Tucker owned a mortgage company and switched to investing around 2008-2009.
He wholesales, rehabs and does new construction.
Tucker talks about the transition from rehabbing to adding additions and moving into knock down and new build.
Learn how he determines which strategy he is going to pursue with the deals he gets.
He also tells us how he uses driving for dollars and direct mail to get his deals.
Tucker shares how he deals with the high levels of competition with key tips on how to talk to sellers to improve your chances of getting them to sell to you because they like you more.
Motivated sellers sell at a discount because they want the ease of disposing of a property. They know they are giving up equity in exchange for a quick, hassle-free sale.
“We’re in the business of getting people to exchange equity for ease of transaction.”
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Danny Johnson: This is Flipping Junkie podcast episode 11. [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.
In today’s episode, we got Tucker Merrihew from The Real Dealz Podcast. It’s an excellent show, and you should all check it out. Tucker is a powerhouse when it comes to real estate investing. He does a whole mix of different things – from wholesaling, rehabbing all the way to new construction. And that transition from rehabbing to building new construction, building new houses is something that a lot of investors never really make it towards and get to. And so, this show is very interesting because we cover a lot of ground and cover a lot of new interesting topics.
And also on the show, we got some awesome tips for what to do with direct mail that gets returned. So when you’re sending postcards and letters, you’re going to get some of those back because the houses are vacant or just being returned for different reasons. And I myself usually don’t do anything with those and most of the other investors that do direct mail don’t either. So if you do the things that we talk about in this episode, you’re going to cut out a lot of that competition.
Tucker also talks about driving for dollars, and that’s how he gets a lot of his bested deals. And we get into what skills people need that will set them apart from the people that don’t make in this business. So all around, it’s an excellent show and I hope you enjoy it.
Tucker Merrihew: Hey! Thanks for having me, Danny. I’m happy to be a part of your Flipping Junkie podcast.
Danny Johnson: Awesome. Thanks for being on the show.
Tucker Merrihew: My pleasure.
Danny Johnson: Yeah. And you do a lot of different things here. You do wholesale and rehabbing and homebuilding. How did you get your start? What did you start with?
Tucker Merrihew: It kind of sounds a little overwhelming when you say all those things that we’re a part of, and we are. It didn’t start that way. We grew into it. I started back in 2002 or 2003 in the mortgage business. And as a loan officer, that eventually turned into owning my own mortgage company. And then during the kind of meltdown as we say of the mortgage industry and the real estate market, that then burst me kind of going full time into the investment side of the business. And so about 2008 or 2009 is when I really kind of change the heading of the ship. I closed down the mortgage company and put all my efforts into our real estate redevelopment company and really started doing large volume. I bought a number of houses along the way to the point, flipped a few, lived in a few, renovated them, sold them, made some money doing that. But in 2008 or 2009 is when I went full time just in the real estate redevelopment company, and we started mainly rehabbing because at the time, late 2008 or early 2009 – especially in my market here in Portland because it’s not really a cash flow market, it’s an equity market – there weren’t a whole lot of people buying anything. So I remember the first deal I got under contract at the end of the 2008 that was just a smoking deal. I couldn’t wholesale because I couldn’t find anybody that would even buy a house at that point.
Danny Johnson: Wow!
Tucker Merrihew: Everybody was still so scared of the real estate market so I actually ended up renovating it. We sold it, and I think we made like 55 grand or something like that. And it was a really pretty light renovation, all things considered. So that’s kind of how I started. It was actually on the renovation side but not big renovations. I mean, they’re pretty light ranch-style homes, very simple homes, mainly surfaces of a few major systems here and there but nothing like add-on or second stories or things like that, at least when we started.
Danny Johnson: All right. So what are you mainly doing now in your real estate investing business?
Tucker Merrihew: So since that time, we’ve grown a lot of different ways. Obviously, the amount of people that work for me has grown. And because of that, we’ve gone in two directions. We’ve also gotten into a lot of wholesaling over the years now, and we’ve also gotten into a lot of homebuilding. And most recently, we’re doing some development and then building as well. So, right now, the way that our kind of flow works is we do a lot of direct seller marketing – big, big advocate of that. We really don’t buy anything out of the RMLS. We don’t go to the auctions anymore. We used to do both but, you know, times have changed. So what we do is we do a ton of marketing. It’s a lot of very targeted marketing to certain areas, certain types of properties. And so, we get our lead flow coming in. We kind of cherry-pick the best ones out of there, out of our lead baskets so to speak of what fits in our model for knock down and new build, new construction, maybe high-margin renovations for least amount of work. And then, everything else, we’ll wholesale out. So wholesaling is just kind of one arm, renovating is another. And then, development and new construction is another.
Danny Johnson: So it sort of depends on the lead. Based on what the lead is and what would be best for that property is how you decide which way to go with it, right?
Tucker Merrihew: Yeah. Exactly.
Danny Johnson: Now, let’s step back just a little bit though because you talked about we do a lot of direct response, a lot of marketing to motivated sellers for certain types of properties and certain areas. Can you explain that a little bit more? Like what types of marketing and then what are those types of areas that you’re targeting.
Tucker Merrihew: Yeah. Absolutely. So for example, when we do our knock down and new build aspect of my business which is basically new construction, right? You knock down the old house. You build a new one in its place. So you knock down a house, you split the lot. You build two new ones in its place. Those are very targeted-type properties, so we do a lot of driving for dollars, and everyone else who’s driving for dollars is. But we’ll drive certain areas, and we’ll identify those properties that would be best suited for that type of model. And so, we’ll market to them. We also drive the same areas and we try and identify maybe ones that would be best suited for just a renovation. So we do a lot of driving for dollars. That’s how we generate most of the lists that we mail. Of course, we do sprinkle in a few other lists like tax delinquent, code violations, things like that. Some are your standards, but our best list by far and away is our driving for dollars list.
Danny Johnson: Yeah. That’s awesome. There’s a lot of people that think that that’s not a very good way to find them or it’s very time consuming and very limited. But honestly, so many people target sort of the low-hanging fruits that they go on and get the absentee owner list and end up mailing to people that are getting letters from 50 other people. But let’s talk about the driving for dollars a little bit more because you said you go and look for these areas, look for properties that would be good for a knock down and build new. So what type of property? When you’re driving through these neighborhoods, are these neighborhoods where there are pretty expensive homes, where people have renovated a lot of them and you still have some dinky rundown homes in between, like here and there that you try to target?
Tucker Merrihew: Yeah, definitely the nicer areas. The reason being is because in our market, building permits are very expensive so we… It’s hard to build new construction under, let’s call it, $300,000 or $350,000 and make very much money. You’re really better suited just doing a renovation because of the amount of work that’s needed for the money that’s made. So generally, we target areas where the end product of what we’re going to build is going to sell for $500,000 to $2,000,000 plus. It just depends. We do kind of a wide spectrum, mainly way towards the higher end these days. But we’ll go in and we’ll identify these neighborhoods or these established areas and we’ll go try and find the houses that maybe you’ve got 2-bedroom, 1-bath, 800-square foot house, right? Those smaller type homes that aren’t suited for a family that the area has matured and grown around it. It’s become more of a nicer, higher end family-type area around it, but that 2-bedroom, 1-bath house doesn’t really fit. It’s not the highest and best use for the land or the lot.
Danny Johnson: Right. Can you walk us through maybe a typical deal like that? So the type of property like you just mentioned, the 2, 1, and 800 and something square feet. Maybe the numbers of what you look for, what you try to buy something like that for, and then the cost of building a home and what size a home that would be, and what you can resell that for.
Tucker Merrihew: It’s going to vary dramatically as far as what the numbers are going to be, but we’ll just do an example of a house that we sold last month. And it’s in an area here, a suburb of Portland called Lake Oswego. It’s a nice area. Nicest public schools in the state which is why there’s so much demand there. It’s a very, very nice suburb of Portland. High household income numbers. Great schools. Great area. So we were buying in a neighborhood. We were trying to find these 2-bedroom, 1-bath homes, a neighborhood within that Lake Oswego area that we were paying anywhere between $300,000 and $350,000 just for the 2-bedroom, 1-bath teardown house. And so, we would basically buy the house for, let’s call it, $325,000. We would then build a new home for approximately that same amount, and then we would sell the finished product for just around a million bucks.
Danny Johnson: Wow! What size of home would that be?
Tucker Merrihew: About 2700- or 2800-square foot homes is what we were building in that neighborhood with no basements which obviously is a big thing because that factors in pretty heavily with your construction cost.
Danny Johnson: Okay. So not adding a basement makes it more cost effective to build.
Tucker Merrihew: Makes it cheaper. Yeah. Because if you’re building new below-grade square footage, it’s expensive to do because you got to dig it out. You got more concrete, more foundation, more finish work. It’s just a more expensive home to build generally. In this neighborhood, basements weren’t needed. It’s not a deterrent for buyers, so it’s one of the other reasons why we kind of identified this neighborhood. We only have to build 2700- or 2800-square feet of above-grade square footage, and we can sell the home for a million bucks. So it made it a real appealing area to do that type of strategy in.
Danny Johnson: Awesome. So what’s the timeline on something like that, like buying the house, getting it tore down, and having the new one up and sort of days on market to get that sold?
Tucker Merrihew: Yeah. Start to finish is going to be somewhere between five and six months if you’ve got a system down and you got plans that you’re already working from. It’s not the first one and you’ve got plans that you’ve used before that maybe you can tweak or recreate or whatever and you know what you’re doing, five to six months is about the timeline as far as buying it, knocking it down, building it, and then selling it. That obviously varies as of late. Meaning the last 12 months, we’ve sold most of our stuff before ever putting it on the market. Or if we do put it on the market, it’s been on maybe a week.
Danny Johnson: Wow! Yeah. And I saw the pictures on your website on some of those homes that you’ve built and absolutely beautiful and fantastic work on all those houses.
Tucker Merrihew: Yeah. I appreciate that. We put a lot of effort into the design. We’ve been recognized on a lot of different sites. We’ve been voted best on house like five or six times. So we definitely put a lot of emphasis into creating that great product. And I think that’s one thing that a lot of investors don’t really do. They don’t put a lot of effort into that side of their business. It’s more about if it’s cheap, it’s good. And so we’ve kind of deviated from that outlook and we’ve gone upmarket. We do a little higher end project, but we also put a lot more effort into our design. And to this point, it’s really paid off for us.
Danny Johnson: Yeah, that’s awesome. So one thing that I’ve always been curious about with having homes built is: How are you finding the construction company, the contractor, to build these houses for you?
Tucker Merrihew: So that’s kind of another thing that we do differently. I actually have my own construction contractor’s license. So I hold the general license essentially for the business, and so we are general. I’ve got a project manager that works for me. My wife is our designer, our construction scheduler, and our budgeter. She works for the company as well. So we essentially hire ourselves to build the home.
Danny Johnson: Wow! So how much do you think that you’re saving? I know that’s going to be all over the board but roughly how much?
Tucker Merrihew: You know, I don’t really equate it to what we’re saving. It’s more about what we’re controlling. Because when you hire somebody else to do it, money aside, you’re giving up control and you’re putting your money, your well-being, your risk in their hands. For the type of product that we build which is a higher-end product, there are just aren’t a lot of general contractors that have the… They’re not qualified, let’s say, to take on that type of project and do it well. So I don’t really look at it in terms of saving money, although we do obviously save some money because we don’t have contractor markups from our subs to our general, to us. But we maintain 100% control of our projects. We manage them all the way through. It just creates for a better product. And ultimately, it makes me feel more comfortable about taking the risk on building these nicer-type homes.
Danny Johnson: So did you have a background in construction to be able to handle what you’re handling? Or is that something you sort of learned with the rehabbing business?
Tucker Merrihew: I didn’t really. My dad built a couple homes when we were younger, the one that he lives in now and one for his folks. And I had to spend every Saturday on the jobsite with him, and I absolutely despised it. So I never thought I will have anything with jobsites, and now I spend my weekends on jobsites. But, you know, I didn’t really. It really came from just starting out. We started with those kind of really simple ranch-style homes. And then from there, we graduated up to maybe doing some gut rehabs, doing some additions, and then into new construction. So it was just kind of the standard-type growth process where you just get comfortable with a little more and a little more and a little more, and you really start to understand how homes are built and what are all the pieces and how they go together. And so, it was just really kind of a slow growth process over the years.
Danny Johnson: So do you do that often with the rehabs where you add square footage to the homes?
Tucker Merrihew: We did a bunch in the past. Now, personally, no. I would rather put a gun in my mouth to do them because they just are… there’s so much more work, so much more management. And a new construction is just an easier way to make those bigger margins. I know a lot of investors that haven’t quite made that leap to new construction because they just feel like there’s this great divide between renovating and new construction. But once they do – the ones that I know that have – they never looked back because there’s just no reason to do big add-on renovations if you’ve done new construction. It’s just so much simpler. You can put it on a conveyor belt. It requires much less management. There’s much less retrofitting. There’s much less question mark as far as what things are going to cost and what you can do. So we’ve done it. I’ve made a lot of money doing it. But moving forward, we just stick with new construction because it’s just a better, smarter, easier way to make those big margins.
Danny Johnson: Great. With the wholesaling part of things, which ones do you typically decide to wholesale versus rehabbing and tearing down?
Tucker Merrihew: So it really depends a lot on our capital position. We’ve got a fair bit of capital that we work with, company capital that I’ve accumulated over the years. And then we’ve got, I don’t know, somewhere around $4,000,000 or $5,000,000 in private money that we’ve raised. And so, my job at this point becomes… I’m basically a money manager on top of business owner. So I’ve got to make sure that money is deployed and working to the best of its ability. And so, depending on whether or not we have a place to park a lot of that money, that really determines whether or not we keep something or we wholesale it. So most of the time, we wholesale those kind of bigger remodels now. That’s something that we wholesale virtually every time we get one of those types of leads in. And it’s not hard to do it because they’re usually in nice areas. The margin that somebody can make is a very attractive margin, and there’s a lot of guys that just haven’t gotten into new construction yet so they line up for those types of projects. The other homes that we wholesale as opposed to renovate are kind of hood houses, houses in kind of not-so-nice areas that may have a slimmer potential profit margin for the rehabber. But it’s also a lower price point, it’s an easier rehab, things like that. Those are usually pretty easy for us to wholesale as well. So those are the two types that we mainly wholesale a lot of.
Danny Johnson: All right. And a lot of the markets around here, there are so many investors now. The competition is pretty high. And so, it makes sense a lot of times to wholesale because you can find people sort of paying insane prices to pick up some of these investment properties. What’s the market like up there in Portland? I know you have like a new podcast that you’re also doing about the market up there in Portland, so maybe you can talk about both of those things.
Tucker Merrihew: Yeah. We just started a new podcast. It’s called The Portland Real Estate Podcast. It’s just all about Portland real estate and the Portland real estate market. Our market has been really, really hot for probably the last year; on and off but most recently, we had like 1.7 months of inventory which is insanely low. And basically, that means that retail buyers are having a really hard time finding houses and rehabbers are having even a harder time finding deals to rehab, right? So wholesaling in a market like this right now is really, really easy because like you mentioned, people are paying ridiculous prices just to have a project to work on. And so we’ve sold a lot of that demand over the last year on the wholesale end and we’ve taken advantage of it. We just actually wholesale to tear down in a really hot part of Southeast Portland just a couple of weeks ago for, I think, it was about a 75-grand profit. We could’ve built it out. We could’ve made more money, but demand is so high right now. People are paying such a premium for not only renovation projects but also teardowns in these hotter areas that we said, “You know what? Let’s unload this side of our pipelines. Let’s take our winnings to 75 grand. It’s a great profit. And let’s just move on to the next.” And so, that’s what we did. So it’s really easy to wholesale when the market is hot. But on the flip side, you got to work harder to find those deals that you can wholesale. So it’s kind of a double-edged sword.
Danny Johnson: All right. Now, with the new construction versus rehabbing, I want to talk a little bit more about that because I think there’s a lot of investors that have considered it and I think maybe just with the rehabbing, there’s a lot more education out there. There’s a lot more opportunities for people to be mentored in getting into flipping and rehabbing. But with the new construction, I don’t know. I haven’t really looked very hard. But I’m not sure that there’s as much out there to do that. What are some of the key points that you feel make new construction a better option than rehabbing?
Tucker Merrihew: Well, first off, you’re right. There isn’t a whole lot of education out there because there just aren’t a whole lot of investors that have kind of made that leap or cross that bridge from rehabbing to new construction. It’s kind of almost two different worlds. You’ve got your world of rehabbers and you have your world of builders. And there isn’t a whole lot of crossover. As far as getting into homebuilding, I think that you really have to be good at finding the inventory to build in the right place. I think that’s huge. Obviously then, you’ve got to create plans. You need to have an architect. So there’s a few pieces that aren’t at play when you’re doing a rehab. Although if you’re doing a big rehab, you should have an architect, then you have to get the plans engineered. You have to have trusses designed. You need to have a foundation contractor because you have to pour new foundation. Maybe some rehabbers haven’t done foundation work or haven’t done much of it. So you have a few things here that you don’t have on your rehabs. But really, those are the only major differences. That and you’ve got to knock down the existing house and get rid of it so you got to find an excavation company that will do that for you. You got to do a few of your preliminary things as far as maybe your asbestos abatement and things like that before you knock the house down so you don’t get in trouble by the EPA. But there’s just a few little pieces that make the difference, but a lot of those… Yeah, I guess those few little pieces collectively scare people off for making that jump.
Danny Johnson: Right. What I’ve seen from people that have considered and said, “No, I don’t want to mess with all of that because there’s just too much involved whereas a rehab could be a lot simpler.” But like you said, if you set up the systems to do it toward sort of you get it going then it really becomes like a repeating process that you’re doing, right?
Tucker Merrihew: Yeah. Exactly. You can really scale. It’s like a conveyor belt. This sub and that sub and this sub and that sub. When you’re doing renovations, sometimes it’s just a messy mess of who does what, when, and all of that. I mean, you can systemize it but there’s always kinks. There’s always curveballs. There’s always things you run into that change your schedule. So it just becomes more difficult to manage and to get that project completed especially with the bigger renovations. Whereas with new construction, you know how long your HVAC guys are going to need to be in there. You know how long it’s going to take them to wire the house. You know how long your plumber is going to be in there. You know how long it’s going to take them to pour foundation. Your framer should know approximately how long it’s going to take to frame the house. So you have all these things that are certainties, and you also then get good at knowing exactly how much it’s going to cost you to build the house, which is another certainty that a lot of times you don’t have with renovating, right? There’s a lot of “I don’t knows” until you’re into the project. So it just becomes a game of a lot more certainties. And for that reason, I like it a lot.
Danny Johnson: All right. And let me see. We talked about a lot of things that we do that work out really well in the business. But what are some of the mistakes that you’ve made? Just maybe give us one of the biggest mistakes that you’ve made that you could share with us and help us avoid with either rehabbing, wholesaling, or the new construction.
Tucker Merrihew: Yeah. I’ll talk about just business in general. The real estate investing business can be kind of a lone wolf business, right? It can be a little lonely at times just because that’s the nature of it. And so because of that, people will sometimes want to get involved in partnerships, right? So they don’t feel like they’re so alone when they take on a project. And I think sometimes people do that way too quickly. And I know a lot of people that have entered into partnerships than those that haven’t, that have ended very, very badly. And so, that will then either buck them off, eventually cause them to leave the business, or it’ll just really take the wind out of their sails. And so, you really need to be careful. I understand sometimes partnering is a great way to get into bigger projects or new construction or things like that. But really, think about who you’re partnering with just like you think about who you’re going to marry, right? I say partnerships are sinking ships unless you really vet that person and you really think it out well. And so, the wrong partnership can really buck you off and kind of kick you out of the business. But by choosing wisely, it’ll help ensure your long-term success, help ensure you stick around, but also help ensure you make as much money possible. So there’s a lot of partnerships out there where one will cannibalize the other, you just don’t get along, or people don’t bring the right mix of skillsets together. And I understand why people do it, but my biggest piece of advice to everybody out there listening around is just really… If you’re going to get into a partnership, really know who you’re partnering with and understand the value that you both are bringing and make sure that there is adequate value on both sides to make that partnership work.
Danny Johnson: Absolutely. I think nothing is worse than seeing when two people that need help with everything get together and act like that’s going to solve their problems, and it’s one asking the other one, “What do you think?” And the other one is saying, “What do you think?” Like nobody brings enough to the table on each side to really provide any benefit. It’s just more of like a comfort thing. “Have somebody to back up me in buying this house and we’re both making mistake but we feel okay with it because we’re both making it.”
Tucker Merrihew: Together.
Danny Johnson: Right. Yeah. “So it’s okay because if I lose out, you will lose out. It wasn’t just me that was the dummy.”
Tucker Merrihew: Right.
Danny Johnson: Well, awesome. I always like talking about best deals, too. If you have sort of best deal that you’ve done, and it might not necessarily be like the highest profit or something like that, maybe the most fun deal, do you have anything like that that you could share with us?
Tucker Merrihew: Yeah, I’ll just make it relevant to today. I’ve had a lot of great deals, but we’re actually working on one right now that we bought about 14 months ago. We got a hell of a deal on it when we bought it. It had a tenant in it, and I left the tenant in it for the last year. We actually just kind of got him to leave about three or four weeks ago, and we started the renovation on it. We bought the house for $110,000. We’re probably going to put about $25,000 into it. So it will be in at let’s call it $135,000. And we should sell it for somewhere around $350,000 to $375,000.
Danny Johnson: Nice.
Tucker Merrihew: So it’s going to be a great spread. It’s really a light, light rehab. And fortunately, we held it over the last 14 months as the market has gone bananas here and that’s of course widened our margin as well. But as far as right now, things we’re working on as far as work put in and money that we’re going to get out of it, that’s the best deal we’ve got on the plate right now by far.
Danny Johnson: Well, it’s a nice deal. So why did you guys keep the tenant in? Because you were busy with other projects and just wanted to sort of let go and sit?
Tucker Merrihew: Yeah. I actually bought it because it was such a great deal. I bought it. I was going to keep it as a long-term rental, so I just bought it with my own cash. But after he said he was going to leave, I started looking around at the market and that pocketed. It’s just gotten so much better over the last 14 months. It was kind of in one of those areas that was just really… It was gentrifying. It was getting a lot of better, night and day better especially over the last 14 months. And so when I started looking at what it was now worth, it just didn’t make any sense to continue to hold it as a rental and just take the cash flow. It was only renting for maybe $1200 a month or $1300 a month. So it was a no-brainer to say, “You know what? Let’s pull a cord on this one. Let’s take our earnings, and let’s move it into something else.”
Danny Johnson: Nice. So what are your current goals for your business? And what do you hope to do like over the next year? Do you have plans for doing something else?
Tucker Merrihew: Yeah. We’re going to continue forward. We’ve got enough projects in the pipeline that we bought at this point to keep us busy for the next 12 months as far as building. And we’re going to continue doing a lot of hiring and new construction. We actually are buying an acre and a quarter right now in the nicest area of all of Oregon. And we’re going to build probably a 3.2- to 3.4-million spec home on that. So we’ve got a lot of really cool projects coming up over the course of the next year. We’re also just about to launch a software of our own. It’s an app. It’s actually a Driving For Dollars app. So that will be launched in about a week or two here.
Danny Johnson: Oh, cool.
Tucker Merrihew: Totally revolutionized the way that you can create custom lists like that. So I’m really excited to get that out there and not only use it in my own business but allow other investors to be able to use it as well.
Danny Johnson: Yeah. That’s nice. Would you mind telling us how that’s going to work?
Tucker Merrihew: Yeah. Basically, it’s an app that you open on your phone. And while you’re doing your driving for dollars, driving around, you can either speak the address into the phone or it gives you an overhead view of where your car is driving around and you can just drop pins on your phone with your finger to identify whatever houses that you want to create a list for. And then after you create that list, it automatically pulls all the owner information and mailing address for you. It merges it, and it gets it ready for any type of marketing that you want to do. So it eliminates all the heavy lifting on having to actually research who owns what and where they live.
Danny Johnson: Yeah, and not to mention writing down.
Tucker Merrihew: Yeah. Correct.
Danny Johnson: That’s the one thing that you don’t have to use whatever.
Tucker Merrihew: Exactly. The yellow pads, the scratch papers, back of receipts, or things like that. So it’s a really, really cool app. The idea is that it gets rid of that barrier of entry of creating those custom lists that a lot of investors just don’t get around to because it takes time and effort. So this gets rid of a lot of that for really hardly any cost. So it should be a really cool thing. So I’m excited to get that launched in the next few weeks.
Danny Johnson: Yeah. So that might be out actually by the time this episode is made live. So you guys sort of check it. Is there a name for it? Where can you find it?
Tucker Merrihew: Yeah. It’s drivingfordollarsapp.com. If you go into the iTunes store, it’s Driving For Dollars app. We’ll have a free trial version in the iTunes store, and then you can actually purchase it on the website. But I’ll have a link for you by the time this goes out so the people can check it out if they want to, but it’s going to be really cool. We’ve been working on it for about two years, and it’s been my maiden voyage into the software world which you’re a little more experienced in that than I am. But it’s been a real learning experience. But at the end of the day, the finished product is going to be amazing.
Danny Johnson: Yeah. I know exactly what you’re talking about. It seems like a thousand people have an idea, and they want to do it with the software. And after being through it, you kind of realize like why so many people haven’t executed it. Like having the idea is easy, but then actually getting it done is… Wow! It gets to be pretty difficult.
Tucker Merrihew: You are 100% right about that.
Danny Johnson: All right. So let me see. The Driving for Dollars app and you do driving for dollars for your marketing. Would you mind explaining a little bit more about your process of—without using the app? Like right now, what are you doing for—? When you get the address, what are you doing?
Tucker Merrihew: So currently, we write the addresses down and then we have somebody research them to figure out who owns the property and where they live. And then, we start putting them into our direct mail sequence and we do a lot of handwritten stuff. I’m not going to go into total detail of exactly what it is that we send, but we’ve got a lot of specialty pieces that we have designed that we feel are worth the extra cost above what most investors will spend on their postcard or standard yellow letter to try and solicit a response because the list is so targeted. So we’ll put them in a four-, five- six-letter sequence that we just keep mailing and mailing and mailing. The thing about the driving for dollars list is it’s a timing list, right? Not everybody wants to sell when you mail them. So we just keep mailing them. And eventually, we get calls off of it that just continually come in as that timing lines up from us mailing them and them wanting to sell.
Danny Johnson: Right. Yes. So you’re hitting them over time for when they are. And I’ve had it happen where somebody has contacted me after I think four or five years from a letter. So when you do that kind of marketing, even if you stop, you could still be getting deals three, four, five years later.
Tucker Merrihew: Oh yeah. The house that I told you about that we’re going to do, the 3.2- to 3.4-million spec home. The people that called me with that lot… it’s a super highly desirable lot. We mailed that three and a half years ago, and they kept my letter and kept it in a file. And now, the father whose property it was is having some serious health problems and they need the money from this to pay for his care and all that. But they kept the letter. They put in a file and they called me three and a half years later, and here we are buying the property.
Danny Johnson: Awesome. That’s cool. I love hearing about that. You have people research who owns it. You know how they’re finding out who owns the property?
Tucker Merrihew: Yeah. There’s a million sites, but you can go to your tax site or whatever locally. And we’ve got a title company site that we use to kind of access that stuff. Some people have an easier time getting those resources than others, but that’s not the reason why we created the app because you don’t have to necessarily have it in with the title company to be able to look all that stuff up. Or if it’s in a county that you maybe don’t have the tax site or they don’t make it easy to find that stuff, we’re able to do it all for you. So of course, the big data providers can do it, but some people don’t have accounts or don’t have the ability to pay for the large minimums that they require every month to have an account.
Danny Johnson: Yeah, and not to mention having to actually go in there and do all the searching.
Tucker Merrihew: Plus that. Yes. Exactly.
Danny Johnson: So what happens? I know whenever I do a lot of mailings like that, I get a lot of letters back and postcards back. What are some of the things that you do with those? Or do you do anything with them?
Tucker Merrihew: We do a lot with them. Obviously, if they’re not getting them, that means they’re not getting other investors letters or postcards or whatever either, right? So when those come back, we sift them, we sort them. TLO is the search engines that we use to kind of track people down. And so, we’ll track them down and then we’ll just basically send the marketing out again to wherever it is that we think that we connect with them.
Danny Johnson: And what website was that? You said TLO?
Tucker Merrihew: TLO, yeah, is the site that we use a lot to basically research and find out where people are or where they’re hiding.
Danny Johnson: Yeah. That’s a good point. Yeah. I don’t know how many years I went with having stacks and stacks of these return letters and always saying, “Eventually, I’ll get to finding where those people are.” And it just gets to the point where I’m sick of looking and I feel bad for not doing it, so I end up throwing them away. And I think a lot of investors are like that. So when you spend the time to go make the extra effort, it’s well worth your energy in doing that. Now, with competition the way it is, do you have any pointers on beating your competition in getting a deal? For example, say following up with leads where a lot of people maybe make an offer and just sort of forget about it after that.
Tucker Merrihew: Yeah. It’s not rocket science, but it’s also not easy. And we’ve created an entire product around this that we call “negotiating with sellers.” It’s just being good at: A, talking on the phone. You got to have your phone skills. They got to be good. But B is being likeable and being able to negotiate in a way that keeps you likeable. A lot of people, for whatever reason, in the real estate investor’s space don’t have very good people skills. And I think it’s just because they haven’t had. Maybe a lot of them haven’t been in sales positions before, so they haven’t had to refine their sales skills and their people skills. And so, if you’ve got good sales skills, you’ve got good phone skills, and you’ve got good people skills, that’s what’s going to set you apart from your competition. Ultimately, I think that’s the difference between people that make it in this business and people that don’t.
Danny Johnson: Well, do you have a couple pointers, a couple examples of what you mean exactly by having the better people skills?
Tucker Merrihew: Yeah. So for example, let’s say you got a seller on the phone, right? And you want to buy their property and they say, “Well, give me an offer.” Well, a lot of investors will take that as, “Okay. Well, I guess I’ll just email you over an offer and hope to hear it from you,” right? And so, that’s one way that investor A deals with it. What do you think happens to investor A? Do you think they’d buy the property? Do you think they ever talk to him again? Probably not.
Danny Johnson: No.
Tucker Merrihew: Because they’re shooting blind. They’re giving him an offer something they have no idea what the hell the seller even wants for it. So investor B is good at sales skills, understands that you need to at least get some sort of a ballpark figure from him or what it is they want for the property. And so, investor B has gotten good at taking him through a conversation that gets them to relinquish that information to you because a lot of people give you a pushback on that. And so, knowing how to get that out of him for just one small example, that continues down the road of putting a deal together as opposed to the door slamming shut and you emailing them an offer and never hearing from them again.
Danny Johnson: Right. So that’s sort of like talking to them and saying, “So tell me more about the property. Tell me more about the situation,” where they walk through and kind of start to feel what they were feeling for the reason for them contacting you in the first place and maybe relaxing a little bit and giving you more information, right?
Tucker Merrihew: Right. Relaxing is the key there that you mentioned. People want to do business with you because they know you, they like you, and they trust you, right? So the more you can get them to feel relaxed in the conversation – it doesn’t feel so stiff and rigid – the more likely you’re going to get that information out of them.
Danny Johnson: Right. So maybe you start out where they might have this idea that you’re sort of going to be a used car salesman. And I’ve had actually people tell me like they just had the opinion that house flippers, they didn’t know any. but they thought that maybe the ones—or just because maybe what they see on TV are sort of these slimy—
Tucker Merrihew: We’re low balling vultures, right?
Danny Johnson: Right. So that’s the opinion that a lot of people sort of have. And before, when we probably both started in this business, not as many people knew about flipping houses and you didn’t have that stigma. But now, I think maybe you do. So you start out with maybe they might have that opinion of you. So if you can convince otherwise by just being yourself and talking to them like a normal person, they’ll realize that. And yeah, it’s like you said, it’s not rocket science. People always fret about what they’re going to talk about or what they’re going to say and how they’re supposed to handle situations when really you sort of develop your own style and just being yourself and learning how to listen to what the seller is telling you and talking and walking them through their situation and why they were calling you in the first place.
Tucker Merrihew: Exactly. And just getting comfortable in your own skin and comfortable talking to people about buying their property. Most people aren’t great at it on call one, two, three, four, five, right? You’re going to say stupid things. You’re not going to frame the conversation properly. You’re not going to probably get all the information that you need to, but you kind of develop your style and you develop a certain level of comfort with yourself. And over time, the idea is you continually get better and better at that. And once you get comfortable with yourself, people feel that. They know that. And when they do, then generally your chances of putting a deal together, let’s say, not getting a deal but putting a deal together increases.
Danny Johnson: Yeah. And a lot of people might hear that and say, “Yeah. That just seems sort of like common sense.” But really think about it because it… And I believe in that 100%. That as I’ve tried to hire some people to go out and make offers for me and try to get deals on the contract and the rate of signups or the purchases kind of goes down and you wonder why. And a lot of it has to do with if that person has never had one close, they’ve never been able to put one under contract, there’s something lacking there. They haven’t had the experience of talking with enough sellers to where… You’re right. That certain level of confidence isn’t there. And you think about what you’re doing. You’re talking about buying somebody’s house and you’re talking about paying cash most of the time. And so, that person doesn’t believe what you’re saying. It’s going to be an uphill battle.
Tucker Merrihew: Right. You got to remember that we’re in the business of convincing people to trade equity for ease of transaction. That’s it. That’s all they’re doing.
Danny Johnson: Right.
Tucker Merrihew: And so, if you just think about that, you know it’ll help you frame how you approach people. Ninety-nine percent of the time, people who you buy from know they’re leaving money on the table, but they’re trading equity for ease of transaction. That’s it.
Danny Johnson: Oh yeah. I absolutely believe that. A lot of people that haven’t bought from motivated sellers before think that you’re just going in there and taking advantage of somebody that doesn’t know any better. But you’re right. They all know better. These people aren’t stupid.
Tucker Merrihew: Yeah. I actually hate the word “motivated seller” because it’s like, “What the hell is a motivated seller?” I mean, yeah, you got your typical motivation points, but I just say we just need a reasonable seller, not motivated but just a reasonable seller because we’re not in the business of necessarily… I mean, it happens that every once in a while you buy a retail-ready house for 60 cents on the dollar, right? But most of the time, we buy houses that are not best suited for the retail market. And so, all we need is a reasonable seller who recognizes what the product is and that it’s a wholesale-type product. And as long as it’s reasonable, then we put a deal together.
Danny Johnson: Right. Most of the time, it’s situations where people didn’t earn the equity. And so, it’s really not difficult for them to say, “You know what? If I can have a check in my hand next week and be able to do this thing that I want to do, that I really, really want to do,” then it’s worth it for them.
Tucker Merrihew: Right. You got it. I think they call that the unearned equity phenomenon, right? They haven’t been in the house earning it for years and years and years, so they’re not as attached to it. But we bought homes from people that have been in the houses for years and years and years, and they’re still, I think, more so a lot of times willing to trade equity for ease of transaction especially if the home needs work.
Danny Johnson: Yeah. And I’ve actually been there myself with the rental properties that I’ve just dumped just because I was like, “You know what? I don’t even want to think about that property ever again. I could probably take some time and make a little bit more, but I don’t give a damn. Like have that thing closed in two days and it’s yours.”
Tucker Merrihew: Yeah. Exactly. So you can understand people do get to that point, and they know that they’re leaving some money on the table. But again, it’s ease of transaction. “Get it out of my life. I don’t want to deal with it. Here you go. It’s your problem child.”
Danny Johnson: So do you have a book that you’ve read recently that you think the Flipping Junkie audience out there would be interested in?
Tucker Merrihew: Yeah. I think that the best book that I read that really kind of helps me understand how to deal with people… Because this is really people business. Real estate is just the product, but really, it’s people business. It’s How to Win Friends and Influence People. I think that that’s a book that everybody should read if they’re going to be in this business and really understand it. Another book is actually one that we’ve written here in my office. We put it on Amazon, and it’s more of an entertainment book but it really gives you the real-life glimpse into what it’s like to buy houses directly from sellers and not through auctions, RMLS, or agents, or things like that. It’s called The Dirty Truth. It’s on Amazon. It’s like 99 cents. We had to charge something. They wouldn’t let us give it away for free on there. But it’s eight of the craziest stories that we’ve ever come across in actually trying to buy houses directly from sellers. So that’s kind of a real-life glimpse into what this business really looks like, some days on the side of it. So I would say those are two great resources for people to take advantage of.
Danny Johnson: Yeah. That book sounds interesting. I’m going to have to check out that Dirty Truth book. I just haven’t seen—
Tucker Merrihew: Yeah. Just send me your address and I’ll send you a hard copy.
Danny Johnson: Cool. All right. Well, we create the show notes for this episode on Flipping Junkie, and you can find that at flippingjunkie.com/podcast/tuckermerrihew. And Tucker Merrihew is T-U-C-K-E-R M-E-R-R-I-H-E-W. So just go to flippingjunkie.com/podcast/tuckermerrihew, and we’ll have the key points and notes for the show as well as links to things that we’ve talked about, resources we talked about in this episode. And I’ve really enjoyed it having you on the show, Tucker.
Tucker Merrihew: Yeah. Thanks for having me. It’s always a pleasure. And hopefully, your listeners got a lot of this. I think we covered a lot of ground. I think we talked about a lot of really good stuff.
Danny Johnson: Oh, we did. Yeah. No, I think I got some stuff out of this so… Well, thanks a lot.
Tucker Merrihew: Appreciate it and until next time.
Danny Johnson: All right. Thanks. Bye. [music]
All right. That was an excellent show. Thanks for listening. And be sure to subscribe and rate and review the Flipping Junkie podcast in iTunes. It really helps out a lot, and I really appreciate it. And be sure to join me next week on the Flipping Junkie podcast because I’ve got a friend of mine from San Antonio, Mitch Steven. He’s going to talk all about owner financing, so see you then.