Jason got his first taste of real estate investing after joining a local real estate club. In 2012, he made his first transaction and hasn’t looked back since. Jason founded HoustonHouseBuyers in July of 2013. In its’ first year they produced $3MM of gross revenue, through wholesaling, leasing, and flipping 70 houses. HoustonHouseBuyer’s is expected to buy 100 houses in 2015 and produce nearly $6M in gross revenue.
In this episode Jason talks about some of the realities he feels most new investors aren’t prepared for. We want you to be prepared so we discussed them in length.
Key takeaways are that this should always be looked at as a business and not just something you can do willy nilly.
Always focus on a strategy and become the best at it because you will get nowhere fast by trying to learn and use every tactic out there.
Things I’ve run into:
Contractors don’t all do a great job, manage themselves, get done on time and all for a great price and you will have to have the courage to fire them.
There are a lot of people out there that are will to sign a contract and then not honor it (sellers, buyers, everybody in between).
When a seller says the house doesn’t need any work, rarely is it true.
There are places in town where druggies will attempt to jump into your moving vehicle.
Nobody is going to care about your work as much as you will (realtors, contractors, other investors)
The hours aren’t going to be 9-5.
I’m sure you’ve run into issues that you didn’t expect. What were they (let us know in the comments)?
Think and Grow Rich!: The Original Version, Restored and Revised (TM)
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Danny Johnson: This is Flipping Junkie podcast episode 20. [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.
All right. Today, I’ve got a good friend of mine on for his second episode, Jason Bible from Houston. Jason got his first taste in real estate investing after joining a local real estate club. In 2012, he made his first transaction and hasn’t looked back. Jason founded Houston House Buyers in July of 2013 and in its first year produced $3 million of gross revenue, through wholesaling, leasing, and flipping 70 houses. That’s just crazy.
So obviously, he dug in and sort of knew what to do and focused on what important things to take action on to get his business going, get it going quickly. So I wanted to include him in this series where we’re talking about getting started, mindset, and all that kind of good stuff. And on today’s topic, we’re going to cover a bunch of realities that new investors rarely expect when getting started. So there’s going to be some things that people just don’t really know what to expect when they get into this business. Some funny, some not so funny. Some cost a lot of money, and some make you money. But we’re going to cover some of these realities that maybe people, if you’re new out there, haven’t experienced. And if you’re experienced, then maybe you can enjoy some of these that you can relate to because you’ve experienced it yourself.
But I’ll be looking forward to having Jason on the show and make sure that you go to flippingjunkie.com/20. It’s flippingjunkie.com/20 for the show notes, and find out more about Jason and what we have on this episode. And then, be sure to also go to Facebook.com/flippingjunkie if you want to add your own realities that you’ve come across that you didn’t expect when you got started. I love to hear about those. And thanks again for listening to the Flipping Junkie podcast. I know there’s a lot of other podcasts about real estate investing and flipping, so I appreciate you listening to ours. Be sure to subscribe on iTunes, leaving rating and review if you have a minute. I would really appreciate it. Thanks and enjoy the show.
All right. So hey, Jason. Thanks for being on the show. We’re going to discuss the realities that new investors rarely expect when getting started. Are you there?
Jason Bible: Yeah, I’m here. Thanks for the invite, man. This is going to be great.
Danny Johnson: Hey. Great to have you on again. I think you were just five or six episodes back actually. It hadn’t been that long, but I enjoyed it so much.
Jason Bible: It’s almost like a double header.
Danny Johnson: Yeah, I know and I enjoyed it so much. It’s good to have you back on. I thought you’ll be great for this episode, too.
Jason Bible: Yeah.
Danny Johnson: You were telling me right before we got onto this recording that the topic fits really well because of something that you have just been working on. Do you want to talk about that real quick just to get started?
Jason Bible: Yeah. So last night, I was at an event with Quest IRA, and we work really closely with Quest. They’re fantastic. And at this event, they had five or six speakers. I was one who got there and gave my spiel, “Hey, we bought a bunch of houses and this is what we do.” We also pitched our radio show in this private money lender event. So I get off stage and like I normally do at these events, I go over the bar because that’s usually where all the seasoned investors are at, right? Everybody is telling war stories and crying in their beer. So I’m chatting with this guy, and he said, “Hey! You know, I’m a new investor. I followed some of the stuff you’ve done on Facebook.” And he said, “You know, I’m having some problems.” I said, “Oh! Well, what’s that?” He said, “You know, I want to buy rental properties and I want to do a couple little flips, a couple little wholesale deals. You know, I’m nervous when I’m talking in front of a seller.” He was just kind of going through this whole litany of stuff. I kind of left early and I was kind of pissed, to be honest with you. I got home last night and took a shower, went to bed, woke this morning, and I was still just hopping mad.
I made this 30-minute tirade video on Facebook. And the kind of encompassing theme of that tirade was of the value proposition. Every business has a value proposition. And one of the things I think a lot of educator… In fact, I don’t know a single educator that talks about this. They talk about the functional parts of real estate, right? Like how to raise money, how to do wholesale deals, how to flip, how to buy, and all that other stuff. But they really don’t talk about the value. And when you’re building a business, where the rubber meets the road is what’s the value you’re actually bringing.
So I’ll give you a good example. I’ve heard wholesalers time and time again or people who teach wholesaling will tell you time and time again, “Just get it under contract and renegotiate the deal.” Like even if the numbers don’t –
Danny Johnson: That’s horrible.
Jason Bible: And it’s like, “That is absurd. It doesn’t even make sense.” You are so bad at what you do, you can’t even bring value to the transaction. So you’re hoping you can screw the seller on the backend, the day before will call you and say, “Oh, really can’t do it. It’s going to be $20,000 less.” And they’re like, “What?”
So I had this entire just rant about what’s the value proposition look like. The guy I had a chat with last night had the same problem I had when I first started where I was like, “Well, I’ll just send out some postcards and I’ll talk to people on the phone. You’re going to sell your house or you’re not…” And that’s not really how this business works. I know we talk a lot about solving problems, but you really have to figure out what that problem is first. You sit down with the seller and say, “Hey, why are you selling this house? Why aren’t you calling a real estate agent? Why are we even here talking about your property?” And what really frustrated me was no one teaches the business of business. They assume everybody knows how to run a business or knows what a business does because they work in one – and nothing could be further from the truth.
So we end up spending all this time teaching mindset, which I think mindset is really important. But teaching mindset and then teaching the technical nuts and bolts, but there’s never a discussion on the value proposition, your strategy, and then the tactical implementation of those two things. And so that’s one thing, I think, a lot of new investors miss. You’re starting a business. I mean, I’ve said this time and time again.
I did a radio show a couple of weeks ago where when I got the invite, a guy calls me over and says, “Hey, I want you to come and talk about that thing you always talk about.” And I said, “What does that mean?” He said, “I want you to talk about that thing you talk about sales and marketing.” And I’m like, “Oh!” One of the things I say is: Look. It doesn’t matter what business we’re in. We could be selling used cars or Avon or whatever. At the end of the day, we’re a sales and marketing organization. Marketing and sales. Sales and marketing. It doesn’t matter what it said. So if you don’t want to get into a business because you don’t want to do sales and marketing, you think real estate is not that, I hate to tell you that’s exactly what it is. We could literally do any business and it doesn’t matter because they’re all the same: sales, marketing, and then the contract end to the contract start, the buy then sell. That whole process, the operational piece. But I think that’s one thing that new investors are not in tune with. You have to build a value proposition.
Danny Johnson: Right. You’re absolutely right. Yeah, because you’ve got to know what sort of your guiding principle is, right? What you’re focused on and what you provide to people so that you have a clear… It sort of reminds me of… You know, I recently went to this meetup for founders of tech startup stuff, just going around and introducing each other. And then, it’s just amazing how many people have no clear explanation of what they do or what their business is about. It’s like, “Whoa, man! You know, there should be a light bulb going. Man, I need to figure this out.” Because you’re doing stuff, but you have no real sort of clear… You’ve got to be able to boil that down to like one sentence, right? Like exactly what your purpose is, what you do, and how you’re unique.
Jason Bible: Yeah. When folks ask us, “Hey, what do you guys do?” I’m like, “Well, we buy houses that need a whole bunch of work from a family that needs to get rid of it. We fix it up, and then we put great families in it.” It’s that simple. This isn’t any more difficult than that. When we started our second company, Sell Us Your House, that got even simpler. It’s like, look, we know people find missing heirs and fix breaks in the chain of title. That’s it. It’s really simple. If it’s any more complicated than that, if you got to really explain it, people don’t understand it, at the end of the day, do you really have a value proposition? Because the reality is that whatever you’re building business-wise has to be a solution that the market wants.
Danny Johnson: Absolutely.
Jason Bible: And one of the things I just absolutely ripped into where the guys that are selling real estate education on the premise that you can make $5,000 wholesaling a deal, I just thought that was an absolute joke. I don’t know what it is in San Antonio. But here in Houston, our median home price is $200,000. An agent makes 3% of that, right? That’s the median, so that’s kind of the middle market. So here you are as a wholesaler doing all this marketing, advertising, meeting with sellers, and all that and you’re making less than an agent. Like, what are you doing? Just become an agent. Right?
And the other reality of that is that you need to have bigger margins so you can grow your business. If you don’t have good margin, you can’t grow. You and I were talking about goals, how many you want to flip this year, and all of that. You can’t do that if you’re not making really great money because it just doesn’t… you can’t grow marketing, you can’t bring people on board. All of those steps in growing your business, those are lagging indicators, right? It’s like you’ve got to build, build, build, build, build and then boom! Then, the revenue starts to come up. But you’ve got to have enough margin where you could start to build those things. So yeah, it’s amazing to me the… “I’m going to wholesale stuff for $5000 bucks.” It’s like, “No, you’re not.” You will prolong. That’s the other reality.
Danny Johnson: When you realize it, part of that is going to marketing in your time too as well, but—
Jason Bible: Yeah. You’re making like $1000 a deal. Wow! That’s great.
Danny Johnson: Man! I thought about a couple of these. I don’t know. I just want to maybe just say just a couple just to get the ball rolling. I don’t know if you’ve thought of something in advance or we’re just going to come up with them as we talk about it. But one that sort of surprise me whenever I get into this business that, you know, just because I hadn’t really done a lot of things in business before this, but there’s a lot of people out there that will sign a contract, a written binding contract, and then not honor it. Now, that’s sellers, buyers, contractors, everybody that you come in contact with.
Jason Bible: Yeah. So when I tell people that our close ratio is 100%, they’re shocked. We don’t put options in our contracts. We don’t put outs and contingencies. The only out that we have is free and clear title. So if there’s a title issue that comes up that’s so huge that we can’t solve, typically the only person that can solve it, the only entity that can solve it is the county when they go in and foreclose for taxes. At that point, they’re able to clear because—
Danny Johnson: Yeah. It tops everything.
Jason Bible: Yeah. They are super lean, right? They fix everything when they take over that deal with the exception to the redemption period. So for us, if it’s anything but that, we can fix it. But if it’s something like that, it’s like, “Shoot! You can’t do anything about it.” So outside of that, our closing ratio is 100%. And when I tell people that, they’re blown away. I got into a little cage match with a wholesaler on Facebook. And he was talking about how… “Just talk stuff up, and see if you can sell it,” and all that. And I said, “You know, that’s unethical way to do business.” He said, “What do you mean?” I said, “Well, I mean, when you sit down with your private money lenders on your flips, you say, ‘Hey! You know what? I might only pay you 50% of the time.’” That’s my close ratio. So you’re either going to sign the contract to do what you say you’re going to do or you’re not. Now, I’ll be honest with you. Those guys are great for our business because they go out there and completely screw it up and then they call the guys that are legitimate, have a real business. They’ll call us or We Buy Ugly Houses, HomeVestors. So I called one of those guys and say, “Look. You know, you all came out… This is typically how it works. We got seven or eight offers. You guys didn’t make us an offer. Most of these guys are clowns. Just come here and buy the house.” And it’s like, “Oh, okay. Well, now we can talk.”
Danny Johnson: Yeah.
Jason Bible: Because all of those guys will promise the moon and never perform.
Danny Johnson: And so many people go into it thinking, “Well, he who hires or offers the most is going to get the deal.” And it’s not true at all.
Jason Bible: Yeah. It just means you’re the last sucker. That’s really all that means. One of the things I said at one of these conferences was, “Hey, if your first value prop is ‘I always pay more than anybody else,’ if you’re already coming out with price like that’s the fourth part of your value proposition, you’ve already lost.” Because if you get into this price… I mean, I don’t want to be a Walmart. They have great margins and all of those. Well, they have tiny margins but huge business. But for us, it just doesn’t really work in the real estate business. I always compare it to… If you look at Dell or Apple. So Dell makes like everything, right? They make monitors and servers. They make all kinds of crap. And then, Apple makes what? A dozen products, half a dozen products, a couple MacBooks and phones. They got those goofy watches now and all that stuff. So who is worth more? Or who’s got bigger margin?
Danny Johnson: Apple.
Jason Bible: Yeah, Apple is crushing it, right?
Danny Johnson: Yeah. Absolutely.
Jason Bible: So I much rather be an Apple. I always likened it to, you know, when Steve Jobs first came out with the iPhone, I think you had to pay 600 or 700 bucks for the iPhone, right? And I’m sure his investor said, “You know, Steve, you should make a 300-dollar iPhone or a 200-dollar iPhone or a 500-dollar iPhone.” He’s like, “No, I really don’t. I’m going to make this one and I’m going to make this one better and better and better. You know, the previous generations I may discount, but I’m not building all these different ones. That’s stupid.” So that’s kind of the way we look at it. We much rather be really good and focused at this one little thing, buying some family houses and doing it this way.
Danny Johnson: Right. So that’s like integrity and keeping your word and being able to do what you say you’re going to do. But then on the other side, to protect yourself as much as you can from people that maybe you’re wholesaling to that are going to do the buying of the actual house that you’re going to be trusting to do that and then with contractors and stuff like that. The bigger thing is to really, you know, you sort of got to go with your gut a little bit and don’t just consider what they’re offering you but just be careful about making sure with wholesaling that you get nonrefundable deposit and with contractors that you have a solid contract with penalties and things like that. They’re going to protect you a little bit. But then also go with how you feel about that person that you’re talking to, right? And you’re going to take some punches and make some mistakes, take some falls, but you’ll find that. But if you start knowing that, I think it’s a little bit easier.
Jason Bible: Yeah. I think you actually hit on a point that I think a lot of newbies don’t understand, is this is a business and you are going to lose money. There’s just going to be deals you do. We’re going to eat one out in Cady right now. We knew the market was going to change in the third quarter. Or by the time we put this thing under contract and finally closed on it, it was like we had already committed to buy it. It was a pretty long close like two or three months as they were moving out. We saw the market change. We should’ve told them a month before closing, “Hey, we’re not going to buy it. I’ll renegotiate or whatever.” I was like, “We’re not doing that.” So we’re going to end up eating it, but that’s the difference between having integrity and not. The market is not the seller’s problem. That’s our problem. So we’re going to end up eating a little bit of money on that one.
There’s a very big real estate investor lender here in town that says—he’s probably a money lender—he will not lend to anybody who hasn’t lost money because that really shows your integrity. He actually said, “If you haven’t lost money in this business, (A) you’re not doing enough deals or (B) you’re a liar.” So he just doesn’t deal deal with somebody who hadn’t lost money yet. So this might be deal #3 in a little over 200 now that we’ve lost money on. But about a 1% loss ratio, I think I’m okay with.
Danny Johnson: But I doubt you’re losing sleep over it.
Jason Bible: Well, it sucks but yeah, you lose sleep over for a day and you go, “When’s the next one coming in?”
Danny Johnson: Hey, but that’s what taught you to not make the same mistake on five more afterwards though I’m sure.
Jason Bible: Yeah. Oh, absolutely.
Danny Johnson: So do you have any other realities maybe that people don’t really come to mind when they get started on this just because it’s not something that they read about or just something that you found that you were sort of surprised by as you got into this business?
Jason Bible: I think the one last night when I was… The other thing I was chatting with this guy about is he…. I said, “Look, before…” And we started to go down in all these rabbit trails. I’m like, “Look. Let’s back up. What do you really want? Let’s start with what you really want.” “I just want to buy some rental properties.” “Okay. So why don’t you do that?” “Well, everything right now is priced between, you know, 85% and 95% for landlords, and I’m looking for deals.” And I’m like, “Well, you’re not going to find them.”
So I said, “Your problem is not in finding rental properties because sure these things still cash flow at 100%. So your issue is not with finding deals. Your issue is with your capital structure because the lender is going to require you to come out of pocket for the difference between 75% and 100% ARV, right?” So I said, “What you really need to do is you need to just spend the time raising private money to: (A) give you the gap financing or the down payment or the difference between the 75% ARV and whatever you buy it for or (B) you just need to raise a bunch of money from joint venture partners and just partner on these things 50/50 or however you want to set it up.” Fifty-fifty is usually how I’ve seen it work in the landlord model. And he said, “Well, wait a second. What profit are we splitting?” I’m like, “What do you mean?” He said, “Do you mean the rent?” I said, “Yeah. You just take all the expenses out. You put a little in there for O and M, some operation maintenance cost that you’ll have to put a little reserve together.” I said, “You just split it 50/50. You do it for three, four, or five years. You reevaluate after that time and decide, ‘Hey, I want to keep money,’ work it or not. You sell it. I mean, do a million things.” I said, “You could spend more time doing that. You close your goal and you could do wholesaling and flipping and making enough money so then you can buy rental properties.”
Danny Johnson: Yeah. That’s one of ones that I had written down here because I thought about a couple of these. One sort of the more funny realities is—let me find it here—there’s probably in every decent side of the city or whatever, there are places in town where druggies will actually attempt to jump into your moving vehicle. That’s a reality. It didn’t actually happen to me. It happened on another investor friend of mine here in town but…
Jason Bible: I had, too. We were trading stories the other night, and they were like hood stories. These guys were owner finance guys in the hood. Well, one was a multifamily guy way back in the day. He was doing hood stuff. Now, he’s a commercial guy. He’s got some class A and class B. And then the other guy does owner finance. While I’m sitting there, they’re both telling stories. So one of them: Guy goes over, chats with this woman at the house, “Hey, what’s going on? You know, I own the house next door, interested in selling,” whatever. And she said, “No. I’m not the owner. This is where I stay. I was here, and I think it’s kind of fun. This is where I stay. “So it’s not your house?” “No, it’s where I stay.” He said, “Okay. Cool. I’ll have the owner give me a call here.” So he’s walking out to his car. And all of a sudden in the intersection, police car comes this way, another one behind. He’s surrounded by cops. And he’s just standing there and he’s like, “What’s going on, boys?” So he found out somebody in the same neighborhood got assaulted. They thought it might be him, so he’s putting his hands up and he’s like, “Hey, I’m a concealed carry guy, so I’m just going to keep my hands up. You all tell me what to do now, you know.”
So it’s all of those kind of just wild stories. One of my favorites is there’s this guy in town. He represents a hedge fund and they buy about 25 to 30 houses at auction. So of course, typical hedge fund guy drives a real nice Porsche. So he just bought all this stuff at auctions, driving over to the house and of course in a crappy neighborhood. He gets out of the Porsche. He didn’t have any protection on him, walks in the house, and he walks into the right… These two guys sitting there smoking a crack pipe and he looks over these guys like, “All right boys. I’m not calling the cops. I’m not a cop. But when I come back this afternoon, you’ll better be gone.” And he looks down the hallway and here come three more guys, and he’s like, “Whoa!” Jumps back in the car and leaves.
Danny Johnson: Yeah. That’s crazy.
Jason Bible: I think from now on when they’re doing stuff in those kind of neighborhoods, they have a police come by and do a courtesy kind of walkthrough with them but—
Danny Johnson: Yeah. You got to be careful.
Jason Bible: Yeah. In some of these areas, you got to be real careful.
Danny Johnson: Even listed houses I’ve been in before where there’s… Me and my brother-in-law were actually looking at one years ago, and I saw like little pieces of things like a little lighter or something in the room. It’s a vacant listed house. It’s bank owned. So I was like, “That’s kind of strange.” When I turned a little bit, out of the corner of my eye, I see like a guy hunched down trying to hide in the closet. So I turned and just like, “Huh.” I don’t know what this dude is all about, so I kind of like signaled to my brother-in-law that was across the house and I was like, “Hey, out front, you know.”
Jason Bible: That’s messed up.
Danny Johnson: Yeah. So we went out front then we were kind of like looking in the window just to see if that dude would come out of there, and he did. And there was this tall, big old burly guy but had a little like puppy with a little dress on it or something. It was strange, so I was looking at him and took off running out of the back or something.
Jason Bible: I’ll never forget the first time I went into those neighborhoods. It’s right off MLK here in Houston. And so, I pulled up and got out of the car and this was when I was still working for the man. I think I actually even had a suit on that day. So I took my tie off, took my jacket off and I get out of the car. It’s in the middle of the day, and I just imagine this neighborhood. Everyone’s at work, right? No, they’re not. They’re all sitting there hanging out in their yard.
So, I walked out. I just put my hands up and said, “Hey. I’m just here. I’m an insurance guy, just checking the house out.” It’s like all the music stopped and they just looked over and they go, “Oh, okay.” And they went back. It was like a scene out of like a party movie, right? Somebody screw something up at the party and the record stops like “err.” And so I was like, “Hey, boys. I’m just here to check the house out. I’m not a cop.” And they’re like, “Oh, okay,” and went back to doing whatever they’re doing.
So we still buy in some of those neighborhoods, but we try to stay out of them. They’re more trouble than they’re worth.
Danny Johnson: Yeah. I think one tip that I picked up on was sort of like when you go to a house, like you said, insurance or something. It’s supposed to be vacant. Still knock on the door and say realtor or insurance or something before you come in. So that if somebody is in there that is scared or something or might attack you, they have time to just go out the back or something before you go in. But anyway, it’s just something to do to protect yourself a little bit. I guess the other thing was: When a seller says that the house doesn’t need any work, how often is that true?
Jason Bible: Never.
Danny Johnson: Right.
Jason Bible: Absolutely. But what we figured out is there’s a couple of different questions you can ask to get at that answer, and one of the things we find is that men answer the question differently than women. So when we ask the question, we’ll say, “Hey, does the house need any work?” And they’ll say, “No, it didn’t need any work.” And if it’s a woman, what we’d ask is: “Hey, so let’s say you’re having the whole family over for Thanksgiving and you really wanted to make it special for everybody. What would you do differently to the house?” And then she’ll say, “Oh. Well, maybe it needs granite countertops. Suzie three doors down said she just put in new laminate floors,” whatever. So then, you kind of start to get the list.
And for men, a lot of times what will say is: “Hey, look. If you have 5000 bucks, what would you fix first?” And then, you’ll get more of the mechanical. “Well, AC is all that needs repair,” whatever. So you could sometimes infer depending on who you’re talking to in the household what it really needs, but you’ve got to ask the question in such a way. It’s kind of like a question when you’d ask… “Hey, does the house have a mortgage?” Sometimes people get kind of thrown off by that. So a lot of times, we’ll ask, “Hey, you paid that house off, right?” I mean, put in that kind of like… Yeah, you’re already talking. You already got some pretty body rapport going just kind of… “Hey, you’ve already paid the house off, right?” They go, “Oh, no. I got a mortgage, 50,000 bucks,” whatever. So you got to be able to ask these things in such a way that are sensitive to giving away… Maybe a better way to put it is you have to ask them in such a way that not make the seller feel bad when they answer. “Hey, why do you want to know about my mortgage?” If they are embarrassed about the house, we see a lot of that. You don’t want to bring it out. The situation is what it is, right?
We’re not trying to make people feel bad. We’re trying to get them out of a bad situation. So you want to make them feel as comfortable as possible, so don’t feel like they’re getting judged or anything, which for us we really don’t care. We look at these kinds of houses all the time. It’s no big deal. So that’s what we thought, so ask questions that way.
Danny Johnson: Yeah. It’s important to do that. Yeah. And it’s not just head in there and have like that objective of “I need this information, so I can make you an offer” and that’s it. You got to care. You got to show some empathy. And if you can’t, then you shouldn’t be doing this kind of business but maybe you should just be buying from a list of properties, bank-owned properties, stuff like that.
Jason Bible: Oh, yeah. That’s why I brought a partner in because I’m not the guy that sits down and does this. I could do this stuff, sit down, the body rapport. But it’s like when I’m sitting down with grandma and you’re sitting down with her 15 cats and she wants to talk about each one of her grandkids, I’m like, “Yeah, man. This is all really important. I know I should sit here and kind of listen to this. But man, I’ve got about 50,000 other things to do today, you know.” And so, my business partner loves that. He loves sitting down with sellers, and all of our sales guys love it, too. They love the stories and just… Actually, we’re wholesaling two deals right now, and I’m going through the pictures of one of the houses. And most of our guys here are car guys. But I see one that’s got pictures of all the houses, of this guy’s house and I think it was his mom’s house, if I remember, and he just bought a new Shelby Cobra. Maybe it’s not new. Maybe it’s a 14, I think, supercharged Holschuh match 600 or 700 horsepower, whatever it is. And then I’m flipping through another one that we’re wholesaling, and this guy just got a Hellcat. So there’s all these pictures of the car, and there’s some pictures of the house. I think there’s more pictures of the car than the houses. I’m like, “Guys, we need more pictures of the houses.” But in any case, it’s just that it’s people dealing with people and it’s kind of fun. One of the things I said last night was I’m really starting to enjoy the people in this business. I thought, I mean, people, our kind of people, but the people that are in this business are fascinating. They’re just really different. So it’s a lot of fun going to somebody’s networking events and hanging out with folks. They all have different business models and personalities and all that. That’s really what makes it a lot of fun. So yeah, dealing with people.
So if you’re not really the sit-down-and-meet belly to belly with a person, then bring on a partner to do that and you just manage everything else. I think the other thing some people think is they think that’s the person who’s the outgoing boisterous one, and that’s not always the case. I’ve got a buddy in mind and his business partner is a really quiet guy, but he told me, he said the guy is just an absolute sales machine. He’s very good one on one, real quiet, kind of reserved guy and that’s what you want to look for in a partner. You want to have partners that are kind of opposites of each other. It’s hard to be good at both, marketing, sales, and operation. It’s hard to be good at all those things.
Danny Johnson: Did you think that coming into this business—I’m not sure that you would but maybe you did—that you think you’d be able to make it sort of a 9 to 5? You can start work now and then stop it at this time kind of gig.
Jason Bible: Even jobs I had with the man, my jobs are never 9 to 5. So I was not under any illusion that this would ever be a 9 to 5 gig. It’s interesting. We had this conversation a couple of nights ago. Somebody said, “Oh, you know, I just want to build a business that’s passive income.” And I’m like, “Okay. You said business and passive. I do not know a single person who has a passive. I know none.” But the only people that are passive that I know own commercial or multifamily or a bunch of single family, and they have a menagerie company involved. Those guys are truly passive. That’s it. I don’t know anybody else in any unless they’ve got… I know some guys that have sold some businesses and they’ll have like a five-year non-compete and they’ll put them on some kind of—I don’t want to call it a stipend. There’s a technical term for it where essentially they’re paying you every month so they can pick up the phone and call you if there’s a problem in this business after they get their huge check, but I don’t know anybody that does this passive. I think the only way to do it is kind of rental properties. But back to your question on 9 to 5, yeah, there’s no way.
Danny Johnson: Yeah. And especially in the beginning it’s going to be a lot more work to get it to the point where you can build up and have it set up to where you can get more of that time that you need off.
Jason Bible: Yeah. It was interesting. I was talking to two folks this morning and they said, “Hey, we love to just go up there and follow you around all day.” And I said, “I don’t think you understand. Like this room right here, this is like what I do most of the day. Like I sit in this room and I talk on the phone. I do emails and talk on the phone some more. And the most exciting part of my day is to get to go to lunch with a private money lender or another investor or to speak at an event that night.” I said, “Most of my time is here doing stuff and signing documents.” Actually, I’ve got a closing right here that I’ve got to sign. This is what I do these days, man.
Two years ago, that’s when you should see because that’s when we’re on the phone, we’re driving around town doing a lot of stuff. But now, we’re kind of running a business here. So if you got a whole staff… It’s one of the things I learned early on when I was a kid. I was 18, I became a lifeguard, and then they put me in… I worked at Six Flags Fiesta Texas here in San Antonio. I became a lifeguard. I don’t know if the title was supervisor or whatever it was, but I had a team of lifeguards. And whenever one of my bosses would come by, I start to kind of look like I was busy doing stuff. And then finally, he grabbed me one day and he goes, “Hey, Jason. I get it. You want to do a good job. You’re a go-getter kind of guy.” But he said, “If you’re on the management team and I see you running around doing stuff, I start getting nervous because that’s why you got all these people working for you. They should be doing the stuff. You should really be taking care of the management stuff.” And that’s when I realized like, “Oh, okay. So this starts to makes sense.”
So we hired between the two companies like W-2 and 1099. We hired employee number 14 on Monday. So we’ve got folks that do sales stuff. They’ve got folks that do transaction management stuff. We have people that do marketing stuff. And we’ve got people that do like accounting/finance stuff. And I should only really be involved in those at a higher kind of management level. I shouldn’t jump in and go, “Oh, you’re not doing this right. Let me show you how to do it.” That’s not really your job as a manager. So a lot of the times, I’m just… It’s not really exciting. You’re just sitting in here in the office.
Danny Johnson: Plus quietly eating a bag of chips.
Jason Bible: That’s right, just working. Yeah. Figuring out what we’re going to do next. That’s just what it is.
Danny Johnson: Strategizing. Thinking bigger picture. That’s the key. A lot of people get caught up like I did for so many years and just working in the business and sort of stagnating without realizing it. You’re just busy trying to do everything thinking that bringing on people is going to ruin the sort of lifestyle part of it but actually helps with that so….
Jason Bible: Oh yeah. Absolutely. Well, I’ll tell you what I did is I started screwing stuff up. See. I think that’s the other thing new investors don’t realize is when they really start to get going, they start doing a couple of deals and build a little organization. You end up getting in other people’s way and screwing stuff up.
I’ll never forget. We have our sales meetings every Wednesday morning. So the whole sales team sitting around. We have these little sales sheets that we do. It’s got all the properties on it, what’s going on. So I used to run these things. At one point, I’m looking down at the sheet and I go, “When did we buy that?” They were like, “We raised the money, foreclosed, and everything.” I’m like, “I don’t remember this one.” And then, “Well, you said we do XYZ.” And finally, I got to the point where I was like, “Screw it. I can’t do this. The transaction I just pointed earlier, you run these meetings from now on. And here’s what I’m going to do. I’m going to ask a couple of questions, and I’m going to sit. So whoever runs the meeting sits at the head of the table. So you’re going to sit at the head of the table, and I’m going to sit here and all you’re going to tell me is… I’m going to ask a couple questions, and you’re going to tell me how much money we need to raise and which properties need money when they are closed.” That’s it. That’s all because I couldn’t even keep up with it at that point.
So you start to get into your own way, and you start making some big mistakes and you go, “Hey, this is why you hired people that are better than you which is really what you should be doing.” That’s one thing I find with new investors. It’s really interesting when they get off on this like, “Well, do I need to hire VAs. There’s another thing, interns.” And I’m like, “Well, are you hiring these people because they bring value? Or are you hiring these people because you’re cheap?” And if you’re hiring these people because they bring value… And I’m not bashing VAs because we use them in certain circumstances. But a lot of times people are using them because they don’t want to pay somebody who’s really good. Well, I’ll tell you what. If you pay somebody because they’re really good, guess what? They’re really good. They’re better than you at doing it. They’re going to find better ways to do it. They’re going to find ways to save you money, even finding ways to make money. So it’s great to give that off to somebody else and then get the hell out of their way. Don’t start micromanaging. Just let them do their thing, right? So I think that’s one thing I see a lot of newbies make mistakes on. Just bring people that are really good at doing this thing and just do it.
Danny Johnson: Yeah, I know that is huge. It’s something to look at and always keep in mind as you’re getting going and realizing that you’re sort of dropping the ball in one aspect because you’re trying to catch up in another part of the business. You crank up the market and you get a bunch of deals. Get busy with the rehabs and two months later you realize, “Oh. I haven’t done any marketing in two months.”
Jason Bible: Yeah. You’re really up a creek.
Danny Johnson: So anything else that you want to share with… Anything that you’ve come across when you were getting started? Maybe in the earlier parts when you were doing a lot of the work that you didn’t expect that came up.
Jason Bible: I think probably one of them, the big one is focus. I think you can have this schizophrenic portfolio of asset. Like you’ll talk to a guy, “Hey, how long have you been doing real estate?” “Oh, I’ve been in real estate 20 years.” And you’re like, “Whoa! Okay.” So you always assume somebody who’s been that long has got like this massive portfolio. He’s like crazy rich. And then you say, “Hey, so what do you do?” And they’re like, “Well, I do a little owner finance. I do some flips. I do some wholesale deals. I buy and sell some non-performing notes.” And you get this hodgepodge of crap. And you start looking at their portfolio and that portfolio is garbage. It’s like, “You’ve been doing this 20 years and this is it?” And you start to worry because you’re like, “I could be this guy 20 years from now.” Don’t get me wrong. They’re making good money, right? But that’s not where I want to be in 20 years. And what causes that is the inability to focus on one thing. It’s actually two things: One is a lack of focus and the other one is a lack of patience. So you probably have months… I know I have where we’re trying to find deals and we might not buy a house that month, and that’s not good. But that doesn’t turn into, “Oh my God. Now, we need to get into non-performing notes,” or “Now, we need to do owner finance.” You just need to be patient because the marketing is coming especially early on. We have one month where we bought nothing. And in the next month, we bought five. And then, they were just freaking out, “Oh! There’s all these houses. What do we do?!”
So I think that’s what ends up happening. They lose focus and they’re not patient enough to allow the marketing and the natural sales cycle to continue. You got to have a bad month because reality is: Our sales cycle in this business is really about 90 days. So you may make an offer today that you’re not going to get until 90 days from now. So you just got to kind of wait and keep turning your leads and keep doing your follow-ups and all that other stuff. So I think that’s one I see a ton of.
And it’s just like the guy we talked about earlier. He was like, “Oh, I just want to buy rental properties.” Okay, so why are you having to learn how to wholesale, which is one business. Now, you’re learning how to flip, which is another business. Also, you can buy rentals which is a third business. Just find one thing and get really good at that. If you like doing that, figure out how to solve the problems in that model. Instead of going after all these other models to solve the problem, just figure out how to fix this. Stay really focused on that one thing. So I think that’s one of the biggest killers to a lot of success.
Danny Johnson: That’s absolutely true. I sort of cringe sometimes when I hear people that haven’t done any deals yet talk about adding new tools to their toolbox. And it’s like all the tools are brand new though, man. And then you’re sort of like there’s some of these complex tools and then you don’t know which tool to use for what purpose. So you just kind of end up in a problem. Keep it simple. Most of the guys that do a lot of business are doing wholesaling or fix and flipping and then a rental. They’re sort of focused on one of those key things and not some fancy-schmancy looks good on paper, but when you add a human element or real life to it, it falls apart. It’s not easy.
Jason Bible: I’ll tell you the one that really shocks me. There’s two groups out there teaching this. Essentially, it’s a “purchasing sub-to” and then, they’re wholesaling it to a retail buyer. So they really are signing the note, if you will, signing a sub-to note. You start looking at it and look at all the paperwork and disclosures and all that. I’m like, “Guys, the reason you’re doing this is because you’re crappy at negotiating. Because there’s plenty of deals out there that have enough equity that makes sense for an investor. You’re just so terrible at marketing and sales that you’re not good in that arena.” Now, don’t get me wrong. Is there money to be made there? Absolutely.
But I’ve been doing a couple of these weekend seminars where they try and teach that to a new investor. They’re talking about, “Well, are you assuming a note?” And they’re like, “Well, we’re doing this.” “No, you’re not doing an assumption, you’re buying a sub-to. What about the due-on-sale? Well, how do you protect the buyer and seller and how do you stay in the deal and when you get out?” And it’s like, “Guys, this is like graduate school level of real estate here.” And you got a room of 500 people and they’re so confused. “Well, I think I can do this and this and that.” And they don’t even understand it.
So like you said, some of these tools get really, really complex. And the reason they start to get really complex is to hide or mask the problem which is, the problem is you’re terrible at marketing and sales. And you need to fix the marketing and sales in your single family business. And somebody had that honest discussion with them. Of course, maybe that doesn’t sell education. That’s really what the deal is, right? It’s kind of like that secret that’ll take you to the next level. But yeah, I see that a lot, and I don’t understand. When it starts hurting my head, I’m like, “Oh, what did you… This is not catered for me. We do this for a living. I don’t even understand it.”
Danny Johnson: I wonder how many people actually end up doing that kind of thing. It’s like you said. To feel like you learned it and you understand it or something. But hardly, who really does fully understand it and want to? I would never want to do anything like that. It makes my head hurt, too.
Jason Bible: Yeah. And you know what’s funny? You’re asking me like, “Hey, have you done this before?” “Oh yeah. We’ve done it a ton.” And you go, “Okay. Well, how many deals?” “Five in the last two years.” I’m like, “Okay.” Look. And the other thing I was asked too is: Is it scalable and how do you scale it? Because you can always do something one-off, right? Like we did this one thing and it worked. We did this and it worked. And it’s like, “Okay. Great. Have you done it five or ten times in a quarter?” “Okay. Great. Have you done it five or ten times in a month?” And that’s when you start looking like, “Oh, okay. This makes a lot more sense.”
I see that with marketing campaigns a lot where somebody will say, “Hey, I’ve got this crazy high response rate.” We don’t even measure response rates anymore because we don’t care about them. The only thing that matters is how many deals you get out of it. So on both ends of the spectrum, you’ll get a newbie that says, “Oh, I got like a 50% response rate,” and then you call some of their leads, we’ve done this before.” So somebody calls like, “Oh my gosh! I got all these leads. I need some help with it.” This is early on when we weren’t like really busy, so I said, “Well, just come to the office and Tom and I will just bank through the phones with you and we’ll make some appointments for you.” It was like friends of ours that were just starting out. And so, we go through the phone and just call, “Hey, what’s going on?” Do the whole kind of dog and pony show, and you realize you don’t have any leads here. You got nothing. Even if you’re an agent, there’s not any listing options. Literally, the letter is almost like, “I’ll buy your house for anything you want. A million dollars is great. I’ll take it.” And everybody calls, right?
Conversely, we also have one campaign that we run that we get two phone calls a year from and it’s got a 50% close ratio. But you only get two phone calls a year. So when you look at the response, it’s like 0.01% or something. One of those deals is a $50,000 deal. It’s a big deal.
Danny Johnson: It actually works out to be pretty nice with some of those because you spend a lot of time with these non-leads that are calling in, these people that aren’t motivated. So sometimes like you said, you don’t want a crazy high response rate if the people responding aren’t your customers and they’re not the people that you’re targeting.
Jason Bible: Yeah. Well, I got probably one more that I just came up with that I think is a shock to a lot of newbies when they actually start working, which is funny because I can tell when new investors are actually working and ones that aren’t. Because the ones that aren’t are still like really positive and pumped up and like, “Oh, wow. This is great.” And the new investors actually working are a little more demure, I don’t say depressed. But it’s because one of the things most people don’t realize is that on a good day, 92% of the people we contact are going to tell us no. So our close ratio is anywhere between 8% and 12% which is pretty high. The national average is about 5% to 6%, and that’s for professional like homebuyer people. So 95% of the time, you’re going to hear no. And when people really start working at this business, that’s when it starts to hit them like, “Oh my gosh! I’m not going to buy a house.” And I’m like, “Well, how many offers did you make?” “I made ten.” “Okay. Well, call me when you make 300 because you need to make enough.” You got to get enough no’s. You know, no, no, no.
Danny Johnson: Right. And so to put that in an easier perspective for people is… So I think what you’re saying is national average—of qualified people—is maybe 1 out of 20 offers will end up being in a deal. And then you guys are door to door and closer to 1 of out 10, right?
Jason Bible: Right.
Danny Johnson: One out of nine or ten, right?
Jason Bible: Yeah, that’s about it. Yeah, 1 out of 20 and that’s not on the MLS. Depending on what your market is like, it’s a total. I think San Antonio is pretty close to Houston, and it’s a total freak show at MLS. Unless you’re doing like new construction or like huge additions, it just doesn’t make any sense. But yeah, one out of twenty. And that’s somebody who is in the business already. That’s not a new investor. You’re a passive for opportunities as you continue to grow your skills. So it may be one out of forty or one out of fifty, maybe one out of a hundred. So ask a lot of these new investors. When they hear those numbers, they get kind of depressed. I’m like, “Well, you said you wanted to do this business. You wanted the freedom and all that stuff. What are you willing to sacrifice? What about one in a thousand? Are you willing to write a thousand offers? Yes or no? It’s that simple, right? If it takes a thousand to do one, that’s one more than you did a month or two ago. So I think sometimes they underestimate how much it takes particularly when you’re starting out, how much it takes to get that first deal or two under your belt.
Danny Johnson: Yeah. So that’s a good question to ask too if it’s like, “I’m not getting any deals.” And then the first question is: How many offers did you make over the last month?
Jason Bible: Yeah.
Danny Johnson: If they did make a decent number of offers then it’s like, “What are you making offers on? How are you calculating your offers? All that kind of stuff. But it usually gets sort of hard of a problem, right?
Jason Bible: Yeah. And a lot of times 90% is, “How many offers are you making?” “Oh, I made 10.” It’s like, we’re not even going into like what you talked about. Are you calculating stuff right? Are you doing your rehab estimate right? Have you got your ARV? And that’s easy to fix, right? But when you don’t have the desire to make all those offers, it’s like, “I can’t help you there, dude. You’ve got to make offers. You’ve got to know—”
Danny Johnson: Right. And that’s usually where the problem is. It doesn’t need to go deeper than that one first question: How many offers did you make?
Jason Bible: Yeah. Right there. Boom! Problem solved. You’re going to make more offers.
Danny Johnson: Well, Jason, I really appreciate you being on the show. I think we shared a lot of great stuff for people to realize more of the realities of what to expect in the business. It’s an awesome business, and we have a lot of fun with it. And I’m sure people out there are getting started well too and hopefully be helped by some of these things that we’re covering in the series of podcast episodes. Jason, you’d mentioned starting a radio show. Do you want to mention that? Or where can people contact you?
Jason Bible: I sure can. Yeah. You guys can find me on Facebook. Best place to catch me on Facebook. I’m trying to limit the number of friends on there. I think I’m getting close to 5000, but I’m taking people out that just add me and don’t ever read any of my stuff. So that’s a good place.
I’ve got this series I’m running called Twelve Weeks to Awesome and really, it’s a 12-week series on how to be a wholesaler, lender, buy in whole guy, or a flipper. And actually, one of my homework assignments is actually to get all the documents written for that, but it’s a 12-week plan. I’ll be honest with you. It’s a lot of the stuff we talked about here. It’s making offers and doing marketing and all that. What do you need to do in 12 weeks to set you up for the following 12 weeks, right? That time period takes three to six months to really get your first deal. So what do you need to be doing for those first three weeks? So you can pick up that first deal in the next 12 weeks. So, yeah. It’s called Twelve Weeks to Awesome. You’ll certainly see me there.
Danny Johnson: How do people find that Facebook group? Because I think I had trouble finding that. So we have a lot of people emailing that they can’t find it.
Jason Bible: Yeah. Type in Twelve Weeks to Awesome. It’s all spelled out, one word.
Danny Johnson: No spaces?
Jason Bible: No spaces. Or just find Jason Bible in Houston. I think there’s only one. But the radio show is going to be pretty sweet. So if you’re here in Houston, it’s 11:10 a.m. That’s the Business Radio Station from 9 to 10 in the morning. And we will do a podcast where it gets uploaded to iTunes and I think we’ll even do some YouTube stuff. We’re going to bring the video camera in the studio for those folks that do the YouTubes. I got a YouTube Red, man. I love it. Where you can just go on and download stuff right to YouTube. I don’t know if you’ve tried it yet. It’s freaking awesome.
Danny Johnson: What is it named?
Jason Bible: YouTube Red. It’s like, I don’t know, 10 bucks a month or something like that. And what I’ll do is I’ll just tag the videos I like and then, I think, there’s a little bubble or something that says, “download to offline” or something like that and it just brings them all in. So you can listen to anything while you’re driving a car.
Danny Johnson: Oh yeah. That’s cool.
Jason Bible: And the cool thing is you can turn the video off and it still plays in the background. So it almost runs like a podcast like on iTunes. So I love it. That’s how I listen to all my stuff. So we’ll start doing some video stuff and that sort of thing. But yeah, we’ll do an email blast. We got to figure out a name for the show. So once we do that, then we’ll email blast it out. But yeah. It’s a call-in show. So if you happen to hear it live, you can certainly give us a call and we’ll answer all your real estate questions.
Danny Johnson: I’m going to call in and prank-call you.
Jason Bible: Yeah. There you go. One of the other guys here in town yesterday told me. He was like, “I’m going to call in and heckle.” I said, “Bring it. Bring your A game.”
Danny Johnson: Do they have that where you can listen to it over the internet?
Jason Bible: Oh yeah. They’ll have that. We’ll get that. And I think they’re supposed to set the website up next week. Monday next week we’re doing intros, outros, and some other… we’re doing all the commercials and all the other stuff. So they should have the page set up, I think, next week. But yeah, you can listen to it live. And then on that same page, you’ll actually have, I think, it’s a downloadable link or maybe you have to listen to it on the webpage. I can’t remember. But yeah, it’ll all be set up online. You guys can listen to it.
Danny Johnson: Awesome. Great, Jason. Well, I appreciate it.
Jason Bible: Yeah. Thanks for having me on the show. It’s a good time. So, yeah. You guys go out there and buy some houses.
Danny Johnson: All right. Take care. I’ll talk to you.
All right. Another great episode. Jason shared a lot of great interesting information and stuff that you should watch out for and just understand that’s a part of this business naturally. And I think his point about focus is really important and should be focused on. But anyway, focus. And then I had also talked to him about a couple books, Think and Grow Rich. I’m not sure. I think he mentioned that last time, but that’s his #1 favorite book and it’s an awesome book. So check out Think and Grow Rich if you’ve never read that book. And be sure to check out leadpropeller.com. That’s our real estate investor websites that we offer and help make all of this possible with me being able to take time to do these podcasts, helping you guys get started in the business that we’re still in and also flipping houses. We got huge goals this year. We’ll be talking more about a lot of the things that we’re ramping up and doing in that business as well. But have a great week and listen in next week for the next great episode in this series of mindset and foundation and going all the way through. We’ll get into more topics of the actual nuts and bolts of analyzing deals, finding leads, all that kind of stuff in the coming months. So make sure that you subscribe on iTunes, leave a rating and review. I’d really appreciate it. And have a great week.
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