In the wholesaling world, there is no shortage of creative strategies you can look into to generate more leads. And in today’s show, you’ll learn that apart from radio, there are two ingenious strategies you can use that’s basically no-competition!
In this episode, REI Radio’s Chris Arnold talked to Paul Lizell. Together, they dissected two no-competition strategies Paul has been using to get more leads and be a step ahead of the pack.
If you’re in the lookout for new, effective, and highly innovative wholesaling strategies you can try, this is one episode you just can’t miss!
Two No-Competition Strategies for Generating More Leads Than You Can Handle
I’m excited for you to join us. I’ve got something interesting in store for you. As long as I’ve been around with the tribe, I love to ask people, “What are you doing as a strategy to generate motivated seller leads?” I find that I hear 90% of the time these foundational thoughts. I hear ringless voicemail, text blasting, cold calling, pay-per-click and direct mail.
I always like to bring somebody on that’s going to give a strategy. I want you guys to be able to read some of the other strategies that are out there. Maybe you can maneuver in a direction in which you’re not doing something that’s saturated or got a lot of competition. If you’re plugging in, this is what you’re going to get by the end of the show.
I am interviewing a good buddy of mine, Paul Lizell. We hung out in Florida. I started talking to Paul and he brought up two strategies on finding deals that I haven’t heard many people talk about. If you stay, by the end of this episode, we’re going to break both of these strategies down, not just introduce you to them but also give you the nuts and bolts of how they’re working. Let’s get into the meat. Paul Lizell, what’s happening? Welcome to the show.
Chris, thanks for having me on. I appreciate it. It was great catching up with you.
Paul has got a little interesting background. I want you to give us a snapshot. This is somebody that has done deals from a virtual standpoint at a level most people have. Tell everyone a little bit about your background. How long have you been in the game and about your business?
I started real estate investing back in 2001. I bought my first fix-and-flip. It was a HUD property back in Norristown. I partnered with a guy. We picked it up for $29,500. We put about $4,000 into it and sold it for $69,000 about two months later. We did pretty well at $30,000. We split it up, $15,000 each. I decided, “This is pretty good here. Let me get into this fix-and-flip thing.” I started doing a bunch more. Into the 2008 financial crisis, I was doing great. I got hammered then and decided to pivot and switch.
In 2009, I switched from almost exclusively fix-and-flip with an occasional wholesale to almost all wholesale and occasional fix-and-flip. I dabbled with owner financing, which we could talk about later on too. That model switched and I went from more of my local area in Pennsylvania. I’m from the Philadelphia market, Pennsylvania and New Jersey. I started buying all over the country and it was all bank-owned properties I would always buy. I was buying a lot off at HUD Home Store.
I started buying on online auctions like Auction.com, Hubzu, Xome and Hudson & Marshall. Before with Xome, there was something else. Nationstar Mortgage decided to create their own auction company because they were sick of selling everything through Auction.com and then not getting any revenue. I switched that model and we bought it in 44 to 50 states over the years.
People say I’m a virtual wholesaler. That means they might work in a couple of areas. Paul is the purest virtual guy that I know that’s out there. 44 out of 50 states is huge.
I totally agree with what you said there too because I know a bunch of other guys who would dabble. They’ll do in 2 or 3 markets on the virtual wholesaler. You are a virtual wholesaler, Chris. You are virtually doing it but open it up to the whole country.
That’s why you want to stay plugged in because Paul is doing something that’s unique in truly pushing this. Let’s jump in and break down this first strategy, a strategy using something that everyone is aware of. I like to talk about radio as the marketing channel everyone knows about but no one is using. I’m going to say the same thing about the MLS. The Multiple Listing Service is a resource. It’s a way to find deals that everyone knows about but how many people do we know that are utilizing it to find deals? Let’s break down your MLS strategy on how to find a deal. Step one is what?
Step one is to pick the targeted markets you want to be in if you’re new or you want to start in your local area. If you have access to the MLS or you know an agent somebody in your family or a friend that’s an agent, have them start sending you listings. You’re going to target certain things. What we target is bank REOs. A lot of times, we’ll target 90 days or more days on the market. They’re getting harder to find because of the way the market is but you’re going to target those items.
You’re going to target estate sales and then fixer-uppers. You want to get into something that needs a bit more work for sure. We send them to our VA. Our VA then looks at the properties, pulls comps on them and then sends them to us. We find out what our maximum allowable offer is. We use all the formulas we use and we start bidding off that. We send lowball offers. We get yelled at and nasty emails at times from agents but most of them come back and say, “It’s not going to work,” or they counter us and we get them. We get quite a few and the most that we get are estate sales and the REOs.
Let me rephrase that. 1) Bank REOs, 2) Estate sales and 3) Fixer-uppers. If I’m in the MLS and I’m like, “How do I target those?” Break that down simply. Are those keyword searches in the MLS? How do you target those?
It’s the keyword searches in the MLS. They’re going to pull it off the agent remarks or what’s put it in some of the major headings there because most agents will put in fixer-upper there or there’s a checkbox so you can put in their fixer-upper. The agents can do that on their end. Every MLS system is a little bit different but for the majority of them, they have those options there. You’re doing a keyword search, estate sale and as-is.
You’re looking for those types of things. You’re targeting specific ones and you want things that are aged. You can almost go to 120 or 180 days in the market and also pull things off there. What you’ll find out a lot of times is those are properties that end up needing to be short sales because they’re over-leveraged or you have people that are unrealistic with their sales price.
You do a keyword search and the time frame. Say that time frame one more time again. How far back?
For a bank-owned property, we target 90 days and greater as far as days on the market. For ones that are non-bank-owned, we’re looking to target 120 or more. If you find things over 180 or 240, you got ones that you want to go after because they need to be motivated.
Any other key criteria outside of the keyword search in the days and the market? Anything else that we need to understand?
That’s pretty much it. We have our target markets so we’ll hit certain counties. We have probably about five counties that we target per each of these. We do this in the San Antonio market too. We target a couple in that area. In Tucson, Arizona, I have an agent that does all that for me. He does all the heavy lifting and then bring to me the ones and says, “This one is good. This is not.” He only brings me stuff that’s good.
Now, I’ve got a list of properties that fall into those three categories the way I search. What’s step number two after that?
Once you get that then you’re making the offers. Our VA writes the offers for us. We give the proof of funds and everything. She emails them and CCs us on it. Generally, we’ll get a response from that agent.
Are you sending offers to everything that pops up on that list and it doesn’t matter?
If that looks good and matches our criteria, we’ll go through three things that are like, “That’s a train wreck. This property needs so much stuff. It’s going to be hard to do.” I’ll try to avoid things that have hills going into the house because you’re always going to have water issues or you’re on the main road. People don’t like those things. We’ll avoid those and that’s the visual look on it and seeing pictures. We’ll X those off and the rest of them we’re making offers on. We do a lot of blanket offers.
What percentages of the list that you pull do you feel like you end up putting offers on?
It’s about 15% to 25% in general.
Your VA sends blanket offers. How does that VA determine the price that offers should be? What’s the system there?
We do that. That’s my disposition manager and me. We get together with our numbers and then we send an email to her to tell her. We give all the property addresses and the prices we want to offer. She fills everything in.
That’s how you and your business partner are sitting down, filtering through, figuring out the best 15% to 25% that fits your criteria and then you’re determining, “We should come in at this offer.” You’re doing those on that 15% to 25%. You send it over to the VA and then the VA submits the offers for you. Did I get that right?
That’s exactly right. When we first started this before the market got really hot, we met about once every two weeks. We tried it once every week because these properties were going pending so quickly. Now, we have two meetings a week. Pretty much like a Tuesday and Thursday, we’ll meet and go through the properties and quickly get the offers out there because otherwise, we were losing out on many because the markets are hot.
MLS campaigns generally do not have marketing costs.
How many offers do you feel like then you’re roughly sending out a week or month?
About 100 to 150 per month on average is what we send out.
Out of every 100 offers you send, what’s the KPI on contracts and deals? What can you expect?
Generally, it’s that one. That’s what it’s coming into. It’s a lower percentage.
I’m sure the cost to run the system is not very high. You’re running big profit margins here.
This is where it changes everything. We don’t have any marketing costs. The only time it cost is the VA of what she cost. She is $5 an hour. It’s not a whole lot of money. Plus, we utilize her for other things. It’s a lot cheaper than doing the pay-per-click, direct mail and all these other sources.
Once the offer is submitted from the VA, what happens after that? A mass offer is being sent out. Walk us through at the end of that system. What does it look like?
I’ll give you a sample one we got under contract here. It was marked at $90,000. It was an estate sale. We started offering it at $65,000 and we finally met at $73,000 as the purchase price on that one. We went back and forth a couple of times with the agent. That was between emails between me and the agent going back and forth after the initial process was started. We locked it up and now we have people going and looking in at the lower $80,000 here.
How are you keeping up with all of these negotiations? This seems like a lot, 100 being sent out. An agent has to respond so that means you’re getting 100 responses in. What is the system to make this efficient so you’re not just responding to offers all day long?
It’s a simple Excel spreadsheet. When we get a response back, they usually hit this all. If they don’t hit this all, I’ll forward it to the VA and then mark on a spreadsheet no or pending. It’s under contract already or they have higher offers. We let them know where our highest and best offer is. Believe it or not, it was pretty quick. When those offers come, we make that counteroffer. We’re getting it usually within 24 hours. It’s not a long period of time. We know right away, especially in this market whether it’s going to be accepted or they’re going to take those other offers. Most of the time, they’re going to take those other offers because they’re generally homeowners as compared to me who is coming in as the investor.
Is there anything else with this system that we need to understand? It seems like it’s maybe about a 4 to 5-step process. I like it. It’s pretty simple and straightforward. You got to remember to do X if you want to run the system.
You can have some fall through the cracks where you don’t get a quick response from the agent. You have to do your follow-ups. If you didn’t get a quick response sometimes they are on vacation or sometimes they are slow. If you don’t get a response within 24 hours, you hit them with an email again, just a reminder and you give them the whole offer again. Usually, 90%-plus of the time, they’re responding to it pretty quickly, almost immediately sometimes.
Your goal then as a marketing channel is to do about one deal a month off of this. What’s the average deal size off of a deal on the MLS? We’ll say that the average around the country is maybe around $8,000 to $10,000 for a wholesale deal. You’re in a lot of markets. Is this a channel that’s producing a good solid deal or the MLS margin is higher?
The margins are between $7,000 and $12,000 so far on average on these, which is pretty solid. It’s your average cost per deal. The way I look at it, I don’t have any marketing costs. Our only marketing costs might be if we are sending postcards out to resell to another investor to wholesale the property. We don’t have many marketing costs in general stuff.
The profitability is pretty good in this. It’s more time-consuming in some ways but it’s a quick, simple process. It’s when I think you should always do in any market. A lot of people think, “The market is so hot. I can’t find anything on the MLS.” You can find deals on MLS always. Don’t get me wrong. When a market is slow, it is easy. You can shut everything else down and pick up deals off of the MLS and the auctions like we do but when the market is hot, you never want to turn it off. It’s always a good source. It’s always out there.
It works in-season, out of season and year-after-year regardless of what’s happening. Buyer’s market or seller’s market, it doesn’t matter. Stick with it.
You can do a lot with them. It gives the options too from this perspective that you can pick up. Especially when a market slows down a little, you’ll be able to pick up more deals subject-to, keeping the existing financing in place and maybe keeping some of these properties as rentals. That becomes a good option. I used to do more of that when the market was slow. Now, they all want cash or a mortgage with anyone out of it. It’s hard to do that subject-to now.
It’s a great strategy. It’s super simple. If you’re reading and you’re like, “I don’t have a lot of money to spend but I’ve got time,” get access to the MLS and look at running a process like this. What I love and what I hear you saying, Paul is it’s a great, consistent process to produce one deal a month. As I look at the overall system, you got a VA doing the work. I’m sure a lot of this you can outsource more and more. It could become something that you build that’s a lot more hands-off if you wanted to push that.
It’s easy to do hands-off. This is probably one of your better methods to do hands-off.
Let’s go to number two. The first one was good. I don’t hear a lot of people talking about it. The number two marketing strategy that Paul wants to share with you is an online auction. What is an online auction? Let’s start with step one. How do I get this process going?
I’ll give you first all the companies out there that we buy off of. Everybody knows of Auction.com. That’s one. You’ve got Xome.com and HudsonMarshall.com. It’s a very small outfit in comparison to the other ones. You’ve got Hubzu which is pretty large. You’ve got RealtyBid, another smaller one with Auction Network. You’ve got the HUD Home Store too. Unlike the online auction where I could bid on anything anywhere in the country, HUD Home Store is a little bit different. You do have to have a local agent representing you there but it’s still a great source. I love the HUD Home Store. I buy them there.
It sounds like there are quite a few different websites to get access to. Once you have access to those sites, what does this work for? Are you getting updates sent to you? Are you on there watching? What’s the process to pull a deal off on one of these auction sites?
I’ve been buying from them for a long period of time so I get updated lists. Every week, I’ll get weekly lists. In Xome’s case, they’ll give you 3 to 4 emails a week because they’ll have different auctions coming up at different times, Midwest Southeast, Northeast and Northwest auctions. They break it down into different categories. It’s the same as the other ones too but they send more frequent emails.
With the process, you’ve got to sign in and create an account on each of these. In Auction.com, for instance, when you’re bidding on a property, there could be five different auctions going on at one time. You have a $2,500 deposit. You have to leave with them to bid on these auctions. They got rid of the VIP on Auction.com, but they still have VIP on Hudson & Marshall and Xome so I don’t have to put deposits on those. If you’re starting out, you’re going to have to learn how to do that and put in the deposit. They put a hold on your credit card and then you can start bidding on these properties.
One of the best things to do when you’re bidding is if you’re looking at a certain area, most of these have an agent on them or a realtor. Contact that realtor. Get some details on the property as far as what they think the asset is valued and the after-repair value is or if they know what repairs need to be made on it. You get all your information there. You’re taking notes. Put them in your spreadsheet and then decide what your maximum allowable offer is going to be based on that. When it comes up to auction, you’re bidding on them.
Are you bidding through the agent that’s representing that property? I’m thinking like eBay and a timer going down. What does this thing look like online?
It’s just like that. It’s online. It’s got the timer. You’re bidding yourself. You create your own account and you’re bidding it. If you want to have an agent to represent you, you can do that. If you’re an agent like myself, I’ll use myself as the agent but in other states, you can’t always get the commission. If I’m getting information from the listing agent, I try to make them the representative for me on the buy-side because they’re giving me info and I want them to get both sides of the commission. I may utilize them to resell the property too and then they’ll get another commission on the backside if I go that route.
How often are you in this bidding type of war with all these different sites? Does an auction happen once a week on each site?
Multiple times. Generally, auctions are Monday through Thursday. Some will have some on Fridays and some will start on a Sunday. It depends on which site. They all have different things. They’re generally 2 to 3-day auctions as far as the time.
How many properties then are you keeping up with because there’s an auction on each separate property? Who is going to manage this thing?
Every ten years, you can jump on the online auction bandwagon for a couple of years and pick up a lot of potential real estate deals.
It used to be many thousands and I’ve since whittled it down. This goes to my VA. The auctions are broken down into categories. I send them to her on an Excel spreadsheet. She comes through and pulls comps on them. It’s not on every single property because it could get tedious. We’re targeting certain markets and there are certain states we don’t want to even bother with. She’ll scrape them, do that and send the email back to me on Google Docs or Dropbox. I pull it up there and look at it. I’m like, “I’ll bid on this one and this one.”
There may be out of 200 properties on the auction but I’ll only bid on 25. It might be a small amount that I’m bidding on. In another auction, I may have fifteen. In another one, I may have 50. Usually, on bidding, when the market is normal, I would be bidding on 500-plus properties a week. It’s not normal now. It’s always nowhere near where it was. That’s not happening now.
How many now would you say generally?
Now, I’m probably bidding on 100 to 125 per week and I’m whittling it down even more. I’m trying to be more specific as I’m worried about a market crash. I want to get the right type of properties. I’m going for low-lying fruit.
What are the numbers here? If the MLS is 1 out of 100 offers, what is the auction side? How many properties do you need to bid on to find a deal?
That’s way less. Generally, if I’m bidding on 25 properties, I’ll get one deal out of that.
Of the 1 out of 25 that you’re picking up, how many deals per month are you trying to do off of auction? You’re doing one a month off the MLS. Are you doing more volume off of the actual auction site?
I’m usually between 5 and 15 per month on the auctions and then as high as twenty in some months. Generally, I’m in that range. What we’re doing is we target the low-lying fruit and hit a lot of rural areas where investors don’t go. Our competition is low in those markets. It’s a little longer for us to resell them because there are less buyers out there but our margins are bigger in those areas. Now, it’s working perfectly because everybody is leaving the cities and these areas and going to more rural areas. Selling them is much easier now than it used to be. They’re flying like a hotcake. It has been good. The Coronavirus is going to help us from that perspective.
That’s what I want to ask. Is this a strategy with everything that’s going on in the market that you’re expecting this strategy come 2021 to be right in front of a bunch of REO foreclosure auctions? Is there expected to be a spike in all this?
It’s huge. You look at the financial crisis of 2008. Between 2006 and 2014, there were $10 million bank REOs. They’re expecting four times that up to $40 million from this. It’s not all in one year but it’s probably another 8 or 10-year period during that time. We could have four times the amount that we had the last time. The last time, I was swimming and finding them everywhere. It was so easy to pick up deals. I was turning down deals that I knew I could make money on because I was going for the ones that I could make more money on.
We’re going to be getting there again as soon as this moratorium lifts. It’s scheduled for the end of 2020. It wouldn’t surprise me one bit if they kick it down the road to the end of the first quarter of 2021 as California did. We’ve got to keep an eye on that. What it pertains to when they do that is they’re talking about FHA properties, the HUD properties and government-backed mortgages. The foreclosures on nongovernment-backed could still go on. The moratorium is only in that government-backed mortgage, which is a lot, obviously. It’s going to be good in 2021.
I love that you’re sharing a strategy. If you’re reading, you should go, “This is something I should consider.” Are all marketing channels working the same, depending on the economy? No. There are years in which direct mail has been strong. There are years when pay-per-clicks have been strong and depending on what was going on with bidding. Now, you’re looking and understanding that in every ten years, we should roughly expect to drop in the economy. I was around in 2008 when everything happened and there was no question. I shifted my business to short sales.
For those of you that are reading that haven’t been in the game, listen to us. What they’re telling you is, “Every ten years, roughly, you’re going to have an opportunity to jump on this bandwagon for a couple of years and pick up a lot of these deals.” I find that people don’t because they have to shift strategy and learn how to do this. They get a little bit lazy about this. We’re not saying you’re going to ride this wave for five years but there’s a couple of years period where you can ride this wave just like we did in 2008. I did that with short sales and REOs.
Short sales will end up coming back again. If you have enough of a drop in the value of properties, short sales become viable again. All you need is a 20% correction to make short sales become viable again. We made a bunch of short sales back between 2006 and 2010. We did well with those short sales. Those became more difficult that banks made them harder to do and then we were buying bank REOs. We were also doing direct mail and a little bit of pay-per-click at that point too.
In 2013, I completely shut off the direct mail and the PPC and stuck with this strategy. I’m doing the bank-owned and the MLS because I had enough inventory to get from for that. If it needs to, I’ll shift right back. It’s not that hard to shift from one to the other but you should always be looking. You may raise a great point. People get comfortable with things and they don’t want to shift things. We have to in business. If you want to stay in business, you need to.
What I do is each quarter, I look at what’s working, what markets have worked well and what markets are not as good. I’ll avoid those markets that sucked and the ones that I’m doing well, I’ll focus on them. You adjust again the next quarter and the quarter after that. That’s why quarterly meetings are important to look at that thing. The most important one is that mid-year meeting because the one in June, where we’re looking at is, “What is it going to be like for the rest of the year? What does the economy look like? What does the MLS or the auctions look like? Where are people buying and selling the most?” We’re looking at everything.
There’s an old acronym. CRISIS stands for Circumstance Requiring Immediate Shift In Strategy. It’s true. This is the time to consider shifting, getting out in front and riding this wave if you’re looking for another marketing channel. Wrapping up the online auction, any other point or rock that we need to turn over for the audience to understand this process?
A good thing for them to know is, for the direct mail, you’re picking these things up with very little deposit down. If you get into the other bank loans, there are $2,500 or $3,000 deposits. If you’re going for a $300,000 or $400,000 property, it’s going to be generally 5% that they want down. The deposits are heavier. Make sure you know it’s a good deal while you’re bidding it. You don’t want to get in there to bid it and back out because it’s not a great deal unless you find out something that you didn’t know beforehand. It’s more capital-intensive from that perspective.
Also, the bank-owned properties you must close. You got to take them down. You can’t assign these contracts. You need to have either a private lender, cash, line of credit or any of these kinds of things to be able to do it. It is more capital-intensive but it is less costly from a marketing perspective because you’re paying next to nothing for these properties as far as picking them up. It’s your time that you’re using. You’re not paying marketing fees. We used to pay about $10,000 a month and cutting that off was nice. That saved me $120,000 a year. That was a big bonus.
Paul, if somebody is reading and they’re like, “This is interesting,” everybody wants to know if you provide any help, education or videos, where would people go to find Paul to learn a little bit more about these strategies? Even particularly, the online auction because that one seems to be a little bit more sophisticated. How do they find you?
It’s REOAuctionAcademy.com. That’s where we train students. Most of our students come from California, believe it or not. The reason that they come from California is that the market is so saturated there. It’s so expensive to buy properties that they’re forced to buy virtually and that’s what we do. We teach people how to buy online auctions and MLS, how to train your VAs to make it easier for you, how to sell on the backend, how to market your properties and different methods that work well in different areas.
We teach them how to do that in REO Auction Academy. Also, I have a podcast called Flipping Out. It’s at www.TheVirtualInvestor.co. We talk about a lot of these different things, investing virtually and interviewing guys like Chris. I’ll probably have you come on my podcast too. It’s all kinds of different information on that. I even get into cryptocurrencies a little bit on that one because it’s virtual investing.
Paul, thanks for coming on and sharing with us and the audience. That’s what I wanted to get you reading. It’s a couple more tools for you to potentially consider as a marketing channel as you’re thinking about 2021, “What do I want to do? Do I want to continue to cold call or direct mail? Do I want to change it up?”
With the Wholesaling Inc. community, we always want to be out there researching and finding you guys good value. After I talked to Paul in Florida, you opened up my eyes a little bit. I’m going to be talking to my team and saying, “Have we thought about this, particularly what’s happening with the ship in the market in 2021 with the auction because it makes a lot of sense? It’s pretty common sense as well.”
As always, if you’re looking for contrarian things to do, radio call is something that we’ve been teaching on our side. It was superhot in 2020. We’ve sold out a ton of markets. Fundamentally, I read a statistic watching Axios on HBO Max. It’s a show. They were doing an interview. They said they should expect anywhere between 30 million to 40 million evictions potentially with Americans come January 2021 when the CDC removes the safety net.
That is a lot of deals potentially coming through landlords. I want you to think about that, looking at your direct mail campaigns. I can tell you as well on the radio side. What a great way that we’re going to be utilizing radio to be able to find deals is letting that word get out there to hundreds of thousands and millions of people utilizing radio. That’s something to be thinking about. Paul is looking at it from an auction standpoint. I’m looking at it from a radio standpoint.
As always, check out what we’re doing. Go to WholesalingInc.com/REIRadio. Book a call, see if your market is open and take a look at the radio. Talking with Paul, take a look at his REO Auction Academy. There might be a couple of great things for you to consider executing on. Paul, thanks for coming on and giving us some contrarian guidance. I always love the stuff.
Thanks for having me. I appreciate it because the opportunity is coming up in the next couple of years for real estate investors. That is for sure.
To the rest of you, thanks so much for joining us. Until next time. We will add more value. I’ll talk to you soon.
- Paul Lizell – LinkedIn
- Hudson & Marshall
- Auction Network
- HUD Home Store
About Chris Arnold
Chris Arnold is a 15 year Real Estate veteran who has closed over 2500 single family real estate transactions in the DFW metroplex. Chris is the founder of multiple companies that are managed by a US virtual team, which allows Chris to run his organizations while living in Tulum, Mexico full time. His passion for leaders has led to the creation of Multipliers brotherhood which serves the top 5% of real estate entrepreneurs out of the US. Most recently Chris has launched his REI Radio coaching program. This program is designed to teach real estate investors the marketing stream that everyone knows about but NO ONE is doing!