How Eric Brewer’s Investment Side Did 375 Transactions and Traditional Side Sold 75MM+ in Past Year

Steve Trang: Hey, everybody. Thank you for joining us for today's episode of real estate disruptors. Today, we have Eric Brewer with Integrity First Home Buyers, and he flew in from York, Pennsylvania to talk about how his company did 375 investor transactions and another 75,000,000 in sold volume on the traditional side in the last twelve months. Crazy, crazy numbers. If this is your first time tuning in, I'm Steve Trang, founder of the OfferFast Homes app, the only MLS for off market wholesale properties, and I'm on a mission to create 100 millionaires.

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And this is a live show, so please ask your questions for Eric to answer. You ready? Ready to roll. Alright. So first question is a simple one.

What got you into real estate?

Eric Brewer: So I got my start in business in the car business. We talked a little bit about that earlier today. Mhmm. But for the sake of of time today, I got started in the car business and spent eight years in the car business, learned an awful lot, established a great work ethic, learned how to sell, and, learned a little bit about how to manage. And, got out of the car business.

I don't remember the exact year, but it was right around the time that my my oldest son was being born and just realized that the time commitment was not gonna work for me

Steve: Yeah.

Eric: In the car business. And, so I got out of the business and made a commitment that I was gonna take about the next six to twelve months to do some soul searching and figure out what my next move was gonna be. And during that period, I kind of identified real estate, but not a a niche or a segment as the next move for me. I just thought I would get involved into real estate. And I in the car business, my involvement in finance and understanding of finance, I felt, always gave me an advantage.

So I decided to get started in real estate and finance and actually took a a position with a local mortgage company, learned how to become a loan officer. I was in the process of doing that.

Steve: Mhmm.

Eric: And the owner of the car dealership that I worked for called me and said, hey. I heard this radio commercial about flipping houses. And so I didn't even understand what flipping houses was back then. So this was 2005. And, he said, I think you would be good at it, and I'd like to talk to you about teaming up and working together.

So I did. We went and had lunch. Long story short, two days later, we decided to start flipping houses.

Steve: So you heard a commercial. Did you at least go to the event or you

Eric: just like So we actually went to it's a brick and mortar flipping school. It's called Investors United, in a suburb of Baltimore, Maryland. I mean, if you generally look for it, it's it's it's a brick and mortar school. So they teach you how to do everything from lead gen to contracting to all different aspects of predominantly wholesaling, I would say, is their core focus. But it was a twelve month course.

We paid it was like 10 or $12 for a twelve month course. It was a significant investment. Two months in, we're like, alright, I think we got the hang of it. We bailed, didn't go back for the next eight months of instruction, and bought our first house a couple days later.

Steve: So Let's talk about that first deal.

Eric: Yeah. First deal was a referral. Oddly enough, it ended up turning into, like, a land development deal, which is certainly not our intentions. But we put the house under contract and then found, like, its zoning was, I don't remember the exact zoning, but allowed for, like, high industrial use, which was actually a negative at the time. We had our title company do the search and like, you know, you're only gonna be able to sell this to a commercial buyer.

Oh my gosh. He goes, well, unless you can buy the neighboring houses and you get over two acres, it could be, you know, worth significantly more money. So we actually went through the process of buying the other three neighboring properties and ended up selling the total of the four homes to a local car dealership, oddly enough, that was gonna put a small franchise there. Back then, Suzuki's were still being sold in The US, and they were gonna put a small Suzuki dealer there. So we sold it to them, made I mean, I think we made a $100,000 on the deal, sold four homes.

So

Steve: Wow. So not bad for a first deal.

Eric: Not bad for a first deal. And then we were hooked. Right? Like, the the the hunt, the chase was was, pretty exhilarating. And then, putting together, you know, four deals to make one was pretty cool.

We made a decent return. So, that was our first deal.

Steve: And then what happened after that?

Eric: We just became a little bit more focused with back then, we did 75% of our business was on market. Just started making more offers, looking at more homes, making more deals. Our next deal we bought off the MLS, a bank owned. My rental budget was 12. We spent 25.

So learned a valuable lesson there. We we you know, we're fortunate enough to sell it, So you gotta think this is, like, 2006, so the market was pretty hot. Mhmm. We got lucky enough that, you know, we sold it for more than we anticipated. You bought an

Steve: REO property in 2006.

Eric: Yeah. Yeah.

Steve: So that works.

Eric: Because my rental budget was 12 when it was really 22. That's why I was the guy that was willing to pay more than anybody else. Got it. So, but we ended up making a little bit of money on that. It was a valuable lesson and just got really, really good at, you know, we were always the first I mean, coming from the car business, right, like it was just one of the things I learned was responsiveness was super important.

Mhmm. The dealership that I worked at as I came up through the sales ranks, I talked a little bit about this with you earlier today, but, like, I would talk to anybody that like, if you drove on the lot, I would sprint to go talk to you.

Steve: Yeah.

Eric: So part of my upbringing in sales was I just was the first. It wasn't always the best or the smartest or the best salesperson, but I got more deals because I was just first.

Steve: Got it.

Eric: So we applied that approach to the real estate business. And, like, if it was a Saturday at 07:00 at night, I'd go look at it and get an offer in. Back then, you could actually get REO offers accepted same day. They wouldn't have this holding pattern or highest and best wasn't even a thing back in 2006. Not on the REO side anyway.

And we got pretty good at buying bank owned properties. And I would say we were probably better at, as I think back and reflect to when we first got started, we were better at selling. So I wasn't really good at acquisitions. I wasn't I was horrible at renovations, but we were great salespeople that came from the car business. So if I paid a little bit extra for it or went over my rental budget, we were really good at finding our own buyers, so we hardly listed anything in the MLS.

Oh, really? We FSBO'd almost everything. We put a FSBO sign out front, a little classified newspaper ad, bad credit okay, everything that I pulled over from the car business, so we were saving $6,000 to $12,000 on realtor commissions, and it allowed us a little bit more freedom when we bought the home. So that was how we got started. I mean, I was bad at buying, but we were quick.

If it smelled like a deal, we'd lock it up and figure the rest out. And I think we bailed ourselves out quite a bit just by being really good at selling the deal.

Steve: Yeah. There's not a lot of people I know that started off buying off the MLS. So that's impressive. And then 2006, what was the journey like? Because there was this little thing that happened around 2008.

Eric: Mhmm. So we got I mean, we got better. You know, we we we established some relationships with some of these REO agents. If you think back to like 2006 or 2007, it's a lot like what we were dealing with now. So there was a there were actually wholesalers that would attempt to tie up properties in the MLS with assignment agreements and then had success assigning them.

So the REO agents would gravitate towards us because I was fortunate enough with my partner that we had a significant amount of cash to operate with. So we were, you know, solid real cash buyers. So REO agents would would, you know, gravitate towards us. We would always afford them the opportunity to be dual agent on the deal. So, you know, they they had a slight advantage in dealing with us versus maybe another buyer that was represented by an agent.

So we always recognized those little advantages and made the best of of them. Yeah. But, yeah. I mean, we just we we we got really good at buying stuff on the MLS, and by the time that started to change, 02/2008 rolls around and 75, 80% of our competition was gone. We were good at buying on the MLS as a competitive market, and we continued that.

It wasn't until probably four or five years ago, where we started to see that change, and I really started, you know, to get into direct to seller marketing about four years ago. For the first ten years that we were in business, we bought 80% of our stuff off the MLS.

Steve: Wow. Yeah. So you're finding that your relationship with REO agents gave you the competitive advantage

Eric: Mhmm.

Steve: In that time?

Eric: Yeah.

Steve: Were you listing stuff? Were you doing anything else creative, or was it just straight buying, from the agents? I'm asking because someone had mentioned, like, oh, he's the short sale king, and I didn't Yeah.

Eric: So we did. So what what we did was the first thing we did was billboards. Mhmm. We had a pretty good relationship with, the local Lamar. You know, it was, like, the VP of sales or something.

So we got, like, a pretty sweet deal. We had, like, eight or 10 billboards that would run. And every time we would examine the results from that, we got more short sale and pre foreclosure leads than we did anything else. Mhmm. We didn't get many high equity deals from billboards.

And each time we would go back and look at whether or not they were worth it, we would always trace it back to, hey, we bought 35, forty, fifty short sales last year. We started a short sale company, saw some opportunity there, and then once it got to an operating level of 100 plus short sales in negotiations, we were like, hey, this is a full time gig. I actually gave the business to the gentleman that still runs it and does all of our negotiations. But even today, we buy 45 to 50 short sales a year. We only buy 25 or 30% of what we originate.

So if you take that times four, that's how many leads that we originate with short sales and turn over to the negotiating team to handle. But we've always done really well with short sales. At the peak, we were buying, you know, maybe 80 to a 100 a year. Even as they cooled off across the country, we still had a significant amount of, you know, opportunity with short sales. I would bring it up, and people were like, you still do those?

You know? And I was like, well, yeah. I never knew they went away. Or and and I think that's in a lot of I'm in a pretty small market. I mean, we talked about some of the numbers today.

I mean, in York, Pennsylvania, which is a, you know, suburb of it's kinda halfway between Baltimore and and Harrisburg, are probably the two bigger cities that people would know. We have a population of 400,000 in that entire county, so it's small in comparison certainly to Phoenix or some of these larger metro areas that people are doing business in. And, you know, the short sale market has always been an opportunity. It's you know, maybe it changed a little bit as it became more popular, which you see with this what went on in 2006. And what we're seeing right now is that, you know, once it becomes a very lucrative opportunity, people gravitate towards it.

So a lot of the competition that we're seeing now for me is much like what I saw in 2006 and 2007. So Yeah. We're kinda used to it.

Steve: So you're it was you and a partner. Yeah. And then you guys are how many transactions were you guys doing at that time? I mean, it sounds like guests just flew out

Eric: the gate. The first full year, I wanna say we did, like, 70.

Steve: Wow. That's

Eric: The first full year. So, like, yeah. I mean, we got started. I wanna say it was, like, we bought our first house maybe, like, April or May 2005, 2006. It's so long ago now.

So I I used to know the exact day. And then so, you know, we went, like, seven or or eight months that year. And then the next full year after that, I think we bought and sold about 70. And then literally from, like, 2008 forever, we've done 200 plus deals. Wow.

So it

Steve: took me How long

Eric: Go ahead.

Steve: Was it just you and your partner doing that those kinds of numbers?

Eric: Quite a while. I think our first hire she's actually with me now. She's my controller. We hired her as a project manager. Yeah.

Quickly found that that was not my strong suit. And, so we hired someone to basically drive around and check on the progress of renovations. After that, we hired a salesperson. We hired an acquisitions agent. And, I mean, today, we have forty two forty two or 43 employees.

Steve: That's crazy. Yeah. 42 employees.

Eric: Mhmm.

Steve: That's not flow, though, all that overhead.

Eric: It's, it's it's pressure. I like to use pressure versus stress.

Steve: Yeah.

Eric: There's a certain amount of pressure that comes along with you know, particularly with COVID, not to get sidetracked, but, you know, when that happened in Pennsylvania, they shut down real estate. So I had 42 people that were looking to me like, hey. Is there gonna be layoffs? Are there gonna be furloughs? And I remember, you know, the first couple days, made the comment to my wife, and I made the comment to to some key people in leadership and was like, my whole goal is to get out of this without laying off a single person.

Steve: Yeah.

Eric: Because you could just see the the real stress that was on people's minds about what was happening with their jobs. And and and it was for me, it was a it was a pivotal moment in my career that, that, like, everything that I had done to this point should put me in a position to where I can I can make it through this on behalf of our people? Right? Like, it wasn't about me. Like, we could, you know, been successful long enough and, you know, been wise enough with our money that we could sustain a two month right?

What was it supposed to be? Sixty days to flatten the curve. It's been six months or seven months now. So at the time, I'm thinking, hey. We just need to get through this sixty days.

And, I mean, I was worried, you know, what what what was gonna happen or, you know and I was I wasn't worried about it. I knew we would be fine. I was worried about the 42 people that worked for me.

Steve: Were you able to make it through without Yeah.

Eric: Yeah. We actually we hired, half a dozen people between and pets yeah. I mean, it was crazy because what happened was a lot of our competition and anticipation of what I was talking about this the other day. Like, there's there's no explanation for what we're seeing in the real estate market right now. Like, all of the the circumstances you think would would lend itself to a correction or a crash, But the real estate market has responded the exact opposite way.

Right? Yeah. So we started to see that in real time, and it was an opportunity for me. And we'll talk about it as we get back to, like, the, you know, the transition from 'six to 'eight was a lot like what we're in now. We just haven't got to o '8 yet.

Mhmm. Like, we're still waiting on it. Yeah. But I I lived it. Right?

I went through 2008, and we made some some key business decisions back then that I think were critical and allowed us to to to not only survive, but thrive through that. So when this started happening, it's okay. This is it. This is the drill. Mhmm.

Right? Like, I've we've we've prepared for this our entire like, I've been since 2008, I've said, hey. If this ever happens again, this is what you do. And as we started to do those things, I saw, you know, people were pulling out of advertising. They were doing all of these things, and, you know, I've always been a bit of a you saw my profile.

We looked at that today. Right? I'm a little aggressive. And, I was like, no. We're gonna double down Yeah.

On advertising. And literally, we were paying I don't know what the exact amount was, like, 75 to a $100 per television spot, and the cost went down to, like, 25 or $30. Oh. We became, like, the go to person where, like, local networks, they would call and say, hey. Someone just backed out of a $5,000 commitment for the month of April.

We'll sell you these spots at a reduced price. And I was like, alright. Well, let's do it. And we saw obviously exponential growth. Like, we picked up all that market share.

Now, of course, television ads are back to five times that amount. They're a little bit more expensive but it gave us what I would call like the proof of concept where we say, Hey man, television really works. So I'm anxiously awaiting the election so TV spots and commercials go back to normal prices or something closer to what we experienced. But yeah, we made it through. We actually hired half a dozen people.

We saw a considerable amount of of growth and opportunity, and, here we are today.

Steve: I can't even imagine the cost of TV. I mean, seeing the this is gonna be every time we have an election, it's, like, the biggest Dude. Election as far as campaign spend. Yeah.

Eric: It's always the most important one. Right? Yeah. Campaign spend and

Steve: But they're spending so much money. And so with you on TV, it's gonna be kinda hard to to compete against that. And I've actually had a friend. He was on the show before, and he said, like, you know, he had one November where he spent, like, 85,000. Wow.

And he brought in zero revenue, being drowned out by all the all the, campaign spending.

Eric: Yeah.

Steve: So what were some of your early struggles? I mean, it sounds like you kinda just flew out of the gate. What were

Eric: some of your early struggles? So the early struggle was definitely renovations. I mean, we bought properties off the MLS, but very few of them were good deals. Mhmm. We had to, you know, literally, you know, bludgeon contractors to try and get, you know, renovation cost down to to to even leave a little bit of profit on the bone.

So, I mean, we probably averaged, you know, single digits on our first 25 transactions, but that was the experience that, you know, helped position us as we continued into our second, third, and fourth, and fifth year, that we knew better, made better decisions about what we bought. You know, I think one of the the bigger challenges we make is in the car business, you can literally buy, you know, a 300,000 mile car that's falling apart and bring it back and renovate it and, you know, run it through recon and and make it a nice, decent car. We tried that same approach with houses and you can't polish a turd. We tried to polish turds. That was probably one of the bigger mistakes we made.

Yeah. It's just buying houses with seven foot ceilings and non conforming layouts. And if it was cheap enough, we'd buy we can somebody's gonna buy it. One of the things we would always catch ourselves saying is, you know, if we just found the right buyer for this and, like, our second year, we were like, hey. If if if we ever say that about a deal, let's just agree that that means we're not gonna buy it.

If one of us says, well, if we could just find the right buyer

Steve: Yeah.

Eric: And, we just, you know, we we learn that lesson quickly. Because, you know, I think that's one of the things that that that we all do is when we get in this business, we we we get drawn to a deal. Mhmm. Like, we say we wanna do a certain amount of deals. Well, at the end of the day, we were talking about that before the show.

Right? It's like, who cares about how many deals you did? Like, what did you make?

Steve: Yeah.

Eric: Right? People get, like, they get yeah. They get too tied up. There's guys in in in, you know, in in different markets that do a fraction of the volume that I do and make twice the money. Mhmm.

You know, cause they have bigger spreads or, you know, whatever the case might be, or they just run a better business than I do. So but very early on, coming from the car business, like, when you're the largest volume dealership, you get those bragging rights. Right? And then everybody just assumes that if I go to the largest dealership, I'll get the best price. So we we sort of apply that thinking.

Right? And if we're doing deals, we're making money and it wasn't until about the third or fourth year, we're like, man, we're just running ragged to make $8.08, $9.10, $11,000 on these deals. What if we got more selective? You know, what if we only did half as many deals but made double the profit? Wouldn't that be awesome?

That'd be great. And then we found that we could do that and still do volume. Yeah. So we just got better about what we bought. We got good at doing short sales.

You know, when we started that, it wasn't it wasn't, you know, vastly popular. So people weren't fighting over those transactions. You gotta think in 2006, people would gravitate towards pre foreclosure because to them, it was a motivated seller that would be willing to part with equity because of the the obvious circumstances.

Steve: They had equity.

Eric: Yeah. Yeah. Lots of people had equity in 2006. And, but everybody that had no equity, like, people would just throw those leads away. They wouldn't do anything with it.

And that was one thing that I really learned from the car. We literally tried to make something out of everything.

Steve: Right. We

Eric: were the best at bad credit, so, you know, they were just really, really difficult deals to get funded and, they would always reduce your advance, right? Like, say if you were selling a $12,000 car, back then if you did a bad credit finance deal, the bank would only finance $10,000 so you had to sell it at a reduced profit. But we built a pretty significant bad credit card business and, you know, we found that, like, it was the short sales were kind of the same. Right? They were deals that people were throwing away.

And you already paid for the lead. Yeah. Right? So, like, you can either do nothing with it or if you make half what you would make on a normal transaction, you would otherwise throw that deal away. So if you even if you make $7.08, $10,000, but what we found was we were making double the money on short sales.

Steve: Yeah. Oh, really?

Eric: Oh, yeah. Yeah. Wow. Yeah. Yeah.

Because there was no competition. I mean, our only competition was the bank. Yeah. Whatever they decided the value was through their appraisal process, their BPO process, this you know, each bank has their different, you know, formulas that they use to arrive at what they're willing to sell it for during pre foreclosure. But we weren't competing against other offers.

It's you know, it was whatever the bank decided and then, you know, depending on the product, they take 85 or 88% of whatever value is. Mhmm. And we just we did really well with it.

Steve: So one thing you were talking about earlier was your profile was not really meant to be a project manager.

Eric: Correct.

Steve: Not really a details person.

Eric: The opposite, actually. Yeah.

Steve: So you wanna talk about how important profiling your your your personality, you know, behavioral tendencies and so on, and how that affects

Eric: your personality? Yes. I'll nerd out a little bit on that. It's it's something that, you know, I've learned a lot about, I'd say, in the last three years or so. We have a mutual friend, Gary.

And, I invited Gary into our business about three years ago, and we implemented EOS. And we really just got to the point, you know, even three years ago, we had twenty, twenty five employees. And, you know, I I was this essentially micromanager for our business. Every decision passed through me. That's not fair.

Yeah. What we bought. I didn't know any different, though. Right? So it was it was my own nightmare.

I owned it. I was happy with it, or, you know, I at least made it work. And, what I found was is I I I tended to hire people like me. Me. Right?

So I would hire someone like me as project manager. So I constantly had this turnover in project management. Right? The only difference between me and them is they had to do it. Right?

I felt like as the owner or, you know, the partner at that point that, if I made a mistake, it was a little bit more acceptable than someone that was supposed to be doing that job at a high level. So we we would constantly hire good people that would eventually fail or burn out. So one of the things that that, you know, we were introduced through through Gary with EOS was right person, right seat. So I I had a lot of the right people, but I had them in the wrong seat, and then I ended up burning those relationships. So I would have salespeople in project management positions, and they would burn out after, you know, two or three years or so.

And that's because they constantly had to modify their behavior to to to do what was required of them. So you had mentioned that we looked at my profile, and I'm not detail oriented. Right? So one of two things

Steve: not manageable.

Eric: At all. So, so it's gonna work for myself. But, yeah, I mean, the only thing was is that, you know, I would find that one of two things would happen. I would either modify my behavior, and I was miserable. If I had to be too detail oriented, it would just crush me.

Or I would gravitate towards my normal behavior, which is to not be organized, and I would have all these handshake deals with contractors. Right? Like, well, Steve, didn't we agree that we were gonna drywall the middle bedroom? And I'm confident, right, that that that's exactly what we discussed, but I don't have it documented. So now we have this confrontation and, you know, I may win the conversation or the negotiations about whether or not he does it and does it for free, but then I may burn that relationship.

Steve: Yeah.

Eric: Right? So we quickly learned that, like, it wasn't just about hiring the right person. It was about hiring the right person for the seat that they're gonna sit in. So we were introduced to behavioral profiling and and and testing that shows someone's normal tendencies and what they feel comfortable with. And then we align that with the job description and what's required of that position.

And it's it's I mean, I have we still have turnover. I wish I could say that I didn't, but it's it's minimal to this point. People are just generally happier in their jobs, including myself. Because one of the things I realized with we use predictive index, and my profile is one in which I'm I'm best suited to to to build big relationships, chase shiny objects. Right?

Like, that's that's actually in my job description as as as a visionary of our our company. But when I was the decision maker and I was in charge of running actual departments that required organization, I failed miserably, which ultimately would fail the people that worked in that department. So I had to fire myself from literally five or six, you know, correct person. And it's tough because, you know, if you're a detail oriented person, I'm interviewing you, and I'm not a detail we we naturally do not get along.

Steve: Yeah.

Eric: You're gonna seem slow to me. Right? I'm gonna go, what's taking you so long to make a decision? You're like, well, I don't have enough information. Yeah.

I need, like, this much information to to to make a decision because I go with my instincts or my my my intuition where someone that's better suited to be a project manager will wait until they get all of the data before they make a decision. Yeah. So it was difficult, until I learned the value of those positions and how important it was. And now, like, we won't even engage in an interview until I have someone's profile.

Steve: Right. And it's so critical for everyone who's listening. We're talking about, Gary Harper with Sharper Solutions Yeah. Who's actually coming to my office in two months. I can't wait for that.

So let's just jump into the numbers right here. We're talking about 375 investor side transactions, which sounds astronomical. As someone pointed out, I didn't even think about it. It was obvious. Dude, more than the deal a day.

Eric: It is. Yeah. Even on leap year. Yeah. Yeah.

I never thought of it that way. It's, but, yeah, I mean, when we when we think about because we have KPIs and scorecards for each of our acquisitions and and dispositions departments, and, our goals are actually much more than that. We talked a lot about it. We have, you know, releases due to title issues and stuff like that. So we're we're finalizing more than a deal a day, but we're doing, you know, 30 to 45 acquisitions a month Mhmm.

Landing around the 30 to 35 market of deals that actually stick and stay together for various reasons. But, yeah, it's, it's got to be I mean, for us, I mean, it's it's it's funny, like, you know, when I have these conversations and people are like, wow. That's a big number. Like, for us, I think we've just we've we I came from a high volume car dealership. Right?

We were selling, across our new and used dealerships, a thousand cars a month. Mhmm. So when we did 70 deals our first year, we were like I mean, these are just small numbers. Right? Because we came from More better than that.

Yeah. I was just like so there was this constant push for volume. And then, you know, we made the decision about quality over quantity, but then we found that we were able to actually do both. Mhmm. And, yeah.

So that 200 number has always been like a sort of a, you know, basement number for us that anything below 200 for me would feel like a failure.

Steve: So but let's talk about because, I mean, there are people that they're struggling to get to, you know, their first deal or struggling to get to two days a month consistently. There

Eric: couple moving parts. Yeah.

Steve: Yeah. So let's talk about all those moving parts Okay.

Eric: Or as

Steve: many of them as we can. Let's do it. Alright. So what's the first thing that you would give to some tell someone, like, hey. You know, you wanna get to doing 30 deals a month.

Like, here are the things you gotta do.

Eric: So, you know, in complete transparency, just to to add some perspective, so, you know, we talked about Liz buying most of our deals off the MLS. About four and a half years ago in my market, that started to change, where it was harder to buy them, had to pay more. You know, I started to transition back to, like, that 2006 feeling where these compressed margins, that's when I reached out and ended up getting connected with Collective Genius. So about four and a half years ago, I was introduced to some advanced methods of direct to seller marketing. And it's, you know, obviously had a huge impact.

If we had not made that decision five years ago and relied still exclusively on on market MLS. So on market for us is, you know, any referral from an agent, sheriff sales, tax sales, like anything where it's not direct to seller. Right? So we would go to public auctions. I bought a ton of properties at public auction.

When we get into novations when we talk about that, that's actually one of the areas where I apply it the most. Mhmm. Just the nature of the inventory that we find at public auctions are, you know, good bones. They got good solid bones. Maybe the the the the purchase price and our max allowable offer is 10 to $15,000 difference.

We found it very applicable in in public auctions. So that's where, you know, once those started to dry up, I mean, it went from being like one of 10 buyers at a sheriff sale to one of a 100. Like, it went from being like, you know, sit wherever I'd roll in two minutes before the sale and, you know, sit down up front to, like, standing room only. And I was like, this can't be good. Yeah.

Right? This is not gonna work out well for me. And we went from buying, you know, maybe five or six properties every sixty days at the sheriff's sale to, like, scraping to maybe get one. Mhmm. And if you've ever worked a sheriff's sale, there's a considerable time commitment.

And you gotta look at 45, 50 properties to maybe bid on 10 to hopefully get five. Mhmm. So we're spending all this time spending money on title searches and all this crap and buying one property. And I saw that across everything that we were doing in the MLS and public auctions. It just started to tighten up.

So I looked for a solution, came across the Collective Genius and the long version of the answer to your question is it absolutely starts with identifying your market and getting really dialed in with lead gen. We talk a lot about acquisitions and sales skills and all of that stuff, but the reality is if you don't have anybody to talk to, you can be the best salesperson in the world. You can't close a vacant seat. Yeah. So you absolutely need to become great at marketing, and lead gen is the best, I think, place to start.

If I were to start over knowing what I know now, I would put a 100% of my focus on acquisitions and marketing. Yeah. I would become, you know, as best as I possibly can to maximize my dollar when it comes to to to marketing dollars and then become, you know, world class or, you know, I like to use that terminology when it comes because people use best or the best of my market or or the top guy. For me, world class is like this elusive plateau that we should all, work towards. Your

Steve: gold gold medal Olympian.

Eric: Yeah. That's world class.

Steve: So let's just say we pluck Eric out

Eric: Yeah.

Steve: Of of Pennsylvania. Yes. Pluck him in the Phoenix. Just drop him him in Phoenix. Yes.

What are the top three marketing channels you would use to grow your to

Eric: So television's been extraordinary for us. Yeah. And and frankly, we we tried it. I don't know. So so somewhere between 2008 and 2018, we tried it and didn't do well with it.

It was very expensive. So your your cost per lead was significant, and it's not very focused. Right? Like, the the great thing or what you pay for billboards and televisions, they they talk about exposures. How many people are watching your commercial?

Yeah. Well, but, like, one percent of those people that are watching Judge Judy actually have a house with equity that I can buy. Right?

Steve: Yeah.

Eric: But they're charging me because there's a certain amount But we've we've found a great relationship with someone that manages our television, and they've really dialed in where our leads come from, the time of day, the program, the network. So we're able to make, you know, very micro adjustments to to to that budget on a weekly basis. So we're I believe they're buying spots only five or seven days in advance. Mhmm. So we're taking the data from this week and seeing where we got our leads and then pivoting all of our advertising dollars towards that time frame or that network or that channel or whatever.

So we've had tremendous success with television, at least in our market. Direct mail still works. I know for a lot of people it's for us. We're very targeted. We're fortunate to have access to, you know, some some really, really, really good data and some, you know, predictive analytics that are included in the list that we buy.

And then we we get extraordinary results out of cold calling and texting. It's super labor intensive, and success in my market with stateside virtual employees. So so by virtual, most people think, you know, VAs, they're they're outsourced out of out of the country. But we have people that work virtually that, you know, live one lives in Connecticut. We have one that lives in in the South.

I feel horrible that I don't know exactly where it is, but trust me, she she lives in The US. She's a she's a great employee. And there's someone actually that lives in my hometown but just works from home. Mhmm. And what we found is is that cold cold calling is just a grind to begin with.

Right? We really try and limit the amount of hours that they spend on the phone, and the ability to be able to work from home makes it less grueling. Like, the fact that they don't have to drive to the office to do know, a job that's thankless. You know, they literally get hung up on 99 and a half out of a 100, you know, phone calls. But their ability to stay from home and then manage that schedule and be at home, contributes to their production.

It contributes to the length of time they're able to stay in that job. So those would be the you said top three. For us, it's television, direct mail, and outbound cold calling and texting.

Steve: Any tips for these guys for direct mailing?

Eric: Measure everything. That's the one thing who are constantly adjusting. So I've changed my mail piece a 100 times. They're all the same. Literally.

It's, you know, it's it's good, I think, to mix up your messaging a little bit, just to give somebody a unique look. But it's really about we've we've found the sweet spot for us as we mail, we get fresh data every 90 days. So we're only mailing people that, you know, show up on the spectrum of being motivated by by our calculations. Then we're mailing them every six weeks. We've done every two weeks, every four weeks, every eight weeks.

For us, the right frequency is every six weeks. So they're getting, you know, two pieces of communication direct mail wise from us every quarter. Yeah. And then if they stay on the list, they'll continue to get it time and time again. When we do direct mail and I buy new data, I always mail the fresh people first.

Mhmm. Right? So if you were on last month's list or last quarter's list and you're on the list again, you get mailed second. I'm mailing the fresh data or the people that have because timing's everything in this business. Right?

So particularly when you're talking about a motivating and that's I told you you'd have to tell me to stay on track. Yeah. So here's what I love about television. Everything about data and direct mail is about timing. Mhmm.

So if you buy a a tax delinquent list, by the time you actually get the data, it could be what? Thirty days old, sixty days old? Or longer. If you mail it out today, it takes it's taken eighteen days. We measure from from the time I sent out a postcard, it's eighteen days until it hits somebody's mailbox.

Steve: Really?

Eric: Yeah.

Steve: Wow.

Eric: So there's you know, the US Postal Service is not at the top of their game right now.

Steve: Yeah.

Eric: And, unfortunately, that has an impact on the results for mail. Right? Because if you're mailing someone because they just showed up on a tax delinquent list or or a mortgage delinquency or something about, you know, the predictive analytics data that we use, they're looking at, like, a 100 different set of circumstances that might change. Maybe they had a recent change in job. They applied for, you know, some relocation program or something.

They're they're they're pulling all kinds of data from everywhere. So if we don't get that that postcard out for you know, it takes a week for us to get the data, to send it to the mail house, does it could be twenty five, thirty days.

Steve: Yeah.

Eric: So we start with texting and calling. As soon as we get the data, we do that first. Mail the new people first because timing is sensitive. So those are a couple you know, timing is is of critical nature at this point. And obviously, you know, mail is expensive.

I mean, by the time you buy the data, mail it, it it could cost you $45.50 cents a record. If you're doing it on a large scale, it's a considerable investment. Depending on the service that you use, the skip trace and text, they cost you between 10 to 15¢ per record to communicate.

Steve: Yeah.

Eric: And all you're trying to do so what I love about cold calling is in texting is people like, well, I'm getting hung up on. Well, how many what's a good response to direct mail? You know what it is. Point 8%. Okay.

So, like, in what other, like, industry is point 8% considered successful? So, like, but we look at direct mail, and we're like, oh, man. I got one so if you get 1%, which is about what we get, you're doing a good job. Yeah. So I told you, you get hung up on 99 out of a 100 times on cold calling, but that somehow is not considered acceptable.

Right? It's like, well, I'm not gonna do that because we're only getting a 1% response rate.

Steve: It's very damaging to the ego.

Eric: It is. But here's the thing. Like, we do direct mail just to get the phone call.

Steve: Yeah. That's true. That's true.

Eric: We don't we don't get we're not getting a 1% deal rate. We're getting a 1% response rate. So if I can text and call them for a third of the price and get that communication established, that's all I wanted. Right? We just want the lead.

We want the connection. We want the ability to be able to follow-up with them. And you can get that through cold calling and texting. It's grueling. It's process oriented.

It's consistent as everything. The good thing about direct mail mail is you can just mail. Mhmm. Right? You don't have to really be super involved.

If you just have a good relationship between your your wherever you get your data in the mail house, it happens without you. It takes a a considerable amount of time and energy to manage cold calling and texting, but it's to me, it's amount of time and energy to manage cold calling and texting, but it's to me, it's well worth it.

Steve: So you mentioned, like, it almost didn't matter what you were sending. And Scott Lewis has been on the show, and he said the same thing. Stop overthinking it and just send anything

Eric: Yeah.

Steve: Because it will work if you just do it. So one question we're getting here is the the the data. I mean, like, you're you're you're relying on the data. So where are you pulling data from that says, okay, these people are worthy of a direct mail business?

Eric: So we buy almost all of our data from a company called Audantic. Yeah. You may know Chris Richter. Yeah.

Steve: Chris Richter. He's in CG.

Eric: So yeah. So he does this predictive modeling Mhmm. That says, you know, I'll give you the third grade version of it because that's my understanding level. Mhmm. And so he'll go back, let's say, twelve months, and he'll look at all of the properties that sold in our market for, you know, let's say 70% or less of of whatever their market value calculation is.

And then they'll they'll look at each of those people and the circumstances or snapshot of that particular person at the time that they sold age, were they non owner occupant, was there, you know, it was much information. You gotta remember how much information of ours is available now. Everything from credit score to, you know, did they have two and a half kids? Did they have three autos? Like, were they married, single?

Like, there there's

Steve: All these data points.

Eric: Yeah. A ton. So then what they do is they create an avatar of a motivated seller. Mhmm. Then what they do is they go into your market, you know, on September 1 and say, show me all of these people that own real estate that fit this avatar.

And then that's the list that I get.

Steve: Yeah.

Eric: So, you know, it's it's extraordinary the amount of data that goes into it to to identify, and it takes a little bit. I mean, we would always guess. Right? Like, it's easy to say non owner occupants are more motivated because they don't live there. Mhmm.

Someone that's on a tax delinquency list or has utility shutoffs or these four or five things. The problem with that is is it's such low hanging fruit that everybody's marketing and targeting

Steve: Everybody's

Eric: that same demographic. This gets a little bit more granular, and it's probably, you know, before they show up on the tax list, what are two or tax list, what are two or three things that happened sixty or ninety days before that? Because you can do that through modeling. You can say that, you know, sixty percent or eighty percent of people that end up in foreclosure had these things that happened Yeah.

Steve: Yeah.

Eric: So I what what I know to be true is that they're they're actually getting into those precursors, as far in advance as you possibly can. So we're communicating with people at the earliest sign that there could be any level of, of, you know, significant motivation. So we, you know, we have tremendous success with with direct mail.

Steve: So that's marketing. You've got incredible salespeople. I I argue every industry is sales and marketing.

Eric: We talk. Yeah. I agree.

Steve: Every industry sells and marketing. And then once you've kinda figured out sales marketing, not that it's perfect, but it's more or less working Yeah. Now everything else is systems and people. Correct.

Eric: And

Steve: I think that's probably the biggest thing It's excruciating. That's helped you. Yes. Right? Because Yeah.

You know, what what we talk about, you know, your company has done, you know, 375 plus another 400 in the traditional side. And it all sounds great, but it's not you. Yeah. It's not you doing it. Right?

Eric: Not at all.

Steve: So let's talk about we we're we're kinda touching a little bit as far as the profiling goes, but let's talk about what it takes to lead an organization and how you make that all happen.

Eric: Yeah. So I mean, bottom line is I'll go back to and, you know, I I I try and, you know, pay credit where credit is due. Like, literally everything that I do is either modeled after or specific teachings that I've learned from someone else. So about three years ago, shortly after I joined CG and we got good at direct to seller marketing and, you know, then I was introduced to Gary Harper and we implemented EOS. And that's really when I started to get the understanding of how to be a leader and not a manager.

Right? Like Gary says something, I'll probably mess it up. But managers manage processes, leaders develop people. Mhmm. Right?

And both are needed at at certain, you know, levels within the company. But as the owner, I really needed to to push myself to become less and frankly, I was a little burned out.

Steve: Yeah.

Eric: You know, for me, you know, I I still think it wasn't that long ago where I was calling leads at seven, 08:00 at night. And it's because I hadn't spent the time to train and trust someone to do it on my behalf. We and you and I talked about this at breakfast this morning. We we believe that we're always literally the best at everything. Or at least I do.

I'll take I'll I'll take the blame for that. Right? You didn't say that. You nodded your head, but I I said it.

Steve: But we have these ideas.

Eric: Yeah. So it was real I never trusted anybody. And so every decision had to pass through me. And, you know, that that wasn't I didn't know that that's what I was doing. I just felt that it was the best thing to do to make a a a marketing campaign, to make the most, out of a a a a property.

Right? Like, I had to go walk the house before I'd sign off on a rental budget. Mhmm. I had to see the house before I would agree to what we would sell it for. Like, maybe I'll, you know, see something that you didn't see, and we'll get an extra $1,800 out of it.

Steve: Yeah. Yeah.

Eric: That's best use of my time. So I've learned otherwise. But literally, when Gary came on, we we, you know, EOS teaches you basically how to put right people in the right seats. And then, one of my mentors along the way was a business coach that I had that talked a lot about what we call tribal knowledge. So I had all of this tribal knowledge.

Right? Mhmm. And literally, I told you, like, the way that I used to train acquisitions agents, I was like, come on. Just come follow me for thirty days and then just do what I do.

Steve: Yeah.

Eric: It doesn't work. Right? It sticks for thirty days, but then they forget 88 and a half percent of what ever it was that I taught them, but I didn't actually teach them anything. I just behaved a certain way and wanted them to emulate whatever I did.

Steve: They heard no worries. They didn't understand the science.

Eric: Yeah. So we started to process map everything. We started to have we we have a it's about the size of this television. So our accountability chart is about this If you can imagine with, you know, five core departments and then 42 employees, how that organizational and accountability chart looks. And I had to literally take everything out of my head and put it on to paper.

And then I had to give people the opportunity to challenge why we did something a particular way, and it couldn't just be because that's the way we always did it or that's what Eric said. So we created this environment of what we talk about, which is agree and commit or disagree and commit or what, you know, Gary refers to or what I've learned to be healthy conflict. So that whole development process was, you know, from the time that we implemented EOS to today, of almost 100% turnover in leadership. Still had great people. A lot of those people still work for me.

They've just been repurposed and repositioned within the company to a place that, what we talk about is do you love it and are you great at it? Right? If you're not great at it and you don't love it, someone else should be doing it. Because there's a person and a and a profile that would actually love to be organized and be held accountable.

Steve: There's somebody out there that loves spreadsheets.

Eric: There's a there's a king there's a there's a my my dad would say there's a s for every seat. Right? And there is. So that's what I started to learn is is is that through, you know, the the addition of of people and then empowering them through process. Mhmm.

Right? I didn't need to be engaged or involved. Like, I'm literally involved in, like, zero decisions today.

Steve: Yeah.

Eric: Unless it's a, you know, a big personnel decision or, you know, a large investment that's outside of our normal, you know, core, you know, focus.

Steve: It's outside of your bread and butter.

Eric: Yeah.

Steve: So I think that's that's important. Right? So you got the the GWC. Right? Get it.

Want it.

Eric: Yes.

Steve: Capable of it.

Eric: Yes.

Steve: And that part where everyone's allowed to challenge you. Mhmm. Not necessarily publicly, but you're allowed to disagree.

Eric: Yes.

Steve: And there's no ego here. And I think that's one of the big things about about Traction. And ironically enough, you know, when we drove here, you were laughing, like, I only have one thing in my trunk. And what is it?

Eric: It's the book Traction. Yeah. It looks tiny in that big trunk. It's like, really? You have one thing back here?

But, yes, I thought that was kinda funny.

Steve: So let's talk about all the I don't know. You said the four or five key leaders. So, like, let's talk about different organizations within to to make this whole engine run.

Eric: Yeah.

Steve: Get some key leaders' key positions.

Eric: Yes.

Steve: What are all those key positions or key

Eric: So I'll start like, for me, I'd operate from memory. If you go from the left side, it's really if you if you think about for us, our accountability is set up for, like, the you know, what's the life cycle of a lead or a deal look like? Like? Right? It starts at at marketing, then it comes into lead management.

So these are all departments, marketing, lead management, acquisitions. Then for us, a deal could go back into lead management if we don't close it. We have our lead management department do about 80% of our follow-up. Then it goes into either dispositions, if we're gonna wholesale it, or it comes into renovation, if it's a fix and flip or we do a considerable turnkey business. So if it goes into renovation, property management if it's a rental or a turnkey, or comes back out and goes to dispositions.

And then you have finance and HR that's involved throughout the entire life cycle of that. Right? There's some accounting measure that needs to be made whether we're buying it, right, and we have to fund the purchase. If we sell it or assign it and there's income that comes in through the assignment of that contract or if we close on it and we renovate it, there's accounting and bookkeeping that has to be done, for the contractors, our lending relationships, draw schedules, all that kind of stuff. So those are our key departments, marketing, acquisitions, lead management, renovations, dispositions, property management, finance.

Steve: So just a a handful of people.

Eric: Just a handful.

Steve: Alright. So let's talk about the 375 transactions.

Eric: Yeah.

Steve: You're broken down for me. I don't remember it, so I apologize.

Eric: So we do roughly a 125 to a 150 wholesale transactions. Transactions, which oftentimes most people before we get into the explanation of it is a whole tail. Right? There's just a different methodology of how to get to the deal, and then the rest of our business is fix and flip, which is a small percentage. I mean, 2006 through 2015, like 99.5% of my business was fix and flip.

Yeah. It took its toll on me, especially, you know, so I'm renovating two fifty homes a year and I don't and I'm not very good at renovating. I was good at buying, got good at selling, never quite figured out the renovation game.

Steve: Just that little meaty part. Yeah.

Eric: Yeah. And it's literally, you know, I tell people all the time if they think about getting into wholesaling or fix and flip, I was like, listen. You you have to understand what's required to run an effective renovation business. Right? Because once you bring it into inventory, you're now a general contractor, at least to be able to operate as one.

Steve: Yeah.

Eric: So what made you great at marketing and acquiring the property does not make you good at managing. Just because you know how to pick out granite and the right color shutters does not make you qualified to manage a $70,000 renovation project. Actually, it disqualifies you.

Steve: Like, if you're

Eric: good at sales and marketing, you probably should have nothing to do with the renovation portion of the the deal. So yeah.

Steve: So, what was the number of flips

Eric: last year? Total? Yeah. What what do you mean? So So it was three seventy five.

So we do between a 125 and a 150 wholesale transactions, do about 75 or so wholesale, novation deals. And then this year, we'll do about a 150 or so, turnkey deals.

Steve: Got

Eric: it. And our so we we we I think in 2019, it was, like, a 100. This year, we're on track to do between about a 150 or so turnkeys. Got it. So

Steve: And just for real quick for people that don't know, what is turnkey?

Eric: So, basically, you've heard of the BRRRR method. Right? Buy, renovate, rent, refinance. If you just take the last r and replace refinance with resell. Mhmm.

That's it. So we buy, we renovate, we rent, and then I resell. And then we sell it with property management in place. So basically what you have is, you know, you have people that get into the wholesaling fix and flip business typically have a considerably high risk threshold. They have an entrepreneurial spirit.

They're comfortable with taking risk. And there's a huge portion of the population out there that wants to invest real estate that does not have the same risk threshold that you and I have. Yeah. But they still want to get I mean, everybody want I think wants to be in real estate just whether or not they can or are willing to to take that, you know, leap of faith to go out and get the proper education so that they're not making mistakes with their money or somebody else's. Mhmm.

So we sell predominantly to what we identify as high income w-two employees. So their time commitment is focused on their primary job. But our average turnkey nets between 1316% cash on cash ROI. Yeah. So our typical buyers are not cash, they're leveraged.

They're putting 20% down using a thirty year amortized product, making 13 to 17% cash on cash returns.

Steve: Got it. So and and that 375, 75 are novation.

Eric: Correct.

Steve: And just ballpark math, I'm guessing it's about 1,000,000 in revenue.

Eric: So 75 transactions. Prop yeah. So we're closer to $20,000 per transaction. So Yeah. Million what's that?

A million 5? 5 and

Steve: a half? Yeah. So there's a million half in revenue you have right now

Eric: Yes.

Steve: That everyone else would throw away?

Eric: Most of it. That's some of it. So we talked about yes. I I think a lot of those deals, well, before I mean, that's how I came to develop this process. Was so let's go back to if you remember, if you've been in the business long enough, you'll remember something called an FHA flip waiver.

So what it meant was is that prior to this waiver, any FHA financing required the property to be seasoned for ninety one days before you could write a contract and a FHA buyer could purchase that property.

Steve: Yep.

Eric: So there was a flip waiver shortly after the market crash because there was a considerable amount of investment inventory where people were buying bank owned properties and flipping them, and now 90% of loans were FHA. Right? No one could get a conventional mortgage anymore. You know, they were doing eighty, twenty, 100%, and we we had this huge reaction by lending institutions where they went from being ultra liberal and lending everybody money to, like, now, you gotta have an 809 credit score and 40% down.

Steve: Countrywide was basically in the strip club.

Eric: Yeah. Just making it rain.

Steve: Yeah.

Eric: So now, you know, you know, flash forward to 2008, 2009, like, everybody's trying to learn FHA. Loan officers that never did FHA loans before are trying to learn them. They're like, it's crazy. Right? So that that I don't remember what it was around 2010.

The FHA flip waiver was tied up in this congressional bill with, like, this other funding, and it didn't get approved. And I'm sitting with my attorney. I'm like, dude, like, I can't hold all this inventory for ninety one days. Like, what's up? Mhmm.

And we started, you know, talking about how I could still make those deals and sell those deals without because if you write the contract on day 91 and it takes forty five or sixty days close the loan, now it's up. That's a hundred and thirty days where otherwise I was able to close maybe in fifty days. Mhmm. So if you think about that when you're doing 200 transactions and almost all of them are fix or flip, right? Mhmm.

And 95% in our market people were using FHA. So it was literally every deal. I'm like, I'm gonna go from holding it for for sixty days to holding it a hundred and sixty days. Like, this is not good. Your

Steve: hold time is more than doubling.

Eric: And not necessarily think about how much cash commitment it takes. Right? If you're doing 200 deals, that means you're doing around 15 to 20 a month, which for me meant I always had to have about three and a half months worth of inventory. So I had to be carrying 75 to 80 homes to do 20, where before it was, you know, literally two thirds of that. Yeah.

And so we started looking at the amount of capital that would be required, the interest expense, like, it it it was significant. And we ended up coming up with this novation strategy, which the terminology novation just basically means replacement. Right? So when I start explaining that to people, I'm like, you know, you go A to B, B to C, which is probably common, you know, commonly understood with most people that would listen. And then you have basically A to C, which is just like an assignment agreement that literally every wholesaler in the world knows about, but you can't do that with a retail transaction.

Right? You can't assign your interest in a contract to an FHA buyer.

Steve: Right.

Eric: Or even a conventional mortgage buyer. I I don't know know, that that that would be an approvable No.

Steve: Lenders don't like that.

Eric: Line item on the HUD because it breaks it's it's it's there's interruption in the chain of title. They don't like that.

Steve: Yeah.

Eric: They can put plenty of fees on the HUD, but they won't let us as investors put fees on us. So we came up with this novation agreement, which and and and I don't wanna get too deep off the bat, but basically what it does is extinguishes the a to b contract. Mhmm. So I'm buying Steve's house. I have a novation agreement in place, and my original agreement says, hey, Steve.

If I happen to come just like the assignment language, right? It says if I assign my interest in this contract, it's permissible, as as written in our sales agreement. So we have the same language except it uses the novation language. And then what it means is if I find a third party buyer, we can extinguish the a to b contract in exchange for the a to c. If I agreed to buy your house for 100 and I sell it for $1.40, I'm able to to benefit from the difference between the $100,140.

If our contract was as is, cash, no contingencies, no inspections, and now this contract has inspections and contingencies, I get the $40,000 difference in price, but I also inherit all of the liability that comes along with it. Yeah. So that essentially is a novation agreement and what I was able to do was skip that whole seasoning process that was now required because anybody was so I stopped taking deed to properties and then reselling them and started novating them to retail buyers at retail values.

Steve: Yeah. So to to simplify it, it's basically you're allowed to sell a property on the MLS to FHA buyer

Eric: Any conventional finance buyer. Without actually owning it. Correct. Or taking title.

Steve: Yeah.

Eric: Yeah. In any capacity. Right. So yeah. So now what happened is we did that to to to, you know, just do or continue doing our f a FHA business back then.

But what I found was is when I started applying that thinking to each of my acquisitions appointments, you know, you gotta imagine, like, you know, the the one of the values is, a, being able to do that deal. Right? Like, now I can sell it to an FHA buyer and not wait one hundred and twenty days or ninety days. So because often what would happen is the buyers will go, well, I'm not gonna wait around. I don't wanna wait ninety days.

I'll just go buy something else. Right? There was plenty of inventory back then to choose from. So what I didn't wanna do was lose that buyer, but once I started applying that and I would look at it, so I'd look at, you know, what's the wholesale price? What's a fix and flip price?

What's a wholesale price? What's a wholesale price? What's a wholesale price? What's a wholesale price? What's a wholesale price?

What's a wholesale price? What's a novation would always afford me the opportunity to spend an extra 10% on the deal because I was saving realistically 10% between the acquisitions cost, transfer tax, title insurance, you know, proration of taxes, all of that's any bank fees that would come along with it plus the sales cost, right? I pay transfer tax when I buy and sell it. So if you buy a 100,000 house, if all you did was buy it for $100,000 and resell it the next day for $100,000 it cost you $2,000 just in transfer tax, right? Assuming that you're only paying your 1%.

In Pennsylvania, it's one percent buyer, 1% seller. So oftentimes we advertise no fees, no commissions. We would pay both sides of transfer tax on the acquisition, so now it costs me $3,000 So that stuff starts to add up. So with the novation agreement, if you just eliminate your need to close on the property, you've eliminated between $3,000 and $10,000 worth of fees.

Steve: Yeah.

Eric: That doesn't benefit the buyer, doesn't benefit the seller. It's taxes. Right? Like, it's it's it's just wasted revenue that that gets donated to to the local and and federal governments. So by implementing this novation agreement, we found we were able to bring more properties into inventory by eliminating those costs, which the novation agreement it's basically it's wholesaling a property or assigning a property to a retail buyer at retail value.

So, you know, when you're for all our wholesalers out there, when you're looking at a deal, you know what your wholesale buyer is going to pay. And there there's the max allowable offer that limits what you can pay. Mhmm. And if you don't have the funds or want the to to, you know, spend the money to pay for it, you're done. Right?

If if your max allowable offer is 90 because you can wholesale it for a 100 and they want a 100, what do you do? Shake hands, you leave, and you hope that they might be more flexible when you call them in a week.

Steve: Yeah.

Eric: So this gives you the ability that now you have to start to look at because I think what what what I lost sight of was as an investor, I knew what wholesale value was and what renovated value was. That's the only that's the only world we live in. Mhmm. But there's this this whole other massive chunk of inventory that gets sold day in and day out that's not renovated, and it's not selling for wholesale value, and it's not selling for full retail value. Right?

It's selling for what we call wholesale.

Steve: Mhmm.

Eric: But for wholesalers, that's not a legitimate exit strategy.

Steve: Yeah. You can't pay what they need.

Eric: Yeah. So this novation agreement allows you to approach it as a wholesale deal because the only thing that's not wholesale about is the price. Mhmm. But if you're still making the same, if not more revenue, you can call it whatever you want. Right?

It's essentially, conceptually, a wholesale deal because you didn't have to pay for it, you didn't have to take title.

Steve: Yeah.

Eric: Right? So to me, that was what it's done is it's opened up all of these, you know, we we would instead of leaving appointments at a $90,000 figure and hoping that they would come down to our number, we're stretching and paying a 100 and then buying it, renovating, and ended up making $6,000 on a 140,000 investment. This was a great exit strategy for us that we sort of stumbled upon because of the the expiration of the FHA flip waiver that allowed us to do all of these additional deals. And then here's the best part. Like, it most often seems to apply to and has for ten years to to homes that are in better condition.

Mhmm. Right? So I kept passing in all these deals that were in good shape. Right? People are like, what kind of house should you buy?

I'm like, ones that are all messed up and nasty. Right? So like when you think about that, it's like, why am I why do I continue to pass on nice homes? Right? Because that's what would happen.

You think about the majority of homes that you pass on that you're 10 or $15,000 away, they end up getting listed, selling in the on the MLS for $40,000 more than what you offered. The buyer or the sellers like, see, I told you. Right? I knew it was worth that amount, but they would have gladly sold it to you for 100. It just it didn't match up with your fix and flip strategy.

It didn't match up with your wholesale strategy, so you had to pass on it. This gives you a third layer or a filter to run those deals through where you can make I talked to certain people that I've shared this with inside of CG. It's now 50% of their total revenue.

Steve: Yeah.

Eric: Particularly in this market. Right? Because everybody wants another $20,000 for their house today than they did three years ago Yeah. Because of the way that the market is.

Steve: So basically with innovation, you can pay more for the same house Yeah. But make the same, if not more money Yes. On the on the back end.

Eric: Yes.

Steve: And it's like was it, like, 7% more, 8%? How much more can they pay with the whole

Eric: Typically, 10% is like, so for us, when we see it, you know, it allows me to pay a 110 for a house that I would other otherwise wanna pay a 100, and it probably sells for $1.40 and as is condition. So when you net out commissions, you know, maybe so typically we're we're doing this with, inventory that would pass an FHA appraisal. You're not gonna get, you know, slammed on a home inspection. This doesn't work for, you know, dilapidated properties. It works for properties that, again, more than likely, if you're not buying them, they're selling on the MLS to a retail buyer for 30 to $40,000 more than what your offer is, and the seller would gladly leave that 30 or 40,000 in the deal, but you don't currently have an exit strategy in place to be able to make that deal happen.

Yeah. The novation agreement and the novation strategy allows you to capitalize on those deals, which for us is a it's a it's a large enough portion of our leads that we get.

Steve: Well, it's 20%.

Eric: Yeah. It's a considerable amount.

Steve: Yeah. So for again, for everyone that's listening, so innovation, more or less, it's a way to wholetail. The way I like to explain it, you can wholetail without actually owning the property.

Eric: Yeah. Because the problem with hotel typically means you buy it, you clean it up. Right? You put it back on the market. Sometimes you don't do anything to it other than just getting the

Steve: the payroll. Acquisition costs. There's holding costs. There's the funding.

Eric: Real money that has to be spent.

Steve: Yeah.

Eric: And depending on your situation, you know, you you may have not the best funding set up, and you might be paying multiple points. And, you know, if if your interest rate's ten, twelve, 14%, which, you know, sometimes with hard money it is, that chews away at that $15,000 profit that now becomes six or seven, and you're passing on those deals now where you could make $20,000 by just eliminating the need to take title.

Steve: Yeah. And you can make, if you so choose, their mortgage payments if you negotiate it. Yeah. Either they can continue making the mortgage payments or you make the mortgage payments, but more at the end of the day, you're not making hard money payments.

Eric: Correct.

Steve: Yeah. So I'm getting a lot of questions about the the the documents, guys. If you guys wanna get the documents, Eric's packaged all of it. You go to brewermethod.com. We can see those documents.

So let's now transition because the 375 investor deals is bonkers. Okay. And then you did 400 on the retail side as well. Yes. What does that look like?

How does that happen?

Eric: Man, so, you know, I told you we started in I mean, the two the big the first couple years, we bought everything on market. So I needed what I found was is that I I'm calling agents trying to get them to show me properties at the drop of a hat. It didn't work well. They didn't work with the same urgency that I did. Right?

I'm buying $60,000 bank owned properties. They're walking away with $900 I'm trying to make $20,000 I had a little bit more urgency, so we just hired an agent. I was like, Hey, why don't you work for me? I'll buy all of my stuff through you, right? Or I'll pay you a salary and I'm a cash buyer on every transaction.

So we started to hire agents as our acquisitions people, which was a good fit because we did everything on market, right? So they just needed to write a contract, they needed to know basic negotiating skills with a bank owned agent, which is not much. Right? If you can

Steve: get them on the phone.

Eric: Yeah. And it was it was a it was a night and, again, we would so a lot of times, we were allowing the list agent to be dual agent because they would call us back. So our agents were getting paid on commissions. We would pay them a flat fee for every house that they bought because the commission was being kept by the list agent, because we just found that that was the best way to get a return phone call. So we started to to to add agents our deals than we were acquiring them and renovating them.

So we started to hire sales people and got them licensed as agents, right? So just from a compliance perspective, if you're working with buyers and all of that stuff, it was cleaner for us to have them be real estate agents and then represent us as the seller. And so we slowly started to accumulate agents that worked for us. And then they were like, Well, what happens if my friend calls me and wants to buy a house? You can't sell it.

You work for me. Right? I don't want you out there, what if I need you and you're out showing a house? That's bull crap. And that didn't go over a period of time, they were solely relying on us to make income.

So if I didn't need to buy a house for a couple months because I had plenty of inventory, they weren't making money or I was paying them a salary without them producing. So we started to loosen up those restrictions and allowed them to sell stuff and we started to make money off of the commissions of buying and selling and them selling retail inventory and people then gravitated towards our culture and I didn't necessarily have a fit for them on our acquisitions team or our, you know, wholesale division or our turnkey. So we basically started to use our retail buyer agent section of our business as a training or entry level position if you wanted to get so if you came to me and you want to be in acquisitions, first thing I'm going to tell you is I want you to become a buyer's agent and sell homes for a year. Once you learn how painful a retail transaction is, you will have a much greater appreciation for cash. Yeah.

Right? Because you got things like appraisals and mortgage commitments and inspection contingencies and people that change their mind. Mhmm. So once you can literally sit across from a seller and say, you know, one of the great things that we offer is, you know, just a streamlined process, and here's what you can compare it to. Like, nobody knows you know, like, nobody knows, you know, like you go to different markets like in LA and you take cash, you're like, well, so does everybody else.

Steve: Yeah.

Eric: Right? In Pennsylvania, like cash transactions are a very small portion

Steve: of of of

Eric: business. Retail wise through the MLS, it's a very small percentage of transactions. On anything over, you know, like a 100 over the median price in our market, which is about $170,000 It's low compared to, you know, a national median value. But, mean, so yeah. For we just started to accumulate real estate agents and, you know, decided to to make it part of our business.

And we have a team of 10 I'm sorry. Nine agents, 12 people in total. We have a ISA inside sales associate, transaction coordinator, and a listing, consultant that helps agents, you know, get their pictures and MLS and all that stuff so that they just can focus on meeting with buyers and sellers. And it just kind of happened. It was a

Steve: Are you feeding them predominantly or they're all

Eric: We do. So one of the things we do is when we get deals in, which has been one of the things I talked about with television, is that's not as targeted as direct mail. So we get a lot of leads from, motivated sellers, but not motivated to sell at a discount. Right? Like, there's a difference between a motivated seller and a seller that's motivated and willing to sell at a discount.

And then, you know, if they just frankly are motivated and would gladly sell to us for a discount, but their payoff restricts them from doing so, we'll schedule that appointment for the agent to attend, rather than an acquisitions agent. We'll lead with an offer. So our agents still attend and make a cash offer, but if it doesn't work out, which we obviously anticipate not working out because of their equity position or what we discovered in the the original call, they transition right into a listing presentation. So we do feed them a a considerable amount, but then you do a really good job of of leveraging each of those listings to generate additional business off of that. We're you know, we run a team inside of Keller Williams, and Keller Williams is phenomenal when it comes to training about how to not just be an agent, but literally how to build a business.

Yeah. I think Keller Williams is like one of the top voted one of the top training companies in the world and they're a real estate company, which is is kinda crazy. Right? So, yeah, Keller Williams has been a great fit for us. They've taught us how to, you know, apply the same type of business strategies, marketing strategies, focus on, you know, squeezing every ounce of opportunity out of the leads that you get.

Mhmm. And that we've seen that, you know, applied to our residential retail agency business, and it's it's been pretty phenomenal.

Steve: One of our guys is saying that Steve wants to go to KW. Alright. So Is that true? No. Absolutely not true.

Proud of our brokerage. So let's see what what questions. We got some questions here. So how many markets is Eric in?

Eric: So we talked I consider it one market, but we're in seven counties. So those seven counties for my home office is they're all within an hour drive. Yeah. So we're in I think see if I can get them all right. York, Adams, Cumberland, Dolphin, Franklin, Lancaster, six.

There might be one that I'm missing in there. So it's it's either six or seven counties, but we consider that to be one market.

Steve: Yeah. So Joshua's asking who manages your TV ads? And, Josh, you should know the answer to this question because you're in our coaching program.

Eric: By the way It's, Bullseye Marketing.

Steve: Yep. So, Joshua, have Matthew go on to our Facebook group and look up Darren Dammy.

Eric: Yeah.

Steve: So we're talking about what list, yellow letter. We're talking about those authentic. Who should be your first two hires on the retail side?

Eric: Lead manager? Oh, retail side. Mhmm. ISA.

Steve: Inside sales agent?

Eric: Yep. And a transaction coordinator.

Steve: There you go.

Eric: If you think about agents will gravitate towards you if you allow them to do what they're great at and they enjoy. And typically, agents are great at prospecting and selling, not the organizational side of the business. So if I were an agent today and I wanted to look for a home or join a team, I would look for someone that would feed me leads, would would probably be a large portion of of of my decision making process, but I would give an equal, if not greater, amount of of influence towards do I have to do any flipping paperwork?

Steve: If

Eric: you have someone that does all of my paperwork, there's a good chance I'm gonna come work for you because, like, I just it's it's hard for me, and I'm I'm really bad at it.

Steve: Yeah. So Bonus points if you can get initials and signatures Yeah. For for missing documents or writing addendums as necessary. Yeah.

Eric: So ISA and and and a transaction coordinator, and I think you would find that agents will gravitate towards you, at least good salespeople that are real estate agents. If you talk about that that behavioral profile again, some of that on predictive index has a high a and a high b, low c and low d will just be an absolute mess with paperwork.

Steve: Yeah. I have a someone in our office who always, you know, complains, like, why are agents so sloppy? And I have to remind her about once a year. It's like, if agents were not

Eric: sloppy, you wouldn't have a job. Yeah. So yeah. Exactly. It's the same with project managers.

Right? When they tell me, like, this contractor sucks. I was like, well, if he was organized enough that he didn't need to be supervised, you wouldn't have a job. Because I've tried that. I've tried to let them go unsupervised that doesn't work.

Steve: Nope.

Eric: Then I always say, you know, you can let me into a brokerage and I'll find you can turn all the all the lights on, have everybody out of the office. You know how to identify the best salesperson. They're the messiest desk. Like, literally, there's stuff everywhere, but he's probably got a pipeline full of deals that would choke you, right? So like, I think it's a good example of like what makes a great salesperson makes them completely unorganized.

Now you'll find a rare profile where someone has Unicorn. Yeah, the unicorn. Where someone's organized and has the behavioral traits of a salesperson, but more often than not, the person that's a great salesperson will not be organized. So I believe whether you're building a brokerage business, an acquisitions business, a wholesale business, dispositions, whatever it is, keep the the the administrative work out of the hands of salespeople. Even if they do it, they're gonna be bad.

Mhmm. Right? So and then all you're doing is just crushing their dreams like your buddy when he left here, you caught him the dream crusher. If I'm a salesperson, you tell me I gotta do administrative work, that is crushing my dreams.

Steve: Well, it's it's it's grading. It's exhausting.

Eric: Yes.

Steve: You'll do it, but you're not gonna stick around.

Eric: I'm gonna complain about it the entire time.

Steve: Yep. It's like my kids. Yeah. So Robbie wants to know where you can find the VACATION agreement. Robbie, go to brewermethod,uh,.com.

And Eric and I are gonna be holding monthly calls where we're gonna go over not just Novation agreements and the documents, but also case studies and how to how to work it. But Warren asked a question, how do you present a novation agreement?

Eric: So here's the thing. I always I present it with every single contract. So That was one of my

Steve: takeaways from our last meeting.

Eric: What's that? How did how you present it?

Steve: Novation in every contract.

Eric: Yeah. So here's the thing. Like, what happens is if if you start at a at a price of, you know and if you're depending on how you manage your no negotiations, Steve and I will call it an anchor. Right? Like, wherever we start negotiations.

So anytime I move off of that number, I'll ask for concessions. For me, it lends credibility to your original offer. It's like, did you ever wonder, like, if you start at 70 and you land at 90, isn't there a part of that seller that's gonna go, Steve, did you try and get over on me for 20 g's or what just happened here? Right? I'm glad that you came to 90, but I kinda feel like you tried to rip me off.

That's a real thing.

Steve: Right? What did you have to give up where it made sense? Otherwise, you were ripping me off.

Eric: Yeah. So anytime I move off of an anchor, I'll propose what we call terms. So at the end of the day, what you have to get the seller to agree to is terms. Will you allow me reasonable access? So it might sound something like and I don't wanna get into sales training here, but, like, presenting it.

Right? Because that's the question. Is I'll say, hey, Steve. It sounds like, you know, ultimately for you, time's not near as important maybe as getting maximum amount of money for the the house. You know, I really think that the $70,000 number we kind of looked over some comps and we talked about it.

You understand how that number makes sense for me as an investor, but ultimately it's your decision. Right? It doesn't matter how much I believe in the price. If you don't like it, it's it's just not gonna

Steve: work.

Eric: Right. And, you know, I would be able to close in a short time frame. It would be completely as is. You know, we could button this thing up, and and it would be easily the the the least hassle free transaction you'd have ever seen. But if I hear you correctly, you might be willing to to go through maybe just a little bit of hassle if it means getting more money.

Mhmm.

Steve: That's correct.

Eric: Okay. So, like, would it be okay if I make a suggestion?

Steve: Please.

Eric: I think I could maybe get you closer to that price that you're looking for if you would work with me a little bit on what I call terms. Terms are like, you know, let's say if we didn't close in seven days, and it sounds like you're not in a huge hurry, you might actually prefer closer to, like, sixty days. Yeah. Is that okay?

Steve: If I get my ninety.

Eric: Yeah. I get it. And you know, it sounds like you got a lot to get done between the time that, you know, now and and when you move. You got to find a new place you shared with me. Like, you got lots.

You got thirty years worth of belongings here you need to get packed up. So it might even help you if it was sixty days versus seven days. So I'm happy to hear that because we can we can work with either one. So ultimately, what what I would think is that, you know, if I buy it, renovate it, and sell it, I mean, I'd literally have to be at the 70,000, you know, unless I think I can sell it for $20,000 more, which I don't think I can. You and I kind of talked about it's worth $170,000 fixed up.

I don't think it's worth $190,000 But, you know, if I were able to, you know, sell it potentially to someone for just a little bit more than the 90 that I'm paying you, and I didn't have to close on it. I didn't have to pay out a full, you know, realtor commission. I didn't have to pay my bank to to to lend me the money. That would allow me to be more flexible. So, you know, if I was able to save 10 or $20,000 on the transaction, and I could pass those savings on to you, I mean, is that something you'd be open to talking about?

Steve: Yeah. I'd be open to that.

Eric: So if you get the $90,000 let's say, Hey, Eric. As long as it's a, you know, it's a legitimate transaction and you don't change the deal up on me completely, that's something we might be able to agree on. And then basically just talking about, hey. Like, ultimately what I wanna do is I wanna market. You gotta be completely transparent with them.

Right? Because what you don't wanna do is dilute what you're actually going to expect of them, and then three days in, you got 15 showings. They're like, hey, bro. Like, we didn't talk about this. Like, what's this all about?

Steve: Yeah.

Eric: So but the bottom line is they're conceding that they will give up some flexibility with terms to get the higher price. It's ultimately what they're gonna do if they list it. Mhmm. Right? And the other part is is I'll go through that, and the person will sit across me and go, I don't like that.

Let's just stick with the 70. So, like, people like options. Right? So the one thing I realized is when we started presenting novation so we anytime I move off of a number, I propose that doesn't mean people are gonna say yes. But if they do, why not have that luxury?

Right? So what I've realized is that, let's say you buy it at 70 anyway, or you buy it at 72, and they gave you, right, authorization for terms and access. Now what can you do?

Steve: You got a lot more options.

Eric: You can list it on the MLS. Yep. You can sell it to a retail buyer. Right? Where we're always as wholesalers, we're trying to to walk this slippery slope of an open house, and I'm gonna bring by my contractor.

And, you know, there's all this kind of gray area that that sometimes we, you know, operate in as as wholesalers Mhmm. To get us access. Because no matter how great of a deal we have, like, our buyer wants to see the house.

Steve: Yeah.

Eric: And we're always kinda dodgy about how we explain that to the seller.

Steve: Partner, my financer.

Eric: Dude, I'm gonna need to bring a buyer through here to get you 90. Is that cool? Mhmm. I might need to bring 10. I just need one of them to say yes.

I need a little flexibility for I'm gonna put a sign up. I'm gonna list it on Zillow. I'm gonna list it on the MLS, but that's the only way I can get you 90, bro. And then people go, what? Why don't they just list it?

Because they wanna deal with you. If you're handling the appointment right, they they don't want you to leave without a solution. Mhmm. And we talked about this today. I mean, I gotta got I'm gonna bring four more people out here.

I gotta tell them my whole life story. They're gonna ask why my wife left me. Right? I gotta get into that whole story, and then they might not pay 90 for it anyway. I really like Steve.

And all he's asking little flexibility with showings. It's not that big of a deal. Yeah. If I get my 90, like you said right, then I'll do it. So it's all about and everything we teach and and talk about with our acquisitions agents is all about transparent and setting the proper expectations.

So, you know, one of the things we can do in our monthly calls is spend some time on because it is different, but I would tell you it's much like what you're proposing to your sellers when you lock up a wholesale deal and you need to have access to bring thirteen, fourteen cash buyers through. You're just setting expectations. This is no different. So as long as you're clear about what your expectations are, and then we propose a novation literally every time I move in price. And if I get the authorization for access, which you really need to be able to no fee, you really just need access, right, To be able to show it to conventional buyers.

You need to list it in the MLS, put it in showing time, and you need to have, you know and we'll talk about, like, hey, if, you know, would would twenty four hours notice be, you know, reasonable for you? So you gotta manage it on the other side. You just can't have you can't blitz them if it's occupied. Now if it's vacant, it's no big deal. They don't care about access.

It doesn't affect them at all. Sometimes we'll do so we I'm big on programs, right? Like anytime I give up something, I like to give it a name. So we'll call it the utility liability program. You know, Steve, it sounds like one of the bigger concerns for you is, like, closing in ninety days isn't a big deal, but you have taxes.

What if we started the prorations from today? Right? So when we get the settlement, you get your tax prorations. What if we took over taking care of the lawn? It seems like that's a really big concern of yours.

You're spending your free time between work and kids and all that stuff over here mowing the grass for two hours a week. That's no fun. So, we'll give them the liability utility program, something like that. Cash for keys, we'll call it. Right?

Like, it's a pretty common term. If you you know, sometimes we'll give them a small deposit upfront, particularly if I know it's a great deal. Hey, what if I could advance you a $1,500 out of your net proceeds that you would get at settlement? Would that help you with some of the moving expenses or the deposit that you need on your next home? Yeah.

Yeah. Yeah. That would be cool. So you gotta you gotta be a deal engineer. Right?

Like, it's not just this one thing where you go, novation, and they go, alright. Deal. Like, you gotta you gotta know how to but that's the great thing about, you know, I think what you and I are doing is we have the ability to explain it. We'll have the ability to do some centered training around how to present it, but it's no different than anything else. Right?

It's the same as getting access to be able to wholesale. It's the same as everything. The hard part's buying the house at a discount. Right? Like, that's literally the hardest thing in the world to do is get someone to sell you a $100,000 house for $40,000.

Right. It's pretty hard. Right?

Steve: Well, I mean, that's there's a whole industry. Yeah. We train on that. Yeah. It's hard.

So Josh wants to know how are you financing the innovation?

Eric: You don't finance it. That's the whole beautiful part about it. Same way you finance a wholesale deal. Mhmm. You don't.

Right?

Steve: No. You don't.

Eric: No. That's the that's the beauty of it.

Steve: It's taken care of. Let's see. What else is there? What are your thoughts on agents and investors working closely together? That's funny because we were talking about that tomorrow.

Eric: Do it. It's yeah. I mean so I I maybe that's a a topic for another day. But literally, Steve and I were were talking earlier today. If you put a 100 people in a room and you send them an investor postcard, right Mhmm.

And you send a real estate agent postcard, and they had similar messaging. If I told you that it was 60 of the people called one person back, 40 of the people called the other person back, who do you think this the larger portion of the people called? Realtor. Yeah. Why?

Credibility. Mhmm.

Steve: We

Eric: don't have the best reputation as real estate investors and wholesalers. There's an assumed credibility that comes along with being a real estate agent. So I think, and and hopefully, I can figure it out, is if you can perfect the messaging to our same database, like, I would love to send a postcard that comes from my agency team and goes to my my wholesale acquisition team, and then all I want is the lead. Mhmm. Once I get the phone call, we'll dig into motivation.

What do you do now? You take a lead from our acquisitions business and you refer it to the retail team because of their motivation and their equity position. Why can't it go the other way?

Steve: Right.

Eric: Particularly if a larger portion of those people are gonna call an agent, but they still wanna sell the discount. They just like the assumed credibility that comes along with listening with an agent. I'm gonna sell it for 100. Right? Mhmm.

If that's the number, I'm okay with it. I know I know my house needs some work and I wanna sell quickly, so I might have to be flexible in price. If an agent tells me that's what it's worth, it's more believable than if Steve Trang or Eric Brewer tells me because you're an investor and your job is to buy my house cheap.

Steve: Yeah. Well, I like what you said, earlier was that some of the problems you have where they need to talk to their son or their daughter Yeah. It's because that it's not a regulated

Eric: It's non conventional. It's non conforming. Right?

Steve: But if you talk to a realtor, it's like

Eric: It's all good. That works with no REMAX. Yeah. Works he he works at REMAX. Right?

It's gotta be a legit deal. And and and, again, I I think there's a portion of that that's that's legitimate.

Steve: Right.

Eric: That's a legitimate concern of a potential seller, and, I get it. So we can either fight about it. Right? We can slug it out with agents and continue to fight. But I told you what happened.

Right? So we we're we're big on analytics, and Aldana gives us a report. And we were at, like, 30% of off market transactions over the course of one quarter. And as I was talking to to Chris, he's like, dude, like, that's a big number. Like, for you to have 30% I'm like, okay.

So what are you trying to tell me? He's like, don't plan on it always being that. Yeah. Well, that kinda sucked. Right?

So I'm like, so I got 30% of of 300 deals, right, in a quarter. But then he shows me this other batch of deals, and I'm like, well, what's this what's what's this big number over here? Like, who's got this market share? He goes, oh, those are deals that sold at a discount on the MLS. So I'm like, well, okay.

Well, how many of those? Well, 1,200. So in one quarter, in our six counties or seven counties, I apologize. It's one of the two. I promise you.

But there was 1,200 transactions on the retail side at a discount. Now maybe it wasn't, you know, a deep discount, but it was a discount by whatever measurement they use if it's

Steve: They're motivated.

Eric: Yeah. And literally, that person got 6% less in their pocket than they would have if they sold to me.

Steve: Mhmm.

Eric: So I said, well, if there's 1,200 transactions and I got just 10% of that market share, it's equal to 30% of the smaller piece of pie that I'm fighting for with every investor in the world.

Steve: Yeah.

Eric: So to me, that's that we developed a tool. I presented on it at at CG. It's basically it takes all of our off market data and scrubs it across the MLS. So if I have a motivated seller and it lists in the MLS, we know the first day that it goes active, and then we go out and make an offer on it. So you might look at that and go, what's not on my radar because it's priced at retail?

But we talked about this, like how often do real estate agents actually know the level of motivation with their seller? Not enough. We bought plenty of homes, right, from homes that were listed for $2.50 and we bought them for 200. And the agent's like, well, I didn't know they were that motivated. Well, because you didn't ask.

But what we teach and what we do is we have to talk about that motivation. It's the only way that we can really solve their problem, and it's the only way that they're gonna justify selling to us at a discount is because we're able to solve their problem, so we have to talk about it. I think so often agents, you know, avoid those difficult conversations, which is understandable. They're they're difficult. Right?

This is what we try and avoid. I try and avoid difficult conversations unless I'm getting paid for them. So, I mean, I I there is no secret that there's plenty of deals out there that originate through real estate agents. So I would tell you the relationship between you as an investor and a real estate agent is significant enough that you should spend time developing those relationships.

Steve: Absolutely. And I think that's a great, great point. Ryan Barry wants to know what percentage of acquisitions are over the phone versus in person?

Eric: Very small. So and COVID in Pennsylvania, we were you know, if you're not familiar with Pennsylvania's restrictions during COVID, it was probably the most rigid, if not, you know, by a a large landslide. So we pivoted to, prior to COVID, zero. I bought nothing over the phone. Everything was in person.

During COVID, it was was 95%. There were very small exceptions where we would physically we couldn't go to the house. So if it was vacant, we might go, but everything that was occupied, we weren't permitted and weren't willing to do in person appointments. So from about, what, March through June 15 or I can't remember when King Wolf let us off the hook, where we could go back to to going outside again. But we moved back to in person appointments today because now we learned how to buy over the phone.

I think it's a great strategy. Our people, and I mean not our acquisitions agents, I think our sellers haven't made the transition. Like, they don't trust what they can't see. So, and our demographic typically, like our ideal sellers over the age of 65. They're the largest portion of the population that gets Right?

Like, they have people from Nigeria that wanna sell them a couch for $1,200 or something. Right? Like, they're constantly, you know, they they they're they're being exploited with with the contractors. You see it on the news. Right?

Like, all the time, it's like little miss Maddie got taken advantage of by a contractor that charged her for a job and never came back to put her ramp in or whatever. So, you know, understandably, they're super skeptical. So while our people started to make the adjustment, I felt like our sellers weren't willing to make the adjustment. They were asking us to come out and we're like, hey, we can't. And they'll say, well, let's let's revisit it, you know, when when you're able to come out to the house.

Like, we could give them a number and they didn't believe it. Like, say, oh, no, Steve. I'll give you 90. Like, based on the conversation we had, I'm willing to commit. They weren't.

Steve: Right.

Eric: So we made the transition to to go virtual, did a pretty good job of it. It was it was a tough spot for our agents to be in because we never did it. We talked a little bit about, like, the energy of salespeople and how they benefit from being in a in an environment, and they really like, I love to be

Steve: They need to engage. They need

Eric: to be social. To be, you know, belly to belly at the kitchen table. It's I can do a fair amount over the phone, but, like, I I feel more comfortable in person.

Steve: Yeah. Eric was laughing at me when we were at Starbucks because

Eric: the couch He was too nice. Steve said this guy is too nice. I didn't know you could have somebody too nice.

Steve: Yeah. That was the experience. I was very uncomfortable.

Eric: Nice. And he got you with the laser tag comment when he did your phone.

Steve: Overly overly I

Eric: think he won you over when he did the laser tag.

Steve: Overly enthusiastic. So Warner has a follow-up question. Is this not kinda like a net listing?

Eric: Yeah. Except net listings, I think, are illegal and Net

Steve: listings are illegal.

Eric: Yeah. So that's the cool part about this. It's legal. Yeah. But it but it essentially is.

Right? Like, a net listing would say, hey, you're cool with us listing it as long as you net a 100,000 and the agent could charge a $40,000 commission. Mhmm. For obvious reasons. Right?

As an agency, it was hard for that to be justified as a reasonable commission. Right. And people are like, well, why are they because I'm taking on the important part is you're taking on all the risk of selling that FHA buyer. A disclosure, liabilities, finance contingencies. I mean, everything that you look at that comes along with an FHA transaction versus an as is contract, all of those contingencies are your responsibility.

So when you look at that, because I've been doing this for ten years, I've had these novation agreements reviewed, approved by hundreds of state attorneys, real estate agents, you know, the local governing real estate body that oversees all of our agents. And they literally can justify, you know, $30.40, $50,000 worth of profit because of all the responsibility that we're taking.

Steve: Yeah.

Eric: We're allowing them to enjoy the benefits of an as is transaction, right, with no contingencies. We're taking on all of this responsibility, which sometimes just means that we talked about this, right, like why is it worth $40,000 more because it's not being marketed as is and you're allowing an FHA buyer to buy it. Mhmm.

Steve: You're gonna be responsible for making the repairs.

Eric: Yeah. And there might not be any. But the uncertainty of that Right. Is worth peace of mind, and peace of mind has a dollar value to it, and it's different for each person. But literally, by just being willing like, we talked about that, right?

Like, the transactional side of our business is painful. Mortgage commitments, right? Like, appraisals, home inspections, like, we're willingly taking on that excruciating responsibility on behalf of the seller, and that is what affords us seller, and that is what affords us the opportunity to make that that net profit difference between what we paid and what we sell it for.

Steve: The inspector comes by, you make the repairs.

Eric: Yeah.

Steve: And then the appraiser comes by, and you have to make more repairs.

Eric: Yeah. It's just And then they come back to reinspect the appraisal repairs that they gave you on Tuesday, and then they find three other ones. I've had that happen a number of times.

Steve: Oh, yeah. Aggravating. So, guys, if you guys wanna check out the Novation agreements, go to brewermethod.com. Like I said, we're gonna do a monthly call going over case studies, how to present it, and solving these problems for you guys. And then, just real quick, I wanna just give how did we meet?

Eric: Collective Genius.

Steve: Yeah. So, you know, just Just a couple months ago. Just a shout out to Jason Medley. Yeah. Absolutely.

Leon, Frank, Bailey, Jessica, what they've done over there has been absolutely incredible. So, you know, I'm not necessarily plugging Collective Genius. I am kind of. But you gotta find people that you guys wanna network and and and and connect with because what you guys can accomplish and do is very much related to who you know.

Eric: Like, literally, as you go back and I talk about, like, the pivotal points of my business where like, so the biggest one of the last twenty four months has been, learning turnkey, implementing it, and continuing to to to this pursuit of becoming world class when it comes to everything that's that's related to work. Because, you know, if you think about it, it's it's it's kind of like a a pretty well kept secret in the real estate investment business. Right? Like, there's this huge focus and a ton of activity in wholesale. Mhmm.

The fix and flip business is is predictable. And as the market has heated up, there's tons of people. My buddy calls them Chuck in a truck. Right? Like a Chuck with a pickup truck can buy a house, use his HELOC, and make $30 a deal.

Right? Then do it twice a year, and it's just he can either quit his job or it's this great ancillary income. This whole turnkey segment, I didn't even know existed until I was in Collective Genius. And I kept going back and I'm like, man, I'm trying to working hard to get these deals and, you know, I'm I'm selling them at this and I'm I'm renovating it like this. And these guys kept saying, well, they're doing 100, 200, 300.

I don't know if you ever heard of Memphis Invest. They do like 1,500 turnkey transactions a year. So I started to look at it and as our, you know, direct to seller became more competitive, as the the the market just heated up, it was not you know, it's great when it comes to selling, but it becomes harder to buy. So that's what's cyclical about our markets. Right?

When it's when it's easy to buy, it's hard to sell. When it's hard to buy, it's easy to sell. Meet, like, both of those, like, I wish they would happen at the same time. I'd be retired by now. But so, like, as the the the market pivots, our focus does as well.

Like, when the market is hot, we spend more time focusing on buying. When the market cools down, there's less competition. Deals are easier to come by, but now we shift and pivot all of our focus towards selling.

Steve: Yeah.

Eric: I mean, literally, anybody can sell a house today. Right? Like, you just if it's reasonably priced and the door's unlocked, like, it'll sell.

Steve: The the term that my, someone I I follow for the market, data, she says is is, dump your junk season.

Eric: Get rid of it. Yeah. If you ever wanted to sell something and you owed a little too much or it just wasn't in sellable condition, now is the time to get rid of it.

Steve: Now is the time.

Eric: It's pretty crazy.

Steve: So I'm gonna make a few quick announcements, and then I'll let you think about last thoughts you wanna leave listeners with. Okay. Alright. So guys, if you get value today, which I think Eric provided a ton and ton of value, please like this, comment, subscribe, share, all these things. If you can do it, it helps us because that's what the algorithm requires.

And again, if you guys wanna check out, the innovation agreements, go to brewermethod.com. And then we got Dan Bro coming next week, and he's gonna talk about how he went from in just a few short months, how he went from struggling in his wholesaling business to quitting his job and now doing 6 figures monthly. Again, less than six months.

Eric: If you

Steve: guys wanna find out about that, tune in next week. Last thoughts.

Eric: Yeah. So I think, you know, if I were trying to to summarize the last fifteen years or so that I've been in business, if I could go back and do one thing differently, it would be to network and invest in the education portion of how I invest my time and pull away even from a little bit of the execution part of the business. We were at 200 deals for ten years. Ten years. We've been at 300 plus for two.

And the biggest difference has been I made an investment in education and networking, thinking and operating outside of my own little market and my own little world. And again, that's how I learned about turnkey. That's how I learned about, you know, advanced methodologies of well, it's not super advanced, but television and direct mail. But you can do direct mail and be bad at it. You can do television and be bad at it.

You can do acquisitions and not be a great salesperson. And literally from this From this connection to Gary to people that have helped modeled my acquisitions marketing portions of my business all came from this desire to go out and learn, even if it meant pulling away from going out to look at homes or going to appointments or you know, cold calling. Like, when I really started to gain traction, not the the the ploy or the the play on the words about the book in the trunk, which is still funny, but, it was it was when I started to leverage my time, invest in education, and I had to pull myself out of certain processes, and then plugged people in and found that even if they do it at 70% of what you think you or I can do, if they like it, love it, and they're really good at it, and they do it more consistent than I do, and I'm now invested in, you know, developing new relationships or learning. The the leverage of those two things combined was much better than me doing every single thing in the business that I thought I was great at.

And it turns out half of it, I really stunk at.

Steve: Yeah.

Eric: So that would be again, if I could go back and the the I would have invested more time in education and made it a religious part, like listening to things like this. Yeah. Right? Just, you know, the the to be able to have access to information like you share here, I think is extraordinary. Someone or a lot of people, I think, are gonna take what we talked about today if they just did one thing and implemented this Novation strategy.

It can be the difference between a struggling wholesale business and a struggling investment business. And if you just did two more deals per month, right?

Steve: Life changing.

Eric: It's half $1,000,000 in revenue if you're doing it correctly, which can be and one thing is it gives you a competitive advantage because literally no one's using it, right? So if you're the person in your market or you're one of the few people in your market that understands it and commits to the discipline of implementing it, you have a competitive advantage, which you need right now because it's uber competitive. So if you don't have an advantage, you're just counting on luck, right? Like I hope I'm the first person or the last situations. So, that would be my final thoughts.

If you could do anything, invest or at least allocate a consistent amount of your time to pull away from actually being in your business and work on your business. And I know it sounds cliche, but there's a reason why that's been around and it's still an effective suggestion, is because it works.

Steve: Absolutely. And if someone wanted to get a hold of you, how would they do that?

Eric: You can go we're on Facebook, Integrity First Home Buyers. Eric@integrityfirsthomebuyers.com is my email. Again, we're on Facebook. You can go to see our property group, or Integrity First Home Buyers. We're pretty active on Facebook.

So, I do a lot of we talked about it, like, morning I share a lot of what we're talking about on morning drives about leadership and business and sales and marketing. So I think I'm a relatively fun follow. You know, so it's, it's entertaining. I, you know, I do some quirky little funny stuff on there as well. So

Steve: Actually, is it too late for them to go vote for your son?

Eric: What time? I mean

Steve: It's 06:00.

Eric: We could it might be. I don't know. We'll we'll post it on there. If it's too late, no big deal.

Steve: So go to Eric's Facebook page

Eric: Yes.

Steve: And go click to vote for his son.

Eric: Yeah. He's up for player of the week, in our local, YAIAA. He had a big game. They knocked off an undefeated team. He had 280 yeah.

They knocked off another one which in this shortened season in Pennsylvania, we went from a 12 game schedule to a six game schedule. If you're not undefeated, you won't make it to the playoffs. So by us knocking off that team, we we snatched their soul, so to speak. And, you know, we we were dream crushers for a night. So it was a big we're a relatively young team.

My my son's a junior. He took over the second half of of the season last year as the starter. So he's worked really, really hard in the off season. And, he had a good game. He got nominated for player of the week.

So if you go to my Facebook page, you can click on the link and vote for it. Any support there would be appreciated. I'm pretty proud of him, and he he works his butt off.

Steve: So Awesome. Alright. Thank you guys for watching, and thank you. This was

Eric: incredibly Absolutely. Fun. Appreciate it. Can't nobody touch us. And, yeah, we about to give you game.

Shout out to Steve Trane. Shout out to Steve Trane. Real estate disruptors. They cannot touch us. And yet we about to give you game.

Shout out to Steve Trane. Jump on the Steve Trane. We about to give you game. REI is flowing through my veins, and you don't have to look no further. See right here, you're gonna learn everything.

Shout out to Steve Train.