JF2484: Turning Distressed Deals into Opportunity with Mark Stubler
When Mark Stubler realized he didn’t have full autonomy in his current position, he went full force into entrepreneurship. He talks about how he finds distressed deals, as well as his acquisition approach. Mark emphasizes his customer-minded focus on finding out his clients’ true needs to provide them real value, while still making great returns.
Mark Stubler Real Estate Background:
- Founder of Joe Homebuyer
- 5 years of experience
- Portfolio consist of 100+ flips & 500+ transactions (wholesale, flip, wholetails)
- Based in South Jordan, UT
- Say hi to him at: https://joehomebuyer.com/
- Best Ever Book: The Rhythm of Life
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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. This is the world’s longest-running daily real estate investing podcast where we only talk about the best advice ever, we don’t get into any fluffy stuff. With us today, Mark Stubler. How are you doing Mark?
Mark Stubler: Joe, thank you. I’m doing awesome. Thanks for having me on.
Joe Fairless: Well, my pleasure, and I’m glad you’re doing awesome. A little bit about Mark, he is the founder of Joe Home Buyer. He’s got five years of real estate experience. His portfolio consists of 100 plus flips over 500 transactions, which include wholesale flips and wholetales. Based in South Jordan, Utah. His website is joehomebuyer.com. With that being said, Mark, do you want to get the Best Ever listeners a little bit more about your background and your current focus?
Mark Stubler: Yeah, thank you, Joe. So, owner and founder of Joe Home Buyer franchise. We’re out there just having a great time, as a lot of your listeners will appreciate, playing the game in real estate investing, including wholesaling, fix and flips, and doing the best we can to capture rentals. But in the crazy market right now, I’m finding that I’m passing on rentals and capturing immediate revenue, because the market is just so good, and when you find these distressed properties, we all know that they’re just worth their weight in gold. It’s an exciting time in the industry to be a part of, but just grateful to be in real estate, Joe. I love what I’ve learned over the years. It’s just been a fun journey in what I believe to be one of the best industries in the world; real estate just affords so many opportunities.
Joe Fairless: What were you doing before you’re doing this?
Mark Stubler: I was your fence and deck salesman. The guy that shows up and gives you a quote on your fence. So no real estate experience.
Joe Fairless: Okay, and how long were you a fence and deck salesman?
Mark Stubler: I was actually working with a great company for 10 years. That has a little bit of a story in and of itself. Great company and made great commissions, but about 10 years in, Joe, they gave me a gift. They made me go from an outside sales guy to once in a while they wanted me to come in for an inside sales position for about four hours a day. I call it a gift because it went from complete autonomy, fluid, set my own schedule, to – I’m sharpening pencils for four hours helping out with the inside sales and it changed my perspective of…
Joe Fairless: You didn’t like that, didn’t you?
Mark Stubler: No, no. Wait a minute, I’m not on my own. I’m not. I don’t have complete autonomy and it was like handcuffs to me. It completely changed my perspective and put me on the course of entrepreneurship.
Joe Fairless: Okay, what did you learn there that has been applied to what you’re doing now?
Mark Stubler: A lot. A lot of it was how to just connect with people and to problem solve. Although I was selling fencing products, I realized it’s a human connection that has helped us be successful in the real estate world. People just want to know that they’re working with somebody that’s fair, honest, and – I know it’s a cliché, people work with people they know, like, and trust, but just connecting with people and helping them solve their problems… If you can get good at that in this world of real estate, finding creative ways to work with people – boy, that has made all the difference. Just being mindful of the needs of the sellers that we’re working with, and finding creative solutions. That’s been an area that I really enjoyed, and I learned a lot in years of just working with people in sales.
Joe Fairless: You mentioned earlier that you’re in the business of wholesaling, flipping, whole tailing, capturing rentals, and holding on to the rentals when it makes sense… But right now, it makes more sense, according to you, and it makes sense to me that you’d say this, to get the chunks of cash from selling properties, then hoard that cash, and then eventually buy rentals when the prices are lower. The logic there is, from my standpoint, I get it. But the challenge that most people have is finding those distressed deals. How are you finding the distressed deals?
Mark Stubler: We’re really big at Joe Home Buyer – and we teach our franchisees the same thing – it’s all about diversity. We have our hands in all the main marketing channels, including direct mail, web, prospecting efforts, we even do a lot of JV partnerships, becoming the celebrity in each of our markets. For us, I feel like the most effective way – and particularly when they’re extremely difficult to find in a very strong market – you have to be diversified. You can’t rely on one marketing channel exclusively, because there are ebbs and flows with the success of those marketing channels and it’s important that you’re well balanced and diversified, and we’ve found the most success approaching it that way.
Joe Fairless: Makes sense. Let’s talk specifics. Will you list all the different tactics you use? Not in granular detail, but you said direct mail is one, and then joint venture partners is another… What’s another one?
Mark Stubler: We’re really big still on the outside prospecting. In addition to those, we do a lot of outbound calling. That’s reaching out to people, offering to pay cash for their homes, and obviously, focusing on the right targeted list. Those lists would be things with life motivation, or life-altering factors going on in the people behind the scenes, the affairs in the people’s lives… Whether it be a bankruptcy, divorce, or probate on an inherited home. Any number of these things could drive someone to needing relief from their property, and that’s where our service comes in, where we can help find a solution for their property.
We focus on life situations and we do that through — the prospecting efforts is a big one for us, as well as direct mail, it still is alive and well. We put a lot of effort into direct mail, and that includes all those different campaigns. We diversify ourselves even within direct mail. Meaning, if there are 25 different campaigns or these life situation-type motivating lists, we focus on each of them. We obviously try to find the art, what’s the cadence, what’s the volume that we need to hit in order to get the best results.
Joe Fairless: What is typically the cadence and the volume?
Mark Stubler: Well, we like highly targeted lists to approach very frequently, maybe even as often as every month or every two or three months. Those that are extended out over something that maybe doesn’t have as many life situation factors to it… Maybe the only thing is, is it’s in an attractive area and it has equity. So it fits into a zip code that is attractive to us and it has equity – that list might be something where we hit them a few times a year. The frequency is also based off of what we’re trying to discover as being what drives people to make decisions the soonest. Maybe that might be a probate list, for example. A probate is somebody that inherits a home. Generally speaking, there’s going to be a higher percentage of those people that need an exit for that property, because they didn’t intend to end up with it. That would be one that I’d want to be more aggressive with.
Joe Fairless: Okay, that makes sense. Let’s go with an example of an attractive area, so an affluent area, and they likely have equity in their home, maybe they’ve owned it a while… Does your direct mail piece messaging say something specific to their situation?
Mark Stubler: That’s a great question. The simplest answer is, we do everything. We will do something that says specifically, “Hey, are you tired of being a landlord?”, “Did you inherit a property?” But we haven’t gotten to the point where we are going away from just general as well. I’ve found a lot of success from the general. So if you asked me if the specialized is like slam dunk better, I would tell you that when you’re dealing with motivated sellers or dealing with people that could benefit from a cash transaction because they already fall into these different criteria and different lists, the general still remains the most effective… Although the highly targeted, to-the-specific list has its place.
Joe Fairless: You haven’t tested out the messaging for that specific niche or different niches. Is that correct?
Mark Stubler: Yeah, I didn’t answer that very well, Joe. At the end of the day, yeah, we’ve tested a few of them, and we generally find ourselves going back to the generic message, but with a message that is doing two things – survive and thrive. It’s hard to describe exactly what that means without having a postcard from me and reading it exactly. But it’s this idea of, if they work with me, they can survive whatever they’re going through, and they can thrive. Meaning that there’s a solution and there’s a plan. I guess I’m giving a nugget without maybe answering the question directly. I believe that if you can address those two things in your marketing pieces… And this isn’t according to Marc Stubler, this is a concept that we’ve learned studying different marketing techniques. Story brand… If I put a plug out there for them, they give me nothing for sharing their name. But I’m really big into this idea of sending a message that you can survive and thrive.
So yes, Joe, there’s definitely a place for very targeted, but we’ve defaulted, in most cases, to a general message of whether you’re going through probate eviction, or tired landlord, or any of these things, that if we can send a message to them that they can survive and thrive through a solution of working with our company – that’s the underlining theme that we find universal for every one of our campaigns.
Joe Fairless: So you’ve been at this for approximately five years… What has changed in your approach that has made a big business impact?
Mark Stubler: What has changed from our approach that has made a big business impact?
Joe Fairless: From your initial approach. What were you doing before that you’re not doing now? Or you’re doing better now than you were before, that’s made a big difference?
Mark Stubler: Great question. For us, it’s about the acquisitions. I think in the early days, Joe, when I was evaluating these opportunities that would come in, these leads, we were looking for layups. We had this mindset of, “Okay, people are going to call, they’re going to be extremely motivated, and they’re going to sell their house because they have various levels of distress that they’re going through.” And I’ve realized over time that although that’s still true, that the funnel is actually bigger than that. That we’re not looking just for people that are so-called layups; like, “Hey, come by my house today, I need to get out of this situation by this day.” If you have quality connections with people, build a solid relationship, and are good at problem-solving, finding out what the crux of “Why in the world did this person call me from a 39-cent postcard?”, “Why is this person talking to my cold caller and engaging in the idea of getting a cash offer?” If we can get to the crux of that, I believe that there are more opportunities out there than the ones that just at face value, say, “Hey, come by my house.” It’s a slam dunk type thing that I’ve discovered over the course of time, that there’s an art to the acquisition, that it’s meaningful conversations, and really engaging with the seller and finding out what’s going on, the distress behind the scenes, that there’s actually more opportunity available through making that human connection, and really discovering the needs of the seller.
There are actually more opportunities than what meets the eye… Because we get conditioned that “Oh, yeah. This person sounds like this when they’re ready to sell their house. They’re going to call me up and they’re going to give me just a wildly great price and I’m going to know instantly that this is a slam dunk.” If we look for those exclusively – they’re there, and you can be extremely profitable, and those are great opportunities, but there’s more than that, you discover that people, as you unpeel the layers of the onion so to speak, there are more opportunities within the opportunities you’re creating for yourself.
Joe Fairless: What are some questions that you ask, or your team asks, on a call to identify why they’re really calling you and what their needs are?
Mark Stubler: As crazy as it sounds, we make it not about the house and not about the price, we make it about why. That’s the question, the why. “Why are they calling me off a 39-cent postcard? What is it that’s going on?” We really want to engage with the seller and find out if there’s some way that we can provide them value. That value might be not working with me; that might be that I steer them in the direction of working with an agent that we can refer to, that might mean that they do some light rehab and they do it themselves. But that I’m customer minded, I have this idea in my mind that I’m going to get to the bottom of what’s going to help this person find a solution. We’ve actually bought homes from referrals of people that we didn’t buy homes. They said, “Hey, I had a great conversation with this guy, you ought to call this company.” We went and bought the home because they felt like we treated them well, and although it didn’t meet their criteria, they were able to point us in the direction of somebody else. Sure, that’s few and far between, but it’s happened enough that we know that if we engage with everybody as if we can provide them value and hopefully that’s us buying the home for cash and making it a smooth transaction. But if we engage them, really trying to discover what their needs are and providing value to them, we’ve found that it opens up opportunities to provide real value. Sometimes that translates to a referral from that same person, but that’s the answer. As far as specific questions, I think that was your question, Joe, is what types of things – we’re really trying to get to the crux of… They might say, “Hey, I just need to get out of this house because I’m in a situation where my daughter is bringing home negative influences.” This is a real scenario for us recently, where this lady is trying to sell her home because her daughter is bringing home people and drugs and situations that “I don’t feel safe in my own home anymore. I’ve got to sell it.” Then it’s going into the “What can we do to help you feel safe? How can we help problem solve? How can we put you in a position? Is it getting you a hotel tonight so that you actually do feel safe and navigate along the way?” That’s where we find a ton of enjoyment, is helping find those creative ways to solve the family’s problems.
Joe Fairless: That’s a helpful example. Thank you for that with the hotel offering. Did you end up putting her up in hotel?
Mark Stubler: That situation, what we ended up doing is we helped her get her daughter evicted. We still bought the home and we helped her move, provided a U-Haul, and gave her about two weeks in the home after closing so that she could make the transition. So there were about three or four other things. The hotel didn’t end up being one that was necessary, but yeah, there was a few creative ways in which we were able to provide value.
Joe Fairless: Good, good, good. What a great story. What deal have you lost the most amount of money on?
Mark Stubler: Well, there are the opportunities that we’ve lost because we just didn’t handle the lead right. There was one where a seller had 13 properties that he wanted to sell. We had an acquisition manager that wasn’t invested into the things that we talked about. Great guy who just found himself in a spot where he had lots of leads. So instead of giving as much energy to that one opportunity as the others, we left a massive one slip through the cracks. A guy that had 13 properties, was willing to do a fair price on each of them, and he went to a very viable competitor, because he felt like the other company was more invested in finding him a solution. That was a painful one recently for us to lose, is the seller that found more reassurance that he could be guided by this other group than us. That’s an area we put a ton of focus, and unfortunately, you have to have some of those kicks in the pants so that the next ones you do a little bit better on.
Joe Fairless: Now, that wasn’t a deal you lost money on, that was a missed opportunity… Which you might argue was a loss of money, but it’s not actual dollars from the bank account. So what deal have you lost the most amount of money on from your bank account?
Mark Stubler: Joe, you’re going to think I’m making this up… As you mentioned in the greeting there that I’ve done about 500 transactions, about 100 of those have been rehabs… Believe it or not, the most I’ve lost on a deal is about $5,000. It was more just by the time you washed it all out of the rehab, it just took way too long. By the time it all just kind of surfaced; it wasn’t as much as a financial loss, it was just a distraction loss, because the city came in at the midnight hour, after everything was done, and said, “This needs to be done” because we didn’t go about it the right way and get a permit.” Believe it or not, Joe, because we focus so much on being as conservative as we are and wholesaling the ones that are on the fringe – and I’m knocking on wood is I’m saying this, Joe…
Joe Fairless: I’ll knock on it for you, too.
Mark Stubler: …we have not experienced a massive blow from a financial bank account loss.
Joe Fairless: I get that if the focus is on the wholesale and wholetail. How many fix and flips have you done?
Mark Stubler: All and all, between the two markets we’re in, aside from the franchise across the country, we have done about 100 rehabs. There’s going to be listeners that have done far more than that… But yeah, we’ve done about — anywhere from just carpet and paint all the way through a massive rehab. Our biggest rehab that we’ve ever done, Joe is about 150,000. They needed about 30,000 to 40,000 dollars in foundation repair and then about 100,000 dollars and some odd in cosmetic. That’s about the extent of the most robust one we’ve done, but that one ended up being wildly profitable. Well, I’ll share the number with you. We ended up making 180,000 dollars on it. To me, that’s a slam dunk. But we bought it for about 196,000, we put, like I said, about 50,000 dollars in foundation repair, a little over 100,000 dollars into it, and by the time realtor fees and all that were closed out, we made about 180,000 dollars.
But we generally stay in the range of carpet paint, maybe cabinets, maybe counters, and because of that I think we’re also moderating our risk. We’re also moderating our distraction. We’re really focused on finding the next opportunity, and because of that, we don’t want to get too heavy into too many projects, where it requires too much management. But again, using that model, it’s kept us out of trouble and losing money, but again, it’s only a fraction of our business. Like I said, not even probably 1/4 of our transactions end up in a rehab for us.
Joe Fairless: When you do a rehab – and I know it’s less than 25%, but we do rehab, what’s the average rehab budget? Sounds like it’s 10,000?
Mark Stubler: I probably downplayed it a little bit. It’s probably closer to 25,000 dollars. By the time you paint, carpet, we’ll generally do the counters, toilets, new doors, light fixtures…
Joe Fairless: I’d say that’s phenomenal, to have over 100 fix and flips with a $25,000 average rehab budget, and have only lost money on one deal, and that deal was about $5,000.
Mark Stubler: Yeah. Honestly, I feel really fortunate. I will tell you we made probably the riskiest decision to buy a property for 296,000 this year. It needed virtually nothing, but we ended up painting it, because after we cleaned it, we found that it just had a kind of a dingy feel. Didn’t replace the flooring, just painted it. It had been rehabbed about two or three years prior. When I say it was the riskiest, the comps said it was only worth 325,000 and we’re like, “Look, we’re not buying that. Everything’s going above appraisal and everybody’s making commitments with money down above appraisal.” We ended up selling that I believe, for 345,000. We weren’t wildly profitable; I think we ended up netting 24,000 or 26,000 on it, because all we had was a little bit of money cost and the paint that I mentioned, cleaning it out that sort of thing. But that was probably the extent of how risky we get, when we knew that the only way to make money on this transaction is it actually has to go above appraisal, and it has to go above whatever the comps are currently showing.
We rolled the dice on that one. That one was a break-even if it didn’t go that way. Luckily, between realtor fees and that sort of thing, costed money. But generally speaking, we don’t get ourselves in that position very often, and so we’re not losing money. Then let’s be honest, over the last five or six years that I’ve been doing this, the markets have only been going up. So if I’m using conservative numbers as I run my proforma – and I’m conservative by nature – and the market is continuing to do well, I’ve been the benefactor of a good market. So it’s important as I go into the future and navigate the market conditions potentially changing, that my rules as far as what I believe to be conservative need to be evaluated, so that I’m not putting myself in a position where I can lose big, for sure.
Joe Fairless: How many rentals have you purchased?
Mark Stubler: We have kind of a unique way of doing that, Joe. We actually like keeping rentals free and clear, and then putting HELOCS against him so we can use it for operating capital. We have a handful of those, and then we have a handful of subject-tos. Personally, I’m only about 15 doors, give or take.
Joe Fairless: Nice.
Mark Stubler: But we own a few of those.
Joe Fairless: That’s phenomenal for five years, in my opinion. But obviously, you are hard on yourself. But 15 doors in five years, that’s a pretty dang good pace.
Mark Stubler: Can I tell you why I’m hard on myself, though? I’ve seen 500 transactions go through the door and it’s like, “Man, I can’t believe we didn’t keep a higher percentage.” But those ones that come in Joe, that I’m thinking, “This is a slam dunk rental all day long”, we explore options, we send it out to our buyer’s list, we start to flirt with what the best exit strategy is going to be, and we get talked out of it nine and a half out of 10 times because the market is so good.
Joe Fairless: I assume you’re saving a chunk of cash to then get those rentals whenever the market isn’t as good?
Mark Stubler: Exactly. Over the course of time, we’ve been able to get ourselves in a pretty healthy cash position.
Joe Fairless: What is your best real estate investing advice ever?
Mark Stubler: Well, it’s going to go a little bit different direction and I think it will tie a bow on some of the things I shared, Joe… That is that if you care about other people, you’re going to be able to differentiate yourself against the iBuyers, the competition, because people want to human connection, they want to feel like they’re working with somebody that provides real value. We’ve never forced anybody, Joe, to sell their house to us. If we put a contract together with the seller and it ends up being determined that they are better off staying in the home – which happens a fraction of the time – we allow them to stay in the home. Now we make them [unintelligible [00:22:58].13] we make sure that they can’t sell it to another cash buyer, and we put a few checkpoints in place, but at the end of the day, we believe that we can provide a real service. And if somebody has a change of heart or circumstances change and they need to stay in the property, we really want to have their best interests in mind.
Simply said, if you’re customer-minded, and provide real value, there’s just so much opportunity in real estate. People are going to sense that and you can provide real service. Fortunately, you can make a lot of money providing that service. It’s not a nonprofit scenario that I’m pitching here. I’m saying that you can make a ton of money, but at the same time, you can do it the right way, providing real value.
Joe Fairless: We’re going to do a lightning round. Are you ready for the Best Ever lightning round?
Mark Stubler: I’m ready.
Joe Fairless: Alright. Best Ever book you’ve recently read?
Mark Stubler: The Rhythm of Life. Love, love, love that book.
Joe Fairless: Do you remember the author?
Mark Stubler: Matthew Kelly.
Joe Fairless: Thank you. Best Ever way you like to give back to the community?
Mark Stubler: Time. I love to get my kids involved as well. I love to do things that are meaningful from a service hands, get your hands dirty type thing. I need to do it more so this has challenged me. If I’m going to be preaching it from a podcast, I’ve got to do it even more of it, Joe.
Joe Fairless: How can the Best Ever listeners learn more about what you’re doing?
Mark Stubler: If you’re interested in just having a friend in the world, reach out to me on Facebook, Mark Stubler. If you’re interested in becoming a Joe Home Buyer franchisee, if you want to use our best practices in your market, and become part of our community of franchisees that are just getting exceptional results in the world of investing and wholesaling, you can find us at joehomebuyerfranchising.com. We’d love to connect with you and talk with you more about the Joe Home Buyer opportunity.
Joe Fairless: Mark, thank you for being on the show. Thanks for sharing your experiences with the transactions you’ve had over the last five years. How your experience leading up to these five years has helped you out connecting with people, problem-solving, and ultimately, that’s a key part of the equation, is being good at problem-solving, really learning why they’re calling and offering up solutions that are addressing that, not necessarily just transactional-based in nature. Thanks for being on the show. Hope you have a Best Ever day and talk to you again soon.
Mark Stubler: Thank you again, Joe.
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