JF1615: How To Set Up A Development Business For Four Unit Apartments #SkillSetSunday with Steven Bond

Steven is a returning guest who has built an incredible development business. One of his strategies is to build four unit buildings, rather than single family homes or large apartment buildings. He has been doing that for years and has a very large portfolio because of it. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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Steven Bond Real Estate Background:

  • Co-founder of Fourplex Investment Group (FIG)
  • FIG has sold over $400M in 6 years in and they have a turn-key multifamily investment vehicle for investors nationally and internationally
  • Hosting The Intermountain Real Estate Investment Summit in February 2019
  • Listen to his previous episode: JF485: BYU Dropout Began During the RECESSION and WON!
  • Based in Provo, UT
  • Say hi to him at http://www.fig.us/

 


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TRANSCRIPTION

Theo Hicks: Hi, Best Ever listeners, and welcome to the best real estate investing advice ever show. I’m your host for today, Theo Hicks, as Joe is traveling to Texas to look at a few apartment deals.

Today is Sunday, so you know what that means – it’s Skillset Sunday, so we will be talking about a specific skill that you can apply to your real estate business. Today I am speaking with Steven Bond. How are you doing today, sir?

Steven Bond: I’m doing great. Thanks for having me on the show today.

Theo Hicks: Absolutely, I’m looking forward to our conversation. A little bit more about Steven’s background before we get into his skill – he’s the co-founder of Fourplex Investment Grup, otherwise known as FIG. FIG has sold over four million dollars in assets in six years, and it is a turnkey multifamily investment vehicle for investors nationally and internationally. He will be hosting the Intermountain Real Estate Investment Summit in February 2019. You can listen to his previous episode all the way back in episode #485, entitled “BYU dropout began during the recession and won.”

Steven is based in Provo, Utah, and you can say hi to him at fig.us. Steven, before we get into your skill, can you tell us a little bit more about what you’ve been focused on since your last interview?

Steven Bond: Yeah, absolutely. It’s interesting. Last time your group reached out to me to be on the podcast I think somehow you found me on Bigger Pockets, through some forum post I made or something, but at the time I had just bought our building to expand our offices. A fresh real estate broker who bought a RE/MAX franchise, and there was construction going on all around me.

As we were on that phone call, I was running from space to space, trying to avoid the hammer sounds that were in the background. We were renovating an old building built in the 1900’s of 26,000 square feet for all of our offices. Now we’ve been going for three years, the building is thankfully done, and we’ve been growing the business since then.

We started a property management company, we expanded to two new states officially – we’re in Texas and Idaho now, in addition to our developments in Utah. We have some sites that we have LOIs on, and now the Colorado market, and in Arizona as well.

Theo Hicks: Great. So the skill we’re going to talk about today is how to set up a development business, because Steven is a developer. More specifically, we are going to talk about how to set up a development business for fourplexes. I know that you do more than fourplexes, but since it’s in your name, I think that should be the focus of the conversation.

I’ve actually never heard of a developer who does fourplexes. Most developers I’ve heard of are either doing single-family homes, and obviously individual homes or communities, or these larger apartments… So that’s my first time hearing about fourplexes, so maybe to start it off you could tell us about what’s different about developing fourplexes compared to, let’s say, larger multifamily apartment complexes?

Steven Bond: There’s typically this evolution of real estate. Someone that says “I want to be a real estate investor” goes to some type of REIA, or gets on Bigger Pockets, for example, or The Joe Fairless Show, and quite often, this person who’s super-motivated and excited doesn’t have a whole lot of cash. Now, where do they start? They start in wholesaling, or using other people’s money. Then they get a couple rental properties and they realize, “Man, I need to get more doors per loan”, so then they get a duplex, triplex or fourplex and they house-hack. Great strategy. Then they start to get a couple of those and then they get into larger multifamily to get into the commercial stuff.

We wanted to carve out this real specific space… About six years ago my partner and I  – he was a builder, I was his real estate agent – said “Where is the market not paying attention to?” and it’s the fourplexes. A very hot product, because now you can get 40 doors with Fannie Mae financing, because you can get up to ten loans; fairly decent LTVs, 30-year amortizations… A great product, and a good hold strategy, but they hadn’t been built since pretty much like the 1970’s and 1980’s on large scale. Back then, almost every major metro area has that area of town that has these fourplexes, and they usually don’t have the best reputation, but the owners love them as an asset.

So my idea was “Why don’t we build new?” and as we came out and went to the cities, they said “No, there’s a reason – we don’t want those in our town anymore.” So my partner being a genius, actually – he’s the one that came up with the concept of “Well, we can do this differently. Let’s go to density zoning in open land through these cities, and we’ll get a PUD plat that will be typically for multifamily and apartment complexes, or townhome communities or condo communities, but all we’ll do is define each set of four parcels that would be townhomes or condos, and give it one tax ID, and pre-sell it to an investor as a fourplex. We build it out, we have the management company and we then stabilize it for that client at completion.”

Theo Hicks: That’s interesting. I actually own three fourplexes in an area called Pleasant Ridge in Cincinnati. There are a ton of fourplexes in that area, and for similar reasons I really like it. I had bought a duplex before, and it was a good investment, but a fourplex is great because it’s still a residential loan, but you’re getting four doors. So thinking about the ten loans, that’s 40 doors, as you mentioned, before having to do any other sort of creative financing.

Steven Bond: Exactly.

Theo Hicks: So basically what you do is you go find a piece of land, and once you have that land is when you start the process of finding a client who wants a turnkey fourplex? Is that correct?

Steven Bond: Yeah. We have a large database of followers. Basically, we have a community of usually on average 200 units, and our typical buyer – again, they don’t wanna be a landlord… Also, in some of these fourplex communities built in the ’70s and ’80s there’s no way to control what your neighboring investor does with their asset. So all of a sudden when their roof needs to be replaced and they don’t reinvest into capital expenditures and make it nice, it draws down the value of your asset (because you’re right next door) and the quality of renters etc. when there’s too many bikes out, or the landscaping is not maintained. We didn’t wanna have those issues in our communities, so our investors really liked the fact that they’re buying a fourplex next to another fourplex that’s managed collectively by an HOA, so that my asset is now preserved and valued.

There’s always a reserve to take care of all maintenance needs, for the benefit of all us collective fourplex owners in the community now. The landscaping is done, the pets are managed, there’s not bikes out on the front porches that are not managed through a community management. So it’s that person who says “Man, I’d love to own an apartment complex, but I can’t quite afford to do that myself, so I’m getting a piece, but I’m getting it fee-simple, not in  a TIC or in a limited partnership. I won  my fourplex in this whole community, so if I wanna liquidate and take the upside equity, I can do that without any restrictions; I sell my fourplex and can go trade it into something else.”

So that’s this little in-between space of the fourplex world that no one else, to our knowledge, is doing anywhere.

Theo Hicks: How many fourplexes are in one of these communities?

Steven Bond: On average we do 200 units per community; some are up to 355, some as small as only 40 units. So we’ll have anywhere from 10 to 70 fourplexes in one project.

Theo Hicks: Okay, so you’ll identify a piece of land, and then based on that size, you’ll determine how many fourplexes you can put on that piece of land?

Steven Bond: Yes, exactly. During the entitlement process, where we’re working with the city for our rezoning and getting our platting approved, we put our proformas together and all of our market data on what the rents will be, and what the absorption should be, and the expenses for managing this community; we put our proforma together, release it to our database, and start taking reservations.

Once the plat records, then those reservations turn into full-on contracts that are held with deposits, and then that investor gets their construction loan. At the end of completion of construction, our management company takes over and stabilizes that asset for them.

Theo Hicks: How do you determine what the rents will be in those communities, since you’re starting from scratch?

Steven Bond: Basically, comparable analysis. Depending on what market it’s in, and how quality the data is – if it’s shaky data, then it’s literally just boots on the ground, we’re going around to all the surrounding communities and find out exactly what it rents for, we go into places like Zillow to see what other owners are marketing their rents to be in that area. We’re finding some of the commercial brokerage houses to get vacancy rates in the area and stabilization times, finding what jobs are coming into the area… So before we ever pick a market to go into, we know what the vacancy rate is, we know where it’s trending, we know how many communities are being built – as far as we can control, and this is always in a closed caption of time; so a new project could be approved, but we know what’s coming. So we’ve done all that market research to make sure that our investor is getting a good asset at completion.

Theo Hicks: And what types of returns is an investor seeing for these turnkey, new development fourplexes?

Steven Bond: For any market we go into, our goal is always to be at least 1% cap rate higher than resale market is giving them, and usually we’re 1% to 2% cap rate higher than the trading market… And we have to be, because quite honestly, if you or I were looking at something today to buy, another fourplex, if that was what we were looking for, why would we wait for construction for the same exact cap rate I could get today, and it’s ready to trade right now? So there has to be an equity play on cap rate.

Specifically, in our markets, we’ve been anywhere from a 6% cap to about an 8% cap, depending on the market and when it was delivered to our investors.

Theo Hicks: How do you find the land to build these fourplexes on?

Steven Bond: Within the FIG ownership there’s a land partner who’s specialized in work for builders throughout Utah, historically, and he’s [unintelligible [00:11:55].14] and entire developments, and has relationships with landowners for these big tracks of land, and he’s our land broker, essentially.

Now, we call him a land broker, but really he’s working with other brokers as well. People will bring us land opportunities… But he’s the bird dog, he’s always out, looking in these different states for different land opportunities that will be a potential to rezone, or that have already have rezoning, to take through as another FIG development.

Once he’s established a top three in a new market, then our marketing team and our property management team comes in to say “Yeah, this is good, and here’s why – because this job is coming into the area” or “The absorption of these types of inventory that we’re looking to build here – we’ll do really well.” Or the exact opposite – he brings us a land opportunity and we say “Actually, this company is not doing so well, and it has 13% of the jobs in the area, so we don’t believe that this is going to be good for our investors, so take that one off the list.”

So from the land guy it goes over to marketing and management to ensure that the asset will be what we want it to be for our investors when we actually pull through and have it completed.

Theo Hicks: Whether using this person as an example or anyone else on your team, what tips do you have for finding the right team member for whatever job it is you want them to do?

Steven Bond: You’re saying for literally any position? Is this a question solely on “How do you hire the right person for any job”, or is this specifically for land?

Theo Hicks: You can take it either way. I would just say in general, but you can use this person as an example, how you found them, how you qualified them and things like that.

Steven Bond: Yeah. One thing that’s really important to our culture is that the mindsets of all those we work with have to be a mindset of abundance. If they’re someone that has a scarcity mindset, that’s constantly trying to pull all the cards on the table to their side, they don’t really fit with our group. Our entire business model is built around giving equity to our investors that trust in us, and finding ways to cut costs, so that they can get the best yield on their investment dollar. So if we have an employee that doesn’t think that way as well, again, it’s not a good fit.

I would say that translates to anything that an investor is doing in our space – if  you’re doing a deal with a seller and you’re always so one-sided that you’re looking to take one over on someone, it’s just really hard to get ahead in our world, because it’s a relationship business, and people end up just not trusting you, and you end up not making the loyal followers that you’re really looking to do, and building a growing real estate business.

Joe Fairless and your group is definitely like that. You wrote this phenomenal book which I’m pouring through right now on your apartment syndication, and it’s that mindset of abundance that says “Hey, I’m not gonna be hurt by trying to lift all the people around me.” That’s really worked for us as well.

Theo Hicks: Yeah… And those people are just annoying, too. I have a couple friends who are like that. [laughs]

Steven Bond: Yeah.

Theo Hicks: Let’s talk about this database of buyers, because if you’re on average doing 200 units per community, I’m assuming that you want those to sell pretty quickly, so that’s gonna be 50 different investors, or at least 50 different properties you need to sell, so… How did you build up that database of buyers? And another question would be what percentage of those people are consistently buying, and what percentage of them are newer, or just doing one-off deals and never doing one again?

Steven Bond: Just to hit the second question first, on average about 70%-80% of our projects are repeat clients, or referrals from a repeat client. Then the rest is new blood that’s coming in to invest with FIG. It’s become quite viral within our own group of investors.

How we found them to begin with is we just simply pre-marketed, we built a website (fig.us) and we marketed through LoopNet. We traditionally didn’t go through the MLS, and a lot of that just had to do with the kinds of calls that we would get – people that didn’t understand internal rates of return, or cap rates, or how valuable the assets were that they were looking at, so they thought that the only was value was in negotiating it so low where it just didn’t work… Whereas once we started working with more educated investors by going to platforms like LoopNet and our own websites and web channels, we found that the quality of investors just really was increased.

They understood what kind of assets we were delivering to them, and what was going on in the area, so it just became a more seamless process with that clientele. So as far as absorption of our inventory, right now we pre-sold our next batch of releases that we’ll have closings in spring through fall of 2019. We have about 800 doors of inventory that we’ve been selling in the last three months. We’re either 100% sold out in those developments – it’s three new developments in Idaho, Utah and Texas – or we’re at least 70%-80% sold out in those developments already, and we haven’t even [unintelligible [00:16:53].00] the dirt yet to start construction.

Theo Hicks: You mentioned that you find the land, and then you’ll sell that to one of your turnkey investors; then they’ll get a construction loan themselves and you’re just managing in the back-end. Do they get to decide all the different materials that are used, or is that something that you have a template of what you guys do for all of your fourplexes.

Steven Bond: We actually decide it, and a lot of that has to do with — real estate can be very emotional, and we try and take the majority of that out and become quite pragmatic through market research that “This is what will yield the best return on dollars, and also create the best experience for tenants.” Because those go hand in hand. This isn’t about just creating the cheapest product, it’s about creating the most valuable product.

So we pick out the products and materials, and the selections – we do have five upgrade options for a client that says “I wanna differentiate with my countertop, or with my appliance package, or with my lighting package”, but they’re predetermined options. It’s really like A, B or C; you choose, and that’s what you’re gonna end up getting. And it’s all put into the first price, and taken care of from that point forward.

Theo Hicks: The last question I have is — correct me if I’m wrong, but you didn’t start off with these massive projects… What are a few tips you have that you believe enabled you to scale to having the average community size being 200 units?

Steven Bond: It really was on accident. Again, we came up with this concept and it was, at the time, “How do we put food on the table, in 2011-2012, in the real estate space?” This was not “How do we build this incredibly large company where we have followers from all over the world that wanna invest with us?” That was not the questions we were asking; we were not doing any big, radical move. It was “What’s important today?”

We found some ground that was FDIC-owned at the time, and came up with the concept, and it was only a 40-unit project. Then the entire project was financed with hard money, because banks would not touch us. So it was one baby step at a time.

To an investor listening to this podcast, the best way to start is to go out and literally look for just an infill piece, a two-acre parcel, and get some partners and collectively go together and create a limited partnership if you didn’t have a ton of capital, and do four fourplexes if you could. Just start that out in that way. There’s so much value and interest right now in the multifamily space, buyers that want stability; they got scared off from the speculation of the 2005-2008 run-up that was in single-family, of people that were buying homes only to flip  them at completion with no intent to occupy… Whereas in multifamily you’re buying the stability of someone who needs a place to live, and there’s still quite a bit of housing scarcity going on throughout the economy and throughout the nation, and many of the major markets.

So if you can buy and invest in stability, which is these types of assets, you can start off with a one or two-acre parcel, get a couple multifamily units, partner up with a good builder, and do that small development to start off with.

Theo Hicks: That was gonna be my follow-up question, but you hit the nail on the head with the best way to start. I really appreciate you coming on today and talking about this very unique development strategy of developing fourplexes. Just to summarize what we’ve talked – you mentioned how you got into the industry by essentially asking yourself “Where is the market not paying attention?” and that happened to be that middle of the road fourplex avenue, as opposed to smaller, single-family homes, or these big apartment complexes.

The advantages are with ten loans you can get 40 doors, and there really haven’t been many fourplexes developed since the ’70s and ’80s, and that comes with a lot of other issues as well that your investment strategy is able to solve.

You mentioned that you’ve got a specific team member who essentially all he does is he goes out and looks for land to build these properties on. Then for other team members, you talked about how really the main requirement you have is that they must have this abundance mindset and not this scarcity mindset. We talked about how you built your buyer database – starting out, you just built a website and marketed through LoopNet, so pretty simple, just making sure you’re grinding daily, and then now you are able to get the majority of your business through repeat customers and referrals.

We mentioned how you determine the rents, through the rent comparable analysis, as well as the fact that you make sure that you are selling these at 1% cap rate higher than the trading market. Then we talked about how to get started, which is look for a two-acre parcel, get some partners together and start off by building fourplexes. When it comes to scaling a development business – or really any business – I really liked your advice (it’s very simple) which is “It’s just one step at a time.”

Is there anything else that relates to starting and maintaining and scaling a development business that you wanna talk about?

Steven Bond: Well, the main thing, if you’re looking to do this for yourself, we’ve covered it all. If you’re looking to do it for clients, the trust comes in the end result, and we’ve found that about mid-way through year three, that our clients wanted us to manage it, because we were aligned in their interest the whole time… And I was really reticent to start a management company; I didn’t wanna own a management company and deal with that… But we did, and we’ve done a really good job with it actually, and I feel pretty proud of our team that’s done that. And it has been the catalyst that has grown the company even faster, because now the client can trust that experience all the way from beginning to end, and there’s no stumbling hand-off, that all of a sudden there’s this new face who hasn’t been a part of the deal from the very beginning.

So if you’re looking to set it up and create a following, you really have to have the beginning all the way through to stabilization under your control, to a large degree – under the control of your culture, your Why, that that client is truly taken care of… Because the second there’s someone with a different interest, you’re probably gonna hurt the relationship in some way… So that’s one other takeaway that I would definitely encourage.

Theo Hicks: Thank you for that. Before we leave, you’ve got a conference coming up in February, so do you wanna just briefly talk about that conference, as well as where people can buy tickets?

Steven Bond: Yeah, you bet. So you go to figsummit.com. February 1st and 2nd. Honestly, a lot of these speakers are good friends of mine. They don’t normally go and speak at these conferences, but they’re industry leaders. One who owns over 100 million dollars of private equity company, and how he built that from ground zero up, owning businesses, hotels, apartment complexes… He’ll be speaking about how he’s built that up. Randy, who’s a president at Lifetime Paradigm, how to evaluate income property. A lawyer to talk about legal strategies. Founder of National Association of Real Estate Investment Advisors, speaking to agents, how to increase their business. Someone from John Burns Consulting, speaking about the multifamily market… The president of UVREIA… So we have all of these great industry leaders that will be coming and just simply sharing their knowledge – how they built their companies from the start to where it is today, and in all aspects, from syndication, apartments, student and family, fix and flips, it will all be covered. I’m really excited about it, looking forward to hosting the event here at Utah Valley Convention Center in downtown Provo. It’ll be February 1st and 2nd.

Theo Hicks: And that is figsummit.com, so make sure you check that out and get a ticket to that conference. Steven, again, I really appreciate you coming on the show today… Lots of great information about developing fourplexes. Have a best ever day, and we’ll talk to you soon.

Steven Bond: Thank you so much, I really appreciate it.

Best Real Estate Investing Advice Ever Show Podcast

JF1062: Getting More Traffic and Conversions on Your Website #SkillSetSunday With Chris Dayley

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Chris Dayley Background:
-VP of site testing and optimization at Disruptive Advertising
-Started his agency, Dayley Conversion in 2014 that merged with Disruptive Advertising
-Helps businesses learn what users want on their website, through psychology based testing, and analytics
-Based in Provo, Utah
-Say hi to him at www.disruptiveadvertising.com/

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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 fluffy stuff. I hope you’re having a best ever weekend. Because it is Sunday, we’ve got a special segment for you called Skillset Sunday, where we talk about a specific skill that you can implement in your business and make more money.

With us today we’ve got Chris Dayley. How are you doing, Chris?

Chris Dayley: I’m doing good, how are you doing, Joe?

Joe Fairless: I am doing very well, my friend. I’m gonna talk a little bit about Chris’ background. Best Ever listeners, you’re gonna know exactly what we’re gonna be talking about… Chris is the vice-president of site testing and optimization for Disruptive Advertising. He started his agency in 2014 and merged with the current agency, Disruptive Advertising. He helps businesses learn what users want on their website through psychology-based testing and analytics. Today we’re gonna be talking about, well, digital marketing and how to drive more leads, and also perhaps we’ll get into some testing metrics and how he approaches that. Based in Provo, Utah, and you can say hi to him at his website and his company’s website, DisruptiveAdvertising.com.

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

Chris Dayley: I’ve been in the digital marketing space for about eight years now. When I very first got into the digital marketing industry I was doing search engine optimization, which is in essence trying to get your website to rank for terms on Google. So it was all about driving traffic to websites.

One day I was sitting down and I was feeling down because most of the traffic I was driving wasn’t converting; they weren’t doing the things I wanted them to do on the website, so I took kind of a step back to figure out why aren’t people converting. What’s happening? Am I driving the wrong people to the site, or does my website suck? No one could really help me answer that question, no one could help me figure out what’s going on here, so I ended up searching around on Google for a little while, I stumbled around this concept of A/B testing on your website, which in essence is you take anything on your website – it could be a popup, it could be your e-mail subscription widget, it could be a forum, and you create duplicate versions of it and you change things, and you see how people respond to those changes.

So I created a test on the site that I was running traffic to at the time, I sent them to a lead generation page, and form completions increased. I had no idea what I was doing at the time, I just changed some design elements, switched some things up to see if they would move the needle, and it did. That’s kind of where I fell in love with what I do now, which is finding out what is it that users want in order to convert, in order to sign up, in order to reach out. I guess that’s a quick background on me.

Joe Fairless: That is a quick background, and very relevant to what we’re gonna dive into, so thanks for that. Let’s talk about site testing first… I know I mentioned the digital marketing thing before site testing, but I’m curious about site testing in particular. If a Best Ever listener has a website and they reach out to you and they say “I’d like to make sure I’m converting the most amount of people who arrive at my website”, how do you approach it? What’s the engagement look like and what do you do?

Chris Dayley: Well, so there’s a couple things that I do, and there are some things that your Best Ever listeners could go in and do themselves to get a sense for where there may be opportunities to do a better job converting people. I go through a very methodical process and analysis of a website, and in this analysis what I’m really trying to do is I’m trying to uncover the good and the bad about the site.

I look at things like content – what content do you have on your site, how much of that content is there? Is it relevant? Those types of things. At this point we’re not talking about testing at all, we’re just saying “Okay, we’ve got content; on a specific page we’ve got three paragraphs of content, or we’ve got two sentences of content”, or whatever. You’re trying to just identify what’s on your site right now.

So we look at content, we look at the value proposition – what value do you have for your audience? For realtors this is gonna be you’ve got a home; people are looking for a home, and you’ve got a home. Then it may be certain aspects of the home that you wanna highlight. You’ve got a home that has a pool, you’ve got a home that has a great location, you’ve got a home that has a great view – whatever it may be, that’s your value proposition… Whatever value you have for the audience.

Again, we’re identifying what’s our value proposition; can you find it? Is it easily identified by somebody who’s coming on the site for the first time? You’ve got the content, the value proposition, and the call to action, which is tell your users what you want them to do. I call those three things the motivation factors. Those are the things that are going to motivate people to take action, and the call to action is a critically important one, because if you want someone to reach out to you, if you want them to give you a call, that needs to be the thing that stands out on your site more than anything else. If you want people to just click through check out pictures of the property, then that needs to be obvious to the users. If you want them to fill out a form on your site, fill out an e-mail newsletter etc. it needs to be very obvious; it needs to be colorful, color contrast on the page, it just needs to be very obvious. So those are the motivation factors.

Then we look at things that I call resistance factors. Those are things like distractions. I’ll usually sit down with my clients and I’ll say “What are things that could potentially be distracting to your users from the thing you want them to do, from your value proposition, from your call to action?” A lot of times distractions are things that people think are really valuable, but what it’s actually doing is just putting extra stuff on the page.

Things that can be distracting are other offers; you might have a ton of other homes that people wanna check out. Or if you’ve got them to a relevant page that has a value proposition that will be valuable to them, you don’t wanna take them to other homes, you don’t wanna take them to other pages on your site; you want them to sign up or to reach out and contact you now. So we try to identify anything that could potentially be distracting, we look at things that could potentially cause anxiety… The things that cause anxiety a lot of times are if I can’t figure out what to do, if I have to take multiple steps in order to actually do what you want… So if there’s a button that says “Click here to contact us” and then I click there and then it takes me to another page and I have to click another button in order to get a form, that’s a high anxiety process. We identify things that could potentially be causing anxiety.

Then we look at — the very last thing is how responsive is your web experience. If I come to your site on a mobile device, is it super mobile-friendly? Is it customized for mobile? Or is everything just shrunken down? Are all the pictures super small and I can’t figure out how to flip through the pictures? Or if you want me to call you, is there a Click To Call button? Because it’s super easy for me to do that on a mobile device.

That’s the process I take my clients through when we very first start, and that is just to identify potential opportunities. Again, if you have a weak value proposition, we might wanna run some tests to strengthen that value proposition. If there’s a ton of distractions, we might wanna run some tests to remove or lessen those distractions, and so on. Hopefully, I didn’t go through that too quickly, and hopefully that’ helpful.

Joe Fairless: Yeah, that’s very helpful. How much does it cost to do that exercise with you?

Chris Dayley: In terms of the actual analysis, we have a small $500 one-time analysis fee; they go through and do kind of  a full website analysis. Then from there you can go one of two ways – either you can go [unintelligible [00:10:51].28] there’s a lot of testing opportunities on my site; I’m gonna go ahead and do that myself… Or, most of our clients will just have us run the process for them, and I’m assuming the [unintelligible [00:11:03].03] but most of our clients don’t have a ton of additional time to do these kinds of things, and when you sit down, you go “Oh, I need to create some other versions of my site?” That’s scary to a lot of people, so it can be helpful to have someone help you.

Joe Fairless: How much of what you do in the testing is copywriting?

Chris Dayley: It is a phase of the process, and I mentioned it’s one of the six factors we look at. It really depends on how, as we start testing the content, how big of an impact that has on conversion rates. I’ll say this – sometimes content is the biggest influencer of conversion rates; sometimes it doesn’t matter at all.

When we’re working with e-commerce sites, for example… A lot of times when people are buying a product they’re not gonna read any of the content you have on there, so you can spend a ton of time copywriting, and it doesn’t make any difference at all.

For the real estate market it can make a big impact. It really depends on who you’re bringing to your site, because certain types of people are a lot more likely to read than other types of people.

Joe Fairless: Knowing that’s the case, that really who we wanna attract is an important component to this, do you have a questionnaire that you ask your client to fill out prior to you doing the one-time analysis?

Chris Dayley: Not necessarily a questionnaire, but I do go through what I call building a customer profile. We’ll try to identify who are you targeting, and if they’re running ads to their site, we’ll take a look at those sites and take a look at who those ads are targeting. If they’re AdWords, we look at keywords that people are targeting; if it’s Facebook ads, we look at the kind of audiences they’re targeting, what are the demographics, what are the interests they’re targeting, that type of thing.

Joe Fairless: What are some typical solutions that you’ve implemented that have generated big results?

Chris Dayley: There’s a few things that I call kind of low-hanging fruit tests; they don’t always work, and that’s one of the things that people need to understand when they start testing – there’s not a guaranteed one-size-fits-all approach for testing. It’s not something that you can just do and automatically get better conversion rates; it’s a process of learning about your audience, of asking questions and saying “Okay, we’ve identified that there’s a lot of content on our site. Maybe our audience wants a lot of content, maybe they don’t, so let’s ask a question – how much content do they want?” And then let’s test three different versions of our site – one that has a lot of content, one that has a medium amount, and one that has hardly any. When we get those results back, let’s ask a follow-up question.

Let’s say that having a medium amount of content works best. Well, if that medium amount of content works best, the follow-up question is gonna be “What content should it be?” If you’re showing a property that’s listed, what is the stuff that’s really gonna drive people to reach out? What is the stuff that people really care about? Do they care how many bathrooms the location has? What is exactly the stuff that’s gonna compel people to reach out?

So the things that I found that typically have the biggest impact – number one is just general design. We’ll usually include this as one of our rounds of testing, but we will create three or four different layouts for a page, or if you’ve got like a pop-up that comes up to try to get people’s e-mail addresses… And I’ll say this – every person who has a site should have some kind of a pop-up to gather information, to gather e-mail addresses, so that you can start remarketing to those people.

So if you have one of those, you wanna test a bunch of different designs, because the way that that pop-up works, the way that it first grabs people’s attention is either going to alarm people and cause anxiety, or it may capture attention and people will go “Huh, what’s this?” Design can be a really important element, and I’ve seen testing different designs have as much as 100% increase in conversion rate, without changing any of the content at all. So design is a major thing that I look at, and that’s obviously something that’s a little bit more involved in order to test.

I think the second most impactful thing is the call to action. This is a very easy thing to test usually, if you can identify what your call to action is. Again, if you’ve got a pop-up that comes up, either maybe right when you get to the site, or maybe it’s an exit pop-up that you try and get some information from people before they leave your site, the way that you tell people to give you their information can be hugely influential on whether or not they actually do it.

I ran a test for a client of mine, a social media examiner – they’re the largest social media information website on the planet… It’s just a content site, so they want people to come and read content, read articles, engage with things, so they obviously want e-mail subscribers; that’s a big deal to them. We were testing for what is gonna prompt people to actually give us their e-mail address. Will they just give it if we say “Get regular updates from us”? Or do we need to have some kind of an offer?

I’m gonna suggest that you should always have an offer on your e-mail pop-ups. It could be something like Five Things That Every Person Should Know Before Buying a Home, or an e-book, or some kind of free content that you can offer people and say “Sign up now to get our free e-book on…”, whatever.  That can be hugely beneficial to figure out what kind of content do people want there. That’s your call to action AND your value proposition.

I will sometimes have my clients test three or four different e-books and say “Okay, well you’ve got this e-book and you’ve been running it for years and years and years… How do you know that it worked? Why don’t you write one page of four different types of e-books, find out the one that people want, and then you can flesh it out, you can write the rest of the content for that e-book that people actually want?”

Those are some things that I would really suggest people think about: design and call to action, and then the actual value proposition, what you’re giving people… Those can really impact conversion rates.

Joe Fairless: Yeah, I’m on SocialMediaExaminer.com right now, and when I went there there was a pop-up. After I clicked through, then the first thing I see is “Get a Free Social Media Marketing Industry Report” and “Enter your first name and your e-mail.” So you’ve got two ways of gathering that information right out of the gate.

Chris Dayley: They actually hit you about four times. They’ve got an entrance pop-up that comes up after you’ve been on the site for like 10 seconds, they’ve got a slider that comes up from the bottom of the page once you clicked to an article, they’ve got an exit pop-up (something that pops up when you’re gonna leave the site), and then they gave something that’s on the side of the page that tries to capture information. So they’ve got four different ways, and I’ll tell you, they get sign-ups from all four of those different pop-ups. If you have one pop-up, if you’ve got something like an exit pop-up, to capture people’s information before they leave, don’t think that you can’t also have an entrance pop-up or something that slides in as people are progressing through the site.

A lot of times when you get a pop-up on a site you just immediately look for a way to get rid of it. And the more times you keep getting hit with it, the more likely you are to take a step back and say “Well, what is this? What am I saying no to?” and that’s when if you have some really valuable content you’re offering, that’s when people will go “Oh, I actually might want this book. I actually may wanna know what are the five things that every person should know”, whatever it is.

Joe Fairless: We don’t have much time, but I do want to address the digital marketing and ways to drive more traffic via targeted Facebook ads and retargeting… So in a couple minutes – I’m sorry for compressing this – what can you tell us about the main things we need to know regarding those strategies?

Chris Dayley: Okay, so the first thing that everyone should probably know is when you’re targeting people on Facebook, finding buyers is easy, finding sellers is very difficult. So probably the best place to start is to be looking for buyers; now, that’s probably what people are gonna wanna target anyways, but just as kind of a heads up… So when you start targeting people, there’s a couple things that you wanna make sure. 1) You’ve gotta make sure that you have a conversion metric. Just driving traffic is not good enough, because if you don’t have some kind of conversion metric, whether it’s “Did I capture their e-mail address? Did I get a phone call? Did I get something?”, if you don’t have a conversion metric, you’re gonna waste a lot of time just driving traffic blindly, not knowing if it’s valuable or not, and people will spend tens of thousands, millions of dollars on traffic like this, where you just get some traffic and hope that some business comes from it. So you need to have some kind of a digital conversion that you can gauge, that you can tie your ads back to and you can say “Okay, when we targeted these people, we got 2% conversion rate on e-mail sign-ups. When we targeted these other people, we got nothing out of it… So we need to turn those off because they’re not effective.”

So you need to have a good conversion metric that you can track, and again, I would suggest that that’s some kind of an e-mail sign-up… Because you get two things when you get someone to sign up to your e-mail. 1) Obviously, you get their e-mail address, so you can send them e-mails. 2) Because you sent them to your site, you can cookie them and then you can use Facebook and Google to retarget them and to remarket to them so that whatever house they came and looked at or whatever offer they responded to initially, you keep hitting them with that again and again everywhere they go on the web. That is one of the best ways to be efficient with your spend, so that you don’t have to spend money twice to get the same person to engage with one of your ads.

Usually, remarketing ads are much cheaper to get clicked with, so that’s one of the best ways — I mean, again, you’ve got someone on your site already, you’ve got their e-mail address, so you’re gonna start sending them e-mails, and then they’re gonna start seeing your ads all over the place, and it’s just gonna be in their mind constantly. As soon as they are ready to engage, boom, you’re right there. I think that’s kind of the general strategy that I would suggest people start with.

Joe Fairless: This has been such an informative conversation, Chris… I’m really grateful that we were able to jump on a call and interview on the show. Where can the Best Ever listeners get in touch with you?

Chris Dayley: Feel free to reach out to me on Twitter, @ChrisDayley. Then we’ve also got an e-book if people are interested in how to get started with A/B testing. If people go to DisruptiveAdvertising.com/guide, we’ve got an excellent guide with all the tools that you need and strategies that you should consider, and a lot of other really good stuff that people can use to get started.

Joe Fairless: Outstanding. Chris, from how you approach testing website, the ways we can optimize the websites, from call to action, to value proposition, how the content looks, to some practical tips on targeting Facebook ads – valuable stuff… Thanks for being on the show. I hope you have a best ever day, and we’ll talk to you soon.

Chris Dayley: Thanks, Joe.

 

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