Real Estate Investing Systems

Mike: Welcome back to the flipnerd.com REI Classroom, where experts from across the real estate investing industry teach you quick lessons to take your business to the next level. And now, let’s meet today’s expert host.
Lex: Hi everyone, Lex Levinrad. We have another REI Classroom tip in this one. We’re going to be talking about real estate systems and why real estate systems are important for your real estate business.
Mike: This REI Classroom real estate lesson is sponsored by theinvestormachine.com, FlipNerd’s private investor coaching program and your blueprint to investor success.
Lex: So if you’re a wholesaler out there, or if you’re a rehabber for that matter, you can really break down your real estate business. If you want to really simplify it, break it down into two systems. You have a system for acquisitions or buying houses. And you have a system for dispositions or selling houses. You can have a business model that could be as small as one person, yourself, and you can have a business model that can have literally hundreds of employees, but it can still be broken down into two systems of acquisitions and dispositions. So let’s break through and discuss those two.
So acquisitions or buying houses is really the system that you use to find houses. In other words, how do you find houses? And, more importantly, who finds the houses? And what systems are you employing or using in order for houses to continually be acquired or for acquisitions to continuously be happening? So a lot of people in this industry acquire properties by direct marketing. So [inaudible 00:01:36] direct mail campaign or a postcard campaign or a yellow letter campaign, or something to that affect. Those are not the only ways of acquiring properties.
You can also do a Google pay-per-click campaign, where you can market to desperate sellers. You can use bandit signs, you can do classified ads, billboards/TV ads, radio ads. We’ve done all of the above for the last 14 years. We’ve spent hundreds of thousands of dollars, probably millions of dollars, testing and refining and marketing all of them. And I’ll say generally speaking, the direct mail is probably the most profitable if you do it on a consistent basis. However, it’s very dependent on the list that you use. For example, we find the highest profit margin on probate lists with direct mail campaign, but you have to do a lot of it and you have to do it consistently. So for many people out there who are beginners, it’s sometimes the budget can be a little onerous for them.
Other systems that are easier to use that have pretty good results that are decent are bandit signs. Doesn’t cost a lot of money to put out 100 bandit signs, about $2 a sign. So for $200 you can go out and put some bandit signs and get potential sellers who are looking to sell their home, give you a call. So, that could be your acquisition model.
Now with us, one of our acquisition models that bring the most deals, believe it or not, is properties that are on the market that are listed on the MLS. So we have a system in place where we have bird dogs or property finders that go out there and they actually make offers on properties that are listed on the MLS and they make offers to all the various online sites. Realtor.com, auction.com, trulia.com, zillow.com, hubzu.com, [inaudible 00:03:21] homesteps.com, Hud Homes Store and many others. So those are just the main eight that I gave you right now, but a lot of people don’t like that approach. And the reason is because it’s very competitive.
And so, a lot of people shy away from that approach. We have done very well in-house with that approach by specifically targeting bank-owned properties, short sales, and foreclosures. It also just definitely depends on the market. So, for example, in the bottom of the market, there was a tremendous amount of money to be made by buying short sales. But now where we are in today’s market, the inventory has dried up a lot on the MLS for REOs and short sales and direct mail is often times the better campaign to flush out a desperate seller.
So acquisitions, however you do it, the key question is, who’s doing it? Who’s answering the phone call? Who’s making that appointment? Who’s going out to the house? Who’s filling out the purchase contract? Who’s making the decision? How is it getting funded? How are you buying the house, and then once you buy the house, how are you going to be getting rid of it? Are you wholesaling and flipping it without closing or are you actually closing on it, fixing it, repairing it, putting it back on the market and selling it?
All right, so that’s acquisitions, and acquisitions is by far the most important because you’ve got to have houses. You can’t sell houses if you don’t have houses to buy.
For the second component, the dispositions is a little easier because you can sell the houses by simply listing them on the MLS. You can list them yourself. You can list them with an agent. I highly encourage you to get a real estate license so you can learn more about the system and also save the commission, but that’s by no means the only way that you can sell a property. You can also get a little bit more creative and unique. You can hold auctions. You can even list your properties on auction sites. But by and large for property that’s been fixed retail, your MLS is your best outlet.
For those of you that are wholesalers out there, if you’re acquiring a contract on a property, you have no intention of closing, you just want to flip that contract, your best place to post that is going to be on Craigslist and online. So if you have any kind of blog or website where you post your deals, then that would be a good place to do that. To drive traffic to that website, use Craigslist.
So acquisitions, dispositions, how you buy a property, how you sell a property, give that a little thought and then ask yourself how you can systemize and scale that up so you can do more deals, make more money, and professionalize your system. So, once again, Lex Levinrad and thanks for watching this REI Classroom.
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