Your Biggest Competitor in Real Estate Investing

Mike: Hey, it’s Mike Hambright with FlipNerd.com. Welcome back for another exciting Expert Interview, where I interview awesome guests in the real estate investing industry to help you learn and hopefully inspire you a little bit.
Just another reminder of our upcoming REI Power Summit, it’s going to be a large online virtual event, 100% virtual. You can watch it from anywhere. We have over 50 great speakers that are joining us so far, a number of workshops. It’s just going to be an outstanding event and you get access to it for 12 months afterward. So if you miss anything, you can watch it later. So check it out, REIPowerSummit.com
For today’s show, I’m joined by Danny Johnson. He’s a real estate investor. He’s a coach, founder of FlippingJunkie.com, which is his blog and newly launched podcast. And Danny has a lot of experience having bought hundreds of houses.
If you’re an active investor right now, you probably have been feeling the pinch. You know it’s a hot market. This is a game where you may have convinced yourself you can’t compete or it’s harder to compete. This happened to Danny recently. What you may have done is made yourself your biggest competitor. You’re competing with yourself for success or it’s a mental game where the cheese is kind of moved and in fact it’s still there.
You just have to convince yourself that it’s not possible to do what you did in the past. So maybe your lack of success is your own doing. I think Danny felt that recently himself. He wanted to share his lessons today about how you should just stay focused on your fundamentals and you can achieve all the success you want.
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Hey, Danny, welcome to the show.
Danny: Hey, Mike. Thanks for having me on.
Mike: Yeah, glad to meet you. Also, this is a funny topic. I think a lot of people, even successful real estate investors, people that I don’t know what success . . . success is a different metric for everybody, but there are some people that can do really, really well buying two, three, four or five houses a month. But as you know, even when you’re doing that, you still go weeks without buying anything and then you buy three at once. It’s a business that can really screw your mind up if you let it, right? Kind of an emotional rollercoaster.
Danny: Yeah. It kind of goes back into where we are constantly learning. You’ve always got to be learning staying on top of what’s happening in the market and in the business and everything. We tend to forget things that we had learned before because we’re so focused on other things and learning and moving on to other things.
My biggest thing, I think recently, the competition has been getting pretty heavy in San Antonio and in most places. I know you said that competition has been pretty high too. I’ve been focused on doing software as a side thing with my real estate investing for our investor websites. I’m still buying deals, doing rehabs and everything and I got into thinking, I don’t know why it didn’t just click immediately.
But I got into thinking there’s so much competition right now and I’m not closing as many deals as I used to because there’s so much competition. I don’t know when it clicked, but several months went by. I was training an acquisitions person to buy some houses. So I got to thinking maybe the issue was there and wasn’t too sure what the problem was.
So I’m trying to figure it out and it just clicked one day talking to my father. He’s also a real estate investor. It was that I needed to just get my mind back into buying. We wear a bunch of different hats as real estate investors. The marketing one is one of the most important and doing the deals, making offers. Obviously if you’re not making offers, you’re not buying houses.
So I had kind of developed the limiting mindset, again, of when most people get started, they have this mindset, whether they truly believe it or not, where they think that there are not that many deals out there. There’s so much competition. Everybody is saying, “There’s so much competition.” They immediately think it’s going to be very tough for me to get a deal. I found myself back sort of thinking that way. As soon as I realized that’s what I was doing, it immediately changed, just like realizing that I had that sort of mentality changes things.
Mike: Yeah. It’s a mental game. Danny, before we get too far into this, why don’t you take a few minutes and tell us about your background and how you got started as a real estate investor?
Danny: Sure. I went to college, got a degree in computer science and started developing software for a defense contractor in San Antonio, which we have a lot of. I really enjoy software but sitting in a room all day looking at a computer and coding, that’s great for so much time, but I like to be creative too and do other things in advance. Where I was there wasn’t much room for that.
At the same time, my father had started flipping houses. I saw him having so much fun with it, driving around all over town and telling me how excited he was about the deals he was doing. It got me fired up. I wanted to do it too. So I started doing it part-time. Lunch breaks I’d be out beating the street and checking on contractors and handling all those things.
I had to be careful with phone calls too because where I was working, we had clearances and we couldn’t have cellphones. It was tricky. It can still be done even if you have a full-time job where you can’t take calls, you can still make it work. We obviously made it work. Anyway, so we started flipping a lot of houses and went full-time after about three years. So we were part-time for a long time.
Mike: Okay.
Danny: And then went full-time after three years because I was losing money by still staying at my job. The good thing that being part-time really did for me was it made me focus on what I needed to do to get results, not the piddly stuff, designing beautiful business cards, stuff like that didn’t matter and I didn’t care. I just wanted to do things that were going to get my phone ringing. When I went full-time though, I was kind of like, it was hard mentally because I was thinking, “I’ve got to fill my time with stuff.” And I started doing pointless things.
Mike: It’s interesting that you say that because I think a lot of people . . . if you started in the corporate world or you started in a traditional job, which you did, I did, a lot of people did, you’ve been kind of classically trained to work for somebody else your whole life.
You’ve been trained to that full-time, even though I’ve never been able to work a 40-hour work week, I tend to work a lot more because I’m a workaholic. But you’re kind of classically trained that these are your start times, these are your end times. Monday through Friday you have to work at least 40 hours a week.
It’s a major transformation to go from . . . I think when you start to have some levels of success, you still tend to fall in two camps. You’re either still working your butt off because there’s never enough or you realize that, “I can work whenever I want. I have more than I need and I want to have the dream of having the lifestyle that I got into this for in the first place.”
Danny: Yeah.
Mike: It’s a de-brainwashing exercise.
Danny: Right. And part of the tricky thing is that . . . I think that’s part of the reason why I went three years without going full-time. I was doing really well with it. My wife and I were doing a lot of business with the house flipping. But we also knew that it wasn’t something that was super predictable at the time for us. We knew that there could be times where we didn’t have a closing for a couple months.
So that was one of the things. And you know, it’s really cool though when you’re full-time and you finally grasp, “I can be super-productive. I don’t have to work that many hours.” Once you make that move from the trading hours for dollars, trading time for money, it’s incredible because then it’s like, “I can make as much as I want,” and then you end up working more because I’m not making so much per hour. Well, you are, but it’s in the thousands a lot of times depending on what you’re doing.
Mike: Yeah.
Danny: So it’s really incredible and gets you fired up to do a bunch of stuff because you know you can make a lot more money. It’s not just putting in that many hours and making that much money. Anyway we went full-time and started flipping houses. We mostly do rehabs. We do fix and flips in San Antonio and then we wholesale properties that are in areas that we don’t really care for that are hard to retail.
Mike: Okay. Awesome. So back to the psychology that this market can play with you, even in a good market, there are so many ups and downs in this business emotionally and financially. It can really kind of tug at your mind in terms of introducing lots of doubt. Or if you’re an overly creative person, it sounds like you are and I am, you start to say, “Maybe I need to do something different. Maybe I need to create something around the real estate investing space or whatever.”
So talk about some of your findings recently. You talked about how you had convinced yourself that competition was your problem. Keep going on that.
Danny: Yeah. I thought it was the problem. I was thinking I need to get more creative. I need to do these other things. I need to do this and this and this other thing I heard about. One side note that’s very important to me and to everybody that I talked to about learning how to flip houses is I need to buy cheap. I want to buy houses cheap. It’s as simple as that.
Everything boils down to that. I don’t like to do creative strategies. I don’t like to do things where I’ll put $500 in my pocket now and make so much later because everything has to fall in place exactly like I was told it would, but when you get people involved in everything, it never does. So I don’t like that kind of thing. I want several options. If I buy really cheap, I’ve got several options. I can wholesale. I can fix it and flip it. I can rent it out. I can do whatever I want. So everything just boils down to that.
So I was thinking try different tactics. Spend a lot more time trying to find good lists that people aren’t marketing to and doing those kinds of things and spend a lot of money doing that. What it boiled down to was I was actually getting great leads from my website. But I wasn’t closing on many of them.
But as soon as I realized I was thinking negatively about how the competition was and how there was competition that was getting the deals and that’s why I wasn’t, as soon as that clicked for me, I didn’t really do anything different. It just changed for me. Like all of a sudden I started getting the same leads I was getting before, the same frequency through my website but they were better leads.
So I set myself up to attract those better deals. It sounds kind of hokey to some people, but I did. I said, “Maybe it’s not competition. Maybe there are still a ton of deals.” I know there are a ton of deals out there. I need to just get them. Then I got the great leads. I wish I can get you hard facts, actionable items, do this, this and this and that will change for you, but honestly it’s in the mind.
Mike: Absolutely.
Danny: If you believe you’re going to great lead that’s going to be a great deal and you keep getting marketing, get your number out there and stuff, you’re going to get one.
Mike: Yeah. If you start to convince yourself, I don’t know what your conversion statistics are, but across the industry for people that are professional investors, if you’re not doing creative stuff or finding ways to do a bunch of really thin deals or whatever, which I don’t really advise, conversions are around five percent, typically. So by definition you’re not going to get most of the houses you look at.
Then if you start to pile on the idea or the thought that, “Well, it’s more competitive now so I’m going to convert even less,” you’re on your way to an appointment and you’re thinking, “I’m probably not going to get this one.” All that stuff has a major, major impact. It even has a major impact on how you communicate with the seller and that kind of shines through, right? If you go in there and you’re not confident, there’s just a good chance that you won’t get it because they don’t want to work with you, right?
Danny: Absolutely. I think most people when they’re starting out do that. They say those things to themselves whether out loud or not. In their minds, their most of the time thinking . . . because I did in the beginning too, “Things were different when my mentor first started buying and that’s why he was able to. Now it’s different.” Don’t ever think that stuff because things are still the same.
One of the things that spurred me a little bit to switch my mind back, I think it was my father. I was talking with him about the competition. And he said, “You know what? Just go out and buy a deal. If you put your mind to it, even just spent one day of this week making offers and stuff, you’ll have one by next week.” Sure enough, I had two when I called him. I got one the next week after that too.
One thing I said that I wish I could give some actionable advice, like do this, that or the other thing. I actually can because I think that if I really look at what I changed, you brought it to my attention when you said you’re on your way to the appointment and saying those limiting beliefs will affect how you communicate to the seller.
Mike: Right.
Danny: I think there was a switch at that point, again, for me, when I went to the sellers. It started with knowing that as soon as I got a lead, I was on the phone with them making an appointment. Whether it was it a deal or not, I was making that appointment, preventing them from contacting other investors. So immediately that’s going to cut out some of my competition.
Mike: Right.
Danny: Always make that appointment as soon as you talk to them and talk to them as soon as you can. So if you get a lead through your website, you have to be on the phone with them immediately or emailing or texting them or whatever.
So at that point, on my way I was thinking, “Okay, this is the one I’m getting. This is the house I’m buying. I’m going to buy this house.” And back to the setting the appointment, you might be asking yourself, “What if it’s not a deal? I set an appointment.” If you’re new in this business, you need the experience anyway. So whether it’s a deal or not, go and meet the seller, talk to them. You don’t have to make an offer, but get the experience.
But once you get more experience you realize after you talk to them, set the appointment and you do some analysis and you say, “There’s no way I could buy this house,” then you just politely call them and tell them you didn’t want to waste their time. You’ve done some research. You need to cancel the appointment. Or recommend them to another investor if you know some others that might be willing to pay more than you or something.
So anyway, then you’re heading over to the properties thinking, “This is the deal I’m putting under contract. I make the offer.” You’re right. When you look at it that way, you make the offer and you’re more confident and the seller’s sense that. They see, “Okay, this guy’s making an offer and he’s not going to be negotiating up a ton with me or anything. He can do this and he’s going to buy this house.” It just ends up working and they sell you the house.
Mike: What are your thoughts on the way of the appointment listening to the “Eye of the Tiger?”
Danny: That’s a good idea. Wear some sweats too. You get out and start doing the run up to the stairs of the house.
Mike: Well, no, there’s a lot of truth to having a process where you kind of get yourself pumped up and excited to be there. More than anything what I’ve always advised people is be less focused on doing the deal than, “I’m here to help somebody. I’m going to solve somebody’s problem today.”
If you’re really focused on that person and their problem and trying to be a problem solver instead of how this might be a waste of your time, it’s just a different attitude. A lot of people don’t look at it that way. That’s a big part of it, just trying to truly help others. If they know that you’re helpful, then they’d probably be more willing to negotiate those things than they would if you’re clearly just there for yourself.
Danny: Yeah. That goes a long way. It’s funny. You said don’t be there feeling like it’s a waste of your time. It’s funny that you say that because other investors would say, “I would never want to be at someone’s house ready to make an offer, be a waste of time.” But when you get busy doing a lot of deals and making a lot of offers, sometimes it becomes the sort of thing to mark off your to-do list. You never want it to just be something to do to mark off your to-do list.
Mike: Right.
Danny: It can get that way where you’re feeling like that. Everything else you do, the phone calls you’re taking, the analysis you’re doing on the leads, all that stuff leads up to this point, so this is the most important point. If you don’t take this part seriously, all that is a waste of time, you might as well not be doing marketing, you might as well not be doing analysis, spending money, all that sort of stuff. Everything else you’re doing is to get you right here to this point.
Mike: Sure.
Danny: And then the other thing also to realize is I had said that you’ll get there and you have confidence and you’ll likely get the deal. Well, getting the deal most of the time for me isn’t right there at that initial meeting because most people won’t make a decision unless they’re really, really motivated. You get those calls where people, you can just tell, they’re like, “I need to get rid of this place now. I’m so sick of this headache. I’m tired of this house, the problems it’s causing me. I need to get rid of this thing.” Those people will likely sign the contract with you at the house.
Mike: Of course.
Danny: But otherwise, most of the time, most of the deals we do, it’s not the first meeting where we’re getting the contract. So we make the offer and then we follow up with them. We make sure that we’re calling them and being first in their mind when they finally make the decision to sell.
Mike: Yeah. Follow up is critical in my business, for sure. But it kind of comes back to that, the mental side of that. If you leave there and you convince yourself, “They’re never going to sell it to me,” or, “Some other guy is probably going to offer more money.” Especially if you see somebody else, if they have an appointment with somebody else, you start to say, “I’m probably not going to get it. They’re going to offer more than me.” Then you convince yourself to not follow up and not let that be part of your process.
Danny: Yeah, it’s already sold. Right.
Mike: Right. Those things, they’ll destroy your business, for sure.
Danny: So if you understand that most people aren’t going to sign right there at the house, even if you do see another investor walking up as you’re leaving, they’re likely not getting the contract on it. So you follow up and they don’t, who’s going to get the deal? A lot of the times the sellers will tell you even if you’re following up, “X-investor told me he would pay this much,” and it’s up to you to be able to pay more of that or not, be more of what they offered. You don’t have to ask for that kind of thing.
But the other thing, I think with buying directly from homeowners and doing marketing to motivated sellers, a big thing for me has always been that I just go and be myself. I’m not concerned with how I’m dressed and all those things because I think when you’re dressed really nice, like a lot of these sellers, they’re not professional execs and stuff like that. They’re just regular people. So most of the time, I’m not even as dressed up as I am now. I just wear t-shirts and shorts. I’m in San Antonio. So it’s really hot most of the time.
Some people will say, “That’s crazy. You’re going to buy these people’s houses and you’re wearing t-shirts and shorts,” but it makes people drop their guard. They feel like they can talk to me and not just be some sort of business transaction. I’m a regular Joe. Everybody’s a regular Joe. I might as well be a regular Joe and just be yourself.
Mike: Yeah. So clearly there is more competition right now and there are people that are seemingly willing to pay more than those of us that are classically trained to buy deep. What are you seeing in terms of . . . how big of a role is the mental side of this relative to the real side of what’s going on right now, do you think?
Danny: I’m not sure how to answer that. If you’ve got steady leads coming in, you should be able to close. Let’s put it in terms of numbers, I guess. With me, if I’m getting roughly 30 leads a month, I should be able to close at least a couple of those, get a couple of those under contract.
Most of the time, if I’m going to an appointment to make an offer on a house, typically I’m buying one out of every two of those or one out of every three of those. I’m not driving all over town looking at 30-60 houses a month. I know people that do that. It’s crazy. Most of the time they’re buying on the MLS. So out of one out of two or three appointments, I’m typically getting the house under contract. I don’t know if that helps at all or not.
Mike: It’s kind of an oddly phrased question. Maybe answer this, maybe you can give some advice to people, especially newer people out there, newer investors. Their family and their friends already think they’re crazy because they quit their job and they’re doing this. There’s a lot of opportunity for people to say, “I told you so.”
It’s easy to say just get the mindset out of your head that you can’t be successful in this market. But there’s probably more pressure for a lot of folks. Those of you like you and me that have been doing this for a long time and know that it’s a great business and know you can achieve success and have actually seen it. Then there are all these new people that in their mind, there’s a lot of doubt because people are constantly telling them that they’re crazy and they shouldn’t be doing what they’re doing anyway.
So maybe you can share some insights or knowledge on how people can manage all the voices in their head and the voices from the people from their friends and family that are all around them.
Danny: Absolutely. That does come into play a lot of times. I think the best way to deal with that is to realize that most of the people you’re hearing from on these podcasts, on blogs, websites, forums, that kind of stuff, the people that seem like they’re doing quite a bit in the business, realize they didn’t do that overnight. They didn’t do that in one month. They didn’t do that in two months.
Most of the time, I don’t know what we . . . four to six months before we got our first deal. Its a lot of work to get the ball rolling and to get it going. If you go into this thinking everyone was an overnight success and they did it quickly and had some help so they were able to do it quickly. And if I don’t get something in a month or two or three, then something’s not right. My market is different, this that or the other thing. It’s not the way to look at it. Everybody has built up from nothing for the most part and done it.
Mike: Right.
Danny: So if you think in terms of, “It’s going to take time. If I really want this bad enough, I’m going to do everything it takes to get it.” Those are the people that succeed because they keep going and keep going and they make it look like an overnight success after a while. It definitely never is.
Mike: Never.
Danny: And the way to get through that initial part that’s so difficult is to just look at what you need to do right now. You get an education. It doesn’t have to be super crazy thorough. Learn how to buy cheap. That’s the thing to learn.
And then figure out, “Okay, well, how can I buy cheap? What do I need to do right now?” What you need to do is marketing. What you need to do is get your phone ringing with people calling you wanting to sell their house. You may not know all the exact things you want to say to them, but you’re going to figure it out pretty quick when you start getting those calls
And realize that also, because I was super nervous putting my cellphone number on bandit signs. My other marketing in the beginning, I thought my phone was going to ring off the hook, that I’d never have peace again. I wish now that was true, that the phone would just ring off the hook, but it doesn’t. You’re going to get maybe one call a week or something in the beginning, if that.
So just realizing that the key in the beginning, at least in my opinion is to get somewhat of an education, learn how to buy cheap and then get your phone ringing, start taking calls. You probably are going to screw up the first several calls. Who cares? Go see some of those houses. You’re probably going to screw that up to. Who cares? But you’re going to learn and you’re going to learn a lot better than from reading from a course what to do because you’ve just experienced it and experienced what it was like not to know what the answer was.
Mike: It’s just like a sport. You’ve got to practice. There’s no professional athlete that doesn’t practice like crazy. They fail a lot too. They fail more than they win. In most sports, especially in baseball, in terms of batting average. But that’s just how it is. It’s a numbers game and you’ve got to practice a lot and you’ve got to get as many leads as you can then the deals follow.
Danny: Right. So you think . . . I know, well, I’m assuming, but most people would think, “I have to get my phone ringing. So I have to figure out what marketing to do. I’m going to get my phone ringing. So what happens if I get a deal?”
So they think that already and they’re thinking, “What happens if somebody calls me and it’s a great deal and I’m not sure what to do.” I don’t have someone that I can wholesale it to. So they don’t do the marketing because they’ve looked ahead already and they’re thinking, “What am I going to do if something like that happens?” So they don’t do the initial action.
But I’ll tell you what, if that happens, if you think that way, then figure out what to do. Maybe you should go and talk to some other serious investors in town at a Real Estate Investors Association meeting, ask them who buys the best deals and then find out who that is.
If you get a good deal and it looks like a great deal, you want to be able to contact them and say, “Do you mind helping me analyze? I think it’s a great deal. You can give me a referral fee if you buy it and I can learn from that. Then I’m going to have all that confidence next time that I’ve got a buyer for this,” or, “It’s a great deal and I can probably find some hard money and do it myself.” So figure out what’s holding you back and find out how you’re going to handle that situation. Then take action. Sop waiting so long to do anything. Just get that phone ringing.
Mike: Awesome. Great advice, Danny. Thanks for being with us today. If folks want to learn more about you, I know you’ve got your website FlippingJunkie.com. Anywhere else where they can . . . maybe take a minute to tell people what they might find there or anywhere else they might go to learn more about you.
Danny: Sure. My blog is FlippingJunkie.com. Basically I’ve got a bunch of great articles and things like that on the site and you’ll be able to find out about my podcast, Flipping Junkie Podcast. But I also have, what most people find educational is a couple years ago, I had blogged about 34 weeks of my real estate investing business.
That was basically everything I did to get leads, the phone calls I got, how I analyzed the deals, the situation of why the people were selling, all of that stuff all the way through the process. People really loved that because it’s real world, like case studies really basically for all this stuff.
I turned that into an eBook. So even if you would just like to get something to read on your Kindle or iPad or something, you can go to Amazon and look for “Flipping Houses Exposed: 34 Weeks in the Life of a Real Estate Investor” by Danny Johnson. You can find that there. And then we also provide real estate investor websites. You can find a lot of that on FlippingJunkie.com. I really appreciate you letting me be on the show.
Mike: Yeah, Danny. Great to see you. Thanks for joining us today. I appreciate your time.
Danny: Yeah. No problem. Thank you.
Mike: Everybody, thanks for joining us today. We’ll see you on the next show.
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