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Justin Williams has been a full-time investor for over 9 years. He’s flipped over 500 houses. He considers himself a house flipping machinist. What he means by that is that he is all about building systems so that he could scale quickly and do more with his time.
In today’s episode, we talk about what amounts to a paradigm shift for most investors. There are three steps to revolutionize your house flipping business:
1. Generating leads on a regular basis
2. Converting those leads
3. Increasing profit
Justin’s whole approach is to focus on those three points, nail down the processes and then scale it. It’s really that simple. Maybe not easy to do, but simple.
During the episode we talked about the importance of knowing your CPL (Cost Per Lead) and CPD (Cost Per Deal). REImobile is the system I use to keep track of these numbers for me.
Justin has done this with his own business and helped many other investors do the same. Trying to figure it all out yourself would not be the best use of your time.
The best use of your time is learning from someone with the experience and ability to teach you every step of the way.
Justin has just opened the doors to his House Flipping Formula program. You can get access to it here: Justin Williams’ House Flipping Formula
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Danny Johnson: This is the Flipping Junkie podcast episode 51. [music] Welcome to the Flipping Junkie podcast. My name is Danny Johnson; former software developer turned house flipper, flipping hundreds of houses. Each week, we bring you interviews, strategies, stories, and motivation to help you get started flipping houses and on your way to becoming your own boss and achieving financial freedom. Thanks for spending time with me today. Now, let’s get to it.
Hey, Justin. Thanks for being on the show again.
Justin Williams: Hey, Danny. Thanks for having me. I’m happy to be here.
Danny Johnson: Yeah. I think this is the third time, isn’t it?
Justin Williams: Woohoo! I think so.
Danny Johnson: Yeah. Third episode with Justin Williams and today – we talk a lot on this show about generating leads, finding leads and generating more deals and making money and all that kind of stuff, the specifics. But I want to talk with Justin today about sort of having an epiphany for people to have a paradigm shift in their thinking about finding deals. So that’s what we’re going to talk about today. Just a little bit of a background study about Justin if you haven’t heard of this already before. But I guess it’s been almost two years since. I talked to Justin on the phone and we were talking about his systems and everything he set up for his house flipping business. After I got off the phone, like two minutes later I’m driving and my brain is going crazy. I didn’t even think more than a couple of seconds before I just hit the redial and I called him back up and I said, “Hey, can I fly out there and hang out with you? I need a whole day to spend with you, like just hang out,” and he was like, “Sure, man. Come on out”. So I got plane tickets and flew out there and hung out with Justin and an eye-opening experience, really showed me a lot of stuff. So that’s just a little background story of Justin and my relationship. But he’s taught me a lot in growing the business. A lot of people flip houses and they’re happy with doing 10-20 deals a year is a good amount of deals. And Justin specializes in setting up systems and processes to where you can scale that 50-100 deals a year. Justin, you did over 100 deals this year, right?
Justin Williams: Yeah, we’re on track to do so. We’re still not up but we’re on track over 100 deals again and Andy, my partner, that guy, he does a lot of wholesale deals but they’re doing over 20 deals a month, wholesale deals. They’re just crushing it. So yeah, it’s fun. The systems are very fun.
Danny Johnson: Absolutely. One thing that I was always hung up on was I could find people to do some of the marketing and do some of that stuff, to set that up and have them continuously be consistent about doing that. But where I was always hung up was I had a hard time having faith that I’d find somebody to go and be able to – because I market mostly to motivated sellers and I go to people’s houses and I make them offers to buy their house directly from them. I had a hard time envisioning having somebody that would do as good of a job as I did or I felt I did doing that. Justin was always telling me, “You will find somebody better.” Like stop thinking that you’re the only person that can do this because there’s people that will do it better than you and just kind of drill that in.
Justin Williams: Yeah, don’t be so cocky, Danny.
Danny Johnson: I’m still better. So I have found somebody and I have him on my team now and it’s just been great. I spend a lot more time on the software side of things because I’ve set up these processes and systems on the flipping side of things. As much as 2 ½ years ago, I was spending a lot more, trying to get the software stuff going and still doing the flipping but my flipping business suffered because I didn’t have the processes and the people. That’s why I went and hung out with Justin because I just wanted to be able to have that going just like he did and have the time to focus a little bit more as I need to, to get the software stuff going with Lead Propeller and REI Mobile. But I’m going to stop talking.
Justin Williams: No, this is great. I mean talk about major massive action taker, right? Like you talked to me, you felt like “I got to learn from this guy”. You were on the plane, you called me back within minutes and I was like, “Is he for real? Okay, sounds good.” You were on a plane and within days you were at my house. And we’re able to go through these things. I remember telling you like exactly what you’re saying, “Oh no one can do this.” I said, “Danny, don’t be so full of yourself.” Still, even on your face you were like I can tell like, “I’m not so sure about this.” But look at you now, you’ve done it. Even a few minutes before this call, we were talking about it and we hadn’t had a chance to catch up and you’re like, “Oh yeah. I don’t even look at these houses anymore. I’m not that involved and I’m able to focus on this other passion that I have and doing more of the things that I love because I’ve put those systems in place that will work for me.” So that’s awesome, man. Super.
Danny Johnson: Yeah. I think some people are maybe struggling with making that change themselves is part of the problem struggle that I had with bringing on anybody for anything is you feel like you’ve got to give all that effort and time upfront to set them up to get them doing the things properly and I think some people hesitate, I know I hesitated because of that.
Justin Williams: Yeah. And here’s the deal. Most people focus way too much on finding deals, finding contractors, finding the money. Don’t get me wrong. Like I get it, I get it, yeah, those things are important, we got to figure those things out. But if you have the paradigm shift, our brains, you know, they can only focus on so much at a time. So if you shift that to focusing on creating a process for these three things – write these down. If you create a process for generating leads and I’m talking about generating leads on a regular basis, I’m not talking about you waking up in the morning, looking on the MLS. If you’re sick, that process stops and going out… no. I’m talking like process. If you do not have a process in place that brings leads to you every single day, then in my opinion you’re going to struggle.
Danny Johnson: First one is generating leads on a regular basis. Let’s go through the three real quick and then go back and do emphasis so that we don’t lose track.
Justin Williams: So number two is then you have to have a process in place for converting those leads. I know a lot of people that have figured out how to have generate leads but their conversion process, it sucks. They are either spending money, throwing money away or they’re breaking even. That’s not a way to run a business if you want to pay your bills. Breaking even does not work. Two years ago, it must have been like 2.5 years ago, a little bit before you came down I met with this girl at a masters meeting that we had and she’s like, “Okay, confession time. I’ve been in this business for about 18 months. I started off doing okay. But for the last six months, I haven’t made any money and I’m going to have to go back to my job pretty soon.” We just broke down her process and it was so interesting because she had spent $20,000 in the last six months, we had spent $20,000 in the last six months. The reason why back then we didn’t spend as much money as we are now was because we are mainly buying from wholesalers and on the MLS and things like that. But we had still spent the exact same amount of money as she had. We made $140,000 off of that $20,000 because I broke it down. I had my acquisitions manager there, we had our numbers and she made 20. She got one deal and she made 20, it’s like, okay, clearly you’re doing something wrong. We are on the same market. The way we’re marketing was pretty similar but yeah, we had 7x our investment and she was breaking even. So we went through and we broke it down and it just came down to she didn’t have a very good lead conversion process in place. So these things are important. It’s the difference between my marketing coach help me have this huge epiphany with his marketing business. His only goal is to break even when he’s marketing. If he can spend a couple thousand dollars and make a couple thousand dollars, it helps him grow his customer base.
Danny Johnson: Right. Because there’s customer lifetime value is higher than that.
Justin Williams: Exactly. So if he can make that like in day one, he gets like free money. He said that is a million dollar business. I can make all the money I want. He calls it a break even funnel. Okay, so real estate is a little bit different. I mean, it’s not very often that the same seller is going to sell you multiple houses, correct? So your goal in real estate is if you can make at least twice as much in profit on each deal as you spend to acquire that deal, which acquiring the deal includes the cost of lead generation plus your cost to convert the lead, so your lead generation plus your lead conversion cost is less than the profit per deal and I’m talking about wholesaling here just because the numbers are easier, flipping similar idea but you want to make significantly more than just two times. Right? So if you can have a process in place that will make you twice as much money as the cost of spend, that’s a million dollar business. Now it’s just a matter of pouring more leads into the funnel if you will, into the machine and increasing your profit per deal. Because once you get to the point where you’re making 4, 5, 6 times whatever you spend, then that is a million dollar business. I mean, Danny, if I were to give you $2,000 for every $1,000 you give me –
Danny Johnson: How many times can we do that?
Justin Williams: Yeah. We could sit all day and that’s all you would do and it would make you –
Danny Johnson: Let’s do that some time just as an example.
Justin Williams: We should. That will be a lot of fun. But that’s really all business is. To me, real estate investing is a business. That’s business first. Like my main passion is business, the systems and the processes. Real estate just happens to be a great way to make a lot of money. The numbers are really big. So why not go that route, correct? But that’s the way. Most real estate investors do not think that way. They get so hung up on like I know people, how many made their first offer, how can you put together a process for generating leads and they’re so hung up on “What if I don’t find the right contractor? What color of paint should I use?” All this stuff. “Where do I get the money?” I’m like, okay, it’s good to be aware of those things that that will come but man you don’t even have a lead generation system. You only have a process for generating leads or converting those leads. Focus on that. If you get those two things down and then you just focus on increasing your profit on each deal, boom! I mean, then you have the life you want and you just keep growing it as you go. That is truth. You’re out of the rat race, life is good and then you’re able to go and create a software company like Danny or something more fun.
Danny Johnson: Yeah, that’s pretty fun. Okay. So we had talked about the generating leads on a regular basis. We’ll go back and do some expanding on those. Number two was the converting those leads. What’s the third thing to focus on?
Justin Williams: The third one is you want to focus on increasing your profit per day. So the number one goal, it’s like a whole equation. A CPD is less then PPD, otherwise your cost per deal is less than your profit per deal. The cost of the deal is by adding up your lead generation cost and your lead conversion cost. So lead generation cost is obvious. It’s whatever you’re spending on – marketing, direct mail, bandit signs, maybe you’re paying someone to make offers for you on the LMS, whatever that might be. Then the lead conversion is either the cost of your own time if you’re the one focusing on bringing those leads yourself or paying someone to help sift through those leads, paying someone to maybe go out and close those leads for you. Maybe you have someone that you pay 15% of the gross profit of each deal. So you want to take those costs into consideration. Now, I am okay, sure, at the beginning I’ve heard you said before, Danny, like if you are brand spanking new, sure get out there, grind it out, go generate some leads. Go network. Make offers. Get things happening. But very quickly if you do not within like a few months start to transition into having some of these things done for you, I’m telling you, I’ve seen it time and time again, you will fizzle out, you will burn out. The market will have changed, your lead generation machine will stop because you’re over here working on this part and you’ll just fizzle on dying. Later on, you’re like, “What happened to the market?”
Danny Johnson: And even if they don’t fizzle out, what typically happens with most people is they get into this, a one-man operation or two in my case my wife works with me on it and in the beginning it was always a cycle, right? So we had to switch hats all the time. So we would be in lead generation mode. We’d start doing marketing and getting deals. Once we got several deals, we’d have to start fixing those up and getting them ready for sale, sell the houses. During all that we stopped marketing because we were busy getting the houses fixed up and selling them and then the leads dried up so we had to wait again, there’s a lag time and it’s just always up and down cycles of this stuff.
Justin Williams: You need to learn how to be a machine operator, not be the machine. Right? If you’re in the trenches you don’t see the bird’s eye view. You don’t see what’s going on around you. You might be getting bombed and you don’t even know it, right? So if you’re a machine operator instead of the machine yourself, you’re going to be able to fix the machine or tell the mechanic, “Hey, fix this machine. Oh, this is off a little bit right here. Hmm, our lead generation and lead conversion is off a little bit. We’re not converting as many leads. What do we need to fix here? Hmm, let’s improve. We have these two lead generation processes set up. Hmm, this one is not as good. How can we improve this?” Then you’re always staying ahead of the game. You’re moving with the cheese. I can name investor after investor after investor who at one time was killing it and now they’re completely irrelevant. I won’t even talk to them because they bring me down and they get things in my head. Not anymore. But remember three years ago who’s one of the most successful investors I know who was one of my inspirations and then after a couple of years I started getting around him because all he knew how to do was trustee sales. I started to get around him and he’s talking there’s no bills in the market and these and that and all these things, and it’s like, I got to get away from you. Because he didn’t have these things in place. He wasn’t able to adapt and adjust.
Danny Johnson: It’s sort of a shameless plug here but I mean, that’s one of the reasons why I’ve started creating that software and I was using all the software for myself before and it just became something that so many people wanted to use as well so I just made it into – the thing about REI Mobile, like the database system, one of the specific things that was always being developed in there is keeping track of those costs per deal so we can always see where we’re at on all that stuff and you make those adjustments based on real numbers on real data so that you’re making wise decisions.
Justin Williams: That is so huge. I see so many investors, they get out there, they either make an offer too or they send out a couple hundred letters and it’s like they spend 50 bucks on postcards or a couple of hundred dollars on letters, and they’re like, “I didn’t even get a deal. I wasted money.” And so they quit. I’m like, okay, look, I get it. Like we teach you how to invest without spending a lot of money. That means you don’t have to spend like hundreds of thousands of dollars to buy the house but there’s a little bit of cost that goes into the marketing. Or yeah, first you’re kind of solo careering doing it on your own but eventually you want to build that business. But real estate is amazing because you can literally spend a few thousand dollars where I heard other people spend like quarter million dollars. Like you see it on Shark Tank all the time, right?
Danny Johnson: Restaurants and stuff like that.
Justin Williams: It’s like they lose it all or they invent this thing they think that’s going to be amazing and no one buys. It’s like, game over. Real estate, you can spend a few thousand dollars. It doesn’t have to be your money, and that’s a whole another thing. I mean, you can get, if you ever spend ROIs and stuff, there’s so many people that will invest in you and get you that money and partner with you or whatever. There’s always a way, right? But you can spend literally a couple thousand dollars to make $20,000. Then once you have that dialed in, okay, let’s say you just spend half of that. You spend now 20 to make, what would that be, to make like 100 and now you have 100. It’s simple math. You have 100, spend half of that, spend 50 to make a couple… it just keeps growing and growing. So yeah, it’s a fun thing but your only goal – people focus too much on the small things and they get frustrated. It’s like, “It’s bad. A month or two and I haven’t made my million dollars.” It’s like no, your only focus at first is to have the machine that is making more money than you’re spending. Once you have that, you have a million dollar business. it’s just a matter of increasing your profit per deal and putting more leads in the funnel. But you can’t do that when you’re in the trenches.
Danny Johnson: We had talked about the generating leads on a regular basis, setting up the systems. Like one simple example of that because I know a lot of people will ask, “Well, how do I generate the leads?” That’s always the question. We’ve been doing the series in the Flipping Junkie podcast. We’re talking about marketing, direct mail. We’re going to get into online marketing here shortly. But we’re doing all these different ones and we’re right in the middle of it here with this episode and I think it’s perfect because it’s showing them what to focus on with these systems and then to follow these three things. But a specific example of generating leads and building a system or process around it, like for bandit signs, what do you think?
Justin Williams: Sure. That’s something we kind of talked about before. So my brother for example, a couple of years ago was dead broke. He was in a dead-end insurance job making about $1,000 a month, just got married, had a baby on the way. Had nothing. He calls me up and he’s like, “Hey bro, I want to get into real estate. I want to flip and wholesale houses. Can you teach me?” And I’ll be honest, I was like, I was scared because I knew that his rope was short and he had a family and I know that some people don’t go out and make it happen. So I tried to talk him out of it but he would not. I could not talk him out of it. He was like, “No, I’m going to do it so I’m going to make it happen.” It took him 90 days and those were 90 stressful days for both of us, of him doing all the things I told him to do and finally on day 91, he got his first deal, made $15,000, changed his life. From there, his goal was to start to create a process. What he did in that first deal, he got from a bandit sign. At first it felt like he’s wasting his time because he’s like out there putting out the bandit signs and he’s like, “Oh my gosh.” Beginning to be like a bandit literally, or whatever he felt like doing all this work. When we had it up, he’s like, “Hmm, I really only put out a few hundred bandit signs which felt like a ton.” He came out and put those out by himself and not getting a deal after 90 days but doing multiple things at the time. So we’re like okay, when you break it down, you made $15,000, what did that cost you? It’s like, “Wow, that cost me like 900 bucks.” Actually, at the time he wasn’t paying anyone to do it so I think it cost him like 500 bucks. It was crazy, ridiculous how much it cost him. Okay, well what would that have cost you if you had to pay someone else to put those signs up? I’m like, hmm, maybe it would cost $1000 or $1200. And it’s not what he set out to do. So he started at first paying people to put them up, he got another deal or two. And he realized oh my gosh, I’m spending $1000 to $1500 to make around $10000 or more. Those are good numbers. There’s your machine, right? There’s the beginning of your money-making machine. But it’s even better. It’s not just one to two, it’s like one to five or something like that. But then he thought okay, now I have to take some of these calls myself and things like that. He’s like, how can I systemize this process? So he set up a system with three different people where they put out all the signs and these were guys that they wanted to get into real estate but they didn’t know a lot about it. Just like him struggling with bills, they were struggling with bills. There’s a huge win-win here. All they had to do was put the signs up, screen the calls so they didn’t have to talk to all the people that were, you know, whatever. They would set up an appointment for him with only motivated sellers. So I remember I went to go visit him one time and I saw his bank account and I’m like oh my gosh, like he was making over $50,000 a month consistently and he wasn’t getting any calls. I was like, okay, how are you doing this? We were going mountain biking. I was waiting for about five hours, did not get one call. So he told me and this is what he was doing. He had these guys putting out these bandit signs, he figured out his cost per deal and they would split the cost of the marketing. Then the bandit signs guys put out bandit signs would take the calls, so their job wasn’t that hard either. They would set up the appointment for him and all he was doing was going on a few appointments every week and he would convert 1 out of 4 of those into a deal. His business blew up and it was pretty automated, it was pretty cool. So he was a part of that overall process but he was only one of a part of it. Now he’s getting to the point where he doesn’t want to be part of any of it.
Danny Johnson: It’s nice. People I think struggle with – you know, I’m glad that you explained it in the way you did because it’s perfect to me with the bandit signs because it’s exactly what you should be aiming to do with all this marketing.
Justin Williams: Yeah. My goal is not to say like I’m going to go and do bandit signs. That’s just one example.
Danny Johnson: And disclaimer too. Most places, those are illegal and it’s your own risk and all that kind of stuff. So check with your local. Sometimes you can buy permits for them, stuff like that but just be aware of that.
Justin Williams: Yeah. Anyway, we will get into we will teach people how to never let anybody know. But there are great ways for tracking exactly where people put them. I mean the goal is like for example in our company and our students, we have this process like dial down to the tee. Steven did a training on exactly what he does, exactly what signs he buys, where he puts them, how he goes about them, caught by the bandit signs, it’s like everything. Every little detail. That is the beauty. That is what you want. That’s why mastermind groups are so powerful and surrounding yourself with people that are succeeding is so powerful because they can tell you exactly what to do. You don’t have to try to figure it out on your own. They tell you to the detail. And that’s the kind of stuff, what we focus on.
Danny Johnson: Awesome. So that’s the generating leads consistently. You can do the same thing with direct mail and getting direct mail set up to where you got other people and making sure that you’re generating these lists on a timely basis and then also mailing them on set intervals, typically 30-45 days etc. And just getting all those dialed in and most of this stuff is not rocket science. I mean, you have to take a leap of faith at first because you’re going to put money in but know that most of the successful investors out there have put money in and made more on the back side of it.
Justin Williams: Absolutely. I mean, people are happy to make a few percent return in like the stock market. Some people have their money in the bank, CDs that are 2 to 3. Private money lenders are good to make 10, maybe 12. But if you think about it, what is your ROI if you spend $2000 to make $10000. Is that about 500%?
Danny Johnson: I’m not going to even try the math.
Justin Williams: That’s a 500% return and that’s a one-time return. If you’re wholesaling and you spend that money and a month later you’re closing on those deals, okay, I was getting crazy there, right? So that is a 500% return annualized x 12. I’m just throwing this out. That is a 6000% return. It’s just so insane, the returns you can make. Yet people will put hundreds of thousands of dollars into a volatile stock market or a CD or something like that. I hear some people say like “Oh, I don’t want to get…” okay, that’s not a good example. But people want to invest in other businesses because that’s what you’re doing when you’re investing in the stock market, but invest in yourself a little bit. If you take a few thousand dollars in investing yourself, the returns that you can get are exponentially larger. I mean, if you learn from the right people so you’re not throwing that money away and you’re learning the right processes for making sure you’re converting those leads, it’s huge. It’s life-changing. If you understand these returns I’m talking about, let’s say that you literally don’t have like any money at all. Get out there, grind it out, get your first deal, get a little money and then you can invest. But what if you partnered up with someone who had a lot of money? It’s like hey look, I’m willing to grind it out, you have some capital, let’s do some deals together, we’ll split the profit. Dude, I would do that. Maybe that will be my next evolution. Maybe in a couple of years from now I’ll just partner up with hungry investors that I can give them a little bit of capital, make sure they know what they’re doing of course, give them a little bit of capital and have them go and make thousands percent returns on that capital. That’s huge. That’s better than any other investment out there. So there’s always a way, always find a way. I see so many people “Yeah, but this, but that…” Get over it. Figure out a way to get it done. There’s two kinds of people. One that finds a way to make things happen and one that doesn’t. There’s always a way to make it happen.
Danny Johnson: That’s right. Your “but-ters”.
Justin Williams: Yeah, but-ters, man. I can’t stand it. But, but… I’m not that smart. I got an 18 on my ACT. The only reason I got accepted to BYU is because I had a football scholarship. But that is lowest you can get to even be allowed to be in. I mean, it was bad. I have ADD, I lose focus. I’m slow to learn things, I really am. But I’m good at copying people so I see what other successful people have done. I’ve made a lot of mistakes and I’ve taken that and it’s been able to help me help other people.
Danny Johnson: Yeah, it’s awesome. It’s important to see because some people do see successful people and get jealous or think “Oh, well. What do they do to get that success? They must have taken advantage of people.” Then the other side of it is, the real way to look at it, the better way to look at it is they did it, so can I. That’s what you’re basically saying. You see these people that have done these things and you just thought man, I need to find out how they did it so I can do it too.
Justin Williams: Yeah. If you look at people who are successful and you look down on them in any way, which I think a lot of times a lot of people do, you’ll never get there. You are mentally planting the seeds in your head. There’s a great book by I think T. Harv Eker, something The Millionaire Mind, I forget but anyway –
Danny Johnson: That’s it.
Justin Williams: Something like that. Secrets of the Millionaire Mind. You have got to look at people who have success and not that they’re any better or anything like that. That’s not what I’m saying. But recognize that as that’s pretty cool. Don’t look down to that if you want to achieve that. Don’t get me wrong, there are some crooked people out there. But for the most part, most of the successful entrepreneurs that I know, they’re good people. They’re giving. They’ve now come to that place in their life where they have enough for themselves and they’re able to give back to other people in more ways than most people are because they’ve achieved those basic needs that we all have.
Danny Johnson: Definitely. So we talked about the generating leads regular basis, converting those leads is number two where you’re doing more of the conversion of the leads that you do get so that you maximize. So we cover more of that in detail.
Justin Williams: Sure. For example, I’ve got a friend that I’ve known for years and he was just talking about his long-term follow-up system, an extended follow-up system. This is after the initial. First of all, if you’re not following up with your leads, if you don’t have a process for following up your leads in the first 30-60 days consistently, you are throwing money away for sure. But he talked about how he has his extended follow-up system in place that helped him, that that’s where he got a third of his deals from last year. We’re not talking basic follow-up. We’re talking extended automated follow-up that is done without his involvement. These are deals that are like dead. Dead deals, thrown in the garbage, we’re not getting any money from these, squeeze the juice out of them, they’re done. A third of them. So he made a million dollars last year and a third of that came from his extended follow-up system. Most investors, they don’t have this in place. But if you have this in place, what is that going to do for your lead generation? They’re saying in marketing that he who can spend the most money wins, right? The goal isn’t to spend the most money but if you’re making more in the backend, your ability to spend more, if you’re converting those leads and you’re making more on each deal, your ability to spend more increases. McDonald’s, they don’t make much money from people buying hamburgers. I don’t know if you know this or not. But they literally will go bankrupt if people only buy hamburgers. The cost of you to go through their drive-thru which hopefully not too many of you are going through the drive-thru, but it’s a good example. I forget what it is, it’s like a dollar or something to get people to go through the drive-thru.
Danny Johnson: I’ve seen that. Yeah.
Justin Williams: So literally they’re making pennies. That’s not the way to run a business. But when you buy a fries and Coke, the amount of money that they make increases by 8 times. Eight times. That’s where they’re making all their money. So your goal is to do the same thing. If you currently have a process that you’re barely breaking even, but you’re not doing a very good job with lead conversion and you haven’t maximized your profit per deal, you’re sitting on a million-dollar business. You just need to increase those two things and then that will allow the machine to flow better so you can – you don’t do the whole thing. You put money in, you get more money out; that’s the goal.
Danny Johnson: Right. Awesome. Then increasing profit. So how do we increase this profit?
Justin Williams: Once again, there’s multiple ways to do this. But going back to the story about my brother, I was buying houses from him. For a while I bought a few houses and all of a sudden one day he stopped selling houses to me. I was like, that’s strange. I know he’s buying more houses than ever, why isn’t he selling them to me? Why isn’t he calling me? What aren’t I hearing from him?
Danny Johnson: Because you forgot about his birthday.
Justin Williams: I forgot about his birthday and he was upset. So, I called him up and I said why. I just had a heart to heart talk, it was kind of awkward. I was like, “Why aren’t you selling me any more houses?” He’s like, “I’m sorry. You just don’t pay enough.” I was like, “What?” I was insulted but I was also intrigued, I was like, “What do you mean?” He’s like, “You know that same deal that I made 15,000 from you, if I were to sell that today, I would make $25,000.” So what he had done was, and it doesn’t sound like rocket science. But he had created this system that automatically helped him grow his cash buyers pool. I was a great buyer. I wasn’t this cheap buyer. I wasn’t just like, “Oh, I just found a better buyer.” It was like he now had this list of cash buyers that whenever he would send that out, it really maximized his profit per deal, which allowed him to make 5,000, 10,000, 15,000 dollars more on every single deal he did. Not only that but it allowed him to buy more houses because deals before that didn’t make sense suddenly now made sense. He can maximize those as well. Maybe he wasn’t making 15,000 on them but he can make 4 or 5 on deals that he before couldn’t make anything. So I was crazy. Then my business partner, Andy McFarland, I remember him telling me about the – I’m kind of going back here to the lead conversion. The training that he did, a basic training on creative financing, I’m not a very smart guy. I’m not super talented in creative financing, but training, what he did for his team allowed them to increase their conversions by 15 to 20 percent because his team now went out there and rather than just swinging the cash hammer, they had a plan B. This was very simple. He created a process for it so his team could all very easily understand it. I mean, he has like three acquisitions people. So they can now go out and their conversions increased by 20 percent. So I’m just looking at all these things and I’m like, okay, those things that helped increase by 20 percent, Steven is now getting an extra 50 percent to 100 percent on each deal. Doug, a third of his deals come from his automatic follow-up system so I just went through and came up with all these different things that different people do and then we either are doing or are starting to implement in our business. I came up with eve more that not even we are doing, but if we did, we’d be killing it. I mean, once you get to, I don’t want to say break even but let’s say like a four times ratio, three to four times. If you’re making 3,000 to 4,000 for every 1,000 you spend, you can do one of two things. You can just blow it up and you don’t have to really improve anything other than put more leads in the pipeline or expand your area and you have, boom, tons of money. You have a multimillion dollar business. Or you can focus on increasing the profit per deal, increasing your conversions. It’s just a really fun way to look at it. People just need to look at this business differently. As real estate investors, typically like real estate investors suck at being business owners. They just do. It’s such a low barrier to entry which is awesome. That’s why so many people do it and so many people were able to do it but you go to these real estate investment clubs and you hear people “I can’t find any deals.” It’s like, what? Businesses are not ran that way. If you think about any business, they don’t say oh, I just can’t find any customers. I’m sitting here and I’m walking around and I can’t… no. They create a process to get leads. They have a process to convert those leads and then they’re constantly focusing on their margin, how can they increase their profit on every transaction. You do those things, that’s why businesses are either like multimillion or billion dollar businesses or they fell because either the machine works or it doesn’t. So you’ve got to make sure your machine works, grow it, keep an eye on it and make sure it keeps working. Continue to grow that and that’s all this business is really. It’s arbitrated. It’s beautiful, I love it.
Danny Johnson: Okay. It’s true. Most people don’t focus on the business side of it and just focus on the individual duties that you have as you get going. And everybody, like you said before, should start out with like learning what the process should be so that you can perfect the process but as quick as you can have somebody come in there and take care of that for you.
Justin Williams: Most things, a lot of things, you don’t have to do everything on your own. Like I’ve never fixed up a house. I barely know how to screw on a lightbulb. I did stuff some envelopes when I first started. But like you don’t even need to like lick a thousand envelopes to know that – have someone do that, right? You know what I mean? So there are a lot of things that right from the beginning you really shouldn’t be involved in.
Danny Johnson: I’m still stuffing envelopes. I’m just kidding.
Justin Williams: I was like, “Oh, maybe we’ll talk about this later, Danny.”
Danny Johnson: Yeah, this is great. These three things would really change things for people. Like I said, I think that this point in the series of podcast episodes that I’m doing, this is perfect because it really will help people as they’re setting up their marketing to always think about it the right way and not just think in terms of how much can I do in one day.
Justin Williams: Yes, I absolutely agree.
Danny Johnson: Then not having to switch hats all the time, taking the hat off to go and get busy with the other part of the business. I just always think to avoid that as much as you can.
Justin Williams: Yeah. Have these processes in place. I mean, I’m sure a lot of you guys, the book you mentioned that I heard about it, and you don’t have to get so deep, how he talks about your operations manual and you can get caught up in a lot of stuff. You don’t even have to read the book. Just know that creating the process for these things will change everything for you. If you look at it as we talked about the cost and realized the ROI on that cost. Even a few years ago we talked about lead generation and whatnot, it was a couple years ago actually. I was like, ugh, I’m not really finding a lot of success making offers on the MLS but I had this girl that worked for me that I didn’t even have a whole lot for her to do so I thought okay, I’m paying her $12 an hour, let’s have her make offers on the MLS. At first I almost told her to stop because I felt like she was wasting her time. But she’s getting close on a couple and she ended up buying three houses over in three months which most people would be like, wow, she spent an entire month. That was her main thing she was doing. She had a couple of side things like utilities but her main job is to make offer after offer after offer. Most people pull their hair out if they spend an entire month doing nothing but making offers. But I looked back at the cost of that and what that made us, and those combined deals that she got made us close to $100,000. You know how much it cost me to pay her for those three months? I’m trying to think of. I don’t remember the exact amount. It was like $500 –
Danny Johnson: But it was $12 an hour, right?
Justin Williams: It was like $2000 per month. So $6000 to make $100,000. Pretty good numbers. But yet if we’re the one doing that, how are we going to be so focused on that thing and talking to the contractors, and talking to the sellers, and being in the city and doing all this stuff that we should not be doing. Turning on utilities, like it’s crazy.
Danny Johnson: And that is very painful. You keep saying turning on utilities. Man, I remember. I don’t know that I ever did it but I remember hearing Melissa on the phone before in the past on hold for 45 minutes to get the freaking utilities turned on.
Justin Williams: I have done it. I will never do it again. Ever.
Danny Johnson: Sometimes I hear the whole music in the other office too when other people are in here trying to do it and I’m just like, “I’m glad I’m not the one waiting around for that.”
Justin Williams: So many things just takes so much time, like you’ve got to get out of that.
Danny Johnson: All right. Did you have anything more to share on this topic? Or we can start talking about what you’ve got coming up real soon.
Justin Williams: Yeah. I guess all I want to say is like sometimes I hear people say something like, that seems hard. Well, number one, yes, find someone who can show you exactly how to do it. Otherwise, they’ll take you super hard because why try to reinvent the wheel. But number two, it’s like everything is hard. If you’re working a 9-5 or nowadays if you’re working a 9 to 5 you’re lucky, like an 8 to 6 or whatever. But if you have a job, that’s hard too. Life is hard. If you’re going to do something hard, why not create a process that once that process is in place, all you have to do is maintain it and it will get back to you exponentially, whatever you want. So I don’t claim like oh, there’s enough to do it, snap your finger, flip the switch and get a million dollar business. No. It takes an effort. You might have to go through a couple things or you hire someone to help you with one thing and it doesn’t work out. Oh well. But if you look at it, if you have the mental mind shift of hey, I’m not taking a couple of months or a few months to just make 10,000 and it’s done. I’m taking time to create a system to create a machine that will give back to me forever. If you have that mindset, then you’re going to be okay when you have a few struggles and things are a little bit harder. Some of my coaching students, the bandit system, there’s one guy that was complaining. He’s like, “I’m on my third bandit sign person. This is ridiculous,” and some other members chimed in like “Oh, I’m on #5 and they’re working great.” So it was like, okay, are you willing to go through three bandit sign people who are by the way so easy to train, so it’s not like training an assistant who takes forever. It’s like, are you willing to go through that to be a millionaire to make a million dollars? Because if you are, welcome to the club. Come aboard. If you’re not, go back to your job. Yeah, it’s not super-duper easy but we’re going to show you exactly how to do it and know that you’re going to hit some roadblocks. But I don’t know anyone who’s incredibly successful who has not had roadblocks. So just recognize that’s part of the process. That’s why not everyone is a multimillionaire. Because people are too lazy or they get too scared or nervous or don’t want to do what it takes, or they don’t want to work a month without getting paid to create a process and business that will then get back to them forever. You’re going to have that mental paradigm shift. Once you do, it’s not that big a deal but when you’re going through that or before you go through that, it’s sometimes hard to recognize that.
Danny Johnson: Right. Absolutely. So what I alluded to was Justin’s course, he’s opening the – because you don’t have it open all the time, you just have it where you bring on people because you’re focused on getting everybody the training.
Justin Williams: We only open it up thrice a year and I think next time we open it up it may not even be for an entire year. Just because our number one goal is to focus on this community, to give the best content. And it’s a lot of work to bring people onboard and to promote it. So once we’re done with that, once we open it up and close the doors, we just like to focus on the people in the group. So when it’s open, it will be open for 10 days and then the doors are closed until a year from now.
Danny Johnson: The story about that too is whenever you’re looking for the domain name for your course and you’ve found the perfect one and it was already taken and you looked to see who it was and it ended up being me. I wasn’t really doing anything with it, so that worked out pretty good for you.
Justin Williams: Miracles do happen. And that is when you’re grateful but you let people like Danny come stay at your house and pique your brain. Because I was looking for a house flipping formula, the domain, and I was like, “Who has this domain? They’re not using it.” I was crazy. I remember the day that I was like, oh my gosh, I think Danny has this domain. So thank you, Danny. Danny actually gave that to us. So that was very generous.
Danny Johnson: Yeah. 1.5 million. I just gave it away for 1… I’m just kidding. It was free. But yeah, so that’s opening up. And we have a special link for everybody listening. Because I don’t ever really promote people’s products on here other than the software that we ourselves use and make in-house here in my business. The reason why I do this for Justin is because I believe in everything he’s doing and I know he’s got the top-notch product. I myself found enough value to fly out there and spend time with him and learn from him. So that’s why I do that with him and I’m just 100% behind him in what he’s doing and what he’s teaching and helping people with. But you set up a link. What was that link that we had talked about?
Justin Williams: They can go to Houseflippingformula.com/Danny.
Danny Johnson: Houseflippingformula.com/Danny. And this episode, it will be live, it will Tuesday if you’re hearing this and that will be open for people to look at and consider.
Justin Williams: It’s on Tuesday, September the 13th. I should have my calendar just to make sure. And then it’s open for 10 days. It will be open for 10 days and then we close the doors and we just get to work. This is what we call House Flipping Formula 4.0 because it’s the fourth rendition that we’ve done but basically what you get is you get everything that we’ve created for 1, 2 and 3, and then we’ll be creating even more new content focusing on these three things that we talked about. Everything this round, House Flipping Formula 4.0 is going to be focused on the three things and helping you do the things that we talked about today. But you’ll get number 1, 2 and 3 all archived in there as well. So once you sign up, you get access to all of that, all the coaching calls we’ve had which has been well over 20-25, get access to everything we have and then we continue to make new content because this business is always changing. We are constantly finding out what is working best for us, what’s working best for our students and we just share it with everyone. We’re an open book. I’ve been taking advantage of it before in this business. I’ve spent a lot of money on education that wasn’t that good. I don’t regret it because I made my money back 10 times. But I have seen people spend a lot of money on even worse programs and they haven’t gotten the value out of it. So our goal has been basically to create a program that has 10 times the value of any program out there at a fraction of the cost. It’s kind of been my goal and my mission ever since I created the systems in my business. I remember one day I just thought “Oh, I have arrived” and we are here in San Clemente and surfing and having fun and that was fun for a few weeks, about a month maybe and I got really bored. I didn’t feel like I was contributing to the world and my wife was tired of me following her around and I just thought, you know, we talked about it, I was like, if I could do anything, what would it be and it would be to help other people get to where I’m at and in a way that I didn’t have. So that’s just what community has been all about, Danny. I really appreciate your support and you’re in that community as well and you’ve been a great part of that. I’m like you. I don’t promote very many people’s stuff because most of it isn’t that great or it takes more than it gives. So yeah, I appreciate you recognizing what we’re doing here.
Danny Johnson: Yeah. Thanks for being on the show and sharing with everybody. I don’t think enough people share the point of view that you share and so I just love it every time I have it on the show to talk about this point of view to be able to do this and set yourself up to truly have the financial freedom. Everybody talks about getting into real estate investing, flipping houses so they can have the freedom and be their own boss, do what they want to do and when. And they get bogged down and running this business and really build themselves another job. Probably a much better paying job but it’s still mostly a job and so you’ve always been focused on making sure people are building a real business.
Justin Williams: Yeah.
Danny Johnson: So go check it out, everybody, Houseflippingformula.com/danny and keep in touch.
Justin Williams: Awesome. You’re the man, Danny. I appreciate it and thanks to everyone for listening and yeah, we’ll talk soon.
Danny Johnson: Great. Talk to you later. [music] All right, I enjoyed that one. Got a lot of information and really just that thinking and just always remembering that that’s really the goal is to having that true freedom that we’re talking about and setting up these systems and everything. That’s why I like talking to Justin so much. And one point that I just want to reiterate in this closing to this episode is the importance of that cost per lead, cost per deal and knowing what your return is because like he said, once you get that dialed in and then you just scale it, you grow it, and you just put that in and get the return out. That’s really what it’s all about and so you can keep an eye on that quickly and everything. But like I said, I use my own system REI Mobile for that tracking of the cost for the marketing so that we can see which of our mailings are producing, which of the online work that we’re doing is producing the best results and cost per lead and then cost per deal of course is the more important one because you get a lot of leads from one marketing source and feel like you’re doing great. But if you’re only converting a smaller percentage of those versus something else that’s not generating as many leads but you’re getting more deals from, obviously you want to crank up the one where you’re getting more deals and not just the one with more leads. So that’s very important. The other thing was increasing that profit, so growing a buyer’s list to take advantage of those deals that you’re not doing that don’t fit your criteria that don’t fit your business model or your flipping model if you’re doing rehabbing but not houses that would be good to retail once you finish fixing them up, you can wholesale them and stuff like that. So definitely want to get a wholesaling website, we provide those with Lead Propeller wholesaling website. We can build your buyers list easily with a pre-made site that’s already very simple to set up and build that email buyers list with all the investors criteria of what they’re looking for and that’s exactly why we built that. So if you’re in San Antonio, you can actually opt into being an investor buyer of mine of the wholesale deals that I do if you go to cheapsanantoniohouses.com. You can see what one of those sites look like. That’s actually my site for wholesaling some of our deals and then building that buyer’s list. So if you want to be on that buyer’s list, just opt in there and you’ll be added to it. So, simple as that. Everybody, have a great week. We’ll be back next week with some more great marketing tips to get more leads and deals for your house flipping business. Thanks a lot for listening to the Flipping Junkie podcast. Be sure to subscribe on iTunes and leave a rating and review if you would, I really do appreciate that. And we’re doing some promotional stuff from time to time on Facebook so if you go to Facebook.com/flippingjunkie, you can ask questions there and see some of the promotional stuff, get discounts on some of the software etc. So have a great week. Talk to you next time.