This is episode #380, and my guest today is Connor Steinbrook.
Most new real estate investors start the business without a lot of access to capital, or perhaps no money at all. Unfortunately, many new real estate investors also fail…sometimes because of lack of cash, but also sometimes because they try to figure everything out on their own…and just don’t have enough time in the day.
Today Connor and I share the concept of Joint Ventures on deal – where you either focus on the buy side of the business, that is, finding deals and getting purchase contracts, or the sale side of the business, or focusing on building your cash buyer list. You then partner with another investor to help you handle the side of the business that you’re not focused on.
Your time is limited, and there are ways to work with others in this business to achieve your goals. You’re going to enjoy today’s show….let’s go ahead and get started.
Mike: This is the flipnerd.com Expert Real Estate Investing Show. The show for real estate investors, whether you’re a veteran or brand new. I’m your host Mike Hambright. And each week I bring you a new expert guest that will share their knowledge and lessons with you. If you’re excited about real estate investing, believe in personal responsibility, and taking control of your life and financial destiny, you’re in the right place.
This is episode number 380 and my guest today is Connor Steinbrook. Most new real estate investors start their business without a lot of access to capital, or really perhaps no money at all. Now, unfortunately many new real estate investors also fail. Sometimes because of lack of cash. But also sometimes because they just try to figure out everything on their own and just run out of time and don’t have enough time in the day to day business.
Now, today Connor and I share the concept of joint ventures on deals. Where you either focus on the buy side of the business, that is, finding deals and getting purchase contracts. Or the sale side of the business, where you focus on building your cash buyer list of people that you can sell to. Then you partner with an investor to help you handle the other side of the business that you’re not focused on. If your time is limited, there are ways to work with others in this business to help you achieve your goals.
You’re going to enjoy today’s show. So let’s go ahead and get started. Please help me welcome Connor Steinbrook to the show.
Connor, welcome to the show my friend.
Connor: Mike, how are you doing?
Mike: Good, good. It’s always interesting when I have people on the show that are . . . because you’re in the same market as me, sometimes as I’m talking to them I’m like, “Wait, this guy is just down the street from me.” Or here we are, we can be a million miles away and you wouldn’t know it the way we’re recording this.
Connor: Yes, so don’t share too many secrets today.
Mike: Yeah, no. Hey I’m an open book. It’s funny, I used to be more close minded like I thought everybody was my competition. And a lot of people that know me well now know that everything I do is around trying to find ways to work with people and joint ventures and partnerships and stuff like that. Because truthfully the business is more fun when you work with other people, you know.
Connor: I agree, I mean, I think that’s pretty common for a lot of investors. They start out and they got this, “there’s too much competition, there’s not enough deals, let’s keep everything tighten down.” And then they realize this is a networking relationship business that they’ve got to get out there and share. And more you share with other people, the more they’re going to share with you. And it’s just a benefit for everybody.
Mike: Yeah. And a market like we’re in here, there’s seven and a half million people here. So sometimes you start to realize like, man, even if I’m the biggest guy in town, which I’m not, but even if I was, I would still probably have low single digit market share, you know. So fragmented so.
Connor: Yeah. It’s just it’s hard to grasp it. You know, it can go both ways, where you’re thinking there’s no deals and then some days you’re driving on the highway, you see so many houses out there now you’re overwhelmed there’s so many houses, how are you going to get to them.
And it’s rare that I come across other investors that I know that are active in the market that we’re competing against the same house. And that’s just how you know that there’s just way more inventory than it actually seems.
Mike: Yeah, yeah. Man, I’m really excited to talk about, this is kind of the basis of what we’re talking about today is ways to joint venture to get started. If you starting, you say you really want to get into real estate investing and you really hate that JOB, whatever it might be, whatever is inspiring you to get started in real estate investing but then you’re broke or you don’t have a lot of money or maybe you’re even in debt, like the answer is, “Well, let me go fix all that before I get started.” Like, there are some ways to get started. This is going to be a good discussion today. I’m glad you’re going to share it with us.
Hey, before you started, tells us, I know you’ve got a pretty interesting background yourself of how you got started. So tell us a little more about you.
Connor: Yes. So I have a little bit different type of past than most. I went off to college in 2003. And one of my hobbies at the time was playing poker with friends, dorm room. The big 2003 Chris Moneymaker movement happened, online poker boom happened. And it just kind of snowballed, it’s kind of like a modern day gold rush. And a lot of young guys in college basically realized they can take a small amount of money and run up to a large amount of money real quick playing a game. And it was kind of made all our heads explode. And so became a real big deal for my generation was online poker boom. And I started playing small stakes, buying in for $10, $0.10 blinds.
And just worked it up and I was what was called an online multi-tabler. We’d play because the systems allowed us to play more than one table. We played 16 to 24 tables a time and put them on a grid. And multi-table the upper mid-stakes, right? And I did very well for doing that.
And between 2003-2011 that’s how I made my living was playing poker. And then those of you listening right now know what happened after that, right? If you were in the poker world or played it all, is the United States Department Justice seized Full Tilt Poker in PokerStars in 2011, on April 15. And they called it Black Friday because the sites were doing money . . . you know, there were lots of issues going on behind the scenes.
And I was too young and too naive to not know the good things do not last forever. And basically overnight, 10 years my life just disappeared like this and I didn’t know I was going to do. And so that’s kind of where I started experimenting going into other businesses and I found myself into real estate.
Mike: Yeah. So aside from the real estate thing, give people that are listening, especially some younger people, but probably not, you don’t have to be younger to learn from this lesson, but just about having all of your eggs in one basket that you don’t control. Like maybe just share your thoughts on that.
Connor: Yeah, absolutely. I’m glad you bring that up because that’s something that I’m very hard pressing on for new investors or anybody. It really is, I had one plan A, right? You have one income stream, that income stream disappears. Even if it’s a really good one, where are you at now?
So I really am big on pressing on MSI, multiple streams of income, having different flows coming into your account. So say, you have five different streams of income coming in and two disappear, you’re still okay, right?
So a lot of people have a job where they’ve been working for a long time and they rely on it. What happens if this job, if the business goes under or they get fired or laid off? You know, so it’s very good to have multiple streams of income. And real estate is a great business to do that for a lot of people that have a job. And we kind of talk about this because a lot of people either don’t have the time or don’t have the money to get into it. And they let that be their limiting belief is why they can’t get into real estate. And you got to have more than one income stream.
Mike: Yeah, yeah. Even inside of real estate. And like you said, I teach people that all the time, like everybody wants to get started with wholesaling or they want to do some fix and flips. But it’s like man your goal should ultimately be for that to enable your business to operate. But to be putting some stuff away whether it’s rentals or notes or some other kind of cash flowing assets that if you ever want to stop you still have some money coming in, right?
Connor: Yeah, I mean, the whole goal with real estate is get to cash flow, right? But not everybody has that path to get there easily. You know, if you don’t understand, if you don’t have a bunch of money to throw in some properties on your own, you’re going to have to be able to raise money and it’s hard to raise money if you have no credibility in the marketplace or if you’re not bank financeable. You can’t go get credit lines, you can’t go get bank loans. Unless you understand low equity purchases, like subject two, how you can actually build a portfolio. So you’re going have to start out doing transactional deals, wholesaling, flipping houses. And that’s just the reality of it for most investors. They don’t have that option to start.
Mike: Yeah. Yeah, because I can tell it’s gotten harder to buy houses. And we’re facing more competition now. And just even me, I’ve been in the business for 10 years you worked really hard for a while and you’re always thinking about, “How can I make this easier? What can I do that’s better?” You know, one of the things that I didn’t really plan for this to happen but when I look back now, I have a decent sized rental portfolio and I look back and I was like, “Man, I wish I would kept three times more as rentals.” Because now I know those things are starting to cash flow, we’re getting some houses paid off. And it’s like, “Wow, they’re a pain in the butt.” But the cash flows for them my family could . . . there’ll be a time real soon where we could live on that if we wanted to. And so, if nothing else it’s a nice insurance policy.
Connor: I mean, it’s tough. You know, when you go on as an investor and you start flipping these houses and you’re like, “Well, I wanted to keep as a rental, but I could sell it right now and make 45 grand.” It’s hard to have that discipline to say, “Okay, I’m going to finance and keep this property.” Even though you know that equity is still in there. In fact, the equity is going to go up.
Just like you, I wish I kept a lot more properties. Especially since some of them have gone up. I mean, some of these houses I bought three years ago that were worth 120 here in Dallas are now gone for 180 or more. So I should have kept on. But it’s a balance between do you take the short-term gratification of the large transactional money or do you put it away and build up that passive income. So it always a back and forth between most investors.
Mike: Yeah, yeah. So this has happened in real time. I am actually selling two of my rentals. I’ve never sold a rental. I’ve just kept them even if they were a pain in the butt. So I’m selling a couple of my dogs, literally one this weekend, one later this month.
So one of them I paid $15,000 for. We put about 10 into it and so I’m actually seller financing them. That’s part of the reason why I want that cash flow. But, like I’m just tired of dealing with trouble tenants. And one of them has an HOA which is . . . I hate HOAs, but, yeah I’m selling that one for 90 and I’m seller financing it. So I paid 15 for it and put 10 into it initially.
And then I got another one I paid 22 for and we probably put about 15 into that one. And I just locked that up yesterday for a 125 on a seller finance note. So I was like, you know.
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Mike: And I’m just going to figure it out myself and then a lot of those people obviously end up failing because they try to do it all themselves.
Connor: Yeah, I mean, it’s a solopreneur type of mentality. You know, I’m going to wear every hat at my business and do it all on my own. And for one, I mean, a lot of people it could be their nature, they may be introverted, they just don’t go out there and meet people. But this is a networking business. If you don’t know people in this business, how are you going to be successful? I mean, you can still kind of go do it but you don’t want to be kind of running on your own solo, a lone wolf I guess you could say. Because entrepreneurship can be lonely for a lot of people. And I see this all the time. They come to me and it’s good to get out and network with people.
And so we’re going to talk about a strategy that I use to build my business when I ran out of money because I think it’s very important because you’re in the education business and somewhere to me that people come to us all the time. And what do they tell us? “You know, I want to get in the business but I don’t have any money.” So how are they going to get in the business if they don’t have any money? And they need a marketing budget, they need costs to run their websites, their e-mail servicing company. Lots of different sunk costs that they are going to have, fixed costs that they have to have.
But if they don’t have money from marketing, how are they going to find a deal? Right? And so this is kind of what I show people. So a lot of people get in and they understand wholesaling, how to do an assignment. But they don’t understand what a double assignment is and that you can do this. And so basically what we’re doing is we’re doing a double assignment or co-wholesale deal but we’re doing the process virtually. So we’re never leaving the office. Because in my opinion the two biggest time wasters for a new investor is how much time they spend on the phone and how much time they spend in the car. So that if they can reduce those hours in the car, it’s just going to increase their income.
And so what we teach them is how to build a free buyers list using the internet and connect buyers or connect individuals who have a house under contract already and sell that property for them. And so this would be the difference between a regular wholesale deal and a co-wholesale deal, is you would be the wholesaler marketing for that deal, spending your money, getting a house under contract, and selling it to a buyer.
Now, in the co-wholesale deal there’s two wholesalers. There’s one individual went out there, spent their money marketing, found a house, got under contract, but they didn’t have anybody to sell it to. And now they need to partner with someone. And that’s what we’re teaching individuals to do.
Mike: So you kind of build a network of people that will bring you deals because you spent your time, there’s only so many hours in the day, right? You could choose your time to build a list of generate leads to try to find sellers or you can spend your time trying to find a list of buyers that are ready to buy. So all you’re doing is kind of partnering up really the buy and the sales side, right?
Connor: Absolutely. Just like in traditional real estate, you have a buyer’s agent, a listing agent. You’ve got two different agents, 3%, 3%. You can do the same thing with the wholesale deal. And so must people don’t understand this but the big wholesale companies in the area they’re doing 400, 500, 600 deals a year. Most of them are not generating those leads on their own, 70% to 80%, 90% of their business, most of them are coming from this co-wholesale strategy where they positioned themselves in the market sponsoring the RAI clubs or sponsoring the expos.
They get out there present themselves as the big wholesaler in town. And then when someone goes out and finds a deal. This is what it looks like from new investors, they get into business, they’re consumed with education of podcasts, YouTube, their job, whatever they’re doing, they’re just rushing to get their business off the ground. Then they finally find a house and then they go, “What am I going to do with it? I don’t have the money to close on it. I haven’t built my buyers list.” And they have two options, terminate that contract or bring it to another investor.
And so that’s kind of what we do is, for one of our strategies, we position ourselves as the exit strategy for these individuals. So you have two options, you can either spend your time looking for sellers or looking for buyers. But at least if you have a buyers list and you run out of money, you can go wholesale deal for someone else.
Mike: Yeah. It’s funny because I just teaching a large group of people this past weekend. We had an event and you could see people are fearful of like, “Well, if I found a contract, what if I can’t sell it?” They’re always afraid of that. And of course if you don’t buy it, right you can’t even go wholesale them and because you paid too much. You’ve got to buy it, right?
But, there’s no doubt. The funny thing is this and I didn’t always appreciate this but, like you said, there’s some people that we know that are here locally that are kind of co-wholesale, and this is really their model is they go find investors that they can help them sell their deal. And when they put effort into building their buyers list, like it’s one thing to go to REIA clubs and have a buyers list full of potentially other broke people.
But if you really know how to go after buyers that are maybe people that are focused on keeping the houses as rentals, people that might be willing to pay a little bit more for them than the traditional like rehabber necessarily that also is in the middle and wants to make money in the short term versus somebody who’s more of a long term. Like, if you really focus on buyers, you can ultimately find people that are willing to pay more than the traditional wholesale buyers, right?
Connor: Yeah, absolutely. So, most people overlook the power of their buyers list, right? They just say, “Oh, yeah, there’s buyers everywhere.” They don’t understand like you said the quality of the buyer. So if you look at it, “Who can pay the most?” It goes from least to most, you go rehabbers, then landlords, then owner finance investors, then owner occupant buyers.
So rehabbers are going to pay the least amount for your deal because if they make a mistake on their numbers in the present moment, they actually take a loss when they have to sell the house, an actual cash loss.
A landlord can usually pay a little bit more because they’re financing. If they make a mistake on their numbers, they’re getting out of it over time. Same thing with the owner finance investors, they can tweak the numbers. But say on some of these low-end properties if you put it on the MLS, you close on it, list on the MLS, these owner occupant buyers will pay the most because they’ll come and do their own labor and they’re going to take that cost, which is the biggest part of the rehab, out of their mind and out of their calculation when they’re looking at buying the property.
But when it comes to a cash investor that we’re looking for, who’s going to pay the most? We’re looking for that individual who’s not using debt service or debt leverage. They’re funding these properties out of their own cash, out of their own REI, or whatever they’re going to do. So they’re not having those underlying points and interest that most investors have. And then they have some type of relationship to the business, whether they own a contracting company or they own a foundation company where they can do the work cheaper. So if they can save $10,000 by not paying interest and they can save $10,000 doing the work cheaper, they can offer 20 grand more than what most people can.
This is why you’re seeing a lot of people pay $0.85 on the dollar for properties here. One, some of them are uneducated and making bad mistakes. Others are just positioning themselves where they can pay more for properties and still do well on it.
Mike: Yeah. Or they’re like first time rental owners where they’re getting Fannie and Freddie loans four and a half, 5% stretched over 30 years. So the financing cost is much, much lower. Yeah, absolutely. Yeah. Maybe we can talk a little bit about . . . well, let’s kind of come back to like how you build your buyers list. So maybe just talk a little more about why the JV. So you just kind of explained a lot of the benefits of, if you really focus on building your buyers list how to find a higher quality candidate.
And so for most real estate investors that are coming in that are really putting a lot of their focus into lead generation, which is truthfully is what I teach, like it’s all about the leads, right? I mean, historically that’s what I teach. And that’s what I do.
But, just that power of partnering up with somebody and also one thing I want to kind of just throw out there as well is in my business when I started I worked with my wife but we essentially were partners. Like we split up the business to the buy side and the sales side. She got her license and she listed most of our stuff. And even for wholesale, she kind of took care of it. So real estate, even individual real estate businesses, it’s very common for people to have a partner. And one person is kind of on the acquisition side, one part parts on the disposition side. That’s probably the most obvious split in a traditional real estate business anyway, right?
Connor: Yeah, yeah. It’s like you shouldn’t shy away from partnerships, especially when you’re starting your business. So let me kind of back up a little bit and just kind of explain how the strategy came out. So it makes sense for a lot of your listeners.
So even though I did really well on online poker, I made a bunch money, when that income stream disappeared, like we’re talking about I had one income stream, it left me basically on my knees. I didn’t know what I was going to do.
And so when I got in the business, just like a lot of people, I made every mistake in the book. I bought a mobile home on land and I didn’t realize that I just bought the land. I had someone steal money from me. And before I knew it I was 65 grand in debt. And I didn’t have any more room to take out credit cards. I didn’t know what was going to do. And so I was literally working for minimum wage, just trying to figure it out, just trying to pay my credit cards minimums because nobody wanted to hire me because I had a tenure, in their opinion, gambling history, right? Even though I did very well in that business.
And so the only thing I knew to do was go to the REI clubs, right? And so I was going to REI clubs and I was building my buyers list for free using sites like Craigslist and other online resources. And there is an individual there who had a property fire. And I asked if I had a buyer for that house, would they split the commission with me. And that’s basically how it all started.
And then a few weeks later I was running ads online. Someone called me, just regular “We buy houses” ads. They asked me if I wanted to buy a certain house in a certain area and I said, “You know, let me think about it.” And right after that someone call me and asked me if I had any houses in this area. And so basically you’re playing the matchmaker between buyers and other individuals in your marketplace who have the deals.
To do these deals I had none of my own money marketing for these deals. I never met the seller in person. I never met the buyer in person. We DocuSign these contracts so we’re doing it all digitally. We’re not going to the property because our buyers are going to the property to see the property. Because we don’t have to show it. Because it’s an assignment contract, we’re never going to the closing table. So I’m literally never leaving the office. My time on these deals are three to five hours usually and they take traditional time for a wholesale deal to close, 7 to 14 days.
And the reason why is powerful is because if you run out of money for marketing for your deals, which is expensive, in a way market is gambling, how are you going to get any deals in this business unless you get just a random referral? And so other wholesalers in your market who have houses under contract have their hands raised, right?
Right now, how many houses do you think are under contract in DFW? And whether they’re at a price that you can sell it or right there borderline that homeowner’s basically been identified as someone who’s ready to sell their property at an investor price, right?
And so we want to work with these people because they have the inventory. And when we’re in low inventory situations if we go directly to wholesalers, new wholesalers in specific, they have all the inventory. And as long as we have a way to help them monetize those leads we’re going to make money partnering with them.
Mike: Yeah. And from their standpoint sometimes people fall back to like, “I want to do everything myself.” But if you’re an investor and you really are focused on lead generation and buying, for you to go focus on selling you’re going to take away a significant portion of your time. So I presume you can kind of teach people like, “Hey, if you find somebody that’s really good at buying.” You say like, “Look, yeah, you’re going to split the deal with me but you don’t have to focus on the back half of the business.” So effectively if you did all that you’re probably going to do half as many as deals because you’re focused on two different things.
And for you, obviously, it’s the flip of that, right, like, you’re going to focus on the selling side and building that side of the business. And you’re facilitating or helping other people focus on the buy side. So it’s a little more informal than like a partnership with me and my wife, right? Where we were married so we were kind of in a partnership anyway, which is the most formal relationship, right?
But I’m saying in business there’s a lot of people that are brothers or just buddies or whatever they get in business together. And so this is a way to kind of have a little more informal joint venture kind of arrangement without being in the business together, if you will.
Connor: Yeah, absolutely. And it’s going to help to educate the new investors in your area. The individuals that you’re going to call are the people putting up bandit signs most of time. People putting up bandit signs are new investors getting in the business. And when I started, I had a number of contracts that I put under contract that would’ve been easily 10,000 deals. But I didn’t have a buyers list at the time and I didn’t even know that I could bring that deal to another investor. So if you let these new investors understand, “Hey, look, if you get a house under contract, bring it to me, I’m either going to buy it from you directly or I can help you sell it. We can partner on it.” And just explain to them that they’re putting up a lot of time, energy, and money going to find these deals.
Right now it costs me over $3,000 to get a deal, in Dallas, from my own acquisition costs from my other business, not my wholesaling business.
So if that individual spent $3,000, their time, energy and money going out to house after house, and get a house under contract. And they can’t sell it. They’re running to the end of their option period and they get three days left. They can either terminate that contract and lose all that time, energy and money, or bring it to you and let’s say I wholesale that house for 10 grand. I make five grand, they make five grand. But in reality I’m making all five grand because I don’t have any costs end up front.
But you’re still saving that individual from losing all that time, energy, and money. So they’re grateful to have you come and do this. Plus you start the psychological spark in the back of their mind that says, “I have an extra exit strategy. So if I can’t sell it on my own, I can bring in someone else.” And there’s a lot of investors in the area that only want to generate leads, they don’t want to have to find buyers. And that’s all they do is they find the deals and let other people sell them for them.
Mike: Yeah. Yeah. Awesome, awesome. We should’ve mention this upfront. We’ve had a lot of veteran folks on this show and there’s a lot of folks with a lot of experience that listen to the show. But I think there’s a lot of new folks too. So maybe just take a minute and just even explain what wholesaling is.
Connor: Yeah, I mean, so guys, when we are wholesaling a property, wholesaling I guess you could say is the easiest barrier to entry for a new investor in the business. If you don’t have the money to close on a property say it’s a good deal. You wanted to flip it but you can’t get the hard money loan, you can’t leave the money in there or you don’t have a credit line or you just can’t close on it. What are you going to do? You know, you hear that you can do this business with no cash or credit. Well, this is what they’re talking about.
They’re talking about going getting a house. Say the homeowner wants to sell the house for $100,000. We’re going to get a contract on the property using what’s called an option contract, we’re going to use equitable title of the contract and we’re going to sell that contract to another individual in our marketplace that can close on that deal. So, for example, a rehabber, a landlord, an owner finance investor, we’re building a database of buyers on the side so that when we do have a house under contract we can get in front of a lot of buyers quickly to increase our chances of selling that property.
So say, I go and meet with the homeowner and I offer them 100 grand. They accept the offer of $100,000. Well, I’m going to take that contract that I have now and I’m going to market it to my buyers list and I’m going to sell that contract and the option on that contract to buy that property for let’s say $10,000 and we’re going to do what’s called an assignment contract and we’re never actually going to take title that property, we’re just going to get an assignment fee.
And then there’s the way of doing it, which is called a double close or double escrow or simultaneous close, which is where we’re contracting the same deal, same buyer, except this time we’re closing on the property. We’re going to use a third party financing source, a transactional lender, who’s going to come in and fund that deal for us. So say, we have the back end buyer, as soon as they wire their money from their lender into the title company and the title company has confirmed that their money is in escrow account. Say Mike was my lender, he’s going to fund the first closing. I’m going to own that probably for a short time. And back to back simultaneously they’re going to do two closings. And then Mike’s going to make a transactional fee for loaning me the money for the debt, or whatever it is.
And so some houses have deed restrictions. You’re going to have to do that on, or if you’re trying to hide the amount of profit you’re making from the buyer or seller. That’s why people usually do that.
Mike: Yeah. Cool, cool. Yeah, and that’s obviously very typical for new real estate investors to start with wholesaling and assigning just because it’s faster, less risk, don’t necessarily need to have money and all that stuff, right?
Connor: Well, it’s just a great stepping stone to get into. So I want people to go from wholesaling houses into flipping houses. So when you’re wholesaling these houses, guys, go back and reverse engineer the property and see what happens. So say a wholesale house to Mike, don’t just kind of let that deal go by. You want to go back later and see what he sold it for. Go into MLS and look at the photos of the property, see how much work he actually put into it. Because you’re going to make a bunch mistakes when you’re new in the business. You’re not going to know if you’re selling the houses for the most that you could sell for. Also if you were going to rehab it, what would you have done different.
So this gives you an idea if your numbers are right. And what they’re selling it for and it’s real life results.
Mike: Yeah, absolutely. I did that recently, there were a couple of deals that we wholesaled off. In some areas here there were like kind of East Dallas where it’s like, “Yeah, it’s not really Lakewood but it’s kind of close and, you know.” So you never really know how it’s going to play out. And there were just ones I was like I just don’t want to take the risk on it. I just rather just wholesale it. I mean, I saw some people like sell houses, I thought the ARV was like 235. They’re selling them for like 350. I was like, “Oh, man.”
Because by definition, I mean, historically, I’m a rehabber. So I don’t mind rehabbing. But I just never thought they could pull off like what they pulled off there and I was like sometimes you see that and makes you a little upset.
But anyway, kudos to them for making it happen.
Connor: Yeah, guys, when you do go back be prepared, it could hurt a little bit because . . .
Mike: Yeah, you might have some regrets.
Connor: Yeah. That happens but that’s you have to learn, right? So I remember a house I sold to a guy in North Richland Hills. Man, like I thought he was going to put like 40 grand this house, he basically put like 5 grand and sold it for full market value. So it just depends on how you look at it. Because if I had bought that house out, I would’ve put a lot more money into it, so would I’ve really made that same money? No. But it’s good to know. Look back and see what other investors are doing because it may give you an idea and you may be over rehabbing or you may be under rehabbing. And it’s just good to go back and look and kind of see.
And then by the time you do this a few times your condition and ready to kind of jump and take on your first rehab.
Mike: Yeah. Nothing else provides you the education and gives you the confidence to believe in what you’re doing. When you kind of see from where you picked it up to the whole value chain like what happened all along the way. If you have any doubt that this business kind of works or how it works, like that will be your education, it’s just watching it kind of it’s like a production line, right? Like maybe you own the first factory and then your raw materials that go into the next factory to make something. And when you see their product rolling off the line and you have some sort of indication of probably how much profit they made it helps you understand the whole process.
Connor: Yeah, I mean, guys if you can make it as a wholesaler, you can make it doing anything. It’s all about what Mike said earlier, lead generation. So if you can find a house that you can wholesale, when you start flipping you’re just going to have that much more room in it.
And then you kind of get to decide what’s your internal philosophy as on which house you keep, which ones you owner finance, which ones do you flip. And kind of as the leads come in, you trade pick them and send them down which funnel you want to take them down.
But that’s why wholesaling is good, because it helps people start their business out. Say, you go wholesale three or four houses, make 15, 20 grand, now you have the cash to get into your first hard money loan. And now you can take a chance.
Mike: Yeah. Awesome, awesome. Well, let’s just take a minute or two and talk about building your buyers list, like some tips that you would give people. I mean, there’s the obvious ones like go to REI clubs and gather business cards, and ask people what part of town they want to buy in. There are some obvious ones like that but I know that ultimately there is some art to this doing it kind of right as well. Maybe share some tips.
Connor: I mean, obviously the best way to go and get your buyers list is go up your competition. And find the investors in area see who’s wholesaling, what deals are wholesaling. Go back and reverse engineer the county records.
And that’s going to take some time, energy and money, right? And it’s going to burn you out if you do it on your own. You know, you’re going to need a virtual assistant to do that. But the way that I built mine up real quick was using free online sources like Craigslist and classified sites. We were we created a squeeze page which is a one page landing page. We drive people there to say, “Join our buyers list.” And then it funnels directly into our back office system that we use to capture emails, whether it’s Getresponse or Aweber.
So we’ll go place ads on really anywhere you want to put them. Facebook Craigslist, any of these online sites are free. Go into the buy, sell and trade groups, put your buyers page, join our buyers page, web link on there, and funneled traffic to your buyers list that way. This is a completely free way to do it, right?
Plus there’s a ton of people that have houses for rent, houses for sale that they just rehabbed. So if you go on Craigslist and it says, “House recently rehabbed.” Had to be a rehabber in the first place or if they have owner finance ads up there for rent. These individuals had to buy the house in the first place. So they may be likely to buy from you. And so reach out to these individuals and get them on a buyers list. And start building that . . .
Mike: You say, “Hey, I noticed you’ve got a house for rent, are you looking to buy any more in that area?” Right?
Connor: Correct, correct. Yeah. And you got to understand there’s a lot of different types of cash buyers out there. And not all of them are going to buy from you directly. So a lot of people contact me all the time and they say, “Should I mail on these cash buyers lists? I got this cash buyers list from whatever program or from the MLS.” And you got to understand that those cash buyers are broken up between cash buyers that will buy from a wholesaler, cash buyers that won’t buy from wholesaler. You got nonprofits and government agencies, and then you’ve got retail cash buyers.
So not all those cash sales that you just pull off of cash lists are going to be someone that’s going to buy from a wholesaler. They could be someone that just sold their house in California for half a million and took their equity out and came here and bought a house for 250.
So we like to go through the county records and go after them directly and find the LLCs, I guess, if you’re going to go do that, find the LLC are more likely than the one-off homeowner names. That make sense.
Mike: Yeah, it’s funny, I’m sure I’m like you I get, because I have some rentals, and I get letters or postcards every day from people looking that want to buy my houses, right? But I can’t remember the last time, if ever, I’ve gotten a card or contacted to say, “Are you interested in buying more houses? I know you have some rentals in this part of town, would you be interested in buying some more?”
Most people don’t put any effort into that, right? They just kind of, I don’t know how they do it, they just kind of the way it’s like collecting business cards or they don’t put a lot of effort into it. They just kind of assume, “Hey, if I find the deals like the buyers will come.” Which historically there’s some truth in that, but it’s always the buyers. It’s always like the traditional investor buyers that want to rehab it or something like that. It’s not usually the more sophisticated buyer that . . . and I say sophisticated like their primary business isn’t real estate investing. It’s they’re investing in rentals or seller financing or something. Those people are hard to find at REI clubs and stuff like that, right?
Connor: Yes. So, I mean, it’s just like when you raise private money, you’re not probably going to go find a very good lender in an REI club. You may find one to lend on your property but they’re going to want they’re going to want high points or whatever.
Mike: [inaudible 00:32:51] money rates, yeah.
Connor: Guys, there’s a lot of individuals out there right now that understand real estate enough that they want to do it. For example, an individual that I just sold a house to, this is a house fully fixed up and flipped. Put it on MLS. Sold it 10 grand above what I purchase of where the guy runs a bunch of gyms here in DFW. Very successful multimillionaire, done very well on business. Not uneducated at all, for any means.
But when it comes to real estate, he’s not classically trained. He hasn’t gone through FlipNerd, he doesn’t understand and the way he saw this property was he was going to pay $130,000 cash, whatever equity around what it was. And after his net-net, he’s going to fund it with all cash, not put any debt on it. And so it’s going to bring in basically $13,000 a year after everything. So he’s saying 10% cash-on-cash return. In the next year he’s seeing $13,000 into 117. Next year $13,000 into 104, right? And so he’s seeing an increasing return. And to him is way better than any investment he had his money in right now.
So and he doesn’t want to pay full market value, fact above market value, pay cash and keep his rental property.
So if you can find the right, and as a wholesaler, I mean, most of y’all are not doing over 100 deals a year. So if you find five or six really good buyers like that, they’ll buy all your properties.
Mike: Yeah. Yeah. It’s like a lot of people that, we’re talking about people that are new or getting started, a lot of times people that don’t have a lot of money assume that everybody doesn’t have a lot of money. But like you said, there’s people out there, there’s a lot of really successful business owners that do really well in their business. And they don’t know what the hell to do with their success, like they don’t know what to do with that money.
Like they don’t necessarily reinvest it back into their business because they might be long term like, “Hey, I want to invest in rentals or something like that.” But they don’t. Like you said, they’re not sophisticated in our business and they don’t have time to go find leads and generate leads and go talk to 20 sellers to turn it into one deal. They don’t do any of that. They’re willing to just pay full price for it because it’s still a pretty good investment. A pretty good return. And they might just have a bunch of cash just sitting in an account somewhere earning nothing, right?
Connor: But, I mean, if you guys, if you’re having trouble raising money these are the perfect individuals to kind of network with. And we’re talking about networking here. You know, a lot of these individuals have big 401K accounts or REI accounts to turn on, before the podcast, if they don’t know they can self-direct that REI into real estate. A lot of times that money is just sitting there doing nothing. And if you can educate them and show them how they can make a 10%, 12% return plus they’re having the shelter of the tax savings in there, they’re really making a lot higher net.
If you’re the first one to get to him and explain to that. Explain to them how to do this and self-direct their account, you’re going to raise a lot of money and you’re going to basically be there go to individual.
Mike: Right. Yeah, yeah. Awesome. Hey, before we kind of finish here, I want to talk about a couple more things which is, basically just give some advice on how to get started. And maybe we can break this into two buckets, like if you are the person that really wants to focus on a lead generation side, how do you get started finding that kind of co-wholesaler to focus on the sales side? And if you’re saying, “Hey, I want to build a network, I want to be the seller that focus on the sales side and I want to build a network of wholesalers that will bring their deals to me that we can work on together.” Maybe break that apart into two different buckets.
Connor: Yes. I mean, right now guys, you’re doing the right thing, you’re on the podcast, you’re on YouTube, you’re getting that basis for education. The next step up is to go to the REI clubs. The reason why the REI clubs is a great way for new investors to start out is, because that’s when everybody else is starting out at the same time. I mean, I still do deals with individuals I started out with years ago, right? And if you’re the one that is a lot of these people go into these REI clubs are going to stumble across a deal from a referral or whatever it is. And if you’re the one to help them make to that strategy, because if you go back from when you start your business you didn’t know what you’re doing, and the first deal you had, unless you had a good mentor someone around, you didn’t know what to do.
So we want to network with the new wholesalers. These are the individuals just put bandit signs up, these individuals running ads on Craigslist, they’re going to the REI clubs. You want to work with these individuals before they kind of figured everything out because they’re going be the ones they’re going to need you to sell their deals for them. Or you can just buy them directly, you don’t have to do a co-wholesale strategy. You’re just networking to get deals. It’s just a referral strategy.
And then on the back side, guys, if you don’t have any money you need to be running doing proactive and reactive marketing on all sorts of social media sites and classified sites. So proactive strategies where you’re actually going through looking for these individuals, contacting people, put ads that they’re running.
And then a reactive strategy would be to place ads out there on line, like banner ads or thumbnail ads, so that people can click on and be redirected to your website.
Mike: Yeah. Awesome man, good stuff, good stuff. Hey, folks who want to learn more about you Connor of what you’re working on, where do they go to learn more about what you’ve got going on?
Connor: Yeah, I mean, guys, you can go on over to investorarmy.com. Also if you’re here in Dallas and you got deals you want to sell, you can find me at connorbuyshouses.com or metroplexinvestec.com. Yeah, you should be able to find me and text me anytime.
Mike: So, if they have deals they want to sell, first they bring them to me and then if I don’t want to this deal . . . I’m kidding guys.
Connor: Yeah, I guess you can send them to Mike.
Mike: I’m kidding man, I’m kidding. It’s funny, I don’t want to like steal thunder from the show or anything, but I actually do some JV stuff where I’ll rehab it and I pay people half the profit from rehabbing. So I’ll fund it, we rehab it, we sell it, we do everything. So, I mean, I do the same type of thing more on the retail side so.
So were basically speaking from the same book here, right?
Connor: Yeah, I mean, it’s a lot of people just don’t want to give it up or give up 50% a deal when they start. And so a lot of my business came from JV’s not just wholesaling. But my first rental properties using other people’s credit and cash to get into the game. So you want to do JVs to build your business and then as soon as you can, obviously, you want to do the deal on your own. But a lot of people don’t have that luxury. Plus you’re paying. You got look at like you’re paying your dues. You’re giving up a big portion of the profit. But that investor that’s helping you get that first deal done is sharing a large portion of their knowledge and wisdom that they’ve figured out in the business. And it probably helps you make money a lot of times. A lot of these new rehabbers is probably going to lose money on a house and then someone helps them come in and save some money. And so it’s.
Mike: Cool. We’ll have the links down below that you just shared with us, down below the show here. Everybody here, thanks for joining us today, it’s episode number 380. Connor thanks for spending time with us.
Connor: And Mike I appreciate you coming on.
Mike: Good to see you man. So, everybody, again, thanks for joining us today for episode number 380. We’re going to keep them coming your way here. We’re going to keep cranking them out. If you could, if you haven’t yet please go to iTunes, Stitcher Radio, Google Play, YouTube, anywhere where we syndicate our information, wherever you’re listening or watching right now, and subscribe and give us a positive rating if you could. That’s the fuel that kind of keeps us going here.
So we appreciate you guys. Hopefully you learned something today. Thanks to Connor and guys, we’ll see you on another upcoming episode.
Have a great day.
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