Best Ever Show Real Estate Advice

JF1391: Start A Business With No Funding & Compete With Those That Do #SkillSetSunday with Nathan Miller

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A lot of investors or would-be investors never get their businesses off of the ground because of lack of funding. Nathan is here to tell us how to compete with other businesses that do have a lot of business. Nathan started Rentec Direct with no outside funding, or inside fundinge – other than minimal fees to set up the actual business, and grew it organically, to $3 Million in revenue for 2018. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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TRANSCRIPTION

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, Nathan Miller. How are you doing, Nathan?

Nathan Miller: Doing good. Thanks, Joe.

Joe Fairless: I’m glad to have you on the show again. A little bit about Nathan – well, he is a returning guest; he gave his best ever advice in episode 1164, titled “Software engineer and investor builds amazing tenant screening software.” Today we are gonna be talking about how to build a business with no startup funding, and compete against those who do. And because today is Sunday, we’re gonna focus this on the particular skillsets of starting something with little to no funding, and competing against others…

Certainly, there are parallels that we can draw from it with real estate investing, with starting a fix and flip company, or a wholesale company, and competing against others who have larger budgets. We’re gonna learn how Nathan was able to do it, and then we’ll see what we can apply from his experience to our experiences as we’re competing with some of the more capitalized competitors. With that being said, Nathan, do you wanna give the Best Ever listeners a little bit more about your background, just a refresher before we dive into it?

Nathan Miller: Of course. My background – for the past 20-ish years I’ve been a software developer, and that’s kind of my passion. I love writing things and creating things, and I call it my little mini electronic invention… And fortunately, as I’ve made enough inventions, some of them worked out, some of them haven’t, but I also have some real estate investments that I’ve done, so I’ve got some experience there, which is what brought into probably my latest hobby/company, Rentec Direct, which is writing software to help me manage those rentals.

This company has kept me very busy, and having a good time running it for — we’re coming up on ten years in business now.

Joe Fairless: Well, congratulations on that. With the 10 years in business – because you started in 2009, so you’re coming on a decade of having the company… It’s grown organically 100% and is also debt-free. When I say organically 100% – that’s in your bio – you’ve never spent $1 on any form of advertising?

Nathan Miller: No, we do spend money on advertising. What I mean organically is we’ve grown our business from — people like to refer to it as a bootstrap business. We got no outside investment, and in fact no inside investment – no investment whatsoever. We started just like an organic plant starts – it starts at nothing and it grows and blooms into something on its own merits, versus requiring outside fertilizer, or funding, as the case of most businesses are.

Joe Fairless: Okay. So then the question becomes how much funding did you put into the business originally?

Nathan Miller: It’s all sweat equity, aside from probably the $150 to register as a business, and a few hundred dollars to set up the original LLC paperwork, there was no personal investment that I had to bring into the company.

Joe Fairless: Wow, that’s great.

Nathan Miller: There’s probably a couple hundred dollars in used servers, but for the most part… It’s probably less than $2,500 of my own money that went into the company to get everything off the ground before the company started paying for itself.

Joe Fairless: That’s incredible. And now what is your annual revenue?

Nathan Miller: We’re gonna be topping three million this year.

Joe Fairless: Congratulations. Bravo! I’m clapping right now, but I’m not doing it too loud because I don’t wanna be annoying in the microphone. Okay, so from $150 to three million dollars in revenue, there are clearly lessons that we can learn for how to grow a company with pocket change, relatively speaking. $150 is a lot of money, but relatively speaking it’s small to create  a big company.

How should we approach our conversation so that we can learn as much as we can for how to replicate something similar in the real estate field?

Nathan Miller: Well, I think I’ve kind of thought through my process in creating Rentec Direct, and it’s a software company, a little bit different from a real estate company, but I’ve looked through what has created the success and how I was able to start it from nothing, and how that kind of applied to almost any industry in the world, including real estate… So I’ll just start with maybe a little more background – what I forgot to mention earlier is our competitors, just to give you an idea of who we compete against and what kind of pressure we have. There’s about ten other software companies that do very similar things and work in the same market as us… Just like real estate investors are gonna have other investors bidding for the same properties, and such… Of those ten, there’s two that really we ran across all the time.

Joe Fairless: Who are they?

Nathan Miller: The two we hear the most of – a company down in Santa Barbara called Appfolio, and then one based in Boston called Buildium.

Joe Fairless: Okay, got it.

Nathan Miller: There’s a few others out there, but I would say nine times out of ten if someone’s comparing our product to another product, it’s gonna be one of those two. And both of those companies started out with approximately — I think Appfolio was about 75 million in investments, and then Buildium was 85 million in investment.

Joe Fairless: [laughs]

Nathan Miller: Now, here’s the fun thing, here’s what I love explaining – we started with zero dollars in investments; now, the last I saw on their published numbers, Appfolio had about 10,000 clients; Buildium has about 14,000 clients, they’ve just said about two weeks ago. We have 13,700 clients right now. It’s like, how are we doing this, how are we competing so head to head with these companies that have 100 million dollars of investment? Back to your question, how do we do this…?

Joe Fairless: That’s fascinating… Thank you for talking through that; that’s really fascinating.

Nathan Miller: Well, I love it, and it’s mind-boggling to me that this little company in Oregon is competing so well with these behemoths in big cities. I’ll have to go back ten years here to explain where we came from and how I pulled it off…

Joe Fairless: Sure.

Nathan Miller: When I started Rentec I was working a full-time job, I was working as a systems administrator and a software developer for an internet service, and that job provided me my support to support me and my family… And I think anyone who’s going out to start something new, you have to have a support system that’s paying the bills before you devote your full attention to it.

In my case, having a full-time job and then start this new project – it was a 4 to 8 AM thing. I’d wake up early, make coffee early, and just hit the computer and start programming.

Joe Fairless: 4 AM to 8 AM thing?

Nathan Miller: 4 AM to 8 AM.

Joe Fairless: Okay, got it.

Nathan Miller: After that, in an hour I’d go to my real job at 9 AM. So I tell people this a lot – cool new companies and cool new inventions don’t come from your day job, they come from your hobby, what you do after, or in my case, before your day job. I encourage my employees, and my friends, and everyone – if you have a passion and you wanna do something, just try it out; go after work, spend an hour a day doing it, and see what happens. So anyways, if you’re gonna start something new, definitely have a support system to pay the bills.

The second thing that I think is really necessary is you don’t just have to have a skill. I was a developer; I think that helps, having a skill, but first off, you have to love that skill, and then you have to have a vision to use that skill for. In my case, my skill is development – and I do love developing – but my vision is, like, I drive to and from work, but we’re always going on trips, and I go up and down I-5, and I see these hundreds of thousands of cars on the road, and I see people going North, and people going South, and there’s companies that are sending people North to sell to people in Seattle, and there’s companies in Seattle that are sending people South to sell in San Francisco… And I think about the inefficiencies in that. Why don’t the San Francisco salespeople just sell to San Francisco, and vice-versa?

I’m seeing this every day, and what I see in my mind is I just see that mankind is pretty inefficient. That’s one very small example. But I try to think “How can I help? What can I do to make things a little more efficient?” and I feel like I’m not quite as cool as Elon Musk, who’s building rockets and sending them into space, and making electric cars – I think that’s awesome, but what I can do is I can write software to save people time.

Joe Fairless: Hey, don’t sell yourself short, that’s incredibly cool.

Nathan Miller: Well, what I love about it – and now I look back on it and it gives me chills when I think about it now, because we have almost 14,000 people that every single day log in and use our software, and I’m saving them an hour or two a day, and if you add that up, it’s like success (I love it!). When I started it was one or two people, so it wasn’t quite as meaningful back then, but I had the vision that I wanna make that happen. So it’s not your skill or my skill that drove me, it was that vision that drove me to keep doing that. Let’s keep on with this hobby, and keep it going.

At the time, I didn’t expect it to be a company, I just expected it to be something that was gonna help people, and I never thought I was gonna make any money or anything, but it turned out to be a success and people ended up wanting more, and it ended up turning into a company. So yeah, having the vision and the passion to accomplishment I think is cool, and necessary.

The third of my 420-point bulletpoint here–

Joe Fairless: Okay, so you said third – I’ve heard one, vision, and two, find efficiencies… Did I get those first two correct?

Nathan Miller: I think have a way to support yourself so you’re not stressed about cash while you’re developing your venture… And then have the skill and vision to do it.

Joe Fairless: Okay, got it.

Nathan Miller: Once you’ve started something, I think the next most important thing – as soon as you can pay for it, and whether you’re using your own funding, your savings, or your company has started to make some profits, is you want to hire and delegate as soon as possible. You wanna look at the things first that you can’t do – mine, for example, I can’t do customer service. If someone calls and yells at me, it’s over, I’m done; I lost that customer, because I just can’t handle that. [laughs] So the first thing I had to do – hire someone that can gingerly handle someone who’s upset.

Then second is delegate everything that’s taking your time. If you’re creating a company, you need to have free time every single day to grow that company. If you get buried in the paperwork or buried talking on the phone, your company is not gonna grow; you’ll get stalled immediately. So as you can get that off your plate – and of course, it goes without saying, hire good people, trustworthy people; I think everyone knows that line.

The next thing I think that really helped our success – and I was talking about those numbers with our competitors earlier, and I think one of the reasons we’re so successful compared to them is we don’t have 300 employees doing small, menial tasks. Our competitors, and most companies in the world, they’ve got an accounting team, and they’ve got an HR team… You add these groups together, and I know our competitors – they have about 300 employees each… And they’re doing the same things as us, but we’re doing it so much more efficient, and the reason I believe that’s happening is the heart of our company is automation… From accounts receivable, to payroll, billing, collections – everything is automated, and even if it costs us a little bit to automate it, I do it.

An example of that is some people nowadays charge to automatically bill your credit card – 3% is a pretty common fee these days… If they also accept checks — well, I don’t like writing checks, because it’s a piece of paper, and it’s time, whether it’s my time or someone else’s time… It takes probably 5-10 minutes to pay a bill, mail it and send out the invoice with the check to the vendor. So I’ll set all those up on credit card; if I have to, I’ll pay the 3%.

Joe Fairless: Okay. Interesting.

Nathan Miller: Bonus there is you get the miles, and you get to go on cool trips… [laughter] So I think next on my list is avoiding distractions. What I mean by that is especially as your company grows, no matter what kind of company this is, you’re gonna get distracted. It’s gonna be in the form of spam in your mailbox, it’s gonna be people showing up to your business wanting to sell you this or that, it’s gonna be these amazing pitches from other companies or other people that want you to pivot your software in a little bit different direction, and I think one of the important things to do is remain laser-focused…

Going back to the second thing I talked about, your vision, is remaining laser-focused on your vision… Not someone else’s vision, and not this company who wants to give you money so you tailor your software for them, and not for maybe a single customer..

Let me give you a real-life example here. We cater really well to property managers that have 200 to 1,500, maybe 2,000 units. But all the time we get calls from property managers that have 4,000-5,000 units, and they’ll have specific requirements. They’ll be like “Your software needs to do this, because we’ve always done accounting, or payroll, or something, this specific way, so if we’re gonna switch to you, we need you to make your software do that.” And the power of saying no is the power of success in cases like this. As much as we’d love to bring in a client that large, that would divert our focus from all of our existing clients and our target market.

Joe Fairless: Can I ask a follow-up question?

Nathan Miller: Yeah, you bet.

Joe Fairless: Your target audience is 200 to how many? 1,500? Did I write that down correctly?

Nathan Miller: Yeah, 200 to 1,500 units.

Joe Fairless: Okay, and in your example where someone wants to come in, add some different functionality was 15,000?

Nathan Miller: I think I said 4,000(ish).

Joe Fairless: 4,000, okay. What if it was 15,000? What do you do then?

Nathan Miller: A 15,000-unit customer we know is not our target market, and we’ll escort them right over to Yardi, or something like that. There’s no sense in us wasting our time and their time, because we know down the road there’s gonna be something we don’t have that they need. We’ll just escort them gently and say “Hey, we just know we’re not gonna be able to handle you as a client, so we’re gonna do you a favor and give your referral to someone who can work with you better.”

Joe Fairless: I think we’ve identified how you’ve been able to stay laser-focused, because I’m gonna go out on a limb and say more people than not, if they had a portfolio of 13,700 customers logging in, and a new customer that could double their portfolio ask for some things, you’re not even thinking twice about it; you’re just saying you’re gonna escort them to someone else, versus wanting to double your company… So can you elaborate a little bit more about that? Because — let me just say one more thing, and then please, take it… You could implement some things to add on to what you’ve got going on, and then you could support this new customer, double your size… It probably wouldn’t double the amount of employees, because of how efficient you are… So please, I’d love to hear your thought process.

Nathan Miller: Okay, sure… Let me clarify a couple numbers real quick. We currently work with 13,700 property managers, each of which may have a few hundred to a couple thousand properties they manage.

Joe Fairless: Got it.

Nathan Miller: All in all, we would need someone to come to us that had 400,000 properties to double us as a company, which there’s no [unintelligible [00:16:42].02] right now, so I know that’s not gonna happen. But to your point, if someone did come in and said “Hey, I’ve got 15,000 properties…”, and regardless, it’s not gonna double our company, but if it boosts us 2%-3%, that’s huge for one customer to come in and boost our overall size that much… I’ll have our sales department, and they’ll just be begging me, like “Please, please, PLEASE, let’s do this.”
Joe Fairless: Yeah, they are! Commission, baby! They want that — I would say commission check, but you probably pay them on credit card with 3%.

Nathan Miller: [laughs] That’s a great idea. So it’s a compelling idea, and I’ve worked in companies in the past who will drop everything and do that, and I think I’ve seen what happens when a  company does that. They drop everything, they stop developing their features for their other 13,000 clients in order to focus on this one client, and you end up alienating the people that really have supported you, and your customers for a long time in the market that you want.

Another aspect of that in our industry is working with mom-and-pop property managers that have just a few employees, and they manage a few hundred units – I love those people. They are so fun to talk to, they’re passionate about their business because they’re doing it themselves, and they love what they’re doing. In contrast, if you step down into San Francisco and you walk into a big apartment management complex that manages 10,000 apartments, no one there likes their job. And if you call them and talk to them, they’re just not happy… And they want things, they want them now, they’re very demanding… It’s just a very different market when you’re dealing with these small companies versus the giant companies.

Joe Fairless: Any other things that you have implemented along the way to help compete with significantly more funded companies?

Nathan Miller: Yeah, I’ll tell you probably the biggest thing I look back and I see “Why do people choose us over someone that does ten times as much advertising as us?” and I think the answer is to compete on service. We don’t have the advertising budget that Appfolio or Buildium has. They’re putting out tens of thousands of dollars weekly; it’s just not practical. So we compete on service.

If you go online, there’s a company called Software Advice. They do independent reviews, and it’s where a lot of people find out independent reviews about property management software… And you look at ours compared to theirs, and you can just see that it’s nearly impossible for big companies who hire hundreds of customer service agents to maintain a level of quality… And as a small, agile company that has a small group of very well trained customer service people, we get amazing reviews, glowing reviews. I think that’s somewhere where a small company competing against the behemoth can always shine, and there’s always a section of clients out there that value customer service over everything else.

Joe Fairless: What are some ways that you’re able to go above and beyond what is typical?

Nathan Miller: I think we’re able to train better, we also have longer retention… We have a total of 12 employees, and of those 12 employees, we’ve only had one person ever leave. It was because they were moving.

Joe Fairless: How long have they been employed, on average?

Nathan Miller: On average about five years.

Joe Fairless: Wow, that’s excellent.

Nathan Miller: Yeah, our first employees are still here.

Joe Fairless: They’re all local?

Nathan Miller: Yeah, everybody’s here in Grants Pass.

Joe Fairless: Okay.

Nathan Miller: That is another competitive advantage, I think. You’re not gonna run across it in the real estate market, but in the software market, most software companies outsource their support to the Philippines, or Indonesia, or somewhere… Whereas everyone when they call us, they’re guaranteed to get someone right in our office here in Grants Pass.

Joe Fairless: As far as the training better, do you do anything in particular there?

Nathan Miller: Well, I think anyone who comes in new gets trained from our senior staff, who have been using the software for up to ten years… And I don’t know if this is gonna be any different from any other company, but I do know that we spend weeks getting someone up to speed and testing them, and then pairing them up with someone who is senior to them, who in general is gonna know the software very well.

Another thing we’re able to do in a smaller, leaner organization like this is we’re hiring for customer service for software… However, what we usually draw from is from people who have been in the property management industry. So they don’t just know how to support our software, they know how to run a property management company, which I think helps a lot.

Joe Fairless: Oh yeah, absolutely. Help me understand one thing, because you said “Find efficiencies.” You have to be as efficient as possible, and that has to do with automation, but yet you don’t automate customer service, which I imagine takes up a large amount of your employee hours.

Nathan Miller: I think so, and there’s maybe a conflict in goals there a little bit… But one of the things that I feel we have to do is always be — we need to be the best at servicing our clients in the industry, and you can’t do that by outsourcing it, or fully automating it. We do some stuff… There’s a knowledge base, we have online chat, which will give automatic answers, stuff like that, which saves us a little bit, but for the most time, our clients enjoy calling us. We have just a handful of customer service reps, so when they call, they’re talking to someone they’ve probably talked to in the past a few times already, so there’s a bit of a relationship there.

Joe Fairless: So we have identified a lot of things, and I’ll summarize them in a second… Any other tactical tips before we wrap up? Especially thinking about it from a real estate, or really entrepreneur’s standpoint, who is building a company – anything else you wanna mention before we wrap up?

Nathan Miller: I think just the benefit of starting your company without funding is you get to make your own decisions. You don’t have investors saying “No, you have to do it this way” or “We demand this much profit” or “You should be investing in this instead of this…” I don’t have any of that; you get to make your own decisions, which is if you enjoy sleeping well at night, I think it’s [unintelligible [00:22:58].12]

Joe Fairless: [laughs] Well, some might say if you get 75 million dollars in funding, like one of your competitors, you’re no longer worried about if you can have dinner tomorrow night, because you know that your company is funded… And I think they get salaries; I don’t know, I haven’t been part of something like that. But they probably get a salary, right?

Nathan Miller: Oh, I’m sure. Yes.

Joe Fairless: Yeah, so then you can probably sleep better at night, but it’s not all your company too, so I guess it just depends on how you look at it. How can the Best Ever listeners get in touch with you?

Nathan Miller: The best way to find me is hop on our website, which is www.rentecdirect.com. You can click on the About Us and you can find a picture of my ugly mug up there. I’m also on Twitter, twitter.com/hitechlandlord.

Joe Fairless: And you said everyone who does have a customer service question should tweet you, so that you will follow up with them, because that’s your favorite thing to do.

Nathan Miller: I love customer service. That’s the best thing. Just hit me up.

Joe Fairless: [laughs] Lessons learned that we can apply as real estate investors to compete with other companies that are more established or are better funded – one is have a vision for the company.

Two is find a way to have a support system which is – in your case, you were employed; there’s two sides of the argument there, because if you’re pushed in a corner, then you’re forced to do some things and you go above and beyond what you likely would have done if you weren’t in the corner, but on the flipside, it can be really stressful… So figure out what’s right for you on that one.

Three is find efficiencies, so you can be as efficient as possible. You talked about how you pay via credit card so you can automate it, even though you have to pay  a 3% fee… I actually wrote down in my notes, in my little notebook to-do list, “What can I automate in my business?” and one of them is check writing. I need to get rid of that, so… Selfishly, thank you for that tip.

Another is avoiding distractions… You talked about your thought process for why you would turn down a customer that potentially could give you all a significant increase in business if it isn’t the right fit for you… It would sacrifice for your base. That reminds me of when I was reading Tools of Titans; Tim Ferriss interviewed someone and they talk about your 1,000 true fans – have 1,000 true fans who are loyal and you add a lot of value and you love what you provide, and that’s all you need. It’s being selectively famous within that group, versus generally famous, which has much more liability than it does positives.

And then lastly, find what you wanna compete on, find what you wanna hang your hat on, what’s your unique selling point – in your case, it’s customer service – and go all-in on that. And then have a local team, too. I believe in that. I believe having a local team helps for many direct and indirect ways.

Thanks for being on the show. I hope you have a best ever day, and we’ll talk to you soon.

Nathan Miller: Thanks, Joe.

direct mail for reinvestors

JF1202: How A Direct Mail Specialists Says RE Investors Should Utilize Direct Mail #SkillSetSunday with Craig Simpson

Listen to the Episode Below (21:08)
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Craig started his direct marketing business when he needed a way to market his fake rocks. He did well there, and sold the business to go work for a large operation and learned more about direct marketing. Now he has his own company again, and he helps many different types of businesses and investors market through direct mail. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

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Craig Simpson Background:

  • Owner of Simpson Direct, Inc.
  • His direct marketing company manages almost 300 different promotions per year
  • Author of The Direct Mail Solution and The Advertising Solution.
  • Based in Grants Pass, Oregon
  • Say hi to him at http://www.simpson-direct.com/

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TRANSCRIPTION

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.

I hope you’re having a best ever weekend. Because it is Sunday, we’ve got a special segment called Skillset Sunday, where you’re gonna come away with a specific skill that will help you in your real estate ventures. Today we’re speaking to the owner of Simpson Direct. He has a direct marketing company that manages almost 300 different promotions per year, so obviously we’re gonna be talking about direct mail. How are you doing, Craig Simpson?

Craig Simpson: I’m doing excellent. I’m glad to be a part of your call today, I’m looking forward to talking to you guys.

Joe Fairless: Yeah, I’m looking forward to learning more about ways to have effective direct mail campaigns. A little bit more about Craig – he is the author of The Direct Mail Solution and The Advertising Solution. He is based in Grants Pass, Oregon, and you can say hi to him at his company website, which is in the show notes.

With that being said, Craig, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Craig Simpson: Sure. I actually kind of fell into the direct marketing world or direct mail world… When I first got started, I was 19 years old and I had made these fake rock climbing holds, the kind that you bolt on the walls and you climb up on, and I had a bunch of people saying “Hey, you should try selling these things”, so on a whim, I went into business manufacturing these fake rocks. Of course, as in any business, I had to market it, and I heard of this thing called direct mail, so I tried doing direct mail, and my first campaign was  completely [unintelligible [00:03:52].02] I didn’t get any response, but I kept on trying and I got to the point where I sold over 4,000 fake rocks through the mail.

I found that I loved marketing, but I hated manufacturing. I didn’t like going out to the sweatshop and making these things by hand. So I closed that business and went to work for a big publisher, and started doing huge direct mail campaigns, to the point where we were mailing 30 million pieces a year… So for the last 25 years I’ve been doing a lot of direct mail, and I love it; I’m kind of a numbers guy. So that’s how I got my start and got into this weird world of direct mail marketing.

Joe Fairless: You’ve been doing it for a while, you said you’re a numbers guy… That type of response rates should we receive on our direct mail pieces?

Craig Simpson: Well, if it’s real estate investing and we’re trying to get people to respond for “Hey, we wanna buy your house” or “We’re looking for distressed properties” or whatnot, usually you can expect about three quarters of a percent to respond to your campaign. Now, that doesn’t mean you’re gonna be able to find that many sellers, but you’d at least be able to get three quarters of a percent for them to call and find out what it is you’re offering, or what it is you wanna know more about.

Joe Fairless: What’s the frequency that you recommend doing?

Craig Simpson: It all depends on response. I’m [unintelligible [00:05:11].23] because this is an area that I do quite a few mailings in. Let’s say you’re looking for absentee owners, and you’re wanting to buy their home at a discount. So you take and you mail all the absentee owners, and there’s 5,000 of them, and you get three quarters of a percent response… And you find out that a lot of them turn into people who wanna sell you their home. So you buy their home or their property, and you have a great return on investment. If it’s a really strong campaign, you don’t wanna just leave it and sit on it and say “Well, I’m not gonna go back to those names again.” Instead, if you have a great response, you wanna hop back in and mail to them again. So normally, the frequency, if it’s a really good list and you get really good success from it, you could mail to that exact same list every month.

Now, if it turns out that the list doesn’t perform as well the second time, then you need to give it a little bit more space. Maybe you can mail to those same names every 60 days or every 90 days. But response really dictates for me how frequent I mail to somebody.

Joe Fairless: That makes sense. When we are looking at direct mail companies, how do we evaluate one against the other in terms of the questions that we should be asking the companies?

Craig Simpson: Good question. I think the biggest thing is – and I guess this goes across the board with any marketing company – if somebody is promising you the moon, that “Hey, I guarantee I can get you X number of new clients in the door”, or “We’re gonna guarantee that you’re gonna get more response than you ever have”, I would shy away from anybody who uses the word “guarantee” or “ensure that you’re gonna get the best kind of response.”

Really the things you’re looking for is people who talk about testing, because all direct marketing boils down to is a lot of testing. You always wanna test to see what works and what doesn’t. For example, if you’re talking to a company and they’re suggesting that you send out a postcard mailing, hopefully they’re gonna suggest “Well, we don’t just have one piece that we think is gonna work for you. We have a few pieces that we would like to test out. One may be pink, one may be yellow, one may be white, but we need to test a few things to see whether or not it works in your marketplace.”

So the keywords to listen for are testing, and you never wanna find someone who’s guaranteeing or promising results, because nobody knows. I’ve sent out thousands of mail campaigns and I can’t come into any client and know what the response is gonna be in advance. All I can do is take my knowledge and experience, run a test, and from there we can learn whether or not we have an opportunity to scale it out and make it bigger, or if we need to retool things and try and make it better.

Joe Fairless: And as far as making it better, what are some suggestions to make something better?

Craig Simpson: So, for those that are interested in doing direct marketing, the key is testing. Things that you can do to make it better – when you’re talking to the prospect, you always wanna talk about the pain points, the things that they may be struggling with. If they’re an absentee and they’ve got renters, you’re probably gonna wanna talk about the fact that there’s some theme of having renters, worrying about people destroying the house, worrying about them paying rents, worrying about them moving out when they’re supposed to move out, and then you can address the solution. “We can take care of this off of your hand; we can take away from you having to deal with this burden every month, and you can sell to us and we can make it so that you’ve got extra cash in your pocket.” So we talk to them about the pain, we offer them a solution – that’s one way.

Another thing would be offering testimonials, having past clients that you’ve worked with rave about you and sharing that with others. People are always convinced and encouraged when somebody else has had a good experience… Just like with Yelp. We’re going to eat at a restaurant, we’re gonna look at Yelp to see if there’s any good reviews or not, to see whether or not we should go there.

But there’s three main things to keep in mind when it comes to direct mail – there’s the list, there’s the copy (creative) and then there’s the offer you make them. The copy (creative) comes to what it is you say to them. The list is who it is you’re mailing to, and that probably is the most important piece of any mail campaign. You wanna make sure you have a targeted list of prospects that will look like the type of customers you wanna go after. Then the final thing is the offer, which is basically what is it you want them to do – do you want them to call? Do you want them to go online? Do you want them to request a free report or consultation? Those kinds of things.

I can dive into more of those deeper if you’d like, or we can move on and talk about something else… I don’t wanna overwhelm anyone here either.

Joe Fairless: Well, perhaps we’ll revisit those three, and I’m glad that you mentioned the list, the copy and the offer. I’m curious, who does direct mail work best on?

Craig Simpson: It works best on boomers and seniors; they love direct mail. But having said that, there’s still a whole group of those who are millennials and those who are older who it works on, but if we were to pick one group – if I could only have one group to mail to, I would mail to boomers and seniors. They’re the ones that love it. But I wouldn’t shy away from testing it on other groups.

One of my big clients is Beach Body, and they’re a fitness company and they have a lot of young individuals who buy into their programs. So I can’t say that it doesn’t work to those younger crowds – it does, but I like boomers and seniors the best.

Joe Fairless: Okay. What type of products does it work best with? And forget you’re talking to a real estate investor… Just in general, and then perhaps we can apply some of this to real estate… But just best in class, what type of products does it work best with, and what type does it perform the weakest with?

Craig Simpson: That’s a tougher question. What does it work best with? I think whenever you’re mailing to people who have a problem and you can solve it. And the problems can be hundreds or it can thousands of different things, because it works for so many different niches, whether it’s a bankruptcy attorney mailing to people who are going through foreclosures, and it’s a way to help them out of it. Or it’s a person who wants to buy their pet food online or through the mail, rather than having to go to the store. The problem is “I don’t wanna go to the store and buy a 50-pound bag of dog food.” The solution? “I can deliver to your front doorstep for the same price as you go into the pet food store.” Wow, isn’t that nice? Just with a push of a button. So really, if there’s a problem and you provide a great solution.

The  third element I guess would be it’s gotta be sold at a reasonable price. It’s tough to sell books through direct mail, because the price is just too low. 19.95 is not gonna make anybody, especially when you have to pay printing and postage. I like to see products that are sold around $100 or $75 and have what we call lifetime value, meaning that’s just the entry point. So if they buy one dog of bag food, they’re gonna buy 20 more over the next nine months, or whatever. So there’s a long-term customer value that’s associated with that initial sale. It’s not just the “Buy one time and we’re done” kind of a thing. Those are the things that are the best. The worst are the low-priced offers.

Joe Fairless: There’s a parallel with what you’ve just said when I look at my sponsors for this podcast. If the sponsor is a company that has a price point that is low and there’s not a lot of a lifetime value of a customer, meaning, as you said, they’re not gonna make money after that initial purchase, then they wouldn’t be a good fit. But if the sponsor has a higher price point or has a higher lifetime value where there’ll be repeat purchases, then it’s a good fit and I’ve learned to disqualify potential sponsors because of that, and then qualify them.

Do you do any sort of qualification process with new people who sign up, or do you kind of just let them test it out and then see how it works?

Craig Simpson: No, I think there’s always a process where we’re kind of vetting out who they wanna go after, and is there a market for it. And also looking at their business to determine, “Will they be able to get a high enough customer lifetime value to make this a profitable venture?” Because it doesn’t matter if you get a 10% response rate; if the return on investment isn’t good, then there’s no longevity with that type of marketing campaign.

So yes, there’s totally a vetting process where we evaluate that, and look at who can we mail to and what kind of revenues can we make from it.

Joe Fairless: And what type of cost or investment dollars into this program, into a direct mail should we expect to do?

Craig Simpson: It all depends on the marketplace you’re going to and how big your marketplace is. When I’m doing a national mailing, I need the client to mail 10k-15k pieces of mail in order to see and gauge response. If we’re doing a local/regional mailing, it could be 2k-3k pieces of mail.

So what is the cost to mail that? Well, there’s a lot of variables there. Are we mailing a letter, are we mailing a postcard? Obviously, a postcard is significantly less in cost than an actual letter would be. When it comes to how much is this going cost, there’s a lot of things that play into that, but I would think you would wanna start out with a budget of, say, $5,000 to test. It may end up being significantly less than that, or it could be a little bit more than that, depending on what it is you’re mailing and how many pieces you’re going to.

Joe Fairless: And generally speaking, $5,000, how many pieces does that get you and what are some of the standard things that that would entail?

Craig Simpson: If you’re thinking of mailing a postcard, you’d probably be able to mail 3,000-4,000 postcards, plus that would include — the $5,000 would give you the money for the copywriting fees if you’re not writing the sales copy yourself. It would give you the money for the list, it will give you the money for the design… It would basically be one of those things that “Hey, all-in this is what it’s gonna cost me to test it.” And that’s doing it on your own, kind of figuring out the list and the copy and the design and those kinds of things.

Joe Fairless: Did you say the list rental?

Craig Simpson: That’s correct.

Joe Fairless: Will you elaborate?

Craig Simpson: In most cases, depending on what are you’re in, in many cases you can rent the list, but the lister may not let you buy the list and use it as much as you want. It all depends on what you’re going after. If you’re going after people that are going into foreclosure, most of the times the lists are only available for rent. You can use them one time for a fee. If you’re going after absentee owners and you’re working with your local courthouse or whatever to get information on that kind of stuff, then you probably can buy the names and use them as much as you like.

Joe Fairless: How do they protect against the rental not being used more than once if you’re mailing —

Craig Simpson: Yeah, they put in what’s called seed names; those are names that they sprinkle throughout the name file, you don’t know what they are but they do, and there’s companies that set up these remote addresses at different locations throughout the country, and when they receive your mail piece, they will mail it back to you. So they may have 50 locations throughout the United States.

Now, they track who is mailing their lists, and if they see somebody who’s mailing it – because they’re gonna have a specific name on there – they’ll know, and then they’ll come after you.

Joe Fairless: Okay. Now, just to circle back to the list, the copy and the offer… What is most relevant to elaborate on for us as real estate investors?

Craig Simpson: I think for real estate investors I would say that one is the list, know who you’re going to. If you’re going after distressed properties, make sure that you have a targeted list for that and that your copy connects with them, that you’re writing specifically to them about owning a distressed property and how stressful it is, and how you can take it off their hands.

If you’re going to the absentee owners’ list, obviously make sure these lists are quality, that you’re getting them from a good source and that you know them to be true. Going to the absentee owners, make sure the copy connects with them – owning a piece of property that they’re not living in and that there’s pain and heartache there and that you can solve that. Or if it’s going after people with probates – you’re specific in your marketing method, the copy and how you talk to this list of people who have probates available.

Joe Fairless: What else haven’t we discussed that you think we should, based on your expertise in direct mail and our focus in real estate investing?

Craig Simpson: I think the thing is there’s so many different marketing channels out there right now, and it’s important to test and to always find out what works and what doesn’t, and I think that anybody who’s in this niche and they haven’t done direct mail, I encourage him to give it a try, because that’s important, and people could think “Well, how can I use direct mail for real estate investing?” Well, surprisingly, there’s dozens and dozens (maybe hundreds) of people using it all over the country to attract the right kind of seller of property that they’re looking for, and it’s worth an effort on your part to give it a try.

So I don’t know if there’s anything missing here… We obviously can’t go through every detail on how to do direct mail, but I think if I could go away from this call today with one thing in mind is it’s worth giving it a test. It’s worth finding out if it can work for you or not.

Joe Fairless: That’s a perfect segue, Craig – what is the best place the Best Ever listeners can get in touch with you?

Craig Simpson: It would be my website, which is Simpson-Direct.com. There’s also some information about me there, and that would be a great way to reach out to me.

Joe Fairless: We went through a whole lot — well, YOU went through a whole lot, I was just enjoying the ride. I really appreciate you talking through the three things to keep in mind when we’re doing direct mail, ways to make direct mail better, the pain points and testimonials, things to watch out for when we’re interviewing direct mail companies, like the guarantee… You really wanna focus in on testing the frequency; if the list is good, then maybe every month. If not, then less than that – maybe 45 or 90 days. And identifying the ideal audience, although of course anyone receives mail, but the idea audience, as you said, boomers and seniors, but again, everyone receives mail, so test  out based on what your offer is… The budget that you recommend at least minimally starting with, and going from there, which is 5k.

Craig, thank you for being on the show, sharing your best ever advice in terms of direct mail, and we’ll talk to you soon. Have a wonderful weekend.

Craig Simpson: Sounds good, thank you very much.

Best Real Estate Investing Advice Ever Show Podcast

JF1006: How to Build an Online Community and Business #SkillSetSunday

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He helps others find the dream career they’ve been looking for. He does it all online. Hear about his challenges, triumphs, and what he’s up to today.

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Mac Prichard Real Estate Background:

– President at Prichard Communications, a public relations agency
– Founder and publisher of Mac’s List, an online community for people looking for rewarding, meaningful work
– Hosts the weekly podcast, Find Your Dream Job
– Author of Land Your Dream Job Anywhere
– Over 80,000 people a month visit the site
– Based in Portland, Oregon
– Say hi to him at http://www.macslist.org/

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Joe Fairless: Best Ever listeners, 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 fluff.

I hope you’re having a best ever weekend. Because it is Sunday, we’re doing a special segment called Skillset Sunday, where by the end of our conversation you’re gonna come away with a specific skill. Today we’re gonna be talking to someone who has successfully achieved an online platform where he’s generating over 80,000 people a month visiting his site, and he’s the author of Land Your Dream Job Anywhere. How are you doing, Mac Prichard?

Mac Prichard: I’m doing great, Joe. Thank you for having me on the show.

Joe Fairless: My pleasure, and nice to have you on the show. The outcome for our conversation today with you is to discuss setting up and running a business and the lessons learned along the way. Before we dive into that, do you wanna give the Best Ever listeners a little bit more about your background, just for some context?

Mac Prichard: Sure. I run a small business called MacsList.org. It’s an online community for people looking for rewarding creative work. At the heart of it, Joe, is a job board with hundreds of listing for cool jobs, the kind of positions that are either in creative work or nonprofits, or even in government, but jobs that you would like to have. In addition, we also produce a lot of information through a blog, a podcast, books about the nuts and bolts of looking for work and managing your career, because most of us aren’t taught those skills in high school and college; we learn them by trial and error, and because we learn them as we go along, often we get stuck in these periods of unemployment.

So while my business is about helping people find work, I came into this almost accidentally about ten years ago, and also the way I learned some valuable lessons that I think would be useful to your listeners, real estate investors.

Joe Fairless: Yeah, absolutely. As real estate investors, we are entrepreneurs. We are small, medium or large business owners, but we’re business owners, so I would love to learn myself the lessons that you came across along the way and how that’s gotten you to where you’re at now.

Mac Prichard: Well, I think the most important one is the power of relationships and connecting with other people. My business has grown by word of mouth. Our revenue is about $600,000 annually, Joe, and it employs five people. A few part-time, several full-time… But I started my business as just telling people about job openings, and I didn’t realize how valuable the information was that I was sharing, but the people that I shared it with did, and they shared it with others. That power of word of mouth and the relationships that I built as I grew my community has just been a huge part of the success of Mac’s List.

Joe Fairless: Relationships built along the way – can you get more specific as far as how do you build those relationships and what is your specific approach when talking about what you’ve got going on?

Mac Prichard: Absolutely. Because we work in the employment space, Joe. I often get approached by people who want advice about their job hunt or their career, and I’ve always made a point of giving my time to others. So if somebody wants to meet with me, even if I don’t know them, I will make the time. Sometimes it takes a while to get on my calendar, but I will see people, and I do it without any expectation of getting anything in return, and I find that when I do that, I get so much back… Not only offering my time, but my advice and ideas. The relationships and connections that I make through those conversations – and I’ve been doing them for years now – keep paying dividends for years to follow.

The other thing I would say about relationships – I’m often approached by people who say “You’ve got a great business here. I think I’d like to do a job board like you” or “I’d like to be a career coach”, and some people might say “Gosh, I’m sorry, I don’t have time to talk to  you”, but for me, my response is always “The water’s fine, jump right in. Let me share with you what I’ve learned about building this online business. Because I know two things are gonna happen, Joe. One is if they’re gonna be successful – the person I’m meeting with who wants to get into this space – they’re gonna specialize. They’re gonna find a niche that I’m not serving.

The other thing that’s gonna happen is they’re gonna be a partner and an ally down the road. I think again we’re talking about relationships, but generosity and giving to others without any expectation of receiving a return has just been a powerful part of my success.

Joe Fairless: Out of almost a thousand people I’ve interviewed – in fact, by the time this episode airs, it will be more than a thousand, so I will have interviewed more than a thousand people – you are the first person out of the thousand I’ve interviewed on my podcast who e-mailed me before the podcast interview and said “Hey, I love your podcast. I just did a review on your podcast. Here’s the review.” So you’re a living, breathing example of that.

Mac Prichard: [laughs] Thanks. I do try to do my homework, so I wanted to know about your audience and about you and what you like to talk about on this show, so I can not only be of service to you, but to your listeners.

Joe Fairless: It’s not a time-consuming exercise, it’s a thoughtful exercise that you employ. Sure, there is some time, but the amount of thoughtfulness that took and just conditioning yourself to do that is very valuable from a business standpoint, and it just makes you feel good when you give. The way that makes you stand out, in my mind — I mean, I’ve interviewed over a thousand people, and you’re the first person to have done that, and it’s just putting yourself in my shoes, like “Oh, he does a freakin’ daily podcast that’s insane. I bet he looks at everyone who reviews the podcast, because this is his baby”, and that’s true. Having a review added onto that is very beneficial for my own purposes, to have more positive reviews about the podcast. So it’s just putting yourself in other people’s shoes, and that’s one of the things that stood out to me, and we had never talked before; this is the first time we’ve actually had a conversation one-on-one, and it set the stage for how I approach my conversation with you, knowing that’s how you operate.

Mac Prichard: Thank you, Joe.

Joe Fairless: On that note, do you do other proactive things like that when you’re either introduced to someone, or you know you’re gonna be introduced to someone? Do you do certain things like that, and if so, can you give a specific example?

Mac Prichard: Sure. If I meet someone at a networking event or a dinner and we have a meaningful conversation (not just nod and shake hands) I will make a point of connecting with them on LinkedIn and I always, when sending a LinkedIn invitation – write a personal note, just a sentence or two, just reminding the person how we met. I tend to meet people in my world, so generally we’ll cross paths again, but doing that follow-up where you connect with someone on LinkedIn or you start to follow them – I’ll follow people on Twitter, as well… Again, people that I’ve had some kind of significant connection with, because so much of business, as you know, is about building relationships and getting to know people, and eventually liking and trusting them, and that’s how deals are made.

Certainly in the employment space we find, and I’m sure that your listeners have had this experience, too – while I run a job board and I’m proud of the public listings that we have and the value that employers get from those listings – most jobs gets filled by word of mouth. There are estimates out there that up to eight out of ten jobs are never advertised and are filled by conversations between peers. There’s no conspiracy here, you don’t have to have gone to a fancy school, it’s just that it’s human nature – people tend to want to work with people they know, like and trust, or who are recommended to them by people they trust. So I find that that’s true not only in the hiring process, but when you’re doing business, as well. It underscores for me the power of relationships, and making real human connections with other people.

Joe Fairless: I loved the comment about LinkedIn and how you write a personal note to that individual after you meet, you don’t just blindly say “Connect”, because it’s personal, it reminds them of how you met. But also, what I found – and I do the same thing 99% of the time… I’ll admit, I’ve gotten sloppy over the last 3-4 months, but that was my mantra up until the last 3-4 months, and I’m gonna get back on this now that we’ve talked about this.

One thing I will say is an additional benefit of writing the personal note is I might forget three years from now how I met them, and I’ll be able to reference, because LinkedIn keeps a thread of the previous messages… I’ll be able to reference how I met them if I want to reconnect for whatever reason, and that’s very valuable.

Mac Prichard: It is. Also, if I meet you and you give me your card and we have a real conversation – again, I’m not one of those people who walks into the function room at the airport Holiday Inn and blankets the space with business cards… I look for real connections, quality conversations. But if we do meet, I’ll make a note on the back of the card after the event, and when I enter it into my database I’ll put a short note there, just five or six words about how we met.

Just this morning I was at an event, a fundraiser for the Alzheimer’s Association in Oregon, where I happen to live and work. A lady sat next to me and she says “Hey, how are you? We’ve met before”, and I didn’t remember, but she reminded me and gave me her card. Then I went back to my office and I was updating her record and there was a note there saying that we had met five years earlier and that she had gotten her job that she has today through the job board that I operate. So just being reminded of that reinforces the connection and makes it even more real.

Joe Fairless: What database do you use?

Mac Prichard: Just Google Contacts… [laughs] I keep it simple. We’re a small operation and we just don’t have the infrastructure and the size of staff to try something like SalesForce, which is valuable, but for a smaller operation we don’t need all those [unintelligible [00:12:43].09]

Joe Fairless: Okay. Now I wanna talk a little bit about the business side of things… Your company is generating $600,000 of annual revenue – is that money coming from advertising sponsors, primarily?

Mac Prichard: It’s largely revenue from the sales of job listings. If you go to our website, MacsList.org you’ll  see a job board on the homepage, and employers paid to put listings there. The reason they do it, Joe, is because they save time and money. They get fewer applications with the posting on our site, but they’re the right ones. That means they don’t have to weigh through hundreds of resumes; they’ll get a few dozen, and 80%-90% of them are from people they wanna hear from.

We also, in addition to serving employers, because we heard from so many job seekers and they tell us that they struggle with the basics of job hunting, setting goals, doing informational interviews, polishing up their interview skills – we also provide education and training services. That’s still a small part of our business, but it’s growing. So we’re serving both communities – both employers and job seekers.

Joe Fairless: Your business has grown via word of mouth primarily, you said. What mechanisms – if any – have you put in there to help facilitate that?

Mac Prichard: It’s a great question. We find that collecting testimonials from both employers and job seekers helps promote that word of mouth; it also adds authenticity to our work, because when we do publish testimonials on our website, we ask job seekers to share their success stories on our blog, we ask people if we can publish their full name and their photos, and people who read these stories or see these testimonials – they see people who look like them, or are chasing jobs that they want, and they can identify.

It’s not surprising to me, because if you think about how people make decisions when they buy, if they’re thinking about a restaurant, they go to Yelp, they read the reviews. If they’re thinking about buying a book or an electronic product or anything on Amazon, they pay attention to the reviews. So we find that one way to support and increase that word of mouth is to collect those reviews and testimonials and those stories and share them.

Joe Fairless: Do you do video testimonials or text, e-mail testimonials and you just copy and paste that info, or anything else?

Mac Prichard: Right now we’re just using text and photos, and we’re certainly very interested in video, because a video, as you know, is so much more engaging and makes an emotional connection that can be much more powerful than you get with written word.

Joe Fairless: When did you launch the company?

Mac Prichard: Mac’s List is a side project. For years (nine years, actually) I just sent out job postings to a small list of friends, and I started hearing from people who wanted to be on the list and employers who wanted me to send postings, but it wasn’t until late in 2010 that I’ve started charging for my services.

Here’s another lesson I wish I knew back then, or 15-16 years ago. If you’re providing a valuable service and people were saying yes to your e-mails or whatever it is the product/service you’re providing for free, chances are they’re doing that because you’re providing something of value, and you should charge for that. It took me a long time before I flipped the switch on monetizing it, and I’m sorry I didn’t do it sooner because I could have served more people and grown the company and the community even more.

Joe Fairless: Was there a year that your growth did more than other years, and what would you attribute that to? In terms of revenue.

Mac Prichard: Yeah, the last two years our revenue has increased by about 40%-45%. The reason that’s happened, Joe, I think is because I invested in full-time staff, and I also invested in people who were mid-career and knew something about the business and could help me grow it.

Joe Fairless: People who weren’t right out of the gate fresh in the industry, but had some seasoning and brought some expertise to the table?

Mac Prichard: Correct. I didn’t go cheap, I didn’t look for recent college graduates; not that there’s something wrong with that, but I needed more seasoned, experienced people who could actually help grow the business and who had experience doing that.

Joe Fairless: Best Ever listeners, this is a sneaky interview because on the surface it might seem like we’re talking about an online platform to help job seekers and employers match up, but the more we talk, the more I’m seeing about 5 or 6 points that are incredibly relevant to us as real estate investors and entrepreneurs. One is how we grow our word of mouth, and that is by collecting testimonials from people… As simple as text and photos would work. Two is how do we stay in touch with people, and that is sending them not only a LinkedIn request (we all know that), but how many of us actually send a personalized note to the individual. If you do, pat yourself on the back, nice work. I need to get back into that, and I will from this point forward, because it’s a great thread that we can look at and review in the future if we forget how we came across them.

Three, if an aspiring competitor wants to talk about our business because they wanna create something similar, think of them as an ally, versus the competition, because if they are successful, as you said, they’ll probably be serving a slightly different area or a slightly different demographic, and I can tell you, I whole-heartedly embrace this because my business is multifamily syndication; I raise money, I buy apartments with high net worth individuals and we’re sharing the profits. Well, I also interview people who do multifamily syndication, and it’s because the listeners need to have exposure to more people than just me who are doing what I do, and I live in a world of abundance, which you do as well.

The fourth thing is revenue growth – how did you go from where you’re at to getting 40% increases in revenue year over year, the last couple years, or in those two years you mentioned… That was hiring people who are the best of the best and paying them accordingly. Is there anything else that we haven’t talked about that you wanna mention as it relates to growing a business and lessons learned?

Mac Prichard: I guess I wanna underscore a point — great summary, Joe… Just about the power of generosity and helping others, and how much you get back in return when you do that.

Joe Fairless: I’ve got some warm fuzzies when your name comes up, because you’re the first one out of 1,000 people to actually write a review and send it to me prior to jumping on the call where I interview you on my podcast. So you walk the walk, that’s for sure.

Mac, where can the Best Ever listeners get in touch with you or learn more about your company?

Mac Prichard: Well, they can visit our website. It is www.macslist.org, and we’ve set up a special landing page where they can get a free chapter of the book. Just go to MacsList.org/bestrealestate and the book is Land Your Dream Job Anywhere. I know you focus on investors and small business owners, but many of the principles that we talked about about networking and relationship-building you’ll also find in the book, and they’re equally valuable to small business owners as well as job seekers.

Joe Fairless: Outstanding. Of course, on your book page that I’m on right now, you have testimonials, and everything that we’ve already talked about about the book itself, so thanks so much for being on the show, Mac. I hope you have a best ever weekend, and we’ll talk to you soon.

Mac Prichard: Thank you, Joe. It’s been a pleasure.

 

 

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JF937: Why Picking the RIGHT Partnership is Key in Wholesaling

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Our guest is doing many types of deals, but he does them with a partner makes up for his weaknesses. If you have any weaknesses, which I’m sure you do, you need someone there to compensate for your loss and leverage what you can’t or shouldn’t do, get a partner!

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Travis Daggett Real Estate Background:

– Owner at CornerstonePropsCo, a Premiere Real Estate Redevelopment & Renovation Company
– Full-time real estate investor for five years
– Made 5 figures on his first wholesale deal..correction: 4 figures…you’ll hear about it in the interview 😉
– Married 19 years and has three amazing kids
– Based in Eugene, Oregon
– Best Ever Book: Visioneering

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picking real estate wholesale partner

 

Joe Fairless: Best Ever listeners, 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 fluff.

With us today, Travis Daggett. How are you doing, Travis?

Travis Daggett: Doing great, thanks Joe!

Joe Fairless: Nice to have you on the show, my friend. Travis is the owner at CornerstonePropsCo, a premier real estate redevelopment and renovation company. He’s been a full-time real estate investor for five years. He made five figures on his first wholesale deal. He’s married 19 years and has three amazing kids, and he’s based in Eugene, Oregon. With that being said, Travis, do you wanna give the best ever listeners a little bit more about your background and your focus?

Travis Daggett: Yes, sure. Well, the five figures doesn’t really sound that impressive… However, I did start with literally no money, so that was a deal where I think I had an earnest money deposit in the deal, and I netted $7,000+. So it was a little better… That could be a $1,000, that’s no big deal, but for my first deal, it was alright.

Joe Fairless: Well, five figures would be $10,000+, because that would be five numbers.

Travis Daggett: Yeah, see…? This is the truth, that you don’t have to be a genius to be a real estate investor. [laughter] There’s a lot smarter people doing all kinds of things, but they’re not necessarily making more money, and sometimes they’re too smart for their own good.

Joe Fairless: [laughs] Alright, so you made 7,000 on your first… Let’s start there, how about that? Let’s start with your first wholesale deal. You made $7,000 on it. Can you tell us the story about that a little bit more?

Travis Daggett: Before this I was a sales trainer for an insurance company, and I was traveling all over… They’ve laid off about a quarter of the staff, so that was the blessing in disguise. I just started learning everything I could. I had a couple of rentals before, and that was about the extent of my real estate investing experience. I started learning about wholesaling, specifically HUD properties. This was 2011 when there were a lot of HUDs, and there was just a little loophole where you could make bids every single day on HUD properties, and you really could do it yourself. You could just find an agent that was sympathetic, I guess, and get their login information, essentially, work with them as their assistant if you needed to be an unlicensed assistant, and make bids every single day… So that’s what I did.

I got a property under contract, and then I found the buyer and did a back-to-back closing, because the HUD won’t allow assignments. So I bought it for seven and sold it for seventeen. All I had was the earnest money deposit out of pocket, which I think was $500; I had some closing costs, and type of a thing, so I think I netted over seven.

Joe Fairless: Alright, that was your first wholesale deal. Catch us up to speed, from then until what you’re doing now.

Travis Daggett: Well, 2012 was great, because there were a lot of HUDs, and I started thinking (mistakenly) that I was in the real estate investing business. At that point I really wasn’t in the real estate investing business, I was more in a tech business and real light on the real estate investing. That lead me to think I knew more than I knew, and started buying at the auction… Which, of course, was okay and I did alright, but then I thought I could get into rehabbing without really understanding it.

2013 is when I bought a property or two wrong – when I say “bought wrong”, I made the first and maybe the most deadly mistake in real estate investing, which is just buying for too much. It’s really hard or impossible to overcome that mistake.

So I made some mistakes along the way, and then HUD dried up, as a lot of people probably know. Auction properties dried up – by that I mean the supply went down, competition went up, so I needed to learn to source my own deals directly from sellers. I started doing that in 2014, and it’s been a rollercoaster, both results-wise, and when you’re self-employed, it’s an emotional rollercoaster too, but I’ve been really fortunate to partner with somebody that knows more than me and learned from him for the past couple of years.

We haven’t bought off the MLS since 2013, I think, and we sourced our own deals for the last two or three years.

Joe Fairless: And what type of volume are you doing on a monthly or annual basis?

Travis Daggett: Nothing crazy… I used to think that was the goal, to do more deals, but now I’d rather do less deals that are more profitable. Probably the average is a deal a month, but we did have one deal that was over six figures, and we had a wholesale deal that was almost $50,000, so we’ve been able to get some more profitable deals, and focus on that instead of volume.

Joe Fairless: And since you are selective with the properties that you end up working on, what is your criteria that you look at for a property to pass the test?

Travis Daggett: Well, we have two main targets or lists that we’re going after, because most of our deals come from direct mail… So the first one is properties where we’ve actually driven through neighborhoods, seen the property, wrote down the address, looked up the owner information, sent him a letter… That’s really the most valuable and valuable list that you can have – at least we believe – because we don’t have to guess at whether the property is a property that we wanna buy. When we’ve marketed to the absentee owner list in the past, we got people calling, they have a move-in ready house, and really that’s not good for them, not good for us. There’s really no way for us to create value or margin in a transaction like that, because we’re not real estate agents looking for listings.

So the first target is residential properties, mostly single-family, and we just call it our “driving for dollars” or our neighborhood list. The second is foreclosures, when the bank has filed either a notice of default for non-judicial foreclosure, or a lis pendens for a judicial foreclosure, because in Oregon we have both.

We’ve gotten a number of deals that way, targeting that list. That’s a lot more labor-intensive for each transaction.

Joe Fairless: Will you walk us through the process for how that works, and your role, and what data resources you need to have access to?

Travis Daggett: When I started in 2011 on HUD properties, again, it was real admin-heavy, it was really more of a tech business, and thankfully that’s an area where I’m stronger… So I started using virtual assistants, and I couldn’t have done what I did then without them, and I couldn’t do it now. We use virtual assistants to do a lot of the scrubbing on our lists. We’ll go out and drive through a neighborhood… Let’s say we take a day and we come up with a few hundred addresses, and then the VAs – they’re usually overseas, they’re in India or the Philippines – during the night (over here), they’ll use Property Radar (or whatever other site we need for that county) to find the owner’s names and their mailing address, because they may be different, and that completes our list.

With the foreclosure properties, we just get those from the title company, that’s free. There’s scrubbing involved there though as far as prioritizing the properties that we’re gonna go after more heavily in the beginning. Equity, for sure, a property with a good interest rate in case we wanna assume the mortgage or purchase it subject to the existing mortgage, that type of thing.

Joe Fairless: Will you tell us about the last deal you did? Give us the numbers and tell us which one of these paths allowed you to find it.

Travis Daggett: Yeah, sure. The final numbers aren’t in on that, but that’s fine, we can go through the process pretty well. The property that was on the foreclosure list, it was non-judicial foreclosure. We always have to have a cooperative seller, of course, or a cooperative homeowner. We wanna help them, they have to want the help, and it’s really a win for the bank too, if you understand negotiating for the bank. They’re not in the business of property restoration, or property management, or really anything to do with properties, so it’s a win for them.

So there were two loans on the property, we went through a number of rounds at the bank of negotiating, and we were able to postpone the sale a couple times, which helps us. In this case, we actually worked successful in negotiating a discount with the first lender, but we knew even if we purchased it for the amount of the first mortgage and the second it’d still be a deal, so we went ahead and paid off the first – they were the ones foreclosing – and then we continued to negotiate with the second, even though they really had no reason to negotiate with us… But we thought we’d just give it a shot, and ended up getting it for the amounts in the first and the second. But it was still a deal, especially when you consider the market here, where it’s less than two months of inventory, so it’s very competitive.

Prices are going up — we’re not buying for speculation, but were all in on our purchase I think at 140, and as it sat, it’s probably worth in the upper hundred, and then with a renovation of probably 30,000 (nothing major), it’d be worth in the low two-hundreds, and we’ll probably rent it out for 1,500/month, I would guess.

Our aim high is definitely a 1% rent-to-cost ratio. In that Eugene area we also have appreciation, so we’ll go anywhere from 0.75 to 0.8%, up to 1% rent-to-cost ratio.

Joe Fairless: Is your goal to buy and hold these properties?

Travis Daggett: Right, so my partner has a property management company, and that’s our partnership: I find the properties, so I’m in charge of the marketing and finding the deals, and then at that point he really takes over as far as the property management side. That’s what we’ve done on all but one; we’ve wholesaled one, but everything in the last couple of years, we’ve held on to through this property management company.

Joe Fairless: And do you just split the costs 50/50?

Travis Daggett: Well, cost of the marketing — again, I was really fortunate to find a guy that really knows this stuff and he’s honest. We met at a real estate investing REIA group (Real Estate Investors Association). So yeah, we basically split the costs upfront for the marketing, and then since we’re not cashing out the property so to speak, we just did an appraisal on the property, because usually we’re gonna finance out of it with a bank loan… So now we have an appraisal, we know what we’re all into it, so we have our equity in the property.

At that point, I can either say, “Well, okay, I’ll take the equity as a payout right now” or I can say “Well, I’ll stay in the property and we’ll just split the cash flow.”

Joe Fairless: Oh, okay. Alright. Either one of you have the flexibility to cash out your equity at closing and be done with that property, and the other person holds on to it, or you both have ownership and enjoy the cash flow and appreciation…

Travis Daggett: Yeah. I mean, it’s really more of his choice than mine. I’m fine with that, of course, because he’s got the property management company. But it’s just one of those — I’m sure people have been in bad partnerships (and good ones) and it’s probably pretty rare (I’m thankful for that) that there hasn’t been that tension when we feel like we’re on opposite sides of the table. For the most part, we feel like we’re on the same side of the table; we’re not negotiating against each other, so it’s been a good situation.

Joe Fairless: Yeah, it’s refreshing when you have a business partner like that. Just for point of clarification, you said it’s really up to him on that… I don’t understand that point. Can you elaborate?

Travis Daggett: We have different ways of looking at who controls a deal, and whose it is, so to speak, who owns it. So since I’m finding most of the deals, I could say “Okay, these are my deals.” However, early on, just because of the nature of our partnership and relationship, we both just agreed all the deals we just throw into the pot.

We were in a situation where I was saying, “Okay, here’s the deal. How much do you want for it?” It’s a traditional wholesaler type of attitude. I said, “Here’s the deal, let’s see what we can do with it?” A part of it is he has access to a lot more capital than I do (at better rates, at least), so he’s funding the deals, so I’m happy to give him a lot of the decision-making that way, too.

Joe Fairless: That makes sense.

Travis Daggett: Yeah, we’re both in agreement. It’s not like I’m saying, “Hey, we should flip this thing because we’re gonna make six figures just after doing floor and paint” and he’s saying “No, I wanna hold to this.” Most of them it’s pretty clear when we buy it it’s gonna be a rental.

For example, we purchased one for a few hundred thousand in Eugene, so that one we know it’s gonna be a flip when we’re done with the rehab.

Joe Fairless: Okay. The point I had missed was that he was financing them and you were finding them. Once you said that, it made a lot of sense.

If you partner were to move away – for whatever reason – and you had to find a new partner, how would you qualify that new partner so that you would attempt to have the same caliber or partner that you have now?

Travis Daggett: Tough question. In partnerships in business, and I’m sure just generally in life, it’s usually (from my experience) more of the intangibles or the character issues that damage partnerships or damage businesses, as opposed to people’s aptitudes. I think we all know really smart, skilled people that can self-destruct and destroy partnerships.

In the case of my partner, I was able to thankfully observe him for a couple of years just through the REIA and just through some acquaintances, and watching him and his business, and seeing that he was someone that did what they said they were gonna do. He had a track record of success in partnering with other people… Without that knowledge, it’d be really tough to find a partner or to choose a partner.

I’d have to start with somebody that plays to my weaknesses… Kind of like a marriage – if you have the same strengths and weaknesses, that can be a little bit of a challenge. So it should be somebody that is strong where I’m weak, and maybe where they’re weak, I’m strong. In our partnership now, I’m certainly not strong in negotiating and funding. I’ve gotten pretty strong in admin and stronger in marketing… So I’d say somebody that’s strong in the funding side and the construction side, that’s who I’d look for.

Joe Fairless: What is your best real estate investing advice ever?

Travis Daggett: I kind of alluded to it earlier… I’d say don’t be confused about what business you’re in and what your strengths actually are, because I think pride and arrogance and blindness in that area can really destroy you.

Joe Fairless: Now, are you ready for the Best Ever Lightning Round?

Travis Daggett: I’m ready!

Joe Fairless: Alright. First, a quick word from our Best Ever partners.

Break: [[00:18:26].14] to [[00:19:07].24]

Joe Fairless: Best ever book you’ve read?

Travis Daggett: Visioneering, by Andy Stanley.

Joe Fairless: Best ever deal you’ve done.

Travis Daggett: A deal in Eugene… It was a short sale, over six figures in profit.

Joe Fairless: Now, is that six figures, is that seven, or is that five or four or three? I have to ask you now a second time.

Travis Daggett: I got it straight now, this is tax season. [laughter] I gotta nail it.

Joe Fairless: Best ever way you like to give back?

Travis Daggett: I think it’s just the lifestyle, it’s really plan. All of us can give emotionally when we see the kid on TV with the belly sticking out, but I think giving is really a lifestyle, so it’s planned. We plan that we’re gonna give a certain amount, we’re not just surprised at the end of the year when we do our taxes.

Joe Fairless: What’s the biggest mistake you’ve made on a deal?

Travis Daggett: Well, I think I talked about this one earlier, but I’ll relive that painful memory again… Bought at auction, so of course, it’s done, paid cash; trusted a partner who unintentionally — he just was outside of his area of expertise as well… Then we made it worse by over-rehabbing it by about double, then we made it worse still by selling with seller financing — not that that’s a bad strategy in general, but just delaying our misery… And then ended up taking the loss I think two years after we bought it. We should have just swallowed the poison a couple of years earlier and taken a loss.

Joe Fairless: Tell us about the six-figure profit that you made. Tell us the numbers on that one.

Travis Daggett: Really desirable area near [unintelligible [00:20:41].28]. It took over a year to finish it, to close on it. When we first shot – short sale, direct mail marketing, they called us… As soon as we looked at it, even online, looked at comps and stuff, we knew that it was a great area property, we really wanted to have it. Even before we looked at it, we said “If we can get this anywhere near 300,000, it’s a deal.” So we met with the sellers, they were very cooperative – he was actually a patents attorney, so he knew a little bit about the legal process. It took a long time, a lot of handholding – I don’t mean that in a condescending way – just walking him through the process and negotiating with the banks, meeting the VPO agent there, dealing with all kinds of liens that popped up with credit cards, and just going through that whole process.

We ended up buying it for 244,000 I think, so just right out of the gate we had probably 50,000 in equity, and then it was a light rehab… Of course, over the years, from when we started to when we finished, that area went through the roof even in property values; it probably went up double digits, so we ended up with over a hundred thousand dollars in equity when we ended up closing on it, finished rehabbing and then appraised.

Joe Fairless: That’s great. How much did you put into the rehab?

Travis Daggett: About 30. Maybe less. Maybe 25.

Joe Fairless: And what did you sell it for?

Travis Daggett: No, we held on to this one, because it’s a hot campus rental area. I really don’t know off the top of my head what we rent it for, but I would have to guess it’s in the twos. I couldn’t see it renting for less than 2,000/month.

Joe Fairless: Yeah, sounds like a great buy and hold, that’s for sure. Where can the Best Ever listeners get in touch with you?

Travis Daggett: The e-mail address is selltocornerstone@gmail.com. That’s my business, Cornerstone Properties Eugene is the name of the business.

Joe Fairless: Travis, thank you for being on the show, and talking about the deals that you’ve done, how you’re getting those deals, the hundred-thousand dollar in equity that you have as a buy and hold, how you found it and the short sale process… Along with the partnership stuff, because that’s really important. Real estate really is a partnership and team environment, and we have to be careful who we partner with.

I love the approach that you take. It is really about having someone who plays to your weaknesses, and I found out the same thing with my partners that worked out – they are strong where I’m not, and I’m strong where they’re not, and it makes for the best partnership.
Thanks so much for being on the show. I hope you have a best ever day, and we’ll talk to you soon!

Travis Daggett: You’re welcome. Thanks, Joe!

 

 

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