272 – Justin Colby – The Science Of Flipping

Synopsis

Justin Colby has been investing in real estate for 15 years. Throughout his career, he has accomplished almost 2,000 deals, 600 rehab flips, and 1,100 wholesales. During this period, he has seen the good, the bad, and the ugly of real estate investment.

In today’s episode, he’ll share the ins and outs of wholesaling and flipping, so we can use them to build wealth rather than simply generate some profit.

Key points

How He Started

Justin began his career in real estate as a real estate agent. He had to start from scratch after losing his house to foreclosure and not having a stable source of income. To rebuild his life, he started cold-calling agents to find deals. After nine months, he was able to close his first deal, for which he earned $7,000.

After this, he borrowed $25,000 to invest in a mentor. According to Justin, this is what he constantly tells people when they are contemplating whether to invest in a mentor. He said that having someone as a guide was the key to his success. Eventually, as time passed, he was able to make connections, and his career was able to pick up.

First Deal

For his first deal, he had to use transactional funding. Transactional funding is a financing strategy used by investors when they intend to do a double closing. It is a short-term loan that is borrowed and repaid promptly, generally within the same day or, at most, within a week.

Using this method is costly, which is why Justin only received $7,000 for the deal. In this deal, he bought a house, then sold it to someone else on the same day. He said that he was able to do so because, unlike other fix-and-flip projects, the property did not need extensive repair.

While still in the momentum, he immediately proceeded to his second deal. That year, they were able to close two back-to-back transactions totaling $14,000 in the last three months of the year.

Finding Deals

When asked how he finds leads, Justin said he believes you need to have three marketing strategies. These marketing strategies are Google pay-per-click, Facebook pay-per-click, and cold calling, which you leverage with text messaging. When they click the link on Google or Facebook, they will be directed to a broad website where they can find the city they are in and begin browsing from there. He also discussed some of the platforms he uses, such as Launch Control and BatchLeads.

When asked why he doesn’t use direct mail, he said that their callback ratio didn’t grow as planned, but they did use direct mail from 2010 to 2016, and it worked well for them during those times. However, from 2016 onwards, their callback ratio dropped from 1.25 to 0.25.

They started exploring new marketing strategies since the cost per deal became so expensive that depending on only a few lead sources was no longer viable. Additionally, the ability to scale is dependent on the number of leads coming in. Justin clears, however, that even if it didn’t work out for them, he is still an advocate of direct mail.

On another note, when it comes to leads, the goal is to convert them into sales. Based on his experience, the deals that have the highest chance of getting converted are those that involve absentee homeowners. In his opinion, these leads are better than those concerning owner-occupied properties.

Finding Team Members

Justin believes that having a vast network is one of the foundations of a real estate business. It is through networking that he finds his crew, which includes agents, title companies, and lenders, to name a few. Typically, he will communicate with someone he knows, who will link him with another person, and if necessary, another, until he finds the person he needs. He is able to build new connections throughout this process, which is helpful in this line of business.

Financing Deals

When asked how Justin was able to acquire 14 rental properties previously, he said that nine of those deals were turnkey properties. Turnkey properties are wholly restored houses or apartment complexes that may be purchased and rented out right away. As for the remaining five properties, he used the BRRR model, which stands for buy, remodel, rent, refinance, and repeat. He loves the BRRR model because it allows investors to earn 95% to 100% of their money back practically every time.

Wealth Accelerator Event

Justin made it his mission to make people understand how to build wealth and active income. Wholesaling and flipping are great strategies to earn some income, but you should also be building wealth while doing them. One way to do this is by buying rentals.

One of his mentors told him in the past that he needed to stop thinking like a rich person and start thinking like a wealthy person. While a rich person is more focused on earning money at present, a wealthy person is not just concerned with growing his current income but also considers long-term goals such as generating passive cash flow. As an investor, your focus should always be on how you can build wealth for the long term.

Wholesaling to Wealth

They have an event coming up in September entitled “Wholesaling to Wealth.” It will be centered on how to take the true business of wholesaling, flipping houses, finding leads, and then converting these leads. It will also address questions such as “Why would you choose wholesaling over flipping?” and “How can you grow wealth using your chosen business model?”

References

More from our guest

• To know more about Justin, you can check out his podcast on iTunes and YouTube.
• If you want to contact him directly, he also has accounts on Facebook and Instagram that you can visit.