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The First Week

Home » Blog » 34 Weeks Flipping Houses » The First Week

This week begins the opening up of my business for you guys to see how my wife and I operate our real estate investing business. If you missed the first post explaining what I am doing, please visit This Post.

Let me mention something upfront. You may notice that I pass up on some deals that other investors would go after. This is because I really am only interested in the better deals. I do not want to get busy rehabbing 5 dumps in war zones and miss the home run deal that would make more than all 5 of those houses combined (and not have to worry about getting mugged in the process). I do make money from some of these junkers and I will show you how.

Edit: Now that I’ve completed this post for the week, I realize that this can become a monster very fast. I’m glad I explained the leads that I did not go to see, and the ones that I just passed on completely, so that you get an idea of how and why to filter your leads. From now on, I am planning on just showing the stats of where the leads came from each week and then only analyzing the ones that I go out to see. Please leave comments if you have any other suggestions.

These are the things I did this week:

Marketing

Total Leads This Week: 8

  1. Bandit Signs[Leads This Week: 5]As you can see, BANDIT SIGNS KICK BUTT! Had my contractor put out 40 bandit signs in a certain target area of mine.  I target houses that retail (value they should sell at after repairs are made) for between around $85,000 to $150,000.  I choose these price ranges because they are where the majority of qualifying people in San Antonio are buying.I paid him $2 per sign to put them out at busy intersections along the main thoroughfares.  If you are just starting out, putting them out yourself the first couple of times will give you a good idea of where the best locations to place them are, and will quickly show you why it is worth it to pay someone else to do it for you.I use the 24×18 horizontal flute (so that they do not bend in the wind) corrugated plastic signs, nailed to posts (disclaimer: check for local restrictions regarding these signs).Here is a picture of the signs I use (I use roofing cap nails post them):
    I changed the phone number in the picture. I wish I had that number.
  2. Yellow Pages[Leads This Week: 1]I’ve had a dollar-bill-sized ad in the yellow pages for the past 4 years. This form of marketing isn’t the cheapest, but it does pay for itself. Every year I question whether to keep it, because of the near $1,000/mo price tag. But, after looking at my results for the year, it is always a no-brainer to keep it.Here is a picture of my yellow page ad (again, changed phone number):
    Maybe it’s a little over the top, but it sure does grab your attention. I decided to set myself apart from all of the other ‘We Buy Houses’ ads in the phone book.
  3. Buying Website[Leads This Week: 1]My buying website pulls a decent amount of leads every month. Well worth the investment of about $120 (per year) to host and the pay-per-click advertising with Google AdWords (only pay for when someone clicks your ad). I was a software developer when I had a J.O.B. so I set it up myself. I usually include my website in my other forms of marketing (not bandit signs – you want them to call you immediately from the signs).You can view my website here: http://www.DannyBuysHouses.com. [UPDATE: I am now offering websites for real estate investors just like mine. Check out LeadPropeller.com to see how you can generate more motivated seller leads.]
  4. Drive For Dollars[Leads This Week: 1]FROM A LETTER SENT TO THE OWNER OF A VACANT LOT THAT I MAILED TWO YEARS AGO.

[fj_optin type=”random”]

Leads Analyzed

  1. Two Rental Houses[Source: Yellow Pages]Received a call from a landlord with two rental houses he wanted to unload. Both houses were 3/1’s and in a “run down” part of town (not quite a war zone, but close). Tenant in the first house has been paying $575/mo and paying his own utilities and has been living there for 12 years. He said the rents in the area support $700/mo. I love hearing that one. If they support it, why didn’t you get it? The other gets $625/mo and has only been there since January.He wants $6,500 down for the first one and will allow someone to buy the house subject to the existing mortgage with Chase ($24k principal balance at 8.5% – $384/mo payment). The other he wants $8,000 down and take over another Chase loan ($22k balance at 8.5% – $350/mo payment).These look like decent cash-flowing properties. They do need some repairs. I did not go and seem them and I will tell you why. At this point in my life, I do not want any more rental properties, unless they are in better parts of town and can be bought super cheap. I’d rather be buying houses and making money with my time, than constantly chasing people and demanding rent all the time (not to mention the constant demands for repairs).I don’t throw them away either. I call a landlord/wholesaler that I have built a relationship with and let him run with it. If he buys, he pays me a birddog fee (usually $1,500 and up, depending on the deal. This is always discussed upfront). All I do is get the lead and pass it on. I am looking at a check on my desk right now that he dropped off for me today. All I did was send an email with the details to him several weeks ago. He contacts them, signs up the deal, closes and sends me a check. Why let anything go to waste? Don’t throw away those leads you don’t want!I’ve already rambled on long enough about this one, so I will tell you about the super easy way I evaluate rentals for myself on another day. Remind me if I forget, and you really want to know.
  2. Newer House In Older Neighborhood[Source: Website]This one was a 3 bedroom, 2 bath newer house built in the middle of a neighborhood of older, run down houses. Here are the numbers:
    Asking Price: $Wanted Me To Make Offer
    Amount Owed: $30,000
    Repairs: $Unknown
    After Repaired Value: $75,000
    Max Offer: $48,750 (65% of After Repaired Value) minus Repairs

    You can tell there are some gaps in that data. It’s because, as you get more leads coming in, you have to be able to filter the time wasters from the true prospects. This seller would not name a price and generally seemed like he just wanted to see if he could get full price. When this happens, I just determine the basics and call back with a ballpark. This really weeds out the time wasters.

    With this one, based on what he told me about the condition of the house, I told him I would probably be able to offer somewhere between $40,000 and $45,000 cash. Usually I am not so conservative when giving the ballparks because I don’t want to scare the seller off too easily. If I have to negotiate it down, it is easier done face to face with the seller. So, if they really have any motivation at all, they will allow me to come and look at it to give them a firm offer. If they don’t, they simply weren’t motivated enough. I do call and follow up after a week or so to see if they had thought anymore about selling at the lower price.

  3. Another House In The Semi-Hood[Source: Bandit Signs]This one was a 3 bedroom, 1 bath run down house, only 912 square feet, near the two rental houses above. Here are the numbers:
    Asking Price: $40,000
    Amount Owed: $10,000
    Repairs: $Unknown
    After Repaired Value: $50,000
    Max Offer: $25,000 – Repairs

    This is the same sort of situation as the last one. The Max Offer is lower than 65% because I have a minimum of $25,000 profit required for any deal I do. 65% would have only allowed a $17,500 profit. I told him $15,000 to $20,000 would be my ballpark. He was not interested. I will follow up with this one. If the motivation develops, I will pass it along to a wholesaler and make a quick buck.

  4. Small House but Decent Area[Source: Bandit Signs]This one is the kind of lead I am looking for. This one was a 2 bedroom, 1 bath, 1.5 car garage, 907 sf, house built in 1995. Here are the numbers:
    Asking Price: $30,000
    Amount Owed: $5,000 (taxes)
    Repairs: $10,000
    After Repaired Value: $70,000
    Max Offer: $32,000 ($42,000 (60%) – $10,000)

    What I like about this one should be obvious. He was asking a very reasonable price from the get go. He inherited the house and only owes the taxes. He didn’t want the house and he really doesn’t need the house. This happens a lot with inherited properties. A lot of people just don’t want to deal with the hassles of selling a house that is not in good shape. He wasn’t exactly sure of his asking price. (He says he still needs to file taxes)

    You may have noticed that I chose 60% of After Repaired Value for my max offer. This was because the house is a small 2/1 (do not sell as well as the standard 3/2) The Comps used were 2/1’s also, so the After Repaired Value is correct. Just accounting for longer days on market.

    I immediately scheduled to see this property and made an offer of $25,000, on the spot, after walking through it. (See how I did not offer my Max Offer. You need room to negotiate. You can always go up on your offer, but rarely can you go down.) The seller wanted to talk it over with his wife that evening. He called me that night and accepted. I got the house under contract this morning and will close mid April. 🙂

    Here’s a picture:

  5. Weird Conjoined House[Source: Bandit Signs]Two houses on separate lots…joined together by a previous owner. Both houses had 2 bedrooms and 1 bath, combined for total of 2300 sf with two kitchens. Here are the numbers:
    Asking Price: $65,000
    Amount Owed: $0
    Repairs: $Unknown-A LOT-HOUSE ALMOST TOTALLY GUTTED
    After Repaired Value: $75,000
    Max Offer: $45,000 (60%) – Repairs (Estimating at least $20k) – $10k wholesale fee

    This house was gutted and destroyed by vandals. The seller says the wiring was ripped out of the walls, the sheetrock tore off the studs throughout, and other miscellaneous damage from vandals over the last 5 years. Due to the hassles with this one, I know I would need to get it super cheap because I would wholesale it to a rehabber that would need it super cheap. So I offered $15,000. He wasn’t having it. Next.

  6. Duplex Close To Downtown[Source: Bandit Signs]Vacant duplex in a neighborhood that I do not invest in. I passed this one on to a wholesaler.
  7. War Zone Full Value House[Source: Bandit Signs]You will get a lot of call from people that want to, and in many cases need to, sell their house at full value. This one was in a bad part of town and owed what it was worth. This was quickly determined by the fact that they had just bought the house (with owner financing at 12%) a couple of years ago (only $1,000 paid towards principal). You should not spend a lot of time of the phone with these sellers. It’s always tempting to try to help them because you feel bad, but there is not realistic way to do that. Do not waste your time or theirs. Get off the phone.
  8. Vacant Lot (mailed to 2 years ago)[Source: Drive For Dollars]This is proof that your marketing builds and the leads you get in now are a result of what you did in the past. The leads don’t always come right away. This seller received a letter from me over two years ago about this lot. He seemed a little motivated, but was trying to hide it (this always shows when you do not seem interested in their property). The lot is in the middle of an older neighborhood. It has utilities. He wants $18,000 for a lot that is probably only worth about $12,000 to $15,000.Lots are nice in that holding costs are minimal and you really don’t have to go to the property to let anybody in. There weren’t any comps for lots in the area for the last 2 years that I could find. I had sold one over there that was bigger about three years ago and figure my estimate is fairly accurate. Without solid comps, I would not want to buy this lot for more than $3k-$5k. It would be pretty hard to screw that up. He was not interested at all. He responded with, “you cannot buy a lot for that amount anywhere in the country!” I could have debated that very quickly, but thought better of it.

Summary

I am always amazed at how quickly a small investment in bandit signs produces results. Signs went up and a deal was put under contract within 5 days. It’s really that easy.

Another thing that I hope is taken from this week’s post is that you really need to learn how to quickly filter out the non-deals. Don’t get caught up in trying to make deals out of non-deals. This happens when you do not have enough leads coming in. Work on getting more leads and get used to saying, “Next!”
Plans For Next Week

  • Get list of 500 absentee owners.
  • Drive for dollars in target neighborhoods. I am going to provide a primer on this.
  • Distribute $20 marketing cards everywhere I go.

Please do not hesitate to leave feedback on the format I am using for these posts. I am trying to figure out what works best.

If you have not subscribed, please do so on the right side of this page. This way you will be notified when my new posts are put up.

Stay tuned.
Danny


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Comments (113)

  • Tamara Pickens

    Hi Danny,

    Im curious how your bandit sign results compare with your direct mail results (guess i will have to stay tuned, but if you want to share past experience, thas cool too 😉 ) How long do your signs stay up on average?

    Also, for everyone you are passing these leads on to, are you collecting a fee?

    With negotiating, i have always heard that its never good to be the first one to mention a dollar amount, but I see that you use a ballpark figure to find out how motivated the seller may be, have you found negotiating that way to be better than the former?

    Also, how are you determining the repairs (is this after walk through and if so, do you visit every potential house?)? Is it smart to have a contractor to bring with you to walk through the house?

    Sorry for the rapid fire questions, but thanks in advance 🙂

    • Danny Johnson

      Great questions.

      Bandit signs have always had better results than just about any other form of marketing. That is why I started with them now that I am building everything back up. They are how we got our first deals when we started investing. My wife and I were mailing postcards and letters more several months and had some calls. Things really got going when we started putting out the signs. It was the “more comfortable” thing to do sending out the postcards. Once we got out of our comfort zone and put the signs out, things really started to happen. It varies on how long they stay up. On average about 1 to 2 weeks. When the city starts cracking down (they do this in cycles), they may only stay up 1-2 days.

      We are doing the letters and postcards again just to have more lines in the water.

      Yes, I am most definitely collecting a fee. I tell them up front what I want if they do the deal. Most of the time $2,000.

      Yes, you should never be the first to mention an amount in negotiation. I only do that when I don’t get a sense for their motivation and/or the house is just not one I am excited about. I know the parts of town that I really want, and for those I will usually go right out and negotiate with the seller if they have enough equity.

      I am only determining repair on ones that I am interested in. For the first week, I only visited the one house that I ended up getting under contract. In the beginning it’s best to visit as many houses as possible and it is a good idea to bring a contractor for the first few so that you get an idea of what to look for and an idea about costs.

  • Gail Smith

    Hi Danny.
    I love the format. I love that you put your thought process out there for us to see and learn from. I’m still struggling with the “I don’t want to rip these people off” sentiment. I know it holds me back in a big way, so I appreciate reading other wholesalers successes.
    Gail

    • Danny Johnson

      Gail,

      A lot of investors struggle with thinking that way, in the beginning. When you start getting calls from sellers and hearing their stories and what they need, you quickly realize that you are really helping them. It’s not just something we say. We really are helping these sellers. They know they are giving up equity and are ok with it.

  • Gail Smith

    Thanks for that! Also for reminding us not to try to “make a deal work”. I’m looking at a house with ARV of $84K. Free and clear. Needs $10K work. Owes $8K back taxes. Went from wanting $60K down to $50K during visit. Told her after I check comps I think I’ll be under $30K. I’m sending a cash offer of $30.6 (we pay taxes) or if she holds paper we’ll give her $32.4K (we pay taxes). I agonize over this stuff.

    • Danny Johnson

      If you get it for what you are offering, sounds like a pretty good deal.

      Remember, “If you aren’t embarrassed by your offer, you are offering too much.” I think Ron Legrand said it first. I still have trouble sometimes making the offers I make.

      Good luck.

  • gail

    Danny,
    Did you ever use the smaller signs (12 x 18) ? Also..we don’t have many telephone poles anymore! We’d have to use wire stakes….do you think that makes a big difference? There’s definitely a diff. in price between big and small..

    • Danny Johnson

      No. I have never used the smaller ones. It’s important to use the bigger ones because people may be driving by as they see your sign and you want to have it be as clear as possible. I’d recommend the bigger ones, even with the greater cost.

      I don’t think using the stakes makes much of a difference.

  • Ron S.

    Hi Danny,
    I like the layout of your blog. Very inviting to all levels of investors. I am a full time rehabber, landlord and wholesaler as well. I’m curious to know how you handle contractors doing 30 deals in a year without losing your mind. 🙂 I have been doing about 5-7 deals per year with hopes of increasing that number without sacrificing all of my time. I struggle doing two rehabs at one time by getting pulled into the day to day management of workers as well as helping chase materials down etc. It seems that things don’t run smooth unless I’m on site a lot. Do you have a full time crew that you keep exclusive to your deals? It seems that workers are only good for a deal or two and then drop off or get too busy and overpromise and underdeliver.
    I’m a big sign guy like you by the way. There is no better bang for your buck in my opinion.
    Keep up the cool blog!
    Regards,
    Ron

    • Danny Johnson

      Ron,

      Thanks for the compliments.

      Dealing with contractors is definitely the most stressful part of this business for me. I have a couple crews that I keep busy. They do get changed out frequently for the reasons you mention. Every once in a while you need to have them bid on a job and then have another crew bid on the job so that they don’t think you are going to use them no matter what. When the other crew gives a better bid, they get the job. The next time your crew bids on a job, their bid will be inline again.

      When looking for a new crew, I am actually looking for a general contractor with a crew. I don’t want to manage the crew, I want to manage the GC. This makes all the difference in the world. You will pay more for the job, but it is absolutely worth it. (I won’t hire the guy that shows up in a Hummer. :))

      I never buy materials. The bid must be for labor AND materials. Home Depot is a time killer.

      When the crew is new, I go by frequently. After several jobs, I go about 2 times a week.

      Danny

  • The Second Week

    […] is the First Week, if you missed it. It has some explanations of some of the […]

  • Jeremy

    Great info, looking forward to reading more!

  • Ron S.

    Danny,
    You mention that you never buy materials. How do you handle this? Do your contractors front the materials while you pay them labor draws and you reimburse them at the end? Do you give them money up front to pay for materials? (there would have to be a lot of trust there) Do you pick out everything at the store, pay for it and let them pick it up? How else would you know that they are installing what you want and that the cost matches what you are paying?
    Thanks!
    Ron

    • Danny Johnson

      They have to include labor and materials in their bid for the job. I have a contract that spells out the work that they have to do and the materials to use. Several trips to home depot to pick out materials and write down SKU’s and prices. My contract includes a Materials Specification that lays out which light fixtures to use, paint colors, faucets, etc. with SKU and prices (from home depot). The contract also lays out the draw schedule which is based on WORK COMPLETED, not on times (like paying every Friday).

      They know what materials they need and will have to go and pick it up when it is time to get it. Their draws include money to buy the materials.

      To reduce risk with new contractors, I break the job up into smaller draws (like $1,500 – $2,000 each). If there is an item that we did not think of I will have them pick up the materials and have home depot call me so that I can pay over the phone (the contractor’s desk does this).

  • Christian

    Wow Danny,
    After reading your responses you seriously have this down to a science…..

    • Danny Johnson

      Thanks, Christian.

      Danny

  • Mathew

    Maybe your hiring of and using forms with contractors can be another post. I’d be curious to take a look at your Materials Specification form, Independent Contractor form, Scope of Work, and Draw Schedule.

    Invaluable information here. Thanks.

    • Danny Johnson

      Mathew,

      I’m considering including this in the next post. Not promising, but I will see what I can do (or more what I am willing to do).

  • Ben

    Great detailed resource! Thank you so much.

  • Mike

    Danny,
    I’ve really enjoyed how your blog is focused on the marketing aspect of this business. I was just wondering if you handle all of your incoming calls from your marketing directly or do you use a voicemail service of some kind? Thanks again for all of the helpful information.
    Mike

    • Danny Johnson

      Mike,

      Great question. I prefer to answer all calls myself. There is just too much information to be gained while listening to sellers. Their tones and urgency can be determined quickly. Not to mention building a good rapport from the get go. Plus, it just helps you to get comfortable talking to sellers.

  • Bailey

    Hi Danny, thanks for sharing your process.

    I have question on Deal #4. Did you pay the back taxes, or did the seller pay the back taxes out of the $32k offer? How is that handled?

    • Danny Johnson

      Bailey,

      The back taxes are usually paid by the seller at closing unless you negotiate and agree to pay for them. In this case, my offer was calculated and presented with the seller knowing that he would have the taxes paid at closing from his side.

  • Chris Crawford

    Hey Danny, can you tell me how you do the postcard marketing? Where do you get the lists? How many do you send out? Etc. Thanks

    Chris

    • Danny Johnson

      Chris,

      I use postcards in conjunction with letters to mail to different lists that I create. Mostly driving for dollars (finding vacant houses), probate, absentee owners (don’t like this one as not targeted enough), etc. Find motivated people and mail them a series of letters and postcards. I try to space mine about by about 3 weeks between mailing pieces. It’s easy to get side tracked and busy and forget to do a mailing here and there. Just get your message in front of the people that need your service. I try to send out about 6-7 mailing pieces to each recipient but rarely make it that far before I get busy and stop mailing. Build up a good list of at least a couple hundred to mail to so that you can get a good idea if it is worth mailing to that sort of list.

  • william (Bill ) Hall

    Thank you again for your blog.

    What is any is your experience with using billboards? I have the chance to rent one on Monday at a deep discount.

    new-bee

    • Danny Johnson

      Bill,

      I used to use billboards. We had the 57 sheet? billboard (I think it was 5×7). Had 15 of those around town. It sure did wonders with credibility and getting the word out but was an expensive way to get leads. Did not get many deals from them and so only used them for one year.

  • william (Bill ) Hall

    If you were only going to spend $1300 for the billboard for three months, would you spend it on the billboard or bandit signs?

    • Danny Johnson

      Bandit signs, hands down. Go for the bandits.

  • Learn How To Invest In Real Estate

    […] The First Week […]

  • Donovan

    Danny is there a template for your website? I use one from a company that sells websites but I like your template more!

    • Danny Johnson

      Donovan,

      Thanks for the compliment. I do not currently have them but have been thinking about offering them up as I’ve had a lot of compliments. Just jotted down in my planner to give this some more thought. Thank you.

  • Candace Martineau

    Awesome site, thanks so much for sharing such detailed information! I’m sure you know how many sites out there are regurgitating the same general info. Can’t wait to work my way through the next 22 weeks plus your recommended reading list! Thanks again.

    • Danny Johnson

      Thanks! Have fun.

  • Donovan

    Is website SEO really all about the inbound links? using seomoz I saw housebuyernetwork has about 500,000 links but you managed to outrank them quickly. Any quick tips?

    • Danny Johnson

      No. It’s about how much Google and the other search engines views your site as relevant and trustworthy. Part of that is calculated by incoming links. But not just the number, but where they are coming from. If they are coming from spammy sites, they won’t help one bit.

  • Benjamin

    Danny, love your blog. Most of what I am doing is modeled after what you describe here.

  • Larry Copling

    Danny:

    I am a brand new subscriber and just stumbled onto your website, through a recommendation of your site in a wholesaling forum I was visiting (REIclub.com). I really LOVE what you are doing here. Not only are you offering real value to newbie’s like myself, but your style of writing is very honest, sincere, and genuinely heartfelt. I live in the north Dallas area, so I am hoping that the values and numbers you mention are relatively close to those in my area. I look forward to reading (and LEARNING!), as I work through the rest of your posts.

    • Danny Johnson

      Hey, Larry.

      Thanks for the compliments. I do appreciate hearing about people getting a lot out of this blog. Makes it easy to keep going with it. Stay in touch and don’t hesitate to ask any questions you may have.

      Danny

  • Derek A. Smith

    I am a beginner and this is a great learning tool. Thank you very much.

    • Danny Johnson

      Thanks, Derek.

  • Sarah

    Hey danny your post are great but how do you get such an exact number for ARV… are you always conservative with your ARV value… because base on comps some houses that are exactly as yours sell a little higher some sell a littler lower lets say one house .40 miles away fixed up sells for $250 and one house 0.50 miles away sells for $210 what do you go with? (assuming everything is the same..)

    • Danny Johnson

      Great question, Sarah.

      You really just have to try and make your best guess based on what information is available. If you don’t feel the comps you have are really “comparable” you must adjust how conservative you are. It is sort of a subjective assessment. I don’t feel like my ARV’s are really exact, but I have to put a number on them.

      When you have comps that are differing in what they sold for, you have to try and figure out why. Many times there will be reasons for the differing price. One house might be next to a railroad track, busy road, junky neighbor, outdated, lack a garage, have a smaller yard. One may have sold for more but sat on the market twice as long and gave more in the way of buyer closing cost assistance.

      After a while you will develop a good feel for running comps and it won’t take very long.

  • Dave

    Danny,
    Just found your site via a post on my local rei. Glad to hear your succuss with bandit signs, also your comment about getting out of your comfort zone by putting them out. I’m a newbie, purchased some signs, targeted a small neighborhood close to where I live for starters. I put out about 10, I put them high on poles 15′ or so. Had one guy ask if it was legal. Got nervous, went home. Quickly got several calls from ANGRY folks wanting the signs out of their neighborhood (out of my comfort zone now!). Ironically the nicest call I got was from the power company saying they took one down.
    I still have 85 or so bought and paid for, but I’m a little afraid to put them out. Have you had this kinda response? Is my skin too thin?
    Thanks, looking forward to reading the rest of your blog.
    Dave

    • Danny Johnson

      I don’t typically get angry calls from my signs. Maybe you were putting them in nicer areas and/or in the middle of the neighborhood. Try putting them up at busy intersections on major roads, in another part of town (preferably not a high dollar area).

      The important thing is to not give up. In a different area, you shouldn’t receive those types of calls.

  • Rico Garcia

    Hi Danny
    I have a question for you, There is a neighbor that is willing to sell me her home that is in desperate need of repairs but is free and clear of taxes and any possible leans and the BEST part “PAID IN FULL” . for less than $4,000.00 dollars.
    Should I buy it even though it needs work, and how do I determin if it’s worth buying ?
    I wasthinking if I put 20k into it, I can still make a profit or rent it out ?

    • Danny Johnson

      Rico,

      Sounds like it should be a deal no matter what if it will only cost you $4,000. But, I do not know where the house is and what kinds of repairs it needs. There are lots of situations where a house could sell for $4k and still cause the investor to lose money.

      What you need to do is find out what the house will be worth after it is fixed up (talk to a Realtor). Find out how much it will rent for (talk to a Realtor). Get a better estimate of what the actual repairs will cost (have a contractor look at the house). Once, you’ve done your homework, you should quickly be able to tell whether it is a no-brainer or not.

      If I were you, I’d be calling people first thing in the morning to find out the real numbers for this thing.

  • Jim

    I’m confused about example #2. They owed; $30000, and you offered approx. $45000 to sell the finished house for $75000. Should I assume the seller will pay the $30000 (not much profit for them)? If you paid it, you’d make nothing after paying off the loan and paying the seller. I’m new at this, so if it seems like a dumb question please be patient with me- I don’t want to just blow through your post, I’d really like to learn something.

    • Danny Johnson

      You are correct in that out of my $45k offer, the seller would only net about $15k from the sale. I have to have room to make a profit ($30k less the costs I would have in buying, fixing and reselling the house).

      If anything else is unclear, don’t hesitate to ask.

  • Marie

    Hey Danny, How do you find absentee owners info? just curious.

    • Danny Johnson

      The easiest way is through a list broker. You can get these lists from ListSource.com.

  • Louis

    Danny,

    Your blog is awsome. You got the fire started back up in me to go and chase after houses again. I worked with a guy who went after foreclosure and I learned a lot from that experience. I stopped working with him due to some misunderstandings. Anyway from that point I let mr fear get the best of me and quit. Since i’ve stumbled on your site I’m going after this beast for me and my freedom from the rat race. Tired of making someone else rich. Thanks

    • Danny Johnson

      Louis,

      Thank you. Glad to hear that you are motivated to get going again. Make some progress and never look back.

  • Anna

    Wow! Awesome info!
    What is your opinion on foreclosures?
    I know it typically takes much longer to close the deal, but would you say that these generally produce good profit once you get them?

    • Danny Johnson

      Not sure if you are talking about preforeclosure, courthouse steps, or REO’s. All are great but all also have a lot of competition. I’ve never targeted preforeclosures because there is just too much competition. If I did, I would probably go door knocking. This will take really thick skin however. A lot of these sellers aren’t in the mood to sell and will be very angry.

      I’ve bought a lot of REO’s (bank owned) and this is what I assume you are talking about. Yes they can have great profit spreads and what I like is that a lot of them are not in horrible shape. Easy paint and carpet rehabs.

  • Omar

    You are the man Dan! We are the flies on the walls of your business! This site is extremely helpful. My question is, from your experience can you run a successful whoesale business using a few good real estate agents?

    • Danny Johnson

      Thanks, Omar.

      You could run a wholesaling business with real estate agents. Just have them send you listings with potential (bank-owned, fixer-upper type properties with higher days on market) and have them submit your offers.

      In my opinion, it is much easier wholesaling when you market directly to homeowners. Just a lot easier to assign contracts and get deals at the prices you need to get them at.

      Danny

  • Rico

    Hi Danny,
    Well last Friday 11/9//12, I sent out my Absentee Owner Campaign of 500 postcards and today I received 4 calls !!!!! (not bad for only 3 days)
    So I’ve spoken with the owner, gathered info, but when it came time to ask ” How much he wanted for the home” he said “I’ll wait to see what you offer me”.
    My question is : now I start my comps search, then search for buyers right ? any advice ?

    • Danny Johnson

      Hey Rico. Glad to hear you are taking action.

      Yes, you will need to figure out what it is worth. Make sure to schedule to see the house and walk through it to determine what repairs it needs and make an offer (leaving room for your wholesale fee of course). Then contact buyers and offer it up to them.

      If you aren’t sure about what you should be paying, you could try to find an investor buyer and have them help you determine what they would want to pay and just offer that amount minus what you want to make.

  • How To Start A House Flipping Business Step By Step

    […] about 34 weeks of all the marketing I did and the leads that came in. Be sure to check out the first and second week where I show my […]

  • DJ

    Danny,
    I just found the site and I love it! This is what I have been looking for! My question is this; at this point in your career you are doing cash deals I assume. Was there a time when you used financing to do deals and if so, how did you go about that? What is your advice? I apologize if this question has been asked and answered somewhere else on the site. I’m just starting to read all of your entries. Again, I love the site!

    Thanks!

    • Danny Johnson

      Hey DJ.

      Private lenders is the way to go. You may need to start with hard money for a couple deals to show that you have successfully done some flips. This is important when talking to private lenders. They want to know that you have a track record.

      You could also try to find a local investor that would want to put up the money and split the profits 50/50.

  • LauraH

    Loving this blog! I just started reading and thank you! thank you! I really want to do this, but had not really found a place that would give me real life information; most just give you a bunch of theory; I like that you provide both!

    • Danny Johnson

      Thanks, Laura.

  • Thomas

    I am out in Las Vegas and I am starting my company by following you. There is some excellent advice here. Just wanted to say thank you. I did have one question, when you get comps do you go to Zillow or MLS and without being a Realtor how do i get daily access to good comps?

    Thanks for your time.

    Thomas

    • Danny Johnson

      Hey Thomas.

      I get comps from the MLS. They are the most up-to-date and accurate. You will want to build a relationship with a Realtor so that you can get comps. You can ask other investors if they can recommend anybody or just start calling Realtor offices and asking if there is an agent in the office that works with real estate investors. Talk to the agent and let them know you need someone to be able to provide comps for you. IT’S VERY IMPORTANT THAT YOU HAVE SOMETHING OF VALUE FOR THEM. They are not going to want to just do a lot of of work for you for nothing. If you are marketing directly to homeowners for deals, you could tell them that the majority of leads you get will not be deals for you because you have to buy at a deep discount, but you would be willing to recommend the agent to the sellers. You could offer to help them out with other things and maybe even offer to pay for comps or offer to help them pay their MLS dues as they have to pay for their access.

      If you are serious about becoming an investor, you need to spend the time finding a Realtor and building a business relationship. Usually the newer agents will be more willing to work with you.

  • Eric

    Words can’t express how grateful I am that you take the time out of your day’s to write these blogs. The information you provide us all is amazing. Truly, thank you so much Danny. You are paying it forward in such an awesome way. You are a gentleman and a scholar.

    • Danny Johnson

      Eric,

      Thank you very much for your compliments. This blog does take a lot of my time but I get a lot out of helping people as well. Thank you for being a part of it.

  • Makilah H

    Thank you for all the information. I really did not know where to start. How much should I save up before starting. I am a mother of 3 kids and I work full time (my husband works part time) and I am struggling with trying to start a business. There are alot of scam artist out in the los angeles area.

    • Danny Johnson

      Glad you are getting a lot from the blog. It really depends on what you want to do for how much you should save up. With wholesaling, you won’t need much because you won’t be actually having to close on properties.

      • Kris

        Hello Danny,

        I’m new to the real estate and looking to get into flipping homes to pay off student loans might be open to doing it full time/long term in the future. Since I am new, what do you mean when you there isn’t much money needed when wholesaling? I think I am just confused on what the wholesaling means in the real estate world. THanks for all your help.

        kris

        • Danny Johnson

          Hey Kris.

          When I talk about not much money being needed to wholesale houses I am generally speaking about assigning contracts. This is where you sign an agreement to buy a house from a seller and then find a buyer (typically cash buyer investor) to assign the contract to for a fee. When doing this, you never take ownership of the house and don’t have to close on it as your end buyer is going to. So, the typical costs are earnest money for your contract to buy the house from the seller (I typically just use $25). Other than that, it is just your costs in marketing and finding the deals.

          I’m going to write a post soon covering the details of wholesaling as I don’t think I have yet. Maybe even tomorrow.

  • Chris B.

    Hey, thanks for the pointers!

    • Danny Johnson

      No problem.

  • Steve

    Hey Thanks for the great
    services you provide
    it help us to go in the right area
    Steve

    • Danny Johnson

      No problem. Glad you are enjoying it.

  • Kathy

    Danny,
    I will repeat what everyone else has said – thank you thank you thank you!! My husband is about to retire on medical disability. My husband, son and I want to start investing in real estate but we just didn’t know how to start. Your blog will be so helpful to us. We have all these ideas and kick them around but just don’t know how to implement them.

    We will have about 50k to invest. What is the best use of our money? I’m afraid to put out the bandit signs because what I’m afraid we will not be able to afford the houses people are calling about. If it is too expensive I guess we just graciously bow out and hope that we can get a few cheaper houses? How do we go about finding investors/wholesalers for the deals we cannot do?

    Thanks again for all your help and the work you have put into this blog.

    Kathy

    • Danny Johnson

      Hello, Kathy.

      Great questions.

      I would hold on to the money as reserves. My recommendation is to either begin with wholesaling or find a hard money/private money lender to fund your flip deals if you go that route. Wholesaling is the safer way to begin as you have much less risk and much less can go wrong.

      Finding investors for the deals is not hard. You can try to find any local real estate investor associations and go to their meetings. You can also simply call investors that market that they buy houses (bandit signs, yellow pages, online, the newspaper, craigslist). Call as many as you can and find out what type of deals they are looking for. Make note of the ones that pay cash and are doing a lot of deals throughout the year.

      Hope this helps.

      Danny

  • Kathy

    Thanks Danny! The helps a lot!!
    Kathy

  • Graham

    Hey Danny, what section of the yellow pages are you posting in?

    • Danny Johnson

      Graham,

      I was posting in the ‘Real Estate’ section. This year I decided to skip the yellow pages as the cost per lead was not as good as the other marketing methods.

  • Justin McClelland

    Hey there Danny, I’ve visited this site a few times before but this is the first time I have commented (I think). I really like what you’re doing by being as transparent as you are with your business. I’ve been inspired to step-up my blogging. Keep up the goodness.

    • Danny Johnson

      Thanks, Justin. Good luck with the blog. The biggest thing for me has been to only post when I have something to say instead of trying to keep a consistent schedule.

  • Ben

    This is exactly the resource I have been looking for. I am about to put your methods into action by purchasing bandit signs. My questions is how can I find out what the city policies are regarding these signs. I have heard that you can be fined $100 per sign in some cities. Is this true or are these scare tactics? I also don’t want to use my personal phone number on these signs. Is there a software service or voicemail service you would recommend to take these calls for me so that I don’t miss any? Do you use your own number?

    • Danny Johnson

      You can call the city and ask them if yard signs are permitted. Neighborhood services and code compliance specifically handles it around here. Here you can pay for permits to post bandit signs. I use my number on the signs. You can use Google Voice though if you prefer not to use your number.

  • Lance

    I noticed that you say that you bird dog a lot of deals that don`t meet your buying criteria. How do you get around the “It’s illegal to Bird Dog in Texas” situation?

    • Danny Johnson

      Lance,

      I’m not an attorney and do not play one on the internet, so this is not legal advice, just an opinion (sort of thinking out loud). Seek competent legal advice always.

      As someone simply telling an investor about a house for sale, the birddog is not representing the seller. If you are actively marketing for a buyer for the seller, that might be seen as acting as an agent. Just might simple take on it.

  • Trevor

    Hi Danny
    Totally dig what you are doing ! You have no idea how much of a gift finding your site is to me at this time. Looking to start over as the economy has dealt a heavy blow to my family. Wholesaling has great appeal to me due to the reduced start up and lower barrier to entry. with that said; I do have a few questions:
    (1) Where can I find a step-by-step guide for wholesaling ?
    (2) Am I only limited to my geographical area or can I expand throughout the country?
    (3) Forms (assignment contracts etc.) – where can I find them?
    (4) Where would I find a template similar to your website?
    Thanks in advance for your answers and your generosity in giving so much.

    • Danny Johnson

      Trevor,

      Glad you are finding great value in the site.

      To answer your questions:

      (1) Where can I find a step-by-step guide for wholesaling ?

      I have a wholesaling training course that will be available again this month (Nov 2013). I will have a link on the resources page. Other than that, there are a ton of articles on this blog covering getting started. Look for the link that says ‘Wholesaling’ on the right side of the page.

      (2) Am I only limited to my geographical area or can I expand throughout the country?

      You are only limited by what you decide limits you. I would recommend starting locally and then expanding if that floats your boat.

      (3) Forms (assignment contracts etc.) – where can I find them?

      I have some contracts on the resources page I mentioned in the first answer and there are more in the training.

      (4) Where would I find a template similar to your website?

      Here’s a website you can use right now: http://www.flippingjunkie.com/free-real-estate-investor-website

      I will have more available in the near future.

  • Taylor

    Hi Danny,
    Just wondering what specific questions or info you try and get from lead phone calls?

  • Henry Nguyen

    Hi Danny,

    Just wanted to thank you for all the work and free information you’ve put into the website. It’s incredibly valuable inalienable. I first heard you on the Biggerpockets podcast. I’m currently living overseas but will start with Wholesaling as soon as I come back to the USA. I also thought about pursuing programming as a career but I think real estate investing is much more fun!

    Much thanks,
    Henry

    • Danny Johnson

      Hey Henry.

      Glad you found the blog. Why not do programming and flipping?

  • Cody

    Hi Danny – Your website is terrific. Thanks for the great tips! I’m curious, what kind of keywords do you use for your Google Ads?

    • Danny Johnson

      Hey Cody.

      That’s sort of a trade secret. You just need to figure out what keywords people are using to express motivation in selling a house. The beautiful things about AdWords is that you can test this and it shouldn’t cost much. Pick out some phrases like “need to sell my house fast” and see how many views/clicks your ads get. Sorry I can’t be more specific but my competition reads this blog for obvious reasons. 🙂

      • Cody

        Understood. Thanks.

        • Chris

          keywords: Real Estate Investing, Analyzing Real Estate Investments, How To Flip Houses
          —–

          those are the tags for this site. Assuming it is an effective ad words campaign the words and phrases would most likely be very similar as they have to be in order for a good seo score.

          • Danny Johnson

            Ok. Thanks. 🙂

  • Cody

    Also, I’m curious of other methods (besides Adwords) that you may use to drive traffic to your DannyBuysHouses website.

    • Danny Johnson

      Right now it’s really just Adwords and Search Engine Optimization for ranking in the organic search results.

  • Cliff Skinner

    I am new to this and would like to know how to start. I have ran into a lot of guys who are willing to help but it always comes with a up front fee attached. How do I go out and get that first deal?? I feel that once the first one is done I will be on my way to creating a great and strong business.

  • Geoffrey

    First, thanks for sharing. much appreciated.

    Second, aren’t all deals for “CASH!”? (except for owner financed) Saying cash seems so pivotal but regardless of who buys it, the seller is going to get cash. either from the buyer directly or their bank. It may signal speed of transaction but that’s it. am i missing something? i always laugh when someone says they’re “willing to pay cash for a car so the dealer dropped their price”. really?

    • Danny Johnson

      Geoffrey,

      The general idea is that there isn’t likely to be any problems. When someone gets a loan through a bank, a lot can come up. They might not qualify for the loan after all. The bank may want certain repairs made. The closing costs could be too much for the buyer and the seller will be asked to help out. Etc. Etc. Etc.

      Paying cash means those problems aren’t going to come up and the seller knows that.

  • maryanne

    always great information, your an inspiration…Ive started the process, business cards, different phone #, a p o box,… new to this and would like to succeed eventually, if i could just burst out of this shell…

    #singlemomproblems

    • Danny Johnson

      Maryanne,

      Glad to see you are working on a plan for yourself so that you’re not just a part of other people’s plans.

      When the reason WHY you want to do something is great enough, you will always find a way to make it happen. Never stop thinking about why you want financial freedom for yourself and your family.

      Danny

  • Brian

    Excellent share. Thanks. You add so much value that buying your product just made sense.

    • Danny Johnson

      Thank you Brian. You made a great decision. We are also doing a lot right now to improve it as well so it will only get better. 🙂

  • Betty Cruz

    Awesome post!

  • Jessica

    How do you know what the after repair cost will be?

  • Matthew Zak

    Hello this is Matthew I’m a senior in high school and want to go down this path. I have the motivation and dedication to do it, I have been reading up on a lot of things and I am going to try to start. Just out of curiosity, do you have a college degree?” Do you have another job?

  • Guy

    good information!

  • David Bartlett

    Thanks for the insight. I am a new investor trying to discover the best way to generate leads. I have purchased your website and look forward to your seminar on Thurs

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