Rehabber, Landlord, Marketing, Wholesaling

[Bila]

What's your ROI on the 3,500 direct mail ?

 

[Ryan D.]

I like the getting a license part; there comes a time when it makes more sense to shell the picks and shovels.

This may be that time.

Well I HATE my 9-5. So I would rather be working in the field I enjoy while investing as opposed to not wanting to get up in the morning. Have you seen this clip from We're The Millers?

 

[Ryan D.]

I currently drop over 3,500 pieces of direct mail a month. I wholesale, own rentals, flip, network with private lenders, and I'm in the process of getting my Real Estate License.

Ask me anything you want.

 

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[MJ DeMarco]

life is good for those that provide value, it sucks for those that don't.

Gonna steal this... love this as a TMF synopsis in 15 words or less... ha ha.

 

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[Ryan D.]

Hi Ryan
How did you get started in RE? Do you focus on a particular area/ niche of RE? How do you find these properties? Can you expand on how you use direct mail? I assume it's to contact owners of distressed properties to convince them to sell? How do you finance/ find private lenders?

A coworker actually convinced a buddy and I to "partner" with him. At the time I was working in a call center. This 3rd guy tried going around my back because I was 19 and he didn't think I was serious. I had already committed to purchasing direct mail and wasn't going to go back on my word. So I told my buddy he could hop on board or I would do it myself. The two of us have been business partners ever since. I spent $600 I didn't have (as a broke newlywed) on a credit card that I couldn't have paid off..... In our first two weeks we got our first deal and wholesaled it for a profit of $10,000.00.

So the direct mail is the BEST way to get Real Estate leads. I have a website as well. The problem with the websites is if someone is going to sell their home they will google "buy homes st louis" and fill out 5 forms. With direct mail typically I'm not competing with anyone else. So I can take my time and often get a much better deal. Same reason why I prefer mail over the MLS.

Distressed properties, other landlords who get burnt out, inherited homes, and folks wanting to require. I typically target two lists. High equity absentee owned properties and decent equity over the age of 65. (trying to get the people who want to head south.)

I have decent credit (760 or so) but I had literally 0 personal resources. I found a portfolio lender (a lender who carries their paper in house) who would loan to my LLC. These guys are typically a local bank or CU who loan based off of the property not your personal situation.

Private money was on other forums/referrals. If you treat people right they talk. If you treat them wrong they REALLY talk.

 

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[Ryan D.]

I personally don't mess with homes that are that cheap. It all depends where you are located at. I invest in St. Louis and Indianapolis. Just because I can pick up a house for 7k in Ferguson doesn't mean that I should. At the same time I know people who have entire portfolios of sub 30k houses who cashflow 20k a month.

Your goal should be cashflow AND appreciation. Try to buy rentals in places where you could live. The nicer the home you get the lower your maintenance costs, the more you appreciate, and the less of a hassle it can be.

I also know people in the country where property is just dirt cheap who have had good luck with cheap rentals. Remember you need to make your money when you buy. Don't go and pay retail for a home because you think you're going to make a few hundred bucks a month. You need to remember to set aside funds for maintenance, vacancy, taxes, insurance, mortgage (if applicable), etc. A quick "litmus test" is the 50% rule. If your rent is 1k and you set aside 50% for expenses that leaves you with 500 a month. You then subtract your debt service and the remaining balance is a rough cash flow estimate. If you're buying nicer/newer homes many people use 65% as the rule as they run into less issues.

The IDEAL property will meet that rule as well as rent for 2% of your total all in cost. So a 75k home should rent for $1,500.00 in a perfect world. However that is MUCH harder to do in nicer areas.

 

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[Chazmania]

Your goal should be cashflow AND appreciation. Try to buy rentals in places where you could live. The nicer the home you get the lower your maintenance costs, the more you appreciate, and the less of a hassle it can be.

After being a landlord for a while now and owning in decent areas and 'not so decent' areas, i will say that the large cap rates that come with slumming come with quite a bit of bullshit too. Although I love the cashflow from the low-end stuff, going forward i'd prefer to own only in areas that are quick to rise in value and don't have the Jerry Springer tenants. Less headaches for sure.

 

[Ryan D.]

What's your ROI on the 3,500 direct mail ?

Great question. It all comes down to how good you are. Really.... I watched a guy drop over 65k on marketing and he only made like 98k back. That is HORRIBLE. I would not waste my time. Typically my ROI is double to triple my amount invested. However that value can vary. It depends if I keep the home as a rental, wholesale it, or flip it myself. It also depends on the time factor. I have made 10k in 45 minutes and 1 phone call. I have also spent 30 hours marketing, networking, and showing a deal to make $3,500. It really all depends on what your exit strategy with the deal really is.

I know people that are happy if they make a few grand on a deal. My average profit per deal is over $8,300. But that's not including the deals that are an actual rehab/flip where 20k+ is on the table.

 

[Metabaron]

Is there certain areas you avoid investing in like low income? I have several properties near me that are in a low income, homes can be picked up under 10k here. However, the quality of tenants scares me a bit. Thanks for your time.

 

[Ryan D.]

Ryan -

Glad I caught this thread. I posted in the other active thread about rentals the other day and now I see this one too. Awesome timing.

I am in a market very very close to St. Louis and Indy actually, so I am not far away from you ( about 2 hours drive prob. )

I am looking to get into RE but I am also very interested in your direct mail approach ( not specifically for RE, but because I am a marketer and haven't done direct mail ).

Just so I got this right, you're doing direct mail to get people who might be interested in selling their home, right?

If this is correct, are you also doing this for people who might be wanting to buy as well?

Don't waste your money on "coaching". I've seen folks drop tens of thousands of dollars to get told what can be found for free. Now mentoring actually walking through a deal has value. But only to an extent!

 

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[Ryan D.]

After being a landlord for a while now and owning in decent areas and 'not so decent' areas, i will say that the large cap rates that come with slumming come with quite a bit of bullshit too. Although I love the cashflow from the low-end stuff, going forward i'd prefer to own only in areas that are quick to rise in value and don't have the Jerry Springer tenants. Less headaches for sure.

AMEN. Just because you can buy a home for 10k does not mean that you should. While I have a few lower end rentals we did all of the preventive maintenance and screen the tenants extremely well. That seems to eliminate a good portion of the drama. Love the Jerry Springer reference.

 

[SteveO]

Yes we are. One of the nice things with Multifamily is the forced appreciation you can bring in.

Forced appreciation has been the model that has worked best for me and has made the most money. Keep kicking a$$!

 

[LateStarter]

What do you do to protect yourself from lead paint disasters (lawsuits)? It's not covered by home owners insurance or a personal umbrella policy.

It's pretty scary too because some of the more degenerate tenants discussed earlier don't seem to have a problem mixing up some paint chips in the little kid's oatmeal and then suing the "evil landlord" for toxic exposure. And even years later too.

I've been reading some articles online that are extremely disturbing. I'm really starting to dislike landlording more and more. Not so much for the business side of it, but how easy it is for sidewalkers to bend you over the barrel if they really put their mind to it.

Easy. Don't rent to degenerates. Know your property, know your tenants.

 

[JustAskBenWhy]

I currently drop over 3,500 pieces of direct mail a month. I wholesale, own rentals, flip, network with private lenders, and I'm in the process of getting my Real Estate License.

Ask me anything you want.

Fancy to see you here, Ryan

 

[MJ DeMarco]

Are you guys from BiggerPockets? Nice to see some RE guys here, usually this forum is the one exporting users over there due to their RE focus.

 

[JustAskBenWhy]

Bullshit!

Haha - well, two things are clear:

1. Any forum which permits "bullshit" as a statement of expression - is my kind of forum. Feel cozy already...just need to figure out how to work this thing.
2. Looks like my reputation may have preceded me. All good things are true - the rest are lies!

 

[jon.a]

Wow - all of a sudden it's raining BP people Thanks Steve!

Can you give me a 3 sentence synopsis - what are people about? And what's the best way to integrate and introduce myself?

Just introduce yourself. We're not formal. Start an intro thread. The biggest thing here is everyone who is anyone has read MJ's book. You can download the first 3 chapters via the link on the right-hand side of the header. In one sentence, life is good for those that provide value, it sucks for those that don't.

 

[SteveO]

Real Estate is not the way to necessarily make money - it is to build wealth. In my case, I am more fortunate than most in that I have both to a certain extent. But, IM and other businesses are a much more efficient way to create CF...

Agree!!!

Build the net worth to the point that you can buy something that will really cashflow. I stated that many times. Most of the properties that I had purchased during the past 5 years were negative cashflow at the start. Zero cap rates were typical.

Once they were turned around, there was cashflow but 5-10%... Who gives a shit? I want the big payday from the sale. Rinse and repeat...

When the money builds to the point that you can purchase something with 100K passive/year, then you are talking.

 

[Ryan D.]

So true!


Sent from my iPhone using Tapatalk

BUT at the same time you have to still cashflow. I see people buy properties that if they really run the #'s are a negative cashflow property. The best way to do that is rehabbing trashed homes. You get a great deal and are left with built in equity. Plus you cashflow. I've seen people rent out 150k homes for 900 thinking that's great because it covers the mortgage. Yet they're losing money every single month.

 

[Ryan D.]

Is there certain areas you avoid investing in like low income? I have several properties near me that are in a low income, homes can be picked up under 10k here. However, the quality of tenants scares me a bit. Thanks for your time.

You really should look into safe leveraging as opposed to dropping 10k in a dangerous area.

 

[SteveO]

I definitely think that the "value add" approach makes more money. It takes more skills as well.

Are you at the level where you could do larger deals?

 

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[Ryan D.]

I definitely think that the "value add" approach makes more money. It takes more skills as well.

Are you at the level where you could do larger deals?

Yes we are. One of the nice things with Multifamily is the forced appreciation you can bring in.

 

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[biggeemac]

Where are you located at? You can make it work in any city. There are people doing this out in the sticks. It's just harder. At the same time... I'm so thankful I'm not in NY or Cali. I got a call from a younger girl wanting my advice on how to get started. The cheapest property in her zipcode was a condemned REO asking over 400k.....

Well, I'm not exactly in the sticks, just not in an overpopulated area. Yeah, I used to live in cali. Overpriced, too much competition, almost impossible. The properties in the pacific NW where I live are more expensive than many areas, but not ridiculous......yet. As far as competition, there just aren't a lot of people out here with a lot of extra money, and more importantly, the will to take the time and market to potential sellers. I have a little bit of money that Im sitting on, and the will to make things happen. Not enough money to buy something outright, but enough to fund a rehab if i wanted to.

 

[MKHB]

Well I HATE my 9-5. So I would rather be working in the field I enjoy while investing as opposed to not wanting to get up in the morning. Have you seen this clip from We're The Millers?

All right I just caught my breath... that is hilarious.

I'm with ya on the 9-5 thing...however.

Take your own little VIX (buyer sentiment) survey...call 10 investor/flippers/agents and ask them if they are buying -
I bet you get all 10 to say yes (of course with the caveat that they have migrated to a can't miss type of asset class or location and somehow they are staying ahead of the pack, uh huh.) Kind of scary.

 

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[MKHB]

If you haven't seen that movie its worth watching as long as you don't mind that kind of humor. I love that scene.

Not sure I follow you with the end part. Clarify please?

When everybody is buying, you might want to be selling.

 

[Andy Black]

When everybody is buying, you might want to be selling.

Hmmm... I wonder what it would mean if the shoe-shine boy was to advise us to sell shovels?

 

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[Andy Black]

Here in America @Andy Black we prefer the term shoe-shine person.

Oops. Sorry. Shoe-shiner.

 

[Chitown]

@Ryan D.,

First, thanks for a wonderful AMA.

Second, with regard to your marketing materials...

How many touches do you make before you typically have a deal?

Are you identifying yourself as an investor in your materials or a buyer?

Are you making an offer in the initial marketing piece or is it a lead gen package meant to get the phone ringing?

Thanks for your time and efforts.

 

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[Ryan D.]

@Ryan D.,

First, thanks for a wonderful AMA.

Second, with regard to your marketing materials...

How many touches do you make before you typically have a deal?

Are you identifying yourself as an investor in your materials or a buyer?

Are you making an offer in the initial marketing piece or is it a lead gen package meant to get the phone ringing?

Thanks for your time and efforts.

Hey that's what I'm here for. No offer is made in the marketing. It's simply just to open the door. I do not identify as an investor that's a good way to turn people off.

My phone that the leads go to has a

"This is Ryan sorry I missed your call. I'll get back with you ASAP".

The letter states along the lines of

"I am looking to buy a home in __________ and I saw your home located at _____________. If you are interested in selling please give me a call. I pay cash and close as is. etc."

I hit the same list for 6 months. Typically month 6 is the most successful. However I've got deals off of every other month as well. My first drop we got our deal in like 2 weeks. While its not "guaranteed" it happens. They recommend that you have enough $$$ to be able to market for 6 months without getting a deal. I have never gone 6 without.

 

[ProblemSolver]

When you first got into this industry, what prior knowledge/experience did you have?

How do you handle your direct mail campaigns? Do you write them yourself, hire someone to do it, or use a service?

 

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