Sourcing Deals and Marketing Your Business

Hey investors. Welcome back to Raising The Flipping Bar, a podcast dedicated to all things fix and flip. I'm your host, Derek Marlin, c e o, and Founder of Elevation. We're a real estate investment company based here in Denver, Colorado. So in today's episode, we're gonna jump into deal sourcing. I know that's obviously a hot topic, whether you're doing things in metro Denver, or whether you are sourcing properties all over the country, no matter what, that should be the lifeline of your business is finding good deals.

As we always do, we're gonna do a quick recap of our last episode and, and one of the things that I mentioned was why did people, you know, kind of give us a hard time in our opinion, which is typically people want to jump into finding deals and then they figure out is it a good deal or not? Deal analysis to me is super important.

That's what we focused on last episode. So for those that didn't make it, the three things that you wanna focus on for deal analysis are the three top metrics are dollars. Which is how much net profit you're making divided by the number of days that you're holding onto the property. Then we jump down to roi, which is return on investment.

So that's kind of your classic percentage of what is your return on the money that you're putting out to fix and flip these properties. And then the last one is net profit. And so that's overall how much profit are you making after you back out every single expense. And again, kind of our, you know, guidelines, if we think back to our sports analogies is a single, if you will in the baseball world, is about a 25 to $35,000 profit.

A double is 45 to $55,000 when you're getting between, you know, 55 and $75,000. That's really essentially a triple in our book. And then that home run profit is anything over a hundred thousand dollars. So that should set the stage for jumping into how we're gonna find these properties. So let's dive into the meat of today's episode, which is sourcing deals and overall marketing that we're gonna get to here in the second half of the episode.

Um, so let's talk a little bit about, um, you know, kind of that million dollar question is where do you find good deals? And I think everybody has different strategies. Um, every market condition also lend itself better to certain ways to target and find properties versus others. And, and also your overall budget is gonna be a big key factor.

Um, really every person is different and what their skillset lies as well. So you really want to analyze and divide. Um, and conquer between you and or your team of matching up what your skillset is with what you think will be successful at, and what you really will spend time doing. Let's really talk about also your budget.

Um, you know, I really kinda learned this the hard way in my opinion. When I started investing back in 2009, I did a bunch of different things and in my opinion, I went really wide versus kind of going deep. And what I mean by that is I would try something for two or three months. Either get marginal results or, or no result at all and think, well crap, this isn't working, so let me just try something else.

And a perfect example is, um, we did what were called bandit signs. And so for those of you that have been investing for a while, those are those corrugated plastic signs that you see, you know, strewn across different highways or different busy streets that say we buy houses for cash, or whatever your fancy, you know, great marketing term or, or jingle may be.

It's essentially a side, a sign on the side of the road, and it's you hoping that somebody calls you. Um, if you think back to kind of my marketing background, which is with the Denver Broncos, I, I really knew kind of how to push the envelope actually of, of treading on, on some, some team, um, marketing ground, if you will.

So one of the things that I did with the Bandit sign, Is I put signs on one of the major roads by, uh, at the time it was called Invesco Field. It's now called Empower Field, where the Broncos play. And I had orange and blue signs. I had kind of a generic looking football player and I said, um, call us if you wanna sell your house for cash and we'll also enter you in a drawing to win season tickets.

And I barely got any calls for that. I mean, these are people walking up and down that street and we didn't get a ton of calls and this was in 2016 when the market wasn't screaming hot. So, um, but I only did that for a handful of games and I thought, well, doesn't work. Might as well try something else. So kind of the takeaway or the message is pick one or two things and consistently focus on those areas, in my opinion, for six to 12.

To give yourself the right run rate to see is this type of marketing or deal sourcing actually working? So let's kinda look at, we've got five different areas that we're gonna jump into, and then we'll save the six this's, kind of a catchall at the end. And these are again, in 2023. These are things that we're focusing on with Elevation, my Company, and we're doing these every single day.

So again, we're gonna tell you what's working for. Don't get to discouraged if you're doing something else and thinking, oh, shoot, I should be doing what Derek's doing or what elevation's doing. Not necessarily the case, but these are our areas where we get the biggest bang for our buck. We get the best return on investment, and we get the most number of deals that fit our investment guidelines.

At Elevation. The number one referral source of where we get deals is actually working with real estate. And it seems kind of obvious and kind of counterproductive, but whether you're working with real estate agents, brokers, or realtors, whatever the designation is in your market, that's where we get the most properties.

And if you think about it, these are people that are around folks that are buying and selling properties all day every day. And so a lot of times, in my opinion, investors actually shy away from agents. Or they don't properly educate agents of the ways that they can really benefit them and work in a harmonious fashion so that it's truly a win-win situation.

So that's the number one place where we get deals. And so if we go a little bit deeper, it's really building those relationships on a one-on-one basis and also paying referral fees. And so I'll give you a scenario of how it's kind of a win-win, um, situation for working with real estate. That would be if a client has a property, and as we've said a couple times in the last few episodes, the Denver market is still very, very competitive.

It's not quite as hot as it was in 21 in, in 2022, but there's a lot of properties out there that need a lot of love. They definitely need work. Um, they don't have to be a hoarder house per se, where you're taken out, you know, 17 dumpsters. Um, which as an aside, that's actually our record. We've done one property where we did 17 full size dumpsters, which is, uh, another episode that we'll get into here in a.

But, um, you know, making it seamless for the seller and for that real estate agent. So the win-win scenario is that real estate agent earns their full commission to sell their property. I, as an investor, even if I've got one of my licensed real estate agents chasing down that deal, we do not charge the seller commission.

So it saves them half of what they would pay if they would traditionally listed on the market. And then we actually pay a referral fee to that listing agent or the person representing the seller for them just thinking of us and calling us first. So it's a little bit of a way for them to double end it or or truly create a win-win situation.

It's great for their clients because they're saving a nice amount of money. On those commissions and then we're able to buy the property in as is condition. We're able to pay cash, which is another huge advantage. And, um, we can work through any of the other problems they've got. So again, if they have tons of stuff in the house, great.

Buy it that way. If they wanna rent it back for a month or two. That's fine. Just factor that in into your holding costs. If they need help downsizing or moving and or getting mom and dad into assisted living, great, let's help with that. So to me, it's all about being a creative problem solver, which is actually one of our company's core values.

Um, both for the agents, for the sellers, and for our company. So really get to know real estate agents in your community and in your market really well, and I guarantee you, you will do a lot of business. And then the way that real estate agents, in my opinion, do a fantastic. Of nurturing their database. We need to do that as investors and reach out to real estate agents and provide value to them.

Um, be really upfront. There's some times where we'll look at a deal and we know the house is actually in pretty good shape and we probably would have to buy it for a lower purchase price point where our numbers make sense. We'll tell them, Hey, you know what? We probably can't give you what you could maybe get by putting your house or your client's house on the.

So just do that. If it doesn't sell where it needs to sell, come back to us. We're always there for the second go round. We're always there. When deals fall in and outta contract 2, 3, 4 times, think about it as a true win-win situation. So just lean into the real estate community, make it easy for them, make it easy for sellers.

And then when people have experience, a lot of times you can work with them on the backend. Another great strategy is you can give that real estate. The opportunity to list your fixed up property. So a lot of times we'll do that as well. Um, or again, if they don't really want to mess with it, we'll pay people a referral fee.

So number one is lean into the real estate agent, broker and realtor community. Absolutely. The number one way that we get deals in, in metro Denver these days in 2023. The second is actually cold calling. So right now we use a third party company who cold calls prospective people in and around Metro Denver to sell their property.

And there's kind of two schools of thought you can go the route, which is higher virtual assistance. Overseas and, and the cost is much lower, but the management and the amount of time you're spending to coach up essentially employees of you or your company, there's a lot going on there. So what we've decided to do is we work with a third party company and they're fantastic at cold calling.

And so every quarter we buy on average between a hundred thousand and 200,000 property address. And the cold calling company does what is called data scraping, um, finding contact information for those homeowners and they are making outbound calls. So in our current market environment, we, we employer, we hire, I should say two full-time cold callers.

They're calling roughly 40 hours a week. And they're using a dollar and they're calling as many times as possible to hopefully reach that seller. On average, they're gonna reach out to that person or that seller around six to seven times in about a six week period. And many times they don't get ahold of 'em.

They can leave messages. You can do customized scripts, so you can really help lean it to how you want to reach that seller or that homeowner to best connect with you and the value that you can provide. And so from there, if they hopefully get an answer and the person is open to talking to somebody here locally, that lead then goes to our CRM system.

Um, we'll give you a little bit of details about that. We use a company called, or a system called po, and it's a great focused, uh, a real estate investment company that's focused on CRMs just for real estate investors. And so that's a great way for those essentially warm leads to get dumped into your CRM system.

And you need to make those cold calls immediately so that essentially it becomes actually a warm. And you're following up. Um, we have a really very specific kind of regimented follow-up system where we're also reaching out to people a couple times that first week, um, a handful of times that next week between calls, texts, uh, if they do get you emails.

We're emailing them and then we're setting appointments to hopefully go and see those properties in person and then make them cash offers. We as a company also back into our partnership FLA options, so we can offer people multiple exit strategies, but cold callers are, are really, really important. And you can spend, um, on average a couple thousand dollars a month and you can have, whether it's one person or you could have 10 people call calling.

I know one of the, the founders of the company that we work. He works outta the Seattle market and I think at one point he's got eight to 10 cold colors. So you can imagine the lead volume that he and his company is generating. But for me, cold calling is actually number two. Um, you need to really look at your municipal regulations for cold texting.

In Metro Denver right now, there are opportunities to text, but that is a rapidly changing environment. And so if you're outside of Metro Denver, you definitely need to look at your local laws and regulations to see if you can do texting versus traditional cold calling. For us. Number three is actually networking.

And again, it seems kind of counterintuitive and it seems almost easy, but you need to focus on. I, in our world about two different areas from a networking perspective. So we'll go over, in my opinion, the four or five top areas where you can theoretically find the best deals. And then if you think back to the beginning of the episode, it's go deep in, in one or two areas, do it for six to 12 months, versus going wide and doing something for a month or two, changing and just never really getting traction.

Probate is an area where when someone passes, A person's property goes into probate if they don't have a will, predetermined to exactly outline where that property should go. And so getting involved in the probate world is an absolute great area and opportunity for you to network and to develop relationships so that people are calling you as their first go-round of a way to sell either their property or their client's property.

The next one is kind of, I'm gonna use it as a wide bucket, but the legal bucket. So whether people are unfortunately going through divorces, Going through family law issues, separations, um, estate planning, those are definitely areas where you want to get to know attorneys in that space so that you can, again, be a problem solver and an easy solution for their clients and make it, as they say, hitting the easy button.

Definitely add as much value as you can, but think about how can you impact and, and connect with attorneys from a networking perspective. Then we go down to estate sales in general. So if you think about when you're driving around on a Saturday afternoon and you see the sign that says estate sale, usually either somebody unfortunately has passed away or maybe they've moved into assisted living or, or going into their next phase of, of their living environment.

And all of their belongings are being sold because somebody doesn't want to keep those or there's too much stuff. Um, estate sales are a great way to network with estate sale companies and professionals. There's tons of 'em in Denver and probably every metro market, and get to know those companies and the people doing estate sales because again, you can pay somebody a referral.

You can even go to the estate sales yourself and just research the property and then try to reach out to the seller directly. So that's another great avenue as a way to source deals. If we look at the fourth way, it's the senior citizen base. This is definitely a big area for us where we do a lot of business.

So whether somebody's getting ready to move into assisted living, whether somebody is needing at-home care, and it's just a matter of time before they'll probably need to do something with their. Those are great opportunities for us cuz again, you gotta solve, in my opinion, a couple problems before they need your help and be ready for after.

If you can be a creative problem solver, that's a great way and a great space for you to generate tra traditionally off market leads. Um, and, and again, the big takeaway with these areas, there's a ton more. You can essentially just jump on YouTube or you can jump. And search off market deal sourcing, and you'll get a list of 20 different things.

But those five or six areas we feel like get you the best bang for your buck from an investment standpoint and a time standpoint. But again, pick one or two areas, go deep instead of going wide. Number four for us is working with other wholesalers. So let's define what a wholesaler is first. Cause I think it's, it's a little different in every market.

So I'll tell you what we've got going on here in Metro Denver, but definitely a great community for you to network with. So I kind of divided up into small wholesalers and large wholesalers, and essentially a wholesaler is a person who is doing independent marketing, or maybe they're a licensed real estate agent and they're getting properties under contract either on the ml.

Or through their own marketing avenues of what we just described, they are tying that property up and putting it under contract and then they are marking it up for a profit and selling it to you as a backend investor. Um, you know, I think sometimes wholesalers just like investors or even real estate agents, bad wholesalers get a bad wrap, but good wholesalers actually don't get the credit that they should get because to me, people are providing a super valuable service.

And so sometimes people say, well, dang it, that person's making 50,000. I have no problem with that as long as I get the property at the right price and our margins are there. I don't care if they make $150,000. Um, you know, we did a deal with a local wholesaler who is another great investor, and I think they made 50 or $60,000 on the wholesale deal.

But we made 105 grand on the flip, cuz they still left. One of my favorite terms is leave meat on the bone. Meaning there's still profit there for us and there's still profit there for them. So on average the, the traditional spread or profit margin for a wholesaler in these current economic times is 10 to $15,000.

A lot of people are doing more volume and of course they're wanting to do multiple of those deals every single. But to put some context to it, it would mean that the, the client, um, the seller is agreeing to sell their house for $400,000. The wholesaler is putting it under contract and offering it to me as the end investor.

For $410,000 or maybe $415,000 to buy that property. But what I think people don't realize is that the wholesaler has done a ton of the work for you. They've spent a lot of the marketing money for you, and if you get a good relationship going, um, they're gonna give you consistent deal flow. So either you're gonna do all the work and spend the marketing money yourself.

To potentially get better deals or they're gonna do it for you, you're gonna pay a little bit more, but you can focus on other areas of your business. So wholesalers are fantastic. Um, again, larger wholesalers are, there's companies out there in the Denver market, they're probably in every other market across the country where there's a large staff of licensed real estate agents and they are writing a tremendous number of offers.

Whether it's on the mls or maybe they're doing a ton of marketing and a lot of lead generation so that they can compete on volume. Um, the tough thing there that I always say, especially if you were a, a newer or a bit more beginning investor, is you've gotta be able to make quick decisions. So when you're working with wholesalers, normally the earnest money that you put down, which is your commitment to buy the property, is typically five to $15,000.

If it's a traditional transaction and you have the ability to inspect the project and back out, if it wasn't what you thought, you can get that earnest money back. But with the wholesaler you're making typically that commitment on the spot, you're handing over your $10,000 check or you've got your $10,000 wire and you're essentially saying, I'm either committed to the deal and, and you hope it's what you thought.

Um, or it's not. And I've seen people lose their earnest money because they ended up realizing this is not a good deal at. Super painful to lose $10,000, but it's better than doing a whole flip and losing $30,000, for example. So with bigger wholesalers there, there's a great place for working with those companies, but in my opinion, you've gotta be a lot savvier, you've gotta be a lot more experienced, and you have to be able to make quick decisions.

Just to give you some context, um, we're, we're right around 80 total flips right now that we've done, um, for us and for our clients over the last seven years. And on average, I only buy maybe one a year from a large wholes. That's also because we kind of get outbid by people willing to pay more. So a lot of times you'll get into a wholesale environment.

Well, you'll walk the property and there'll be six other investors walking around, and it's almost like the off market on market mls. And so people are willing to pay more and that's okay. Just stick to your numbers. Where we like to live is working with smaller wholesalers, and that's even what we do as a company.

Once we hit four or five flips at any given time, we typically wanna keep our marketing machine going, but we'd rather sell to other investors. And then maybe when we're a little light, we're gonna buy from them as well. So working with smaller wholesalers is, is I think, a better step, both as in a beginning investor and as a seasoned investor.

Cuz you want to get to know that person as an individual. Find out exactly where you know they're doing their market. Be committed. So if they send you a deal and it fits your guidelines where you've told 'em, Hey, this is where I'll buy this property. You gotta be ready to commit. Um, they're typically having a smaller buyer pool, so hopefully you're not competing against 10 other people at that walkthrough.

It's maybe one or two. So I would really lean into to smaller wholesalers. The other thing that we do is we factor in that we're gonna do a sewer line replacement on every single. Which I know seems a little weird because people are like, well, does that always happen? Yeah. In Denver it's probably happens about 60% of the time where you have to do significant sewer line work.

And unfortunately when you work with wholesalers, most of them do not give you the opportunity or the time. In working with the seller to do a sewer scope. So we'd rather just factor that into our budget and then know that, hey, if it's not the case and we don't have to replace that, then we just saved ourselves a bunch of money.

But normally that is what takes you, you know, that $10,000 swing in budget is what takes you from a 13 or 14% roi and it being a, you know, a really nice profit and project. Down to an 8% ROI and things start to get really thin really fast. So lot of tips and tricks and things to just be careful of. Um, I think the other thing is, is that I would leave you with, if you wanna work with big wholesalers or, or these larger, higher volume companies, just get to know your sales executive really, really well, so that rather than competing with a bunch of other people, Um, or, or getting to know a bunch of different sales agents or sales reps get to know that person really, really well.

Have them. Ideally if they're hopefully adding value to you, if they're only sending you the deals that fit your buy box guideline. Cuz if you think back to the last episode, you know, you don't wanna be analyzing tons of deals that probably aren't a deal anyways. Um, but build that one-on-one relationship with that person at the larger wholesaling.

Number five for us in how we source deals off market is doing digital media. And so I break that into a couple different buckets. I'm looking at it from what can you put out and provide from a content perspective, and then what can you do from a paid perspective. So, um, again, even when you're starting out, Have your own company Facebook page, have your own company Instagram account, ideally have LinkedIn and have YouTube going.

You'll be really, really surprised even in a small community of fellow real estate investors or ideally people looking to sell their house. You being out there gives you credibility when you're sitting in a seller's living room, and it gives you the opportunity to interact with more people in different mediums.

So having those presences. And those platforms, I think is a great opportunity for you to source deals. Then if we kind of look at it from a paid perspective. You can go pretty deep down the rabbit hole of, of how much money you're gonna spend and where you're gonna get the biggest bang for your buck. Um, definitely you gotta be cognizant of other people and how much money they're spending.

So we, we had done SEO marketing, we had done keywords. Um, we've essentially, you know, tried to get on the first page of Google. I think that's important cuz if somebody is, you know, in a distress situation, they want immediate results and so they're gonna, you know, enter into the search bar, sell my house.

You know, Denver or sell my house for cash quickly in Denver. Ideally, you do wanna pop up at the top, but that's gonna cost you a lot of money and a lot of, of runway, and a lot of, um, you know, energy and effort and focus to get there. So, not saying you shouldn't do it, just be committed for the long haul and be committed to, to spending several thousand dollars every month to get you up there.

The way that we typically would rather, um, ideally source deals is to provide and put out content. So if you're out there putting out content, um, and then also advertising on those platforms, I think that might be a much more cost effective way. So you can run ads on Facebook on. You know Instagram, on LinkedIn, on YouTube, telling people what you're doing and how you want to acquire properties, and I think that's a far more better bang for your buck.

You're talking a couple thousand dollars initial setup, and then depending upon how much, you know, an ad budget, you're buying a couple thousand bucks a month. But if your net profit is $50,000, Pretty good return on investment. So lean into the digital media, lean into the marketing and uh, and putting out that content and or paying for that content.

And for us, that's definitely a piece of puzzle. It does fall a little bit lower. When I first started out, it was definitely a little bit higher, um, you know, up the totem pole as far as how are we getting deals in the current environment. Our last bucket is gonna be kind of a catchall. So I want to talk a little bit about a few different ways that you can find properties on and off market.

And I really think you should again, use this as a way for you to stress Tess and dive into does this want to be one of your one or two ways to find properties? Um, you can do direct mail. Obviously direct mail is, is very successful for some investors. You have to be committed to doing high volume, and so what that is, is typically you're buying a list of properties.

There's a lot of different companies you can work with to hopefully narrow down the avatar or the type of seller you're going after. So you want to focus on a house that hasn't sold in the last couple years, cuz obviously if it has, there's probably enough margin for it to be profitable for you.

Ideally, you don't want a bunch of loans or liens on the property other than maybe a first mortgage. You know, you want that person, ideally have some equity in their house. So if they bought their house in 2010, even if they haven't taken care of it, it's probably worth a heck of a lot more, you know, 13 years later.

Um, but you can buy different types of lists. You can target zip codes. So if you wanna focus in specific areas, that's another great way that you can kind of niche down. But you're sending either letters or you're sending postcards essentially saying, Hey, Mr. Homeowner, hey Mrs. Homeowner, I'd love to buy your property.

And, and hopefully you've got a little bit different value proposition than. But it, it's a numbers game. Normally, on average, you're gonna have to hit that person. You know, if we think back to our marketing 1 0 1 classes, you're gonna have to hit 'em over the head probably 78 times. And if they are also on that list that many other investors are mailing to, you might be one of 10 letters sitting on the, the kitchen table.

So not to say doesn't work, just hasn't worked quite as well for us. We did that early on and I did that in 2015, 16 and 17 kind of just tailed off cuz we didn't see great return. Um, but I know a lot of other investors that, that do see good returns for. There's another way there. There's a lot of different apps.

Technology has been tremendously helpful in sourcing deals. Um, another great app out there that we don't have any affiliation with, but we do use it, it's called Driving for Dollars. And so, um, that's a great app where you can be out physically driving around. Or you can have other people driving around.

You can drive by a rundown property. You can do what they call as, ping that property or identify that property on, you know, your smartphone, and then it'll download all that information and you can either send a direct mail piece to them, you can dump them into a database for your cold callers to call.

But that's a really targeted narrow list. It takes, you know, some time and some energy, but you know that that house is either vacant or abandoned or super rundown. So that's a great lead. Um, you know, that's almost the other end of the spectrum, rather than mailing to a hundred thousand people and you might have mailed to a person who bought their house, you know, two months ago, and it's super fixed up.

This is a great way to go. So driving for dollars is, is a great app. And then you build this organic database that you can continue to market to and, you know, infin, you know, infinitely essentially until that property sells. And that kind of also dovetails nicely with, uh, a term of, of kind of fellow investor and, and they're called bird dogs.

And so those are people. And they're out looking for properties on your behalf. And so whether it is, you know, a third party company that's doing on your behalf, um, one of the things we actually love to do is when door to door salespeople come to our door, we actually ask them if they'd like to make a couple thousand dollars helping us find deals.

And when they're out knocking on doors anyways, they can use that Driving for Dollars app and send you that property where they're trying to sell. Cable or solar or a subscription to whatever. Um, and that's definitely a great way that people can be out bird dogging or finding deals on your behalf.

You've just gotta obviously set aside the, you know, the referral fee money to take care of them and pay them. But, but that's a great way to, to help build your business and to find deals on and off market. Um, Again, we could go way, way down deep down the rabbit hole, but those were the top five areas that we see the best return on investment for our time and for our money.

So I think the biggest takeaway in my opinion is do not neglect the real estate agent community and the networking and referral community. Focus all your eggs in that basket, in my opinion, and then pick one or two out of the rest of the list that we just provided. And go deep for six to 12 months instead of super wide for one to two months.

Cuz I think you'll be significantly more successful. Um, definitely again, this is another great place where we would love to interact. With our community. So if you've got other ideas, if you've got timely things that either worked or didn't work, we would love to, to hear from you and share that on future episodes for ourselves and for our community.

Again, if people wanna partner up, these are ways that we're always open to, you know, finding great ways for other people to cross market. And if you're great at public speaking or if you're great at, you know, figuring out digital marketing, then hey, let's all work together. Pick those couple areas and go deep.

Um, season two, we're gonna have a lot of guests on that'll actually be experts in each one of those individual categories. So keep an eye out for those episodes. There's gonna be great content, um, along those lines. And the other thing that we're again, happy to offer up to folks that listen to this episode is our deal analyzer.

So it's a little bit cart before the horse where our last episode was talking about how do we figure out is it a good deal? I still want people to know that. So if you tune in on this one, just hit us up and reach out to us and we'll give you the ability to download our Deal Analyzer spreadsheet. So before we jump into our next episode, um, want to just remind people to again, engage with us.

We love the whole like, subscribe, and follow, but on um, elevation invest.com. Reaching out to us at Elevation Invest or Elevation Investment Properties on all the major social platforms. We'd love to connect with you guys. So thanks for tuning in. I'm your host, Eric Marlin, and we'll catch you on the.