How To Succeed Flipping Houses
When it comes to making money in real estate, one of the most straightforward options for investors is flipping homes and other properties. In this video with veteran flipper Justin Colby, we will talk about the market right now, as well as how to manage flipping more efficiently in the future.
As always, Justin is one of the best in the business – he used to flip over 300 properties annually, so he knows more than a thing or two about this process and how to make it work, both in good markets and bad.
In this video, I pick his brain and try to figure out what advice is best for anyone who is either struggling or wants to improve their numbers. Here are some highlights from our conversation.
2:00 – The Market is Trending Down (and That’s Healthy)
We’ve come a long way from the subprime mortgage crisis that led to the market crash in 2008. However, although we’ve rebounded and made strides forward, the market is starting to cool off. If you started in this business four or five years ago, you have only known the benefits of properties that appreciate in value.
However, just because things are cooling off and buyers are getting less enthusiastic about properties, this downtrend is healthy. Justin talks about how he understands the pain of going through flipping in this kind of market, but it’s a valuable lesson for investors and real estate professionals. This kind of experience forces you to find creative solutions and develop strategies that work, regardless of the market.
4:30 – Diversify Your Marketing Strategy
No matter what kind of business you’re in, marketing is critical for long-term success. In real estate particularly, you need to find a variety of marketing methods that will generate buzz and help you find new leads. While direct mailing is still a powerhouse, you need to recognize the value of different options, including:
However, regardless of your strategies, the point is to “surround your seller” with information and invitations to work with you. When someone sees a bandit sign, gets a voice mail, and a direct mailer, it’s much easier to make an impression and get someone to sell. Part of the reason is that a seller may not be ready to make a deal right away, so sticking in his or her mind ensures that you’re the first person that a seller will call when the time comes.
9:02 – “You Need to Figure Out a Six-Month Budget”
When it comes to marketing, you have to invest in getting leads. Now that the market is trending down, you have to work a little harder to convert a lead into a sale, which means that your investments have to be both consistent and substantial enough to be competitive.
With a six-month budget, you can strategize enough in advance to surround your sellers and keep your name in their mind, but it’s not so far out that you can’t make adjustments based on what’s working best.
Another thing to keep in mind is that this budget is independent of any money coming in. If you stifle your budget because your cash flow is limited right now, you will lose momentum and your leads will go to a competitor. Even when business is lean, marketing should always be a priority.
11:17 – What is Your Lead Conversion Rate?
Based on my experience, I believe that you should be closing about one of every 45 unique leads that come into your business. Realistically, out of 45 different leads (i.e., an individual seller, not one seller clicking on three different ads), 15 of them will be coming and talking to you, and about half of that will be motivated sellers looking to make a deal.
According to Justin, with some marketing techniques, that number isn’t realistic (i.e., voicemail drops). However, with direct mailers, you should be able to close about one in 20 leads.
Although these numbers are based on our experiences, you should have a solid idea of your conversion rate, which means that now you have some real numbers with which to compare. In some cases, you may not be closing the number of deals you want because you don’t have sufficient leads coming in. If you’re supposed to make one deal out of 20, how can you accomplish that goal if you only have 10 leads coming in?
Again, this is where diversifying your strategies comes into play. If you only do one marketing technique and it’s not getting you the numbers you need, add some new tactics until you can have a sustainable and reliable conversion rate.
Watch the Rest of the Video to Learn More!
I’ve just covered a few of the many golden nuggets that Justin had to offer in this interview. We discuss everything you should know about flipping houses and dealing with a weak market. Now is the time when you can make your move and outshine investors who aren’t able to adapt. Learn from our experience and find a path to success.
Also, be sure to check out REIVault to see if our services can help you get the most out of your marketing campaign.