Episode #2 – The Fever
Welcome to EarlToms podcast. Today we’re going talk about what I call the Real Estate fever. It could be a death sentence to anyone. Those that are getting in the business and even those that have been in the business for a little while. Now, let me explain a little bit about what I call the fever, what that actually is. When you get in to Real Estate, you see the promises of a lot of money, comfortable lifestyle, those kind of things. So what a lot of people wind up doing is they get caught up in the moment instead of actually realizing there’s a bigger picture involved in it. So every deal that they come across is a must have, and what that does is puts them in a bad situation. That’s when you start getting a bad reputation of putting things under contract that you can’t close. Sellers start giving you negative reviews online and in general you get a bad reputation, whether it be sellers, buyers, people in the industry that are there that could potentially partner with you on certain deals. So what I always try to remember is number one is you don’t force this business. You don’t force a deal. You don’t force the seller to agree to a price.
You don’t force a buyer to say, Hey, this is a good deal. Why are you not getting it? Those kind of things are going to wind up being annoying to everyone involved. So for example, yesterday I had a deal the sellers real patient. He’s a local investor. I thought I had the property under contract for what is a good amount now. I’ve been in this business long enough to where I can actually go buy it if I need to but the buyer that I sent it to sometimes they’re in a good mood and sometimes they’re not. That’s the nature of Real Estate. You can actually sit there and say, Why are you not buying this? This is a good price. It’s their money. They decide what they want to do with it. So yesterday, when I basically hear that their offer completely cut the profit out of the deal, I thought to myself, you know, that’s kind of harsh. I just replied back to them and said, you know, that’s harsh and I put an emoji with my hand over my face. They just kind of laughed and said, sorry, man. That’s how you have to treat your buyers because it’s a good relationship. Now, what wound up happening is about an hour after this text exchange went on I had another seller that had already renovated a property, was about to get it rented. They wanted to sell this property so that they could go develop some land somewhere else. So they were just freeing up some cash. What wound up happening is this property is actually a double the profit that I would have made on the other deal with this buyer. I’m not saying this happens every single time but if you don’t force the situation, it’s a lot like karma. It will come back and find you.
If you run into a seller that says, you know, let me think about it. You know, that’s fine. Let them think about it because what’s going to wind up happening is they’re going to think about it. They’re going to call another home buyer, we buy houses, whoever it may be, They’re going to constantly get these low offers but if you give them the respect without forcing them and show that you’re professional. You keep in contact with them. Hey, I’m just checking with you to see if anything has changed or you’re sending them an email. Just some kind of non-intrusive way. You’re building a relationship with this seller. The next thing you know, when they get tired of getting all these low offers when yours was similar to it because you took the time to say I’m not going force you to sell your house if you want to think about it. This is your house. You do what is best for you. Then nine times out of 10 they’re going to come back to you as long as you’re keeping in contact with them. You have to keep in contact with them because they’re going to wind up talking to all these different people. They’re not necessarily going to remember who is which. I met with John the other day. John was real nice. I would prefer selling my house to him but I don’t remember how to get in touch with John. So that’s where your follow up becomes very, very important. And the way that you follow up is just as important. I’ve closed deals where I’ve sent them automated emails for over a year and never gotten a response. Then all of a sudden, they show up and say, Yes, I still want to sell my house. You call them and ask, are you considering what offered before? Well, I don’t remember what you offered before. Then you tell them and say OK, yes, because by then they’re ready. So a lot of times, you have to remember that when someone initially contacts you, they just may be in the information gathering stage.
A lot of these homeowners don’t know the process of selling a house that investors do. Homeowners a lot of times don’t understand how it works. So you sit there and you explain it to him. You tell him how it works. Your word has to be followed through because if it’s not it’s going to damage your reputation between buyers, sellers and everyone in this business. If you sit there and what I see a lot of people do is they’ll send the property out that they don’t even have under contract. Your buyer says, Hey, I’ll buy it. Next thing you know, you can’t actually get control of the deal because this homeowner has decided either not to sell it or they’re under contract with someone else. So you just lost that deal because you thought you had it under control but you didn’t have the paperwork involved to actually have it in under control. Then your reputation starts suffering because this buyer wasted enough time visiting the house, looked at it, work their numbers in their office, and now they can’t even get it. So the next time you send them a deal, they’re going to think, do they have it under contract? You’re going to start getting asked every single time. Do you have it under contract? When do you have to close by? What do you have it under contract for? You’re going to actually suffer in the long run if you rush into all of these deals without actually slowing down, staying calm, not acting desperate. When you act desperate, you put yourself in a bad position because you lose your leverage of negotiating. That’s with a seller or buyer. When you go to a seller and you’re acting desperate, they can read that. They know that. So if you sit there and say, I’ll give you $100,000 for your house next thing you know you’re under contract for 120,000. But that mentality, the way that you approached it, was the difference in that $20,000. And at the end of the day, that could be the difference of you actually being able to close that deal with a buyer instead of rushing it, forcing it, and now you don’t even have a deal. You put it on the contract for too much. That’s going to wind up costing you in the end because you spent money on marketing, whether it be signs, online, Facebook ads. Whatever you were doing, you spent money. And now you have nothing to show for it because you were desperate. You rushed the situation instead of sitting back, acting cool about it, and let the seller come to you. Then when you turn around and try to sell it to your buyer, you have to sit there and say – okay, well, if you don’t want it, you know that’s fine. I’ve got other people. You don’t necessarily tell a buyer that, because a lot of these buyers will be the only one. The more desperate you act, the more money that you wind up losing on every single deal.
So what I always suggest to people is that you just keep it simple. You stay calm. Not every deal is a deal. You may think it’s a deal, but a buyer may not. So if a buyer doesn’t think it’s a deal, then there’s nothing you can do about it unless you buy it yourself and try to sell it down the road somewhere. When you go into these situations, the fever is what gets you in these predicaments that you can’t get out of a lot of times. I know I see a lot of people out there that say okay, well, this seller decided to back out. I’m going to go file the contract down at the courthouse to cloud the title. That’s one of the worst things that you could ever do in your life. If you go down there and do that nine times out of 10 you’re exposing yourself whether it be the attorney general of your state, the real estate commission, whoever it may be because now you’re going to wind up with attorneys involved when the seller ever does decide to go and sell this house. You have to make sure all of your paperwork is in order, dates of contracts and signatures. If an attorney for the seller decides, you know what, they didn’t do it right, let me go tell the commission, let me go tell the attorney general. The problem with all of that is if you’re not a license agent, you don’t follow under the commission’s jurisdiction. You fall into the attorney general’s jurisdiction. So instead of getting a slap on the wrist with the commission now, what you’ve done is criminal. You could actually face a fine or jail time and ruin the rest of your life because you rushed the deal. You thought I’m going to show this seller but you didn’t think long term about what you were doing.
The other aspect of the fever is the cost that’s associated with this business. When someone gets in this business all they can see is the hope of a lot of money. And to be honest with you, there is a lot of money in this business if you do it the right way. But what you don’t see is how to sustain this business. So let’s take, for example, just a personal cost every month and a very small cost to operate the business. Let’s say, for example, that your monthly bills for you to survive on whether that’s a mortgage, rent, insurance, car payment, etc. Let’s say you spend $5,000 a month just on your bills not necessarily any money left over, just $5,000 a month on your bills. Well, let’s say at the same time you have a business to run. On top of that $5,000 let’s say you have another $5,000 that you have to advertise to get leads, SEO, Google AdWords, cold calling, bandit signs, Facebook ads, direct mail, all of those things combined. Whatever you choose that you’re going to how you’re going to market. Let’s say that’s another $5,000 a month, because it can easily get to $5,000 a month. So if you take that $5,000 just to pay your bills to have a roof over your head every night when you go to sleep, plus the $5,000 of running a business that’s $10,000 a month that you have to make in order to keep your doors open and a roof over your head. Because if you only make $5,000 month, you can’t market. You have to make a choice. You’re either late on your mortgage, car payments, rent, whatever it is, just to be able to send out a mailer or just to be able to keep running Facebook or Google ads. So what you have to realize is the overall picture. If you’re spending $5,000 month on bills, plus $5,000 a month on advertising to get your deals now, you’re at $10,000 a month. If you look at that, every year that’s $120,000 a year just to keep a roof over your head and to be able to keep deals coming in.
So when you start rushing out, you start getting those deals under contract that you shouldn’t get under contract – you’re wasting your marketing dollars. You’re putting the roof over your head at risk because now all you’re doing is putting deals under contract that you can’t close. You have to figure out a way to get the deals to come in that can actually close, that you can make money and that you can keep the roof over your head, plus the doors open with the leads coming in. It’s not that every month has to be the same amount. Some months you can scale it back. What I always recommend everyone do is you almost run your business on 30% of your income. So let’s say that you need $10,000 a month to live plus do your marketing and get the leads to come in. You actually need to be making around $30,000 a month. That way you have $20,000 in the bank because what’s going to wind up happening is that some months are going be great but some months are going be terrible. Some months you won’t close a deal. You’ll have periods where you go three months, four months without closing a single deal. So if you’re sitting there every single month with every dollar that comes in and you’re putting it right back out when you run up against one of those months, you’re not going to be able to keep your doors open or you’re not going be able to keep the roof over your head. It’s going to put you in a hole that you can’t get out. You’ve got to be out of the business for six months, a year, two years, whatever it may be, to where you can build that money back up and start all over again. So any time you do this, it’s not a I can do this with no money. You can do it with little money, but you have to crawl before you can walk. That analogy will work every time in every business, in every aspect of life. You don’t go in guns blazing and say, okay, well, here, I’ve got $20,000, What should I spend it on? Do your research. Try to get some professionals involved as far as marketing because one thing that you’re going to do if you don’t have experience in, let’s say AdWords or Facebook ads, you’re going to go out there and you’re going to basically waste the money that you’re spending because you have no idea what you’re doing. If keeping you in business is that important, there are certain things that you need to outsource. You’re going to have to pay to outsource those things. So who you hire and who you work with is just as important as the deals that you are putting under contract. It’s not a let me go put some bandit signs up and the leads are just going to come rushing in. It’s not how it works. You’re going to get some leads, but is it going to be enough leads to keep a roof over your head? To keep the doors open? You have to have different avenues of marketing to be successful. One person may call it a bandit son, another person may look at Google ads or organic results in SEO, another person, may be on Facebook. You have to find where you’re getting your most profitable leads from and stay with it. You go through the process of figuring avenues out. Let me try Pinterest. Why in the world would you try Pinterest? Well, I have some extra money. I want to see if maybe there’s something on Pinterest. There’s nothing wrong with that, but after three months, if it doesn’t work, stop it. Don’t keep throwing money at something that’s not going to work or because by the time you’re in that three months, you should have enough data that comes back. I ran this type of ad this month. The next month, I ran this type of ad. The month after that, I ran this type of ad. You constantly have to test the way that you market because if you just throw something out there and hope it sticks, all you’re going to do is waste money. You’re not going to be profitable. You’re not going to stay in this business long. You’re going to go to all these groups on Facebook and say I have this house under contract. What do I do with it now? If you don’t know what to do with the house once you have it under contract, you don’t need to be sending out any marketing. You need to learn what you’re doing first, then start. That’s going protect your investment, the roof over your head. When you go through these marketing channels, you have to be able to adjust to the next thing. Maybe Instagram works. It’s going to change from market to market. You have to stay ahead of the curve because once you do that you get ahead of it. By the time everyone else catches up with it, you’ve somewhat already got it mastered. Why? Everybody else is trying to figure it out. So they’re wasting money while you’re just making money. It’s not an okay, well, I just took this course and you know this mentor, this guru told me to start cold calling. These people are getting 10 calls a day because now everyone is cold calling. So what’s going to make you stand out versus everyone else? Just doing it? It could be the person that’s doing the calling. They could be the friendliest person in the world, close all the deals that come through. Odds are they’re not going to be that and you’re not going to be that person. So when you’re thinking to yourself, well, everybody was cold calling. Now that’s where the money is. No, that’s where the people that are telling you to do it, that’s where their money is that because you’re listening to them but you’re throwing your money away because those groups aren’t necessarily concerned with you closing a lot of deals because the better you get at something the less you need them. They need you to go out there and be halfway successful. So you continually come back to him and ask for new ideas. Pay them more money. That’s how they make. It’s not because you’re out there doing deals, learning how to do this. They need you to always come back. So they’re only going give you just enough to give you a limited amount of success, but keep you coming back so they can keep making more money off you. That’s how the 10X actually works. You have to just give people pieces of things but never give them the full story. That’s why I always say, go find a mentor that will take a vested interest in you. Someone that will take you step by step in this business and show you what you’re doing that’s going to lead to your success. You’re not going to have a lot of success if you go out and you’re constantly paying for courses or you’re constantly given somebody money for half information. You need a structured step by step.
This is how I became successful. This is what you need to do, and you’re not going to do everything. I mean, a mentor may have been going out years ago and just driving around like what the drive for dollars is now. They may have just driven around and looked for boarded up houses, wrote the address down and then had to manually go down to the courthouse and pull the address to see who lived there and get their address. You know, I sent him a letter or if they were local, maybe go knock on the door. You could do that years ago. Now, unfortunately, people don’t like others knocking on their door when they don’t know them. The structure part of what you’re learning from that mentor is the most important thing because you’re not necessarily learning all the ends and the outs of the marketing aspect of it. You’re learning how to structure a business, how to keep the doors open, what bills to pay, what to put back, those kind of things. That’s going to be the most important thing because the deals will always be there. It’s a matter of you finding them and investing the right way in yourself in your company. So make sure that you can always find those deals. If you’re in a market that you want to run TV ads. TV ads are expensive, sure they get a lot of response if you do it the right way and have a presentable ad. But are those the people that you really need to reach? Is that going maximize your profit? Or are you in a market to where you only get deals online? They all come from direct mail? Well, if you only get two deals a month, but you’re making $25,000 a deal. In all honesty, I would spend that $1,000 sending out direct mail and just live off that when it slows down or in the process of trying to figure out something else. See, now, if you have got two deals at $25,000 a month, you have $50,000 a month coming in. Well, if you only need $10,000 to survive, you have $40,000 every month to be able to test out Facebook or test out instagram, Google ads. Spend another five on that. You still have $35,000 in the bank that is there for a rainy day.
Once you get to where it gets consistent and I always tell people, don’t do this until after you’ve done it for two years because by then you’re in a habit of running a business. So after after two years, that’s when you can start buying. You can start holding yourself because you built up enough of a nest egg. You have enough habits to where it is sustainable. It’s consistent. Then you’re not going to have all of these months where no deals come in. Nothing closes, no revenue comes back in the office. It’s going to be a consistent monthly occurrence. Even if something doesn’t come in from your typical marketing, you might have a seller that sold you the house two years ago when you first got in the business and tell a friend, John helped me sell the house. You know, a couple of years ago, he bought it from me. It was great working with him. Well, guess what? You just got a one off referral that didn’t cost you anything. So now you double that up. That’s where you have to learn the reasons that you’re treating people the right way is because a lot of these deals that you’ll start getting to come in won’t be of any additional cost to you. You will have spent money on that one time and then word of mouth because of the way that you treated him. They’ll refer a friend, a family member, somebody like that over to you. And now you’ve made money twice off one deal. It’s important to understand. Don’t rush this. It’s a marathon. As long as you stay calm, you don’t force deals with sellers or buyers. You’re relaxed. It doesn’t matter as long as you do that with everyone that’s involved in it. You’ll have more opportunities to sell deals because some of these that wind up being a little tight if you’re easy to get along with with a buyer, they’re more likely to look at your deals when they’re tight. And let’s say that, you have a deal that you put under contract for $120,000 but you’re that wholesaler that says, I have to have this. And you’re calling them every day, every hour. You’re annoying. You’re not going to get them to take a second look at that. If you’re the laid back kind of wholesaler, that gives them a good product nine out of 10 times and then when you need a favor, you’re going to be able to call that in.
So, in summary, do not get the fever. You’re providing a service. You cannot close every deal that you come in contact with. There’s not enough time of the day. There’s not enough people in the market buying. Sometimes you have to let them go. Then if they come back, that’s great. If they don’t, that’s great as well. But you kept your doors open because of the way you conducted yourself, and you didn’t burn any bridges with a seller or buyer. So any time you need that favor you’re going to get it, by the way you acted. When somebody says you’ve got to get every house under contract, don’t listen to them. That’s not good business. You can’t close every deal you have. You have to get to the point where you know what your buyers are going to buy. Put those under contract. Those are your closable deals. If you have to go out there and search for a buyer a lot of times you’re not going to close. If you turn into what I call is an order filler because you know their criteria, you know what they buy, you know the areas, the style, bedroom, bathroom count, what kind of materials they like. Do they like hardwoods, or do they care about carpet? When you start filling their needs, you will have more success. So instead of forcing the deals and getting the fever, just be the order filler. When something comes along that you know that you can sell, put it under contract. Then your marketing dollars and the roof over your head will be without worry because you know what you’re selling is not necessarily a house. You’re selling yourself because that’s all you sell in the first place. Anyway, whether it be to a seller or a buyer, they’re not necessarily buying a house from you. They’re not selling their house to you. They trust you, your opinion. They’re going to listen to you. That’s the reason all of these wholesalers that have been successful over the years. It’s not because they have the best deals. It’s because they’re the easiest to get along with.
So with that, we’re going to draw to a close. I hope everyone has enjoyed this. Whatever you do, do not get the fever. Do not force it. Let it come to you. Be smart about your business. Plan your business. Understand things are going to come up that you can’t control. Roll with it, just go with it, let it let it happen. And once it does, it’ll all get a little bit easier. You will not have near the stress and near the anxiety You actually give yourself a chance to be successful. I appreciate you listening to this episode. Well, we’ll be back with another one here shortly.