JF1302: Switching To Wholesaling After Flipping Over 2000 Houses with Brad Chandler
Starting in 2003, Brad and his company have flipped over 2100 homes. With so much capital out, he decided to switch to the wholesaling model. Figure out what it takes to flip a high volume of houses, and what it takes to build a wholesaling business that does 200+ deals per year without your assistance. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
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Brad Chandler Real Estate Background:
- Co-Founder and CEO of Express Homebuyers, one of the largest home buyers in the entire country.
- Successfully flipped over 2,100 houses since 2003
- Passionate about real estate investing in 9th grade, he read a book about how to buy a home with no money down
- He has been able to build a real estate investing empire that does 200+ deals per year without his assistance
- Based in Fairfax, Virginia
- Say hi to him at https://www.bradchandler.com/
- Best Ever Book: High Performance Habits by Brendon Burchard
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Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Brad Chandler. How are you doing, Brad?
Brad Chandler: I’m doing awesome, thanks for having me.
Joe Fairless: My pleasure, nice to have you on the show. A little bit about Brad – he is the co-founder and CEO of Express Homebuyers, one of the largest homebuyers in the entire country. He has successfully flipped over 2,000 houses since 2003. Based in Fairfax, Virginia. With that being said, Brad, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?
Brad Chandler: Sure. So I could go way back, but we’ll go back to ninth grade – I read a book in the ninth grade on how to buy real estate with no money down. I had some financial challenges as a kid and knew that I wanted something that would generate unlimited income. I had an investor buy my neighbor’s house in 2002, and I went and talked with him. He said, “Yeah, I buy houses at 20%-30% below market, I fix them up and I resell them”, and I go “That’s what I’m gonna do!” I always knew I wanted to do real estate, but I thought you got rich in real estate by putting down 20%, paying off a house with the rent check over 30 years and hopefully it appreciated.
So after eight long months, I bought six houses in July and August of 2003, quit my full-time job in October 2003, and basically rehabbed, fixed and flipped up to last December. Then we said “You know what? We’ve lost so much money renovating houses that I’m gonna switch my model to wholesaling, get rid of renovations.” So this past year we wholesaled just shy of 200 houses, just in the DC market; we had our best financial year ever, and here we are today… I decided to start a coaching company to teach people exactly how we do it. We started that about six months ago.
Joe Fairless: Well, I certainly understand going from fix and flip to wholesaling. I always tell guests when we talk about fix and flipping versus wholesaling, if I was doing one of the two, I would 100% be wholesaling, versus fixing and flipping. Just less risk, better return on time, in my opinion… Unless you really get fulfillment by doing fixing and flipping. Wholesaling to me is a much better approach.
Brad Chandler: You are so right, and it requires so much capital if you’re gonna do rehabbing on a big scale. We had tens of millions of dollars out.
Joe Fairless: Well, with your process, you all wholesaled, as you said, 200 homes last year. Do you also invest into properties for long-term holds for your own portfolio?
Brad Chandler: In 2010 to 2012 we bought approximately 80 single-family houses in the DC Metro area. We found that we were not making the yields that we thought because they were all single-families; it was low, low single digits, and we were borrowing money for the rehabs, so the cost of capital was around 10%-12%, and we’re thinking “Does this make any sense? We’ve got a couple million dollars tied up in rentals that are earning us let’s say 1% or 2%, but yet we’re paying 10%-12%.”
So we actively decided the time is right to sell, so we’re in the process — we’ve sold probably 65 of the 80. Then probably at some point in time — my wife and I are doing some investing on the side, and we’ll likely get back into it. My actual degree in Virginia Tech from an undergrad standpoint was residential property management, so I would love to own apartments, just never have gotten around to doing it… Yet.
Joe Fairless: Yeah, I’m with you, okay. The reason why I ask is wholesaling is a job, whether it’s automated or however you have it set up, it’s still a transaction-based business, so that’s why I was wondering when you do make that money, are you then investing it for more of a long-term play, so that you’re not chasing the transaction?
Brad Chandler: Right now we’re investing it into growth. We’ve launched in six other markets, we’ve done some test launches and we’re gonna see how that works, and if that works, we’re just gonna continue to take our excess cash and fuel it to growth.
Joe Fairless: Got it. So I wanna give you a scenario… I’d like to hear your thoughts on this, because it’s a tactic I’m playing with and I’d just like to hear your opinion. So I buy apartment buildings, and you’re wholesaling primarily 1-4 unit properties?
Brad Chandler: All one-units, really.
Joe Fairless: Okay, all one-units. If I were to come to you and pretend I’m just some random person you never came across, you don’t know me from anyone else, and I met you at a local meetup, and I heard that you’re wholesaling, and you are wholesaling at an amazingly high level, and I said “Hey, I’ve got some apartment buildings and I’d like to buy some more. I know you’re likely doing direct mail – first off, is that assumption correct?
Brad Chandler: It is correct.
Joe Fairless: Okay, so you’re likely doing direct mail… What if the direct mail leads that you’ve got – what if you asked them one extra question, and that question is “Do you own any larger properties?” And if they did, if you sent them my way, then I would give you some sort of referral fee if we close on a transaction. What would you say to that?
Brad Chandler: I would say it’s fine. I hope my acquisition staff is actually asking, because that’s a question I learned long ago – ask everyone you know and come in contact with, “Do you have any other properties you are looking to sell?” So I think it’s a good idea. I’m not sure how — it’s like a needle in the haystack… Of all the people who’d call us, I don’t think there’s gonna be a ton of them that have a multi-unit, but maybe.
Joe Fairless: Cool, so you’d be open to it. I’m testing this tactic out, by the way, so you are my focus group… How would you structure that so that it benefits you, or so that you know that you’re getting compensated? Would you want a percent, or would you want just a flat fee, or how would you structure that?
Brad Chandler: We’ve given a lot of leads out free over the years, and we typically ask for a percentage… A much larger percentage than I would ask for an apartment. So yeah, we’ve asked for a percentage of profit, but this would be much tougher. It would probably be a small percentage of the purchase price. Just something easy, that’s not gonna take a bunch of brain damage to figure out each time.
Joe Fairless: Yeah, fair enough. 200+ wholesale deals last year – how do you get to that volume?
Brad Chandler: Well, processes is really what it is. There’s probably 30 people now on our team, when you include our virtual assistants. I started out in 2003 with a negative $80,000 net worth and bought six houses in two months, and then just scaled it. As we needed more people to do more jobs, we would systematize the position, and then we would go out and hire really great people, and then we would just reinvest profit into marketing.
We were spending like $200 marketing budget per month when I started, and now we’re well over six figures a month in marketing. It’s just a process of scaling, one month at a time.
Joe Fairless: 30 people on the team, including VA’s… Can you tell us what categories of departments they’re in?
Brad Chandler: And we’re growing, by the way. So we’re looking to hire eight different people, not here in Springfield, in Orlando, Tampa, L.A. and Seattle. Departments – so we have accounting, that have two people; we have a marketing department that is two people, looking to put a third person in that… We’ve got acquisition and sales, which is ten people; myself, my partner… What else am I forgetting? I think that’s it.
Joe Fairless: And then VA’s across the board?
Brad Chandler: Yeah, there are like 10 VA’s [unintelligible [00:09:45].10]
Joe Fairless: Right. What are your VA’s doing?
Brad Chandler: They’re doing a lot of nurture. They’re actually screening — we get leads on a nationwide basis now, so they’re actually screening those calls and seeing if there’s a level of motivation, and if there are, they’re handing them over to our acquisition staff.
Joe Fairless: And where are those VA’s located?
Brad Chandler: They’re in the Philippines. However, we’re just about to hire three more people – one in Tampa, one in the Texas area and one in the state of Washington. Those were found through Upwork. Those are obviously US-based folks.
Joe Fairless: Sure. All of them found through Upwork?
Brad Chandler: Those three were found on Upwork.
Joe Fairless: What about the Philippines?
Brad Chandler: Everyone else is through MyOutDesk.
Joe Fairless: MyOutDesk?
Brad Chandler: Yeah, they’re a VA company that specializes in virtual assistance for the real estate industry.
Joe Fairless: Okay, got it. I had not come across them before. Cool. Did you say six figures a month marketing?
Brad Chandler: Yes.
Joe Fairless: So you’re spending over $100,000 on marketing every single month?
Brad Chandler: Yes.
Joe Fairless: How do you allocate that budget?
Brad Chandler: We are spending approximately $50,000-$60,000 on internet, both pay-per-click and organic. We’re likely spending about $60,000 on direct mail, and then we’re spending about $30,000/month on television.
Joe Fairless: Okay. How do you evaluate the effectiveness of television, and what are you doing on television?
Brad Chandler: Ironically, Joe, TV has been our bread and butter for years. I started TV advertising I think in like October/November 2003, so it really was our only marketing source for so many years… So that’s how we evaluated it. Now we do our best with tracking numbers to see what’s coming in, and we also are able to look at the Google Analytics now. We’re setting this stuff up now, where we run a commercial and see if there’s a spike in internet traffic.
Joe Fairless: And with the internet allocation, pay-per-click and organic, how do you know your marketing dollars are being invested effectively?
Brad Chandler: We’re really good at tracking everything. Obviously, pay-per-click is really easy because you actually see the returns. SEO is accounting for about 600 of our out-of-area leads. We track everything with what’s called UTM parameters.
Joe Fairless: What is UTM parameters?
Brad Chandler: Wow, so this is pretty technical… When you go to Google, it’s like Google.com and it has a long string of numbers and letters, each one of those is tracking, so anytime anyone clicks on something and it goes in our database, we can see where it’s coming from.
Joe Fairless: How did you build that team out? Or is that your area of expertise?
Brad Chandler: I would say my expertise is marketing, but I’m more of the high-level “Hey, I know the consumers’ behavior and what makes them buy and purchase…” Things like that that are very technical – we just hire people with that know-how.
Joe Fairless: How do you know you’re hiring the right people?
Brad Chandler: We have a pretty exhaustive interview process, where it’s very, very intense. We run through a [unintelligible [00:12:36].17] analysis, as well as the behavioral test. We ask for lots of references and we go really deep in the reference checks, and then we literally spend about three hours with each candidate. When you spend that long and you do that much testing, you really have an idea. Of course, you wanna look for past success and previous positions and previous accomplishments in their life.
Joe Fairless: What’s the behavioral test?
Brad Chandler: Behavioral test – we had actually used something that helped Keller Williams grow. It’s a small company in [unintelligible [00:13:02].04] it’s called an AVA. It’s a little bit different than a personality test; the report that it gives really tells you your behavior, and what you’re good at and what you’re not good at.
Joe Fairless: Got it.
Brad Chandler: And if anyone is hiring people and not using those tests, you’re really missing out.
Joe Fairless: If I wanna give the test to someone, how do I get access to it?
Brad Chandler: It’s through a small company called Corporate Consulting in [unintelligible [00:13:24].12] Virginia. But there are several products, Joe, as you probably know, on the market, like the Myers-Briggs, and… There’s a number of them.
Joe Fairless: So you are investing over 100k in marketing, and then once you get a lead, what are some things that you have evolved over time? Because you’re getting a high volume in your process.
Brad Chandler: We’re getting ready to recreate everything now to make it simpler and flow smoother, but approximately in 2010, 2011 and 2012 we kind of looked back and said “Gosh, we’ve probably lost millions of dollars not following it properly.” So we implemented Infusion Soft, which is pretty complex, and for the normal homebuyer I would not recommend using it… But we implemented it.
My COO did a deep dive and really learned the ins and outs of it; he got training from one of the ex -founders or one of the first guys at Infusion Soft, and we just have become so good at follow-up. We touch them 15 times in the first four days, and then we never let a lead go. We closed leads last year that were seven years old. In 2017 I think we closed like ten deals just from calling back missed phone calls… So we’re all about follow-up.
Joe Fairless: What are the 15 ways – and obviously, you don’t need to mention all of them, but can you talk more about that? And four days, 15 times…?
Brad Chandler: It’s just simply a combination of voicemails, phone calls, text and e-mails.
Joe Fairless: What part of that is automated?
Brad Chandler: It’s semi-automated. Let’s say a lead came in today; it would trigger saying “Hey, give him a call.” So we automatically give him a call. When we push the button that said “Did not answer”, they would get an e-mail fired off, and then a couple hours later they would get a text fired off. When they came in the next day, it would say “Hey, you’ve gotta call Johnny back”, and the same process would start – call, if you didn’t get him… And we’re soon gonna have a technology where we just — well, we kind of have that now, where we can push a button, it leaves a voicemail, and then an e-mail would go out and then a text would go out.
Joe Fairless: What’s something else from the evolution of your company – not necessarily marketing-specific, just the evolution of your company – that you’ve learned that could help other Best Ever listeners who are wholesaling and looking to build, or even just an investor looking to build their company?
Brad Chandler: I’ve gotta mention the follow-up again. That’s probably the single most important thing.
Joe Fairless: [laughs] Yup.
Brad Chandler: Something I’ve known, but I just didn’t do it – I’ve always known how important people were, but I was never able to pull off a team that just every single person is an A player, and after 13 years of going through a lot of bad candidates and a lot of bad employees, we have got a team now that there’s not one person that I’d say “Oh, if he/she left, I would care…” – we don’t wanna lose anybody. Good people make everything a lot simpler, so make sure — even if people may be listening to this and saying “You know what, I’m getting ready to make my first hire. I don’t spend $150,000/month in marketing, I don’t do 200 deals a year… I just need someone to help me out, so what I’m gonna do is I’m gonna put an ad on Craigslist, I’m gonna put an ad on Monster.com, hopefully I’ll get three candidates and I’ll just pick one.” That’s the worst thing that you could do, because a bad hire can absolutely ruin you.
Whether you’re hiring your first person or your hundredth, make sure that you do a detailed, detailed interview, and make sure that you’re selecting someone who you really, really want to. If red flags come up, really research those or just discount them and move on.
Joe Fairless: Do you do a test period with your potential hires?
Brad Chandler: We’ve done it in the past, but it’s not protocol. Virginia’s an at-will state, so we’ve got really strict KPI’s and we’re looking at people on a monthly and weekly basis – are they performing? And if they’re not performing, they just don’t stick around.
Joe Fairless: What’s an at-will state?
Brad Chandler: At-will means the employer has the ability to fire at any time, without repercussions, without cause.
Joe Fairless: What is your best – and you might have just mentioned it, the follow-up process… But what is your best real estate investing advice ever?
Brad Chandler: We’re marketers, really. Anyone in the homebuying business, they’re a marketing and follow-up company that just happens to buy and sell houses, so I think I’ve just mentioned it – marketing, follow-up and just people.
Joe Fairless: Got it. Okay, cool. Are you ready for the Best Ever Lightning Round?
Brad Chandler: Sure.
Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.
Joe Fairless: Best ever book you’ve read?
Brad Chandler: I think I just may have read it, and that was High Performance Habits by Brendon Burchard.
Joe Fairless: Best ever deal you’ve done?
Brad Chandler: We wholesaled a deal in 2005 where we made $300,000 on it. It was a small building… Actually this was a multifamily, like a three-unit in Adams Morgan in DC.
Joe Fairless: How did you find that deal, do you remember?
Brad Chandler: I bet you it came off of a TV ad.
Joe Fairless: What’s a mistake you’ve made on a transaction?
Brad Chandler: In 2005 we bought three development deals in one month, thinking that we were the smartest people in the world and knew everything about real estate, and we ended up losing three million dollars collectively on those three deals.
Joe Fairless: Oh, that’s fun. That’s a good lesson.
Brad Chandler: Oh, great lesson. [laughs]
Joe Fairless: When presented a similar opportunity, how would you approach it now?
Brad Chandler: Well, we have had similar opportunities and we’ve actually turned it around and made great profits. We didn’t know what we didn’t know back then. We should have done our due diligence, we should have had an attorney involved in the process… So just before you go hard on a deposit, make sure that you’ve got all the approvals that you need.
Joe Fairless: Is that what happened – you went hard on a deposit, but didn’t get the right approvals for breaking ground?
Brad Chandler: That was the problem on two of them, and the third one was just a complete debacle in every way, shape and form.
Joe Fairless: Fair enough. Best ever way you like to give back?
Brad Chandler: I am finding it very fulfilling to teach people what I do, and starting to change people’s lives by teaching them how to invest in real estate.
Joe Fairless: And how can the Best Ever listeners get in touch with you?
Brad Chandler: I’ve got a book titled “Wholesaling Secrets: Discover This One Technique We Use To Close Over 200 Wholesale Deals Every Year Consistently.”
Joe Fairless: That’s a mouthful.
Brad Chandler: Yeah, I know. The next book I’m gonna shorten… Simply text the word “invest” to 855-999-1616, and they can go to BradChandler.com for my coaching programs.
Joe Fairless: Cool. And I’m kidding about the mouthful, because my podcast is The Best Real Estate Investing Advice Ever Show, and I always tell people “It’s tough to say, but great for Google searches.”
Well, thank you for being on the show and talking to us about how you have scaled your wholesaling company, how you are in marketing and you happen to be selling houses, so it is about the follow-up and it is about the people that are on your team… And how you’re allocating your marketing budget – 40% towards internet, 40% towards direct mail, and 20% towards television… And then how you screen potential candidates for your company.
Thanks for being on the show. I hope you have a best ever day, and we’ll talk to you soon.
Brad Chandler: Thanks so much, Joe.