Question for Javipa

General Real Estate Investing
1

Javipa, you’re a tremendous wealth of knowledge and I enjoy reading through your posts.

I’m curious to know, if you’d be so kind to answer, if you had to start in a new market today, from scratch, what would you focus on right now knowing what you know?

I have experience with short sales, wholesaling, rehabbing, but I’m looking to focus on ONE, build a marketing system this year, systematize the processes and start killing it.

I realize every market is different, but that’s part of my question. Let’s assume someone placed you in New Jersey and gave you… let’s say $25k… to begin investing/marketing etc. How would you go about determining a niche, marketing, and working leads? Would you focus on direct mail? Networking with realtors/lawyers/investors/etc? Where would you expect that $25k to take you?

2

What are we “Chopped Liver”?

     GR
3

Not at all! :cool

I just thought I’d shout out Javipa because his primary method seems to be direct mail, and I’m working on setting up my direct mail campaign, but which leads to target?

High equity & 65+? -seems like a definite niche to target
Lis pendens? -only if a short sale system is in place
Sub-2? -never did one, how would I determine whether this niche is worthwhile in my market
Absentee out of state owners? -not sure if this is worthwhile either
Etc? -what am I missing?

My point is, and I apologize if it came off as exclusive, what direct mail campaign should be necessary part of an investor’s marketing campaign? And what are the best tools/services to automated direct mail?

And if not direct mail, what other methods will get me a good rehab project in the next 30 days?

4
  1. Find cheap houses on the MLS that need some work and won’t qualify for owner occupant financing.
  2. Put house under contract.
  3. Close on house, rehab, and rent house out for rent of at least 2% of purchase and rehab cost.
  4. Repeat steps 1-3 until you reach your desired income goal.

See, I’m no help. No direct marketing campaign to help you. :biggrin

5

Well, problem with that method is there are no great deals on the MLS in my area. And the 2% rent rule doesn’t work in my area. So I need off-market tactics to get leads, otherwise, I’m competing with sharks.

I spoke to an investor today who deals directly with REO agents before the home goes on the market, because once it’s on the market, it’s no longer a great deal.

6

Yeah, that’s been the benefit of the housing crash…it made getting deals easy. We’ve been able to build our portfolio without doing any marketing for houses…ever. Prices are firming up here.
We got a house under contract Monday for $14,700. It’s a 2/1 that needs 5-7k of work. So worst case, we’ll be all-in at 22k on it and it will rent for $525/mo. I was questioning whether I wanted to pay close to 15k for this house because I’ve become accustomed to getting houses like this for less money.

7

Then move to another area. That’s what I ended up doing.

You can even move into Justin’s area. :stuck_out_tongue:

8

If I recall, you moved and got into apartment buildings right? I just recently came back onto this forum. How did you land your first deal that motivated you to move out of state?

This…is…insane. Where are you located?! I’ve never heard of figures like this!
What are the typical vacancy rates if you’re receiving $525/mo?
And is it in a decent area? Good tenants?
What are property taxes?

9

This property is located in Mississippi. We rent to regular cash paying tenants as well as to people on the Section 8 (or HUD) program. We pretty much stay full all the time and have relatively low turnover. These houses are in a decent area of town, but our town has pretty high crime overall anyway. There are certain areas of town I wouldn’t take a house in if it was given to me.

Some tenants good, some other. If you’ve ever checked into dealing with low-income rentals, you know there’s more drama, BS, stupidity, etc associated with them. I just evicted a guy yesterday who thought cable tv was more important than getting caught up on a little back rent. Dumb decisions render people homeless if they try to screw me over.

Property taxes for this house we’re buying are $826.34. Insurance should be around $400/yr. This is what we’ve done over and over since the market crashed.

10

inve$t_,

I just saw your post. Forgive me for taking so long to respond.

I’m happy to give you my idea on how to start from scratch in a new area. I’ll provide as much rationale for my decisions.

Here goes:

First, I would pretend I had NO MONEY. Money just gets blown.

Second, the assumption is:

I don’t have the energy to…

  • compete with bargain-hunting wholesalers
  • screw with rehabs
  • do cold-calling
  • make serial, blind offers
  • pound bandit signs
  • sift through bargain hunting buyers
  • wade through a herd of option weighing sellers
  • negotiate financing with banks
  • cough up down payments
  • provide credit reports
  • get appraisals
  • screw with agents
  • and have my pants pulled down around my ankles, so that everyone and their dog can have a look at my financials.

So, that means I have to find and flip houses on my own, that don’t need new financing; don’t need rehabs; don’t require down payments, and don’t depend on agents, or even title insurance to buy, or sell.

This means I want to “flip pretty houses.”

So, I find sellers who will give me their deeds, and let me take over their loans, in return for pocket change.

What’s that mean? This means I want to buy:

  1. Houses that need nothing that everyone wants to own.
  2. Houses that can be bought for a little below retail.
  3. Houses that can be resold for a little above retail.
  4. From sellers that are up to their eyeballs in debt.
  5. From sellers that couldn’t sell through an agent.
  6. From sellers that will give me their deeds, and let me take over their loans, in return for money to buy burrito combos at Taco Bell.

To find these sellers I create a mailing list based on the criteria I’ve outlined, including little equity, failed escrows, and lots of consumer debt.

Then I send them all letters, letting them know I’m ready to buy their houses today, if they call me today. Then I close on the prospects that fit my criteria, and then flip the financing immediately, in return for cash down payments.

The secret to all this is that I buy a little below retail, and sell a little above retail, and pocket the spread.

On a $300K resale flip I can put about $30K in the bank within a few days. In a few months I can put another $30K in the bank, from the same deal.

The typical cost, not including what I give to the sellers to get them out of the house is about $3K. So, I’m trading three thousand for thirty thousand in a matter of days, and then collecting another thirty thousand later.

It’s the way I would start from scratch, but is NOT the way I started.

However, with what I know now, I would absolutely not start any other way. There’s no way to make this much money, this fast, with such a small amount of money, that I’m aware of. If there was, I would love to learn how.

So, I would find a nice neighborhood, send letters to the owners, get their deeds, take over their payments, resell the existing financing to motivated buyers, and pocket the down payment money.

No agents. No licenses. No banks. No down. No credit. No problem.

Is that a good answer?

11

I wanted to get into real apartment buildings instead of houses converted into rentals like I had been buying before and the prices of those apartment buildings in that city were ridiculous compared to the revenue they generated and those landlords were inflexible and holding onto it like they were diamond crazy.

I searched other cities and couldn’t believe how much cheaper they were in some cities compared to my city. I started selling off my properties and putting down offers in other cities. A lot of offers were turned down, but the experience gave me a greater understanding of the different types of buildings out there, what else to look out for, and who to talk to.

One day on the mls, I found a really nice 18 unit apartment building in a far away city. I drove down there. There were three offers the first day it was listed. I rarely pay what sellers ask, but I told the listing agent to offer him an assignment fee of $6K and it was reassigned to me. Then it was finding the right people to close it, which I found out when I was building a who’s who from the offers that were turned down.

12

Javipa, thanks for the great, detailed reply! Sorry for my delayed response.

I’ve never done a sub-2, but I’ve always been interested. I’ll explore this future in the near future. I have no idea what the sub-2 market is like in my area, but I assume the leads can be pulled from Listsource.com to target low-equty/high-debt folks?

I can’t go all into sub-2 right now b/c I’ve been focusing and spending lots of time on marketing for rehabs/wholesaling but I’m tempted to give it a try on a small scale.

13

My goal is to eventually get to where you are. I need to do some more flips and build up some capital!

14

Do you have nicer, newer houses in your area?
Can you find the ones with very little equity?
Can you mail the owners a card that offers them quick cash?

If so, you have what you need for deals.

I have a subscriber/student who’s been doing just that since the first of November 2013. He told me that he gave up on wholesaling, because he could not find enough good deal (lots of competition).

He closed on his first 2 deals in a little over two months.

He bought and sold his first deal in December, and netted $25K on the front-end. He’ll capture another $55K when the buyer refies.

He closed on his second deal today, and even has a giant list of buyers ready to buy, that he collected from his previous advertising.

He captured almost $85K in gross equity on today’s deal, and he’ll put in about $12K in repairs (carpet, paint, and some ‘unremodeling’) and offer it for $40K down and net $28K on the front-end, and the rest of the $85K when his buyer refies.

The reason I mention this is, again he was going broke trying to close on wholesale deals. When he called me for help, I told him what I was doing. It took a few weeks for him to get his mind around another approach.

It takes a while for some people. They get used to the smell of their pig farms, and so moving off the pig farm is scary.

He’s been off that farm since November and now he’s beginning to smell like a rose …to his wife, especially.

He has found what I’ve found; that flipping financing on houses, that everyone wants to own, is MUCH easier than wading through an avalanche of unmotivated sellers, and grinding them on price, just to make a skinny profit.

To be fair, he dove into the four and five hundred thousand price range of deals. There’s a lot more money per deal in that price point.

Does this sound like a hard-sell? :banghead

Good luck inve$t_. I’m pulling for you. :beer

15
My goal is to eventually get to where you are. I need to do some more flips and build up some capital!

inve$t_,

Who are you modeling after to accomplish this?

I mean who has actually arrived at where you want to be?

I don’t know many people who’ve move up the food chain like you describe, very fast, or very easily, doing what you’re describing.

I know some, but they’re kind of the extra chromosome investors.

Wholesaling is very time-consuming.

My friend Todd is one of those wholesalers that sends out 120,000 pieces of mail a month to just to keep busy.

Just asking.

16

Javipa,
My market right now has great opportunities for rehabs and short sales. My goal this year is to get at least 3 rehabs going, with financing partners, and build a short sale business as well. I’ve dealt with the headaches of short sales but I haven’t systematized it, which I’d like to do, because there are many leads and although it’s a pain, it’s also a great method for acquiring discounted properties to rehab / wholesale.

As for wholesaling, it’s not my primary aim. But I did just order 1,000 door hangers to hang on delinquent property taxes and driving for dollars. And I’ll soon start a direct mail campaign for age 65+ with 80%+ equity in their home.

I’m tempted with what you have going and I understand the gist of it. If I come across a seller with little equity who needs to sell, I’d like to reach out to you/take your course/partner with you if possible. But right now, the smell of the pig farm isn’t TOO bad :slight_smile:

17

That is hilarious!! :biggrin :biggrin :biggrin

18

i wish you were active on my forum! i love your creativity.

i bet a compilation of all of your posts would make one of the best ebooks out there :slight_smile:

19

Ryan - would love to hear your experience with sub2’s in NJ. Have you specifically targeted this niche?

20

targeted? not yet anyway. these are leads that were not wholesale deals so we wanted to find out other options to monetize these leads. one thing lead to another and we have our first sub2 contract being signed today. we’ll see how it goes :beer