Lauren Hardy 0:00
When all this statistical data that I just labeled year just went through right is really positive and looking really, really good, that’s actually a bad place to wholesale. Because what that means is that there are no like sellers are not distressed, because the sellers like they got the word that actually their markets doing really well and it’s desirable, their real estate that they own is desirable, like they live there, so they know. And wholesalers, we make money by buying properties at a discount and the way you convince a seller to buy a property at a discount is that they have to be in some kind of state of motivation. So if they’re not motivated if there’s not a lot of seller distress in the area, you know, you’re gonna have a hard time wholesaling houses.
Welcome to CRE PN Radio for influential commercial real estate professionals who work with investors, buyers, and sellers of commercial real estate coast to coast whether you’re an investor broker, lender, property manager, attorney, or accountant Well, we are here.
J Darrin Gross 1:03
CRE PN Radio. Thanks for joining us. My name is J. Darrin Gross. This is a podcast focused on commercial real estate investment and risk management strategies. Weekly, we have conversations with commercial real estate investors and professionals who provide their experience and insight to help you grow your real estate portfolio.
Today, my guest is Lauren Hardy. Lauren is a real estate investor with a people-first approach to business, investing in hundreds of properties in our career, Lauren has the unique reputation of being a virtual investor having not lived in many of the states she’s invested in. And in just a minute, we’re going to speak with Lauren about how virtual investing differs from investing in your home market, and how to determine the right market for you.
To learn more Property Insurance for Flipping Houses, go to: https://www.buildinginsurancerisk.com/property-insurance-flipping-houses.html
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With that on Welcome my guest, Lauren. Welcome to CRE PN Radio.
Lauren Hardy 2:25
Hey, thanks for having me.
J Darrin Gross 2:28
All right. Well, I’m looking forward to our conversation today. Before we get started if you could take just a minute and share with listeners a little bit about your background.
Lauren Hardy 2:37
Well, well, again, thank you so much, it’s an honor to have me or had to be here today. So a little bit about my background, I am investing in single-family residential space. I started out as a house flipper about nine years ago. I live in Orange County, California. So it’s a very competitive, high-priced market. At the time of me starting my flipping and investing journey, it did make sense to work in my backyard, I was able to pick up real estate deals that made sense, the profit margins were healthy. But as time grew, and my market became more saturated, and you know, house prices crept up the returns on my deals started to really not make sense and not really fit the buy box. So I was forced with the decision, either, you know, quit this and go get a job, or I need to figure out how to invest out of state. So I’ve built my whole career, my whole business on virtual investing, I everything I do now is out of state and what I really you know, through time realized that you know, once you learn that virtual technique and you learn how to set yourself up in a way where you invest out of state, you’re not dependent on your backyard, it really opens up the entire country to you and it opens up a ton of opportunity. So I know, now fast forward nine years, I’ve got a coaching program where I teach other people that the specific niche of wholesaling and how to wholesale virtually, that’s, you know, one of the big things that I’m into right now, but I still run, you know, a successful wholesaling and real estate investment company on the side along with that, so
J Darrin Gross 4:33
Awesome. Well, I appreciate you taking us back to the beginning and kind of how you got to where you are right now. So if I should right though, you’re flipping was pretty much local to where you are. That was your main focus.
Lauren Hardy 4:49
At first, it was so at first I was just your typical house flipper, you know, very HGTV stuff. But I would say I started the business in two 2012 and by 2016, I was really reading the writing on the wall that deals were drying up. And I mean, I just could not find anything that made sense. It was very, very hard to find my next deal. And I was starting to get really concerned. And when I was making offers on deals to sellers, you know, there was always some other competitor or five, that offered more, and you’re looking at the numbers, you’re going, Oh my gosh, that’s like a 5% return. Like, how, why would anyone even do that? Like, I don’t even understand, you know, how that makes someone money? Or, you know, because if there’s one thing that’s unforeseen, I mean, now they’re not making any money. So I realized, though, my friends that were in different states, like they, weren’t having those issues. I mean, yeah, it’s gotten competitive, you know, everywhere, just, you know, my real estate cycles, how they are, I mean, we’re in at the top of the cycle right now. And everything’s, they’ll say, it’s super hot right now. But in where I was, I mean, it made absolutely no sense. I mean, today, at the time of filming this podcast, like in Southern California, it makes nowhere I at least where I live, ocsla Inland Empire the way price is, if you say you wanted to, you know, buy and hold, for example, if that was your strategy, there really doesn’t it doesn’t make any sense. There’s no way to use leveraged capital and still cash flow. You’ve got a negative cash flow situation. So it’s, you know, I know that that primarily, it sounds like, you know, the audience might be interested more in commercial, probably multifamily. But the same rule applies, you know, that, you know, you’re in an area where your backyard just doesn’t make sense. Well, what do you do? You know, and for a lot of people, it is out of state, and they have to figure out how to make that out-of-state model work.
J Darrin Gross 6:53
Right. So let’s talk a little bit about the out-of-state model and how you arrived. And where you’re investing and how you kind of determine which markets to invest in and kind of get your, your, you know, your projects going I guess we’re finding properties to and let me also be clear, are you still flipping? Are you buying and holding or what’s your current model?
Lauren Hardy 7:18
current model would be fixin flip in wholesaling? Yeah. Okay.
J Darrin Gross 7:24
So for the properties, and actually even back up one more step. You mentioned, kind of the 5% margin that some of the people you’re competing against, were willing to accept, what was kind of a target return you were looking for when you were actively flipping in your neighborhood?
Lauren Hardy 7:41
Well, when used to be 15%, and then it was like, okay, 12 Okay. 10. Okay, now we’re not making money. It was it? Yeah. So at one point, it was 15%. You know, cash on cash return was the goal for house flippers. And then in California, and literally, my competition was just looking for if it was above 5%, they would take that deal. And I go, Oh, my gosh, skinny,
J Darrin Gross 8:08
if you make one gouffre, you don’t care, you know, cover count for something? Or? Or if you have to carry something, the longer yeah, that’s pretty skinny, very skinny. So so let’s talk, then, you’re you make the mindset or you make the decision to look elsewhere. What were some of the criteria? Or? or What were you looking for? And where did you end up?
Lauren Hardy 8:37
Well, you know, that criteria, really, there’s an evolution to that. So when I first got started, you know, in this virtual, you know, concept, I didn’t know anybody that was virtual. So I really didn’t have a blueprint at all. So it was all gut feelings and taking a map and throwing a dart on it and seeing where it land. That was basically how I did it. So my first territory just happened to be Nashville. And it was because Nashville sounded like a cool place to visit. So that was all that I put in. through time. I have absolutely come up with better ways to pick a market. And again, it’s actually, you know, very applicable to the commercial real estate space. So I’d love to get into that. Because it is it would it’s very helpful. I used to use I say there are two approaches, there are gut feelings, and then there’s statistical data. And I do think there’s a place for both. I if you are just using statistical data, you are going to miss something. But if you’re just using gut feelings, well, you know what our gut does to us sometimes, right? So I used to just use gut feelings and that was very amateur of me. But over time, I’ve learned a few things and read some books and listen to some podcasts. So the things that I like Look for right now, our I want to look for let’s talk, first statistical data stuff that you can actually look up and look up hard numbers, I like to look up the population growth. So if you take the last, say, five years, and you take a, let’s start with a metro first, so start with a metro Statistical Area and MSA for short, I want to look at the last five years of population growth. And you look at it year over year, and then you look at a total of five years. So if you look at the total has the population growing, and you might see maybe a 1%, you know, population growth, and you see a, you know, a tiny, tiny percent each of those five years, right, that’s growing up, up and up, it’s also important to look at the last two years to see what’s happened the last two years because that could, there could be something new, that has happened as of lately, that’s, you know, maybe making the population trend way up or, or backwards, maybe you’re getting a negative. So the perfect example is Orange County, California. So we had negative population growth last. Like in 2019 2018, somewhere around there, I don’t on my spreadsheet in front of me. So you want to see, you know, what is the most recent trend, just because your five year trend is positive, does not necessarily mean though, you’re totally in the positive, you can be trending, you know, negative. So population growth is really important, because you want to see, you know, are people moving to this stuff, you know, metro area, and then you can dial it down into the city of interest. So if you have a deal in a particular city, then you know, you can dial it down to there, but I like to focus on metros, because if you just focus on cities, you’re gonna you’re not gonna have enough deals to, you know, underwrite. Um, another thing that’s really important is just looking at unemployment rate. So, course, if you take the last year, you’re, you’re gonna have a very interesting unemployment rate everywhere you go. So I’ve actually dialed that back down to eight years, because if you just do five years COVID really messes stuff up. And so I like to kind of get a broader picture of what the unemployment rate has been in the last eight years and where it’s trending. And, you know, if you see that the unemployment rate is trending upwards, you know, that’s a that’s a not a great thing, you know, that is showing that, you know, there for some reason, there’s not a lot of employment opportunities in that area. And why is that? Right? So you ideally, I’d like to pick an area where the unemployment rate is trending upwards. Now, there are some areas if you want to talk
J Darrin Gross 12:45
Did you say unemployment or the employment?
Lauren Hardy 12:47
Unemployment, unemployment, so I want it Yeah, so I want it downward. Sorry. You get a little dyslexic when you say, the we want a low unemployment rate. So I want unemployment rate to to trend downwards. And if I notice that it’s trending upwards, I want to see why right? What’s going on. So if one really let me give you an example of like, a very interesting territory to me, is Birmingham, Alabama. So Birmingham had a pretty decently high unemployment rate like five years ago. And then you will notice their unemployment like five year trend went their unemployment rate went down almost 50%. Meaning that Okay, there have been some employers Move, move to town and employed everyone, you know, that that’s a great sign, there’s something stimulating Birmingham’s economy. So if you want to look for emerging markets, you know, you might want to look at the unemployment rate, and then it’s you start dialing it, even, you know, start getting even more micro right now, I want to look at job diversity. So, what are, you know, the major employers in the area? Like, is there just one industry in the area? Or is it diverse? You know, that’s important. So if there’s one industry, that is that makes up 25% or more of, you know, the populations jobs, that’s an indication that you know, if there’s something that happens in that industry, I mean, if you believe in the industry, that industries like not going anywhere, like one example would be like Amazon, like an Amazon, you know, location being built all while they’re just coming up everywhere. Well, you know, maybe you believe in it, it’s not a big deal. But, but if it is an industry that could be you know, having some problems you might want to maybe consider another territory or dial it even more micro, and now look at the employer diversity. So look at the major employers in the area and see that there is some kind Have there there’s at least diversity in those employers, there’s not just one employer that employs 50,000 people, and then there’s kind of like everybody else is like, 1000 2000, you know, you want to see that’s a little bit more even like, 10,000 10,000 11,000 12,000, you know, it’s more diverse, right? So, you know, these are all statistical, you know, it’s statistical data that you can easily pull from the census, you know, websites, and the Bureau of Labor Statistics. And it just tells you, you know, the health of a territory, and if you are looking to say, buy, you know, a multi tenant building into territory, you know, why would you buy somewhere, you know, that, you know, when you can easily just move and buy somewhere with with a, with a better economical health. So, I love looking at this type of stuff. And you know, you could really nerd out on it. But I love this statistical data, because it does give you, you know, a lot of information. But then there’s gut feelings. And I kind of classify gut feelings as like, well, I heard this, I heard this and you know, the stuff more of like kind of hearsay, but also like, looking for the proof of concept. So this is a little bit more in if you’re interested in house flipping and wholesaling
Unknown Speaker 16:24
The proof of concept. What I mean by that is, are there other people doing what you’re trying to do successfully there. So in wholesaling what’s really interesting, and I’m not sure how familiar you guys are with wholesaling, or, you know, if your audience is familiar with wholesaling, but essentially, it’s like house flipping, but instead of fixing up the house, you sell it to another investor. And the funny thing about choosing a territory for wholesaling is when all the statistical data that I just labeled year just went through right is really positive and looking really, really good. That’s actually a bad place to wholesale. Because what that means is that there’s no like sellers are not distressed, because the sellers, like they got the word that actually their their markets doing really well. And it’s desirable, their real estate that they own is desirable, like they live there. So they know. And wholesalers, we make money by buying properties at a discount. And the way you convince a seller to buy a property at a discount is that they have to be in some kind of state of motivation. So if they’re not motivated, if there’s not a lot of seller distress in the area, you know, you’re gonna have a hard time wholesaling houses. So when I’m picking an area for wholesaling, I actually want to look for more balanced numbers, like I don’t want to, like my Birmingham example. By now Birmingham is already a little bit too competitive. Because of that 50% like Birmingham, it’s pretty known cats out of the bag, like, you know, they’re the hit that real estate has value there. But there are areas like Pittsburgh, Pennsylvania, where the unemployment rate is actually going up in the recent years. And there’s definitely more distress there’s actually a negative population. And but I’m telling you, I’ve that’s one of my markets, and we’re able to get a lot of houses under contract there because sellers are more motivated. Now, would I buy a commercial? Would I go buy an office building? They’re probably not. Right? Not. So it’s interesting that in the single family space, it’s it’s like opposite. You want to look for some more distressed markets, but you don’t want like, you know, you don’t want to completely depress market either.
J Darrin Gross 18:43
Yeah, like nobody’s home.
Lauren Hardy 18:45
J Darrin Gross 18:46
So let me ask, you mentioned a couple different cities, and kind of the statistical data that you look at for your kind of a base field for something. MSA Is there a size of a MSA that you stay above? Or how, how would give me a range on the size of the MSA issue?
Lauren Hardy 19:07
You know, so for my students, I have a pretty big coaching program and if i if i told everybody a million population or above everybody would end up like in the same 15 metros, so for the sake of my if you were like a student asking me like I would say well, no, because now you guys would all compete with each other. Right? But for me, personally, I do like to be in that million population. Because then I don’t run out of options as frequently where the the smaller metros or the smaller areas, you know, you you are going to run out of available property, you know, but I’m not saying that that’s a hard standard. I mean, I there’s like my students for wholesaling I tell them at least 150,000 population if you’re wholesaling. But if it was probably commercial, I would probably say I want to be in the larger metros, maybe at least five 100,000 great metros that have you know, 500,000 population. So,
J Darrin Gross 20:05
Yeah I know, I think to anybody, if you’re interested in selling eventually, you’re going to need to have somebody that’s buying, like you, you know, cited all of the other stats about jobs and an inward migration and, and all that kind of supports the demand, do you look at all at median household income? Is that a factor you take into consideration?
Lauren Hardy 20:28
Not at this time? I don’t know, I mean, I’d be interested to hear you know, your perspective on it. And maybe I will, though,
J Darrin Gross 20:36
Well, I think a lot of people I speak with that are multifamily investors, look at basically, you know, rent, rent income ratios. And I think that a, a long held, you know, opinion of that is that you want at least three times the income to the rent. And that gives you just kind of a, you know, even for lending and that kind of stuff. And, but I think things are changing, and we based on prices going up and interest rates coming down. And I mean, there’s, you know, there there are even, you know, a willingness to get closer to two, my personal experience with with properties is that three is a pretty good solid number and that your, your ability to collect rent is greatly improved. When you go below that, you’re probably going to be sending out late notices and having to chase your rental a bit more. So that’s, that’s just kind of the you know, the theory and some my experience with that. What do they ask you on the when you say you, so basically, if you’re sitting here at your computer in the city, pops in your head, and you plug it in, whether it be Birmingham, Alabama, or Pittsburgh, Pennsylvania, and you go to the census, and you pull up your data, and that it’s one thing to have kind of a virtual picture of it. You mentioned like Nashville is a fun place to go, do you ever go to these places? Or how do you vet the locations? And I’m assuming at some point, you’ve got to know somebody or get to know somebody on the ground that has local carnal knowledge of the place and can direct you on that? Well, that’s a good deal. But that’s the wrong side of the tracks or, or something like that.
Lauren Hardy 22:28
Yeah, so if I was investing in commercial, I would say you absolutely want if you’re getting serious and you know about a property, then yeah, I would absolutely go visit since I’m primarily in the single family space, I actually am more comfortable, you know, relying on my boots on ground. So I make a lot of connections, a lot of networking, you definitely want to get on the phone and talk to you know, any investor that will be your friend and share information with you. So I do a lot of that I do all of my business personally virtually but again, I’m doing wholesaling. I’m doing, you know, house flips. This is a you know, if I mess up, it’s not quite as big of a hit is like a, you know, huge, you know, 50 unit apartment building. So if obviously, I think if I was buying, you know, an apartment building or, you know, an office building or anything, I’d absolutely go visit the territory.
J Darrin Gross 23:25
Sure. Well, in wholesaling, I get that. I mean, basically, I’m assuming you’ve got a significant buyer’s list.
Lauren Hardy 23:32
Yeah, I do. So I kind of know something’s gonna move right when I lock it under contract, and I’ll know really quick if it’s not,
J Darrin Gross 23:39
right. And then how do you gauge the condition of the property? Do you have people on the ground? Do you pay? You know, Fiverr or Craigslist? Or somebody go take pictures of it? Or how about your nuts and bolts on how you get the transaction under contract and closed and sold?
Lauren Hardy 23:58
Yeah, so exactly that. So we will have the conversation with the seller over the phone and get an idea of the condition of the home and a lot of that is just asking really good questions. You know, you’re talking to a seller and they’re what how’s the condition of your house? Oh, it’s great. Isn’t livable. Oh, yeah, it’s definitely livable and then you go look at it and the you know, paints peeling on the walls and there’s no flooring and you’re going How is that livable? And so we learned, you know, you got to you got to ask some more detailed questions. You know, when is the last time you remodel your kitchen cabinets? Did you replace the kitchen cabinets or did you just paint over the existing You know, when was the last time you know, the roof was replaced? You know, tell me about the flooring, what you know, get real micro in the details. And then you’ll start being able to picture this house in your head. And then we look for comps that are similar to those houses that we’ve pictured in our head. And we do account for condition. So if it’s, maybe we can’t find any comps that look like this house that we’ve kind of pictured, but we, you know, might say, Okay, well this house to get there would probably take $30,000. So we’ll subtract. So it’s we actually are very, we don’t overthink our offers, when we’re just having a phone conversation, it’s more like, we found that it’s just better to get an offer in front of the seller. And we do, you know, have contingencies in our contract that we need to inspect the property. So when we can get a seller to agree to our price, the next thing we do is within a day, we are at the property, and I do get somebody from Craigslist, I call them runners, and we try to work with the same runner. So we’ll have like runners have worked with us for years. And we just pay them $20 an hour and they go down, they take really good good photos. And then we look at her, you know, once we get the photos and the walkthrough, we do a video walkthrough, then we look at our contract price and say, Okay, do we think based on you know, what we know our buyers buy box, like will be will be Will we be able to move this property? Is it in the condition that the seller you know, said it was in a lot of times, it’s not a lot of times the sellers, they they got rose colored glasses, and they want to you know, they try to sneak things by us. And we have to go back and say, you know, we need to adjust pricing on this, or we need to you know, walk away. In the end, we don’t waste the sellers time very much. It’s a couple days, you know process where we go through that with them. And then by if we’ve gotten to that point, we’ve inspected, we’ve got pricing, you know where we believe it is right, then we show it to our buyer base?
J Darrin Gross 26:46
Is there a formula are kind of a target price that you shoot for if the market is x, and you’ve got a property? That’s, I mean, is there a Is there a? PE, how do you arrive at the offer, I guess what I’m trying to?
Lauren Hardy 27:03
Yeah, so a lot of that is, you know, looking at the purchases in the area that have been purchased by other investors. So a lot of it is just looking at what houses are going for in that area. And we have I use prop stream, I’m able to it’s basically like having the MLS I’m able to zero in on an area, I like to look at the corporate purchases, because those are usually the real players. And I will look at an area and if I don’t see any corporate purchases, like and I’m mainly looking for the landlord buyers, those are the ones that pay the most the flippers don’t pay enough. So I’ll look for the landlord buyers in the area. And if I don’t see a lot of red dots, you know, in the last year to two I have sometimes right now, because of COVID we have to go back two years, which is crazy. But because a lot of areas they have not been recording, they’re not on top of their recording, because it wasn’t essential. That’s a side story. But anyway, I’ll go back, you know, two years, and if I don’t see a lot of red dots, showing me that there’s a lot of purchases, we won’t even offer on the property anymore. If we’re in a really, you know, roll area of you know, 30 miles outside of Pittsburgh or something and there’s no investor purchases, well, we know we’re it’s just not going to work for us, it’s not going to fit our any of our buyers buy box, so it’s not gonna fit ours. So I’ll make sure there’s buyers in the area. And then we start looking at the pricing. And we try to you can see trends, I mean, you usually will, if you look zero in on an area, you’ll see an easy deal where it’s kind of straightforward. it’ll it’ll be like, Oh, 81,000 90,000, you know, like the trend there, there’ll be a trend. So we try to get the property at the lowest comp we could find. And then we use these comps to support our narrative. So we do a lot of that that is in it takes like 60 seconds to come up with an offer price. A lot of novice wholesalers, they’ll take like 35 minutes to come up with an offer price and just overanalyze it and use this ARV times this minus that and, and I just laugh because I’m like, Well, if you don’t have a comp to support that the seller is going to lock you off the planet. So you need to just go straight to the cops, look at the look at all the sales and just start there at least you can then support your narrative and you know that an end buyer will pay that. So yeah, that’s how we do it.
J Darrin Gross 29:33
Want to ask you some of the people that you that are critical to your operation in the market you’re in? You mentioned the runner. Is that pretty much the person you need or is there is there anybody else that you have in your quiver of you know, people help you get the deal done?
Lauren Hardy 29:55
Yeah, I know. I you know, our competition is critical. So we work with Other wholesalers and other house flippers and buyers, you know, to having really good conversations with buyers, and really good conversations with wholesalers and making friends, you know, with your competition so you can collaborate. So we do a lot of I call it joint venture JV deals, where if we have a hard time moving something, we’ll JV with somebody on 510 deals until we figure it out on our own. And they’re usually happy to do it, because, you know, it’s deals they wouldn’t have ran into anyway. So yeah, right, and the runner, of course, to help with the photos and, you know, those the running errands. Yeah.
J Darrin Gross 30:38
And then as far as like, wholesaling, as opposed to like retailing. I know like in retailing, there’s there’s just basically you’ve got a whole laundry list of whether it be you know, brokers and inspectors and appraisers and lenders and all that kind of stuff. When you get into the the wholesaling thing, basically, you’ve got your, your your runner, to kind of go out there and give you an assessment, you’ve done your kind of your homework based on assessing the market trying to understand the price, and what people will pay is a pretty much the seller sells to you you sell to somebody else, and and you collect your fee, and you’re on to the next one is that? I mean, yes.
Lauren Hardy 31:23
It really is. Yeah, and we do everything off market. So we don’t need a realtor. We just need a good title escrow company to you know, process and transaction. And what’s the average turnaround time from?
J Darrin Gross 31:36
You’re having a conversation on a Wednesday with you know, potential seller you be able to assess the price? make an offer, we agree.
Lauren Hardy 31:48
Close that gap go through the process? Yeah, about 90 days.
J Darrin Gross 31:52
Okay. Okay. And so I’m assuming that in that time you get your inspection, overnight, your spectrum, but your your runner to go out there and do that. If there’s work that needs to be done, you can get a contractor’s bid on what it would cost to do? Or do you have a pretty good feel for what it might take to do the renovations? Or if your buyers would even be willing to take on such task?
Lauren Hardy 32:15
Yeah, so well, I say 90 days, and that’s because sellers don’t usually say yes, on the first call, or even the you know, second call. So there’s usually a month of back and forth with the seller, okay, there’s a month of let me talk to my husband, let me talk to my kids, let me think about it. So on average, it’s 90 days, sometimes we get sellers that sign that week, sometimes it’s six months, you know, so and then the average escrow kind of depend now, this depends on the area, but 30 to 45, day escrows. So the so that, you know, to kind of I just wanted to clarify, you know, that when you’re wholesaling, you don’t typically get your own contractor in there. There’s a couple of reasons actually why I would say it’s actually smarter to not do that. You don’t want to put yourself in a position where now you have to disclose a bunch of stuff. And I don’t that sounds bad, but it’s also kind of making you liable, that if like, you know, now I’m liable for like, like, if there’s a buyer can come back to me and say, Well, you didn’t disclose that there was this foundation issue, or my contractor didn’t disclose it to me, and now I’m like in this position of like, you know, it looks like I should have known it and didn’t disclose it. So we just we always say is that you know, and buyer has to do their own inspection. We know nothing about this property other than what the seller has told us and disclosed. And so we will say anything that the sellers disclose to us, we’re careful about that. And then we say bring your contractor and bring your inspector in,
J Darrin Gross 33:56
As is. In as far as funding on these, do you when you close on a property? Is it pretty much a you’re using the buyers money or is there I mean, the wholesaling thing if I understand right, the ideal is like a double close, where you’re you’re basically just collecting a fee after the transaction closes as opposed to having to come up with capital and and buy something and then sell it to somebody else.
Lauren Hardy 34:29
Yeah, that’s the ideal scenario is absolutely avoiding any kind of transactional funding and instead, we are double closing. We know that there’s if you want me to get really into the weeds, I don’t like double closing per se. Double closing is when the escrow companies running two escrows concurrently. Instead, I do it via assignment. So the escrow it’s one escrow it’s just two, it’s two sides of paperwork. So it’s actually a lot of people don’t realize that you don’t have to double close, I think I double closed like a couple times a year, it’s very rare that I have to double close. So instead, I work with escrow companies that are experienced in assignments.
J Darrin Gross 35:17
Gotcha. And basically on the offer you and or your assigns kind of who’s going to buy the property thing, and then allows you to assign your your interest to your her buyer. So, so let me ask you on on, you get 90 days of engagement with the seller, you’ve got time to market it to a buyer. What what’s a target? You know, profit Are you looking for on something like, you know, these these kinds of deals?
Lauren Hardy 35:54
You know, that really depends on the area. So what I’ve noticed as an industry trend is that your typical wholesale fee will be about 10% of what the end buyer paid for it so that that end price you sold it for. So if you’re working, you know, in that $100,000, you know, space, then $10,000 would be, you know, a typical assignment fee. So it’s very different. You know, if you’re working a very low end area, some people would say, $5,000, you know, if you’re working a higher end area, I mean, so my fees have been crazy. I mean, we’ve had a couple $60,000 fees this year. So sometimes we get really like wild ones. But then sometimes you get Yeah, the $5,000 ones, you know, so on average, so I like to just talk in average numbers, you know, I’ve noticed they’re about 10% of the sale price.
J Darrin Gross 36:52
Got it. And I’m assuming this is a numbers game, from a standpoint of not everybody that picks up the phone. And we haven’t talked about how you get your leads, whether we’ve talked about how you get your market, how do you get your leads?
Lauren Hardy 37:06
Everything I do is very direct to seller marketing. So we do more inbound at inbound and outbound, you know, marketing to get these leads. Yeah, so I’m not mail direct mail, what
J Darrin Gross 37:18
Do you do outbound phone calls?
Unknown Speaker 37:20
All that stuff works. So me PR I’ve personally done it, I think it all honestly, I’ve done it all, all the things. What I’m doing, I usually like to juggle two marketing campaigns at a time. If you start doing too many campaigns, it’s just I’m not that big of a company, I you know, you start just it’s like squirrel and shiny object syndrome. Um, you can’t do any one really well. So I like to do what’s, you know, giving me my heart, my best ROI at the time. And it really changes, you know, the certain marketing techniques gets saturated. So for a while it was direct mail and direct mail was the thing and nobody was doing it. And then after a while, it got very saturated. So my favorite right now I’m loving TV ads. So I have a commercial. And yeah, I love it. Because it’s inbound. It’s you know, just I put a commercial out there. It’s very plug and play, and you just got to answer your phone. And then I do mass texting, text message blasting. I don’t know how long that’s going to be around for because you know, it is there’s a lot of TCPA complaints out right now. It might go away. But at least I’ve got you know, two so if it does go away, I’ve got the TV ads, you know, to get into FLOTUS. But I do a lot of text message blasting, I did do cold calling for a bit. And I might after a while our ROI was really low on it, because it just got saturated, and the carriers got very good at blocking those calls. So you know, I dumped that campaign campaign actually, as of recently, but yeah, I think direct mail actually coming back, which is interesting, because it went away for a while. And I think it’s coming back. Because, you know, people stopped doing it because they started cold calling. And so it’s interesting how that works. But yeah,
J Darrin Gross 39:07
Shift with the seasons there. So let me ask you another question. buyer’s list how big of a buyer’s list would I mean, would you encourage people to have they’re gonna get started in wholesaling?
Lauren Hardy 39:21
I mean, the bigger the better, right? The biggest you can get Go for it. But I think a really healthy number would be like 1000 buyers on your list.
J Darrin Gross 39:31
And I guess in that kind of identify their buybox kind of what they’re what they’re looking for kind of thing as you go, or is that does that change? Or how granular Do you get with your, your buyers,
Lauren Hardy 39:44
Sometimes it’s just adding them to our list and not we never even make contact and then you know, I do recommend though having that dialogue with them because it helps you understand, you know what type of properties that you need to market for and you need to avoid locking up You know, so like an example like we have an area in, there’s an area in Pittsburgh, like nobody likes to buy in McKeesport, if they do, it’s got to meet kind of this certain price point, and then you know, whatever. So it’s like good to know ahead of time rather than locking up deals and McKeesport not being able to sell them. So it is good for you, it’s a very good practice to get on the phone with those buyers, if you can.
J Darrin Gross 40:27
Lauren, if we could, I’d like to shift gears here for a second. As I mentioned you before we get started by day, I’m an insurance broker. And I work with my clients to assess risk and determine what to do with the risk. And there’s their three strategies we typically look at, we look to see first we can avoid the risk. If we can’t avoid it, then we look to see if there’s a way to minimize the risk, and when neither avoid or minimize our options. And we look to see what transfer the risk and and that’s what an insurance policy is. So I like to ask my guests, if they can look at their own situation. Could be your clients, investors, tenants, the market interest rates COVID. However, you want to frame the question, to identify what you consider to be the biggest risk. And again, for clarification, while I’m an insurance broker, I’m not necessarily looking for an insurance related answer. But if you’re willing, I’d like to ask you, Lauren Hardy, what is the BIGGEST RISK?
Lauren Hardy 41:31
For wholesaling houses, specifically, the biggest risk, I would say I’ve seen a lot of people do this would be spending too much money on marketing. And by not making any money. I mean, just too much money and overhead expenses, not enough profit, not enough revenue. I see that a lot. There’s a lot of people that will listen to a podcast like this and get real excited. And then they’ll start a TV ad and spend, you know, $5,000 a month on a TV ad, but they’ve never closed a deal before. And they don’t they don’t know how to put a deal together. They don’t know how to comp the house out. They don’t know how to talk to a seller. They you know, they have absolutely, you know, just don’t know what they’re doing. And the next thing you know, is they could they go broke. So I think it’s the overhead expenses. When you’re just starting out. People spend a lot of money trying to get into wholesaling houses, they send out direct mail campaigns, a big one was direct mail campaigns, less people are going straight for TV, but direct mail campaigns, they’ll they’ll hear on YouTube university to send out you know, 5000 postcards a month, and some of these people they don’t have that kind of money to play around with but they’ll do that and they’ll do it for six months straight. And they’ll not realize you know, this isn’t going anywhere and you’re not just going to get that one deal that got you $100,000 at the end of six months, but they keep going thinking that that deal is going to come and then they just end up you know broke. So I think that’s the biggest risk right there.
J Darrin Gross 43:10
No, the the output is greater than the input You got a problem there. So definitely, definitely some words of wisdom there. So I appreciate that. Lauren, where can listeners go if they would like to learn more connect with you?
Lauren Hardy 43:26
Well, I’m very active on Instagram you can find me at this mom flips that’s my handle and then I got a YouTube channel that I post we do drop a video every day. And that if you just search Lauren Hardy, you can find me there. I also have you know I do have a coaching program where I do coach virtual wholesaling at virtual investing mastery comm if you guys are interested in coaching,
J Darrin Gross 43:51
Awesome. Well, hey, Lauren, I can’t say thanks enough for taking the time to talk today. I’ve enjoyed it. Learned a lot, and I look forward to doing it again soon. Awesome. Thank you so much for having me. All right. For our listeners. If you liked this episode, don’t forget to like, share and subscribe. Remember, the more you know, the more you grow. That’s all we’ve got this week. Until next time, thanks for listening to Commercial Real Estate Pro Networks. CRE PN Radio.
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