At this time, you didn’t have a job? You guys had to go all in right now, make it or break it?

Mike:

Yeah. We were all in, and I remember there was a time when we first started when I don’t know if I wasn’t taking it seriously. I weren’t in a desperate position, but it’s weird when you’re getting started in real estate, probably any business. But real estate investing, I’ll say just because of my experience, it’s hard to go from not doing it at all to making it a full-time job unless you’re doing busy work, like you’re out driving for dollars or your hustling. But if you advertise and you put advertising out and you’re sitting around waiting for the phone to ring, there’s all these periods of hurry up and wait. I just remember feeling like, “Why isn’t this going faster? How do I make this go faster?” I would do work, probably like a lot of people that are getting started, feel like I’ve done something but have nothing to show for it. Like, “Well, what am I going to do next? How do I do that?”

Mike:

So I didn’t really understand at that point the wholesale industry. I mean, I understood real estate, but I didn’t really understand, “Okay. I have to spend money on advertising to get leads to make my phone ring.” It was just like I’m calling realtors and I’m looking at deals. At the time, people were posting on Craigslist or random things. I just didn’t know this real estate investing industry. And I found even when I was in, it was like nobody knows that exists. There’s an industry for pink poodle lovers. When you’re not a part of it, you just don’t know it exists. And back then there were virtually no podcasts. There wasn’t a lot of information online at that point. It’s very different now.

Mike:

But we ended up finding a couple people that mentor and people that I could be around that knew what they were doing. I have a mentor now still today that owns a couple thousand doors in his portfolio and just found my way there by getting around the right people and surrounding myself with the right people. And we were coming out of corporate America, one of the blessings was we were very good at putting together systems and processes and corporatizing it, which is probably something that I do better than most now because when I’ve always taught people, I’ve always taught you want to build a business. Not just there’s some people that are like, “Let me show you how to do your first deal.” And I’m like, “Well, I can show you how to do that, but then you’re not going to know how to find a second deal unless I keep showing you. I want to show you how to build a business.”

Mike:

So anyway, long story short, we went all in. We systematized what we did and really started to understand I put money out for advertising, leads come into my funnel. Most of them are going to be crap but some of them are going to turn into deals, and you start to figure out, okay, for every… It’s changed of course a ton, but at the time if I put in $3000, I’m going to get a deal out of it. So I put in $15,000, I’m going to get five deals out of it. Just kind of systematize our business to figure out how to put something in and get something out and rinse and repeat and do it over and over again.

Mike:

So in our first calendar year after we flailed for a few months, we ended up doing 65 deals in Dallas. And we were rehabbing probably 70% of them. So doing it the hardest way. But we just came out gunning and ramped up really fast, and we’re operating at that level for several years. And then life starts to get more complicated or it’s easy for me to get shiny object syndrome and say, “Oh, we should be doing this,” or, “We should be doing that.” But within a couple years, we’re building up a rental portfolio. I started doing coaching and mentoring and showing other people how to do it. And over many years, the coaching became a sizable operation for me as well, and we were doing lots of JVs together with coaching students.

Mike:

We literally, as of the time we’re recording this, I just stopped my coaching program after 12 years of coaching and mentoring people, newbies, let’s say. I’ve officially stopped doing that, and I love doing it. It’s just it’s hard to scale because a lot of people want to talk to me, and I brought in team members and stuff. And I’m the guy for that. And the truth is I have my mastermind and we have an agency now, The Investment Machine, which we talked about earlier. So I’ve just found that I get the most joy out of working with experienced investors, and I have a soft place for newbies too. But it’s just hard to scale that really emotionally because I really want everybody to be successful and a lot of people are not successful. That’s why I’m prematurely gray here. You can tell I’m just… For a lot of people I’ve wanted it for them more than they’ve wanted it for themselves, and that recipe doesn’t work.

Mike:

So right or wrong, I’ve chosen to go all in on experienced investors through our mastermind and through our agency because it’s way easier to take somebody from going 40 miles an hour to 60 miles an hour than from zero to 20. And I’m at a point in my life where I don’t have to work as hard anymore. So it’s like something had to give, and that’s what I decided to do.

Paul:

All those people in your mastermind, what’s one of the couple characteristics of them that they all have that brought them to that point?

Mike:

So just to give you a little bit of context, so for Investor Fuel, we have two groups. We have what we call the platinum group, which is people that are doing 50 deals a year or more, and then we have a gold group, which is people that are doing 10-50. Every once in a while somebody gets moving up to the next group, which is really awesome.

Mike:

I would say this is total commitment. This is where it’s different than coaching is that a lot of people that have come through the coaching programs, they’re not committed. They’re not committed because they still have a job or they just want to put their tail in the water and see if this works. I’m not saying you can’t start part-time and be successful, then grow from there. But I’ve found that most people don’t realize how hard of a business it is. It’s hard work. A lot of people that still have a job, they end up having a hard time leaving that job or they’re just like, “It’s just a little too comfortable.” So a lot of people that I know that have been successful, and I’m not saying that anybody should just go all in on this. But people that were willing to burn the boats and say, “I’m doing this.” Or they lost the job or something bad happened that they hit a wall, hit the bottom of the barrel maybe in some instances, and they’re like, “Failure is not an option that I can accept. I have to go this way.”

Mike:

Even if you don’t like it, it’s consistent. It’s reliable. It feels like it is at least until it’s not. I mean, I felt that before too and then it wasn’t. But until you’re hit with it, sometimes you’re a little too comfortable.

Paul:

So most of these people all started off the same. I’m trying to visualize this myself because I’m in the same boat, work with W-2. When I think about it, when you actually envision it, it’s a hard obstacle to get over, just stepping out of it. So do some of these guys in the mastermind, do they deal with that? How do they deal with that?

Mike:

Leaving a job?

Paul:

Yeah, yeah.

Mike:

I don’t think there’s anybody in our group that still has a job. [inaudible 00:13:10]. So I would say for the most part they’re committed. They’re all in on this. So another thing that I would say on what’s their common characteristic is they’re more willing to take on risks I guess than the average person. But one of the things that I feel when you’re outside of real estate, you think what we do is risky. But when you’re doing it, you’re like, “I don’t think this is risky at all.” It’s measured risk. It seems risky to the outside, but it’s not. It’s not that bad.

Mike:

And the other thing I would say is I think that a lot of the people… This is a little bit of a misconception. A lot of people that are in our group are huge givers. It’s not uncommon for us to bring people into the mastermind. Of course what you think is people want to come in, learn from their peers, be around other people like them. But it’s pretty common for us to have people say when we interview them, because we don’t allow just anybody in, to say, “I want a group that I can come give to. I want to share my knowledge.” Which is really awesome because it’s just this cycle of giving and sharing and taking it to another level that is really cool to watch.

Paul:

What’s some of the struggles that these guys and girls deal with in your mastermind?

Mike:

So everybody’s problems are kind of the same. It’s just different shades of the same thing I guess. So one common thing is we all want more leads. We all want to work less. We all want to make more money. For most people it’s not about the money per se it’s just that’s a resource that allows you to use for impact or other things. So that’s a common theme across the board I would say.

Mike:

And then I think for our gold group is people that want to be less involved in… At that point, people are still doing a lot of the work. At the platinum level, people tend to be having more finding the right employees, finding the COO, finding… So it’s always people problems. Either they’re the people that are in the way and they’re doing a lot of it, or they’re having a hard time finding the right people or retaining the right people to grow their business so they can be less involved.

Paul:

Going from a one-man show to starting to get people in place, what’s some of the progressions that you lead people through?

Mike:

So who do you hire first?

Paul:

Right. Yeah, yeah.

Mike:

Yeah. So it’s usually I’ll say the most common two people that you hire first are an acquisitions manager, which is basically the salesperson that’s meeting with sellers to make offers, and an administrative person, like called the office manager or coordinator. There’s a lot of different names for that person, but an administrative role. So for the most part, by and far, those are the first two roles that people fill. Which one is first kind of depends on that investor and what their skillset is and what it’s not. So it’s pretty common that a lot of the top investors are good at sales. They like meeting with people. So they’re good at that acquisitions role.

Mike:

So you could argue it two different ways. Some people say, “Well, if you’re not good at it, you should get out of that role as fast as possible,” which is true because it’s hurting your business. If you’re the sales guy and you suck at sales, you’re hurting the business. But sometimes when people are really good at it, they retain that until it’s the last thing to fill, which is just the scale issue. It’s like I don’t have enough time to go enough appointments, which is how I did it. When I brought somebody on the first time, I was still doing 50% of our appointments, and they were doing 50%. I had other things to do too. Over time, I just brought in a second person and I was out of acquisitions completely, but I was always there to help close deals and drag stuff over the goal line.

Paul:

How many deals you think you’d have to do to get somebody like that in place first?

Mike:

So here’s a little rule of thumb to think about is you have to be doing enough volume for that person to make a living from you. Does that make sense? Because acquisition managers are often a commission-based role or a variable compensation. So sometimes you might have a small salary or something to start, but usually with salespeople, it’s pay per performance.

Mike:

So if you’re advertising enough, this all comes back to advertising lead gen. If you’re only advertising enough to do enough deals to do say one deal a month, and let’s just say a common commission for acquisitions manager or a salesperson is about 15% of the gross profit. So let’s just say on your average deal you made $20,000. On average, you make $3000 from that. So if you’re consistently doing one deal a month and they’re making $3000, and I say consistently, which this business is consistently inconsistent, which is the truth. So sometimes you don’t buy a deal at all in one month, and the next month you buy three. It averages out to one a month, but it’s not like the 15th of every month we get a deal. It just doesn’t work that way.

Mike:

So if you’re going advertising enough or have a big enough operation to do one deal a month, are you going to find a killer salesperson that’s totally committed to you for $36,000 a year? Probably not. So it’s like, “Okay. I need to create a big enough opportunity for people on my team, so I can pay people on my team, otherwise I can’t grow. So that is honestly one of the problems with a lot of real estate investors is they think small, they act small, and they end up staying small because of that. So if you say, “I want to create a business. What is a stair step look like?” Because I have a stair step approach. You can do everything on your own and probably buy two or three deals a month, especially if you’re wholesaling so that if you’re rehabbing, things are harder. Bookkeeping’s harder, checking on projects is harder, raising money is harder. All those different layers. If you’re just wholesaling, it’s a little bit easier model.

Mike:

But I generally say you could probably do two to three deals a month on your own, but it is a job. It’s not a business. If you’re doing everything on your own, you’re self employed and your business is dependent upon you. You can’t take vacations. The kids are sick. Well, your business is suffering because your kids are sick. That’s just not a good place to be in. But a lot of people start there. So I look at it as a stair step to get to two to three deals a month. Once you get to two, three deals a month, you could probably hire an acquisitions person and an admin. If you want to get up to five to six deals a month, you probably need two of each. Sometimes you can supplement things with a virtual assistant versus an in-house admin.

Mike:

So I think that the average acquisitions manager, again depending on your model, depending on how committed they are, you can probably do three to five deals a month for you. You could probably have somebody who does five, six, seven, but if you have all your eggs in that one basket and they leave, then you’re kind of screwed. My buddy Joe Martina says if you have one acquisition manager, you have none, which is basically just saying in this business, any small business, we can’t afford a lot of redundancy. So the risk point is you, the owner, the CEO, chief bottle washer, whatever you want to call yourself is whenever a light bulb’s out or a toilet doesn’t flush or something in your office, or somebody quits or somebody’s sick, you often have to step in. And you can’t really get out of that situation until you scale your business, otherwise you’re just going to constantly get pulled back in.

Paul:

Hey, real quick, I want to introduce you to my free daily newsletter where I give out free daily tips to real estate investing strategies, marketing, and sales techniques to keep you, the part-time investor, moving forward every day. So head on over to realestateaudios.com, and you’ll get a free report along with that free daily newsletter.

Paul:

Does everybody have to go through a pretty rough period of hiring AM, acquisition manager? Is that a training process or usually you can find somebody who’s a natural sales rep?

Mike:

No, I think the average person, and I’m guilty of this early on hiring… Like, “Oh, he sounds like he’s pretty easy to talk to. He’s got some experience selling this or that, siding or whatever. Yeah, I think he’ll be good. I’ll hire him.” It’s like going to the grocery store when you’re hungry. You tend to make bad decisions. We tend to hire people when we need them the most. So I think certainly over time I’ve learned that you should take more time finding the right person, having them talk to other members of the team. Personality profiles so you can see what is the data say. And so there’s a lot of ways to evaluate people now. It used to just be, “Do I like this person?”

Paul:

Yeah, yeah.

Mike:

I like what they said to me enough to say, “Hey, you’re hired.” And the problem is if you do it that way, you surely have more turnover and make bad decisions just because you didn’t evaluate them enough. I think it’s a little bit of an art to find the right person, and the truth is the right person should be harder to find. So I think it’s a little more work to find the right person. There’s a lot of people that want to do it, a lot of people that want to be in small real estate investing, and they see a way to get in. But I think it has to be more than just gut feel for sure.

Paul:

Right. Do you think that these AMs end up leaving because they’re entrepreneurial themselves. They say, “I can do this business. All it takes is closing deals.” So they leave.

Mike:

I probably worked with over the years, I probably had eight or 10 different acquisition managers. And I don’t think there’s a single one that ever left because they figured out how to go do it themselves. And some of that could be back to who I hired. So I think at the end of the day I think the average… I had one guy that worked with me for a long time, did a lot of deals with me. I think he saw how big of a struggle the non-sales part was. So he’s like, “Man, I don’t want to do that.” There’s a lot of crap that goes into it. There’s a lot of risk. I think a lot of people worry about that. Am I going to train my competition? A lot of people worry about that. I don’t think that’s as big as an issue as what most people think.

Mike:

And in my story, when I went back to the beginning, there was a time where I had more of a scarcity mentality. The first probably 18 months I was in this business, I didn’t want to talk anybody. Don’t take my secret sauce. There’s not a lot of secret sauce in this business, and some of the secret sauce that is there is hard to replicate because it’s about dedication, commitment. So I think once I realized that hey, I can teach people this, because as soon as you start to teach people things, what happens is they’re like, “Oh, wow. That’s awesome. Well, if I find a deal, can I come to you because I don’t have the money for it.” It’s like, “Yeah. If you find a good deal, let’s talk about it.” So it just creates more opportunities.

Mike:

So imagine this model: you have acquisitions people and you tell them up front, “This is an apprenticeship. I want you to work for me. Honestly, I want you to work for me forever, but if you ever feel like you want to go out on your own and do this on your own, then let’s talk about it and we’ll find a way to work together.” Maybe I’m providing funding or we find somebody to JV on stuff. There’s a lot of real estate investors JV with people. I mean, I would much rather JV with my coaching students or people that I’ve had some input in teaching them to think like me versus the average random investor that honestly is over paying for deals and doesn’t really know what they do. I’m just like, “No, there’s no way I could do that deal. Can you get the price down $30,000 or whatever?” There’s a model there to say, “Well, what if when I hire people to work for me, it’s open from the beginning of like, ‘Here is the path if you want that path,'” knowing that most people aren’t going to take it anyway. “That I’ll support you if you move on and here’s what that program looks like. We’re partners.”

Paul:

We could probably talk hours about business building and all that. That’s what your mastermind is designed for. But the marketing part, this takes… I’m thinking about this. This takes quite a bit of volume coming in to start stacking the employees until you get to the CEO. So in the marketing part, you got to fuel this machine. Have you been seeing people with this market today, the response minimizing, leads are coming in a little slower?

Mike:

So I’ll say on the resale side for retail properties, the market is hot. I would say almost everywhere that I know of right now, the retail market is surprisingly hot. And the reason why is because there’s very little inventory on the market. As real estate investors, if you rehab a house and you go to resale it, we’re always competing with owner occupants, and so it’s different in every part of the country right now because of the COVID stuff, even though things are coming around quite a bit. But for the most part, I think the prime selling season is usually list your house in the late spring, sell it, and move during the summer. And I think a lot of people just skipped that this year. They’re just like, “I didn’t get a chance to go look at houses. Let’s just not move right now. Timing’s weird. I don’t want to wear a mask everywhere I go, or I don’t want to have to… Our contractors couldn’t come over and fix the things we needed to get fixed before we wanted to sell it.”

Mike:

So I think it’s just caused a slow down of the retail market, which of additional inventory effectively, which is good for real estate investors. So it’s kept the prices high because there’s low inventory. So people are pretty commonly these days are getting deals above asking price still, and it’s because when a house hits the market, there’s more demand than supply right now. And so what’ll happen a year from now when twice as many people are selling or they’ll have some pressure on us the opposite way or even the small, who knows when people will start to act more normal again. I don’t know.

Paul:

Yeah.

Mike:

But at the end of the day, the market is still pretty good on the retail side. Now, on the wholesaling side, it’s a little softer because credit has dried up. So credit is still pretty strong for buying homes for homeowners. For a lot of hard money lenders, some of them sat on the sidelines for a while to see what was going on. So they’ve raised their prices or charging more points, or they’re charging more interest up front. So that’s driven some real estate investors out of the market or to the sidelines. And so there’s good and bad with that.

Mike:

The bad is that people that would traditionally buy me would say as wholesalers are not buying right now in some instances, or at least to a lesser extent. The good side is when I do get leads, I have less competition for those deals. So there’s a lot of things at play. The other side is that when sellers sell houses, there’s always the psychology that they’re watching in the media. Usually it’s media driven of when they’re saying the market is tanking right now, the people start to plant in their head, and they’re willing to accept less. When they think the market’s on fire, they want more for their house. So despite all this stuff that’s been going on in the media, for sure, there’s very little conversation about how it’s impacting real estate. So absent that knowledge that people get from watching the news or reading the newspapers, they assume the market is still strong or it’s still good or they still want to be able to sell their house for what they could’ve sold it for a year ago, even the cheese has moved, if you will.

Mike:

So it’s a mixture of pros and cons. This helps me; this hurts me as a real estate investor. It really is any small business. So I would say that sellers are a little slower to make decisions these days because a lot of people are just… There’s so much uncertainty. Like, what does all this mean? How does this impact my job or my life or my retirement or whatever I do, my family or my health? All those things. Just so much uncertainty in the market right now that there’s a guy that I follow in the marketing space, and he basically says, “A confused mind says no.” That’s generally-

Paul:

Oh yeah.

Mike:

That’s Russell Brunson, by the way.

Paul:

Russel Brunson, yeah.

Mike:

That’s true. I don’t know what I should do. I’m going to do nothing because I don’t know what I should do. So the easiest thing to do is just not do anything.

Paul:

Yeah. I think that came from Gary Halbert, the confusion, the death of a sale. Well, he was probably quoting Gary Halbert.

Mike:

Same thing.

Paul:

Yeah, same thing. Yeah.

Mike:

Gary Halbert book.

Paul:

Oh, awesome.

Mike:

I was digging through a box looking for something the other day, and I came across that book. I was like, “Oh my god, I’ve been looking for that.”

Paul:

Have you read any of his newsletters or-

Mike:

A long time. Yeah, that’s why when I found that book I was like, “I need to pull this out and look at this for a while.”

Paul:

I’m going through right now… You know who Ken McCarthy is?

Mike:

I’m not sure.

Paul:

He’s considered the father of internet marketing. He’s still around. He’s one of the first to commercialize internet marketing, to teach it. I’m going through his copywriting course. I don’t have it with me right now. I’m looking around for it. But I highly recommend it. Ken McCarthy.

Paul:

So going back to the conversation, what do you think is going to happen with real estate going forward?

Mike:

So first off, there is always opportunity, and this is why I… Talking about where I spend my time at these days, why I prefer working with experienced investors because they know proverbially somebody has moved my cheese but the cheese is still there. The opportunity is not going away. We tend to buy houses from people in distressed situations or that have gone through some sort of life change, death, divorce, inheritance, problem with rental properties, things like that. None of those things are going away. They don’t follow any sort of other trend with COVID or the economy or anything like that. So those things aren’t going away. So they’ll always be opportunities to help people that are in a difficult situation sell their house quickly or sell their car quickly, sell their jewelry quickly, sell whatever they want to sell, buy or sell, there’s always a market for that. As long as there’s people and houses, there’s always going to be opportunity.

Mike:

I don’t think that’s going away. It’s just changing. I think what happens is, and I know people haven’t been around for a while now. I know people that used to be rock stars and they just disappeared. Some of it is they just couldn’t shift with the market shift or they just decided to call it quits, whatever it might be. But no, I don’t think… The industry’s not going anywhere. It’s just the matter of it just goes through ebbs and flows of how big the opportunity is or how you have to go about generating those leads. Or if you’re doing creative financial offers, like Sub2s and seller finance deals and stuff versus just cash offers. So I think again the cheese just moves for us.

Paul:

Now going to the marketing side for motivated sellers, is there anything you’ve seen change throughout the years? The ebb and flow, the shifts that you have to make. What are some of those things that you’ve seen or has everything been pretty much consistent as far as having the same list, marketing in the same way?

Mike:

No, I think marketing has changed quite a bit. Here’s what’s changed is it’s just some people have gotten more sophisticated. So at the end of the day when it gets more competitive, one of the things that happens is the amount you have to spend on advertising or lead generation gets more expensive. So if you don’t change with the market, then you’re doing something outdated, then you’re going to bare the brunt of that cost-wise. So a lot of things have changed.

Mike:

One of the reasons we created our agency, The Investor Machine, is because we know that if using better data, we can lower the cost of marketing and reduce the people we’re marketing to. So at the end of the day, what we wish existed was this list that got printed out that’s like, “Here’s the list. This is all the people that are super distressed and they’re going to sell in the next week.” But that list doesn’t exist. So it’s like, “Okay. Well, how do I try to create that?” It’s like, “Well, through data.” So do they have tax problems? How many problems do they have? So we go in effectively what we call list stacking. So how many lists are they on? And there’s a bunch of well known ones, probate, recent divorce. Are they on a pre-foreclosure list? Is their house going up for foreclosure? Mowing liens, tax liens, IRS liens, mechanics liens. There are dozens and dozens of factors if you can find that information. The problem is there’s no one place to go get that information. It’s every county and every city records things differently all across the country.

Mike:

There are a couple lists that are easier to get to than others, but most of them are really hard and take a lot of effort. And so if you can get all that information though and stack it up and say, “Wow, this person has everything wrong. The spouse died. They haven’t paid their taxes in three years. Not one year, three years.” All these different data points that start to say, “This person is the most distressed in the market,” and you can sort that from top to bottom, which is what we do in our agency. So if you get that data, you have that data, you have a little bit of an unfair advantage because the average real estate investor is not willing to put the effort to go find that information.

Paul:

Yeah. 100% agree, man. I think that’s what Gary Halbert talks about the list being 40% of the effort when it comes to marketing. So then many stacks I guess? If you’re going to be hiring somebody, you have to have a system for doing this. You have to have an operational manual to do this, right? And so you have to cut it somewhere. Like, “Okay. We’re going to be stacking these three lists together.” Is there a certain system you have, certain rules, three to four lists that you put together?

Mike:

So again, we try to pull it off 40 different lists at the market level. So a lot of stuff. Now if you have two, that’s better than one. If you have five, that’s better than two. So the more data you have, the better. But yeah, I mean, for a long time, people that understand this have tried to do it in Excel, which is a pain in the butt. There’s Batch Lead Stacker, which is probably the best thing on the market right now to go do it yourself. And then we’ve developed some proprietary software and systems for how to get data, how to stack it up. We do a little more than stacking. We score stuff based off of if somebody’s gone through probate, that house and the person tied to it is a higher value let’s say than somebody who has one mowing lien. So somebody died versus the city cut your lawn for you once.

Mike:

So we give different things a score, and we remove stuff from the list. Problem is a lot of people that say, “Well, I have the list,” whatever that list is, they assume it’s a static list. Every list changes every day. There’s people that come on, there’s people that should go off. And because somebody got divorced 15 years ago doesn’t mean that the house that those people owned 15 years ago is still in distress. That has a shelf life that ends at some point. So nobody knows the answer to those things, but you have to make decisions on assumptions and say, “Okay. Well, if somebody goes through a divorce, we’re going to say that house is going to be in some sort of distressed situation for up to nine months.” But if the house sells and changes hands, then we remove it from the list completely or we wait. If it doesn’t change hands, we’re going to market to it for nine months and give it a score, one point for that thing.

Paul:

Okay.

Mike:

It’s a little more sophisticated than that, but in principle, we just give every house and every seller a score. And the more things you have wrong with it, the higher the score, the more likely they’re going to need to sell.

Paul:

That makes sense. Wow.

Mike:

So at the end of the day, I’ll say this. When I first started a real estate investment, what I really wanted was passive income. The truth is, and I liked rehabbing. I liked the idea of it even though I’d never rehabbed a house. When I first started, I actually had no idea what wholesaling. But I realized that that’s an important component to generate cash faster to pay the bills and stuff. Rehabbing was a way to take back a deal that I could make 10 on and make 20 instead, even though it’s harder. So they feed each other, and for us, it was like, “Well, I can’t spend money finding or foregoing income to keep rentals unless I wholesale and rehab.” So it was something I had to do to be able to… I had to buy four to keep one or whatever the ratio might be. Never looked at it as a ratio, but if you have that income coming in every once in a while, you’re like, “You know what, I don’t need that $20,000 from selling this one. I’m going to tuck it away for right now because some day I don’t want to have to work this hard.”

Mike:

So we built up a single family rental portfolio, which has a lot of equity. Most of our wealth is in just appreciation of things that have happened from that. But when I’ve gotten to the point to where I have some other businesses, I don’t have to worry about covering the bills at home anymore. And I’m fortunate in that regard. So it’s like, “Okay. Well, I love today money. I want a big stack of hundreds in my hand right now,” or whatever the biggest bill you can find, put it in my hand right now. I want today money all the time. But if I have a choice, I would rather reinvest that in my future.

Mike:

So more and more we’re trying to do bigger deals or other things that are more wealth building and will generate repeat income, like passive income, over time residual income. So that’s where I’m focused more on now. And I think for me it’s personal freedom, and part of my freedom is the ability to impact others. I love having that ability. Maybe I’m doing it from an RV halfway around the country right now. I’m not now, but I want that freedom for myself. But that freedom gives me the time to impact and influence others. So for me, it [inaudible 00:36:54].

Paul:

Yeah. Yeah. Right now do you consider yourself having that freedom?

Mike:

I do. I’ll say this, I’m not saying this to brag. Financially I do. I’ll say I’m a workaholic. So I’ve got a problem with it’s hard for me to not want to take it to another level. So that’s something that I struggle with. I mean, I worked hard to get here, and so sometimes you’re like, “Some day I won’t have to work so hard.” But when I’m here, I do work hard mentally for sure. It’s a labor of love too. It’s like I’m trying to get somewhere here. Whenever I sit still for even it’s a three day weekend, I’m like itching at something to do or some problem that I think needs to be solved. Freedom to me is not… Retirement to me is not now I can sit on the beach and do nothing. I like to sit on the beach. I like to golf. But if I was retired and I golfed every day, I would hate it. I have to have some variety there.

Mike:

But I think it’s just having the ability to do what you want when you want with whom you want. It’s not the ability to do nothing unless that’s what you want. But that is for a lot of people that I think have accomplished some level of success and like impacting others, their goal really isn’t to, “Man, I’m just going to sit in that chair over there and do…” I might do that for an hour, but then I’m like, “I got something to do.”

Paul:

Right. Yeah, yeah. Yeah, I know what you mean, man.

Paul:

All right, Mike, I appreciate your time here, man. I really do. Awesome.

Mike:

Thanks so much for the opportunity. I appreciate it.

Paul:

Thank you, man. Take care. Have a good one.

Paul:

All right. That’s a wrap, and hope you enjoyed it. And if you did, please go ahead and subscribe to it on iTunes, Google Play, Spotify, or whatever you use. It really helps me keep producing these. Just search for the Deals Today Podcast in your podcast directory, podcast app.

Paul:

So if you’re not on my daily emails newsletter and you want to be, you want to receive the free 40 Days to Find a Deal Seminar, go ahead and go to realestateaudios.com/flipping. Again, that’s realestateaudios.com/flipping.