Welcome to the first episode of the Real Estate Game Changer Show. My name is Mike McKay and I am your host based in the Jacksonville, Florida market. Each Friday at 4:00 PM Eastern, we'll dive deep with guests all over the country who are changing the game in real estate. For this week our guest is Jacob Bluestein, owner of Blue Sky Home Buyers. Jacob is an expert at using data to acquire off market wholesale and flip deals in the Jacksonville market. And besides himself, Jacob's entire team is virtual and located all over the world. So Jacob, welcome to the first episode.
Jacob:Thanks for having me, Mike. I'm glad to be here.
Mike:It'll be a good one. Let's kick it off with an easy question. How did you get started in real estate?
Jacob:Sure. So, long time ago when I was 15 years old, my brother and his girlfriend at the time, they bought a house and renovated it in my hometown. And after school I'd go over there and I'd like, help them take down drywall and help them do some of the demo work. It was fascinating to me to see a house go from like super dilapidated, like bad electrical, bad plumbing, to this just beautiful, renovated product. It's so different to anything that I'd ever seen. And so that sparked my interest in real estate. However growing up in upstate New York, I followed the sort of traditional path go to school, go to college get a degree. That took me in a different direction for about six years or so. Couple years in, I found myself asking the question, I think a lot of other folks in this community do of is this where I want my career to end? Is this what I wanna be doing for the next 40 years? And the answer for me was, no. I think I wanna go out and build something for my myself real estate. I feel comfortable. I seen it and I decided to take action. In 2017, my brother and I bought a condo it was sort of a live-in flip situation. I financed it. He lived in it and did the work, managed the contractors.
Mike:This was in New York?
Jacob:This was actually in the Midwest, Louisville, Kentucky.
Mike:But you were living in New York City when that, when you did that
Jacob:yeah. So I was, what was it, 23 maybe at the time? And that was such an interesting experience. And this was back when you could buy deals on the mls, right? We bought this condo and the owners were going into a home. There was moldy carpet in the bathroom. Cigarette smoke everywhere is really disgusting. And kudos to my brother for doing a killer job of dealing with it. But we we renovated it entirely in 2019 as the two year occupancy rule came to fruition to avoid paying capital gains. We sold it. And I was like, wow, this is amazing. This is like the market appreciated. And I had a check in my hand that was like half of my annual salary. I was like, wow, I think I gotta get into this. So, That was my first project. And shortly thereafter I formed a company with a friend of mine who had a construction background. And we tried to do the same thing in New Jersey. So Jersey City Bayone Elizabeth City, and it was incredibly difficult to source a deal on the market. It was so competitive. It was all these all these other bidding wars and other investors. So we decided to go off market and that was my first experience in off market acquisitions.
Mike:Cool. So at the time you're still working, right? You were doing consulting in New York at the time, and you're doing this on the side. So once you decided to go off market in New Jersey how did it go from there?
Jacob:So after researching various methods, we decided to try direct mail. So I sent out a direct mail campaign. and I got my first deal a month later. This very this very sophisticated elderly Italian s Staten Island lady. She was a broker and she had an extra house in New Jersey she didn't need, didn't want. And she decided to give a shot out of the people, other people sending her postcards. And that was such a difficult flip the first one ever because our hard money terms were terrible. I didn't really know what I was doing. We had to come up with 80 grand to close. So we're both taking out balance transfers. I'm call my brother and I'm like, I need to borrow this money. I'll put it back in a couple weeks doing that focus. And, and so we got it done. We closed, we badly renovated it, but we sold it for a profit for a pretty good profit. And that was our first like start to finish project that was off market. know, I'd go on my lunch break at my corporate office into a conference room and I'd field leads So
Mike:That's awesome. And what do you think you took away that, that first off market deal, whether it was sourcing it or whether it was meeting the seller or doing the bad renovation as you said. Like what do you think was your big takeaway there?
Jacob:the biggest takeaway was sellers don't sell to people just because they may be qualified to do so. Just because they are they qualified to sell a house at a discount doesn't mean they're automatically going to sell to you. They sell to you because you build a certain level of bonding, of rapport and you present yourself in a way that shows you will execute.
Mike:And is that the thing that you think you did really well with that lady and that's why you were able to stand out from the million other postcards, I mean, new Jersey's a competitive market. I mean, I used to do business there is that what made you stand out, you think.
Jacob:I do. I talk to her every day on the phone for the like 40 days leading up to closing every day. Where are we? What are we doing? Why are you doing this? You're doing it wrong. You know this she talk with her hands all the time and we I let her back home over the bridge cause her GPS wasn't working back to Staten Island every day. And I learned so much from her. And she was a broker. She was a successful Staten Island broker who probably had a dozen people she could have sold that house to for probably more money, to be honest. That was my biggest takeaway.
Mike:Awesome. Looking back at that first deal, I mean, obviously we all make tons of mistakes on our first deal. Is there something that you would've done differently than you did at the time, if you had the wisdom of today, right?
Jacob:Of course hindsight is 2020. the renovation component of it, well, two things. One, going out to multiple hard money lenders for different offers. We have this idea in our head that because we're new, that we'd be lucky to get hard money from a lender, when in reality we're bringing a very a highly collateralized good offering to them and which they're gonna make 12, 13% return on their money. And if I had that to do over again, I would've Googled it and I would've found four or five. And I would've sent out my deal package, and I would've thought for better terms. That's one. on the renovation side, you can't work with a contractor on a list that says, replace the kitchen, redo the bathroom to redo the floors, because their definition of new floors is different than mine. so,
Mike:Especially when there's a fixed price involved.
Jacob:Exactly. Exactly. And instead of getting nice l v p modern flooring, we got brownish laminate that in one of the bedrooms stuck up like four inches. You had to press it down with your foot On comfort expectations. we did
Mike:okay, and you made money, which is great for a first flip.
Jacob:Yeah. We we didn't make nearly as much as we probably could have if we were better. But for us to spend$6,000 in marketing and make 35,000 on a flip was a really awesome. Deal. For starting out
Mike:So describing and looking back, it always, makes it sound so easy, right? But how hard was it to get and finish your first deal and actually turn a profit out of it?
Jacob:I mean, start to finish like that flip for example, there were two deals that came at that period of time. There was a wholesale deal and a flip deal, and wholesaling is supposed to be easy, right? Well, it turns out it wasn't either. The wholesale deal, we ended up having buyers who were dragging their feet. And I'm trying to play the middleman between a seller who's just trying to sell this house in Jersey City with buyers who are taking too long. And it, I can't believe I did this looking back, but it took me emailing them or having my attorney email them cuz New Jersey is an attorney state. If you guys don't close on this in the next two weeks, we're gonna buy it. and then all of a sudden they came to the table, they were gone, and yet they, and they came back and they even doubled their fee. So it's managing sellers is its own conversation and its own animal, but managing buyers can be just as difficult as well,
Mike:Yeah, no, absolutely. And then from there, so you did that New Jersey Flip and that wholesale New Jersey, like what was next for you at that point?
Jacob:well being younger and cocky and arrogant because we had just done a couple deals thought we could do this anywhere cause it's super easy, right. And so we tried going virtual for about a year in northeast Ohio in Cleveland, Ohio. And it was not a successful campaign. We didn't understand the market very well. Ended up sort of breaking, even if not losing some money. And by this point, about two years had passed. Four or five deals in total. I bought, a house hack for myself in Brooklyn, and two years in, this isn't working out. It turns out that what, like our vision was not shared in the real estate company and what that was supposed to be. And it, we went our separate ways. Fantastic guy, amazing person. Just, we didn't have the same goals of what we wanted out of real estate. So now at the same time we're at, we're now at November of 2020. I have quit my job, right? 30 days into quitting my job, my company starts to dissolve. I don't have a profitable business. I don't have cash flow and everyone is just cheering me on you got this you're gonna go do buy lots of houses. And I just felt like a sack of shit For about four months. I'm like, what do I do? Do I go back to work? Do I do something else? I'm so stupid. That like imposter syndrome that I think hits us often, right? That comes in and in the mid-April timeframe, I'm like, okay, we're gonna do this again. I'm gonna try this one more time. Relaunch somewhere else. So I do this analysis in Excel of 10 different cities in the US and through a combination of economic factors and real estate factors like strength of employment real estate values, year over year, average price points on and so forth. I boil down to three cities Philadelphia, pa Charlotte, North Carolina, and Jacksonville, Florida. And I went to Jacksonville for a week. I did a GMass campaign with a bunch of agents who have, who had done deals who I thought were prominent flippers, just to talk to people just to see. And a guy I was in a mastermind with previously is in Jacksonville as well, and going there and it just switched you. Just this abundance mindset sort of, sort of set in,
Mike:Do you think that was something that set in, because that is the mindset of the Jacksonville market or because that was something that just you came up with on your own?
Jacob:I'd say in majority the Jacksonville market and in part something I came up with on my own in this period of time. I read so many books I could get my hands on. Obviously like Rich Dad, poor Dad a Jen sincere, a lot of good you're a badass. And I'm reading these books. I'm like, okay. The common theme here amongst all these successful entrepreneurs is that they have this undying. Be it in the universe, in God, whatever, that they can manifest what they want. I was like, well, I can't just turn that on like I can't just pretend to believe in that. And it wasn't until I came to Jacksonville, April tour around with one of my JV partners now met with a guy from my mastermind where it just clicked, saw the opportunity. Everyone has been super Oh yeah man, come on down. Here are the zip codes you want to hit. Here's what you should do. You hear the asset classes that sell the best. it was a done deal. Packed my stuff up and we moved a month later.
Mike:Awesome. So then you moved down to Jacksonville. Did you wait to market till you got down here, or did you start marketing before and try the virtual thing again?
Jacob:I did not try virtual. I was like I got my butt kicked. I'm not gonna do that again. I'm gonna understand my market and we're gonna wait. But between moving here and launching was less than three weeks
Mike:So you come down to Jacksonville, you get a place, what do you do in those three weeks to launch a whole new market? I mean what'd you do first?
Jacob:So I decided what avenue I was gonna take for marketing because there's a thousand different options, right? You can go the carrot route, you can go seo ppc, Facebook, cold calling, direct mail, you can door knock, and for me, around this period of time, I was getting into a software group called r e I. software platform and community, and I decided I'm going to build my business this way. I believe, I agree with their model. They're more they take a more bootstrap model and then a scale from there. Whereas the last place I was at and how we did this in the northeast was very capital intensive, send 15 grand worth of direct mail. And that's how you can get a deal and it works if you can monetize those deals because you know your market.
Mike:So you got down here what time of year was this, or what month Of 2020 or 2021.
Jacob:this was June of 2021 launched in July of 2021.
Mike:So you start marketing July, 2021. How long did it take you to get your first deal and like, how did that first deal come about?
Jacob:So it took three weeks. I hired one cold caller. I set up my call tools account. I went through the different training and educational challenges to have an r I sift as a community set up. My system got, I tried to segment my data. I put all my list pulling into place. And towards the third week of July, I got my first deal, which I ended up actually JV with cash geeks. And it was a older landlord who had squatters and he didn't wanna deal with it anymore. He wanted X amount of money and someone else can deal with all the other bullshit, also happened to be the first deal where a friend of mine from cash geeks and I got chased off of a property by Duval County Mathematics.
Mike:Oh, that's good. You got broken in the hard way.
Jacob:yeah, that was a nice learning curve. For uh, for Jacksonville. But it was a good deal though. Learned a ton. Stella was a really good guy and and that was it. After that, it just snowballed.
Mike:Got it. So that was your first deal and since then you've done how many deals since? I think July, 2021. You said? In Jacksonville 22. Okay. And you've you and I talk a lot, obviously offline. You are, and you've helped us a lot with it. You are really big into using data not having this massive team, targeting the right people who would probably sell to an investor. Can you share with the audience, what your approach is versus the typical, or maybe even compared to the way you used to do it when you were doing the mass marketing up in New Jersey?
Jacob:Yeah, absolutely. So, just to set the context, what the traditional way of bulk marketing means to me is you pull a list of some kind and you push out a bunch of cash in marketing, and if the amount of cash that you receive back is higher than what you sent out, you're crushing it, you're doing a great job. The way I rebuilt this business on the backbone of R e I sift, which is our main software hub and our crm, is to take all of the lists that you're utilizing and add a couple new dimensions to them. So it's one thing to pull a list, right? And we all know what list stacking is. You take a list of boarded up houses, for example, and you can market to that, and then you can layer on top of it. Maybe the utilities have been shut off for three months. Maybe there's tax tax ancy. But you can take it a step further and say, okay, out of all the people who are on three lists or more, which houses are vacant per u s ps, what if we layered that on top? What if we layered on top who's an absentee owner out of state? What if we layered on top who's, who has all of those issues? But they also own multiple houses, which creates multiple opportunity for the same marketing costs. So we took that and we applied it to our bulk marketing at first, right? That's how we built the business, was bulk marketing. But the difference is, out of all those lists, we didn't hit everybody. Out of the 300,000 parcels, give or take, in Jacksonville, we have about 20,000 records of tier two niche data, I would call it. And that went into our dialer as stacked, vacant, and single target, a single list that are likely to produce. So it became less about the list and more about when the lists are combined together, what new dimensions can we add to the data and then market to it.
Mike:So, we just had a question come in from Hayden Vance, who's works at Cash Geeks, who was probably, wasn't he the guy who was there with you that day? Uh, I got chased by the meth addicts He said, what is the thickness of your most stacked list? Like how many lists are they on?
Jacob:They go up to about six. I'd say six is the most that I've seen.
Mike:Okay.
Jacob:Yeah,
Mike:And have you found more success with the person who's on six versus the person who's on three, for example?
Jacob:I think it's relative to how, statistically, how many people you can get in touch with in both of those venues. So for both cold calling, we'll go through an average of maybe 50 leads to a deal, which is consistent. They're lower, generally lower profitability, but they're consistent. They're predictable, they keep the lights on to keep our piano. And then 20% of our marketing effort is niche sequential marketing to the top 1% of the top 1%. And that's where we generate the capital to boost us to the next level.
Mike:For the people who don't know, can you share what niche sequential marketing means?
Jacob:Of course, and if anyone's interested, you can just go to rei sift uh.com and they have a Facebook community that's a wealth of knowledge and it's free. It's a term that was coined by r ei sift, it's called the Sensei Flow. It's basically single line dialing to understand who you're getting in touch with and who you're not. And so when fresh data comes in that next day, we can single line dial, call voicemail, send a text message, and send in-house direct mail. We've hit that, that high likely high profitability prospect in four different marketing channels within 48 hours. And I guarantee you like the direct mail that comes from this office is gonna get there way faster than Yellow Card HQ or ballpoint marketing.
Mike:Yep. And so you're pulling some of these lists every day, like every single day,
Jacob:Some of them, yeah. As it makes sense. Like for us, we tend to pull, we pull weekly across the board. The only time we don't pull weekly is for recently sold houses to update our data or failed listings because they're not as material. But anything regarding utilities, taxes any government instrument that's been recorded with the county, we pull that weekly so we can be as fresh as.
Mike:And do you think that gives you an advantage hitting those people? Maybe first, or maybe they're getting bulk marketing from other people, but you're more and more intense about it. Are those conversations different than a conversation from just a normal bulk cold calling campaign, which is the other 80% of your business?
Jacob:Significantly on the bulk side. And I would imagine it's sim, it's similar for those who do texting. people have already spoken to multiple investors. They typically already have offers. They typically have had that interaction before. And so our ability to be to differentiate ourselves as someone that's worth having a conversation with, instead of being just another guy calling me is harder and harder with bulk marketing. Whereas niche sequential marketing, we find very few people have spoken to these people. And when they do speak, it's less ambiguous about why we're talking. If the house has four or five problems with it, the utilities haven't been on in two or three years, you probably need my help
Mike:And are you, I mean I love sales stuff, right? From a sales perspective, it's probably an understatement of the year. But from a sales perspective, are you talking to these people differently on that initial phone conversation versus a bulk cold call, which may just be, Hey, are you know, you interested in selling? Are you bringing up these things to them? Are you changing that approach? Or is it still the same, you're just being more targeted with those people?
Jacob:So it's relatively the same process. We utilize the Sandler Selling System. That's what our company is built on, courtesy of you and your referral. Mo mostly because it's the first L system I've seen that validates you as a salesperson and levels the playing field a bit. It's less about my job's not here to persuade you. Like my job is to ask you questions that I think you can come to this, the realization of what's best for you. And if that happens to be me, great. If not, let's be friends and we'll move on. So that is our, that's our system. And we have a three-step process. So the initial marketing staff will speak to somebody on the phone, cold call, niche, sequential marketing, a single line dialing really. And if they're interested, we live, transfer them to our lead manager who goes through a more in depth Sandler based qualification, really a disqualification. And from that point, if they qualify, then she'll live, transfer it to me or schedule an offer call with me. But the process pretty much remains the same.
Mike:So one thing I've always, and I do a lot of bulk marketing and we pull a lot of the lists and we've got a lot of that stuff from you, but we still don't really do any single line dialing any, anything like that. The area I've always struggled with understanding it is like aren't these people still getting, like the people who are your single line dialing, aren't they still getting calls from all the people who are just bulk marketing, like who were hitting the absentee owner list or just hitting the high equity list or whatever? So I'm always shocked to hear that they haven't had conversations with other investors. So you explain to me maybe how that works or why you feel it's different there?
Jacob:So some people have and some people haven't. I've just noticed across the board someone I spoke to the other day who we ended up signing a purchase agreement. She had been contacted by other investors, but none of them ever followed through. They didn't, they never followed through with an actual offer. They just moved on, got distracted, whatever. And for the most part, even if someone who's that niche has spoken to someone else, they're more likely to be in the right ballpark to start. I'd rather, if I have to compete, I'd rather compete against someone who's at a hundred thousand dollars for their$200,000 house because there's no argument over value. If you've gotten offers from seven other people sure, maybe we have to bid up a little bit, but you're in the right range to start. Whereas a lot of bulk calling leads, they're already at 90% of value. It's it's hard to, to bid against.
Mike:Do you think like the reason those other investors maybe aren't following up is cuz they don't have the data that you have. Do they just not understand how valuable this lead is? So it's just like in their system somewhere and it gets called, when it gets called versus you are prioritizing it? Or or do you think it's just the right time because the prospect just got that notice of foreclosure or whatever list you're pulling.
Jacob:It could be that there's an element of time, right? We've all experienced that being at the right time, the right place when the seller's ready to talk, but with single line dialing. You understand on a record by record basis what's happening in a larger operation or where you're trying to just blow through as much data as possible. It's, these are just, they get lost in the stack. I mean, they're just not move on to the next, move on to the next, because to an extent it is a numbers game, right? You call X amount of people, you get a deal. So the follow up is not as important.
Mike:Yeah. And for your other your other 80%, right? This is 20% of your business. And you said this, actually, let's go back to this for a second. You said those 80% are they can be decent deals and keep the lights on, right? They keep money coming in. these are the juicy deals is this 20%.
Jacob:That's what I found. Yeah. I would say the average profit per deal is roughly double or triple in some cases versus bulk marketing. And you can get we've gotten good deals from bulk marketing. Maybe we just hit someone at the right time. Maybe they liked us better than whoever else was offering at the time. Maybe you and I both were talking to the same seller and we partnered on it. It really depends. But, I find on average the more niche now that comes with that though, are deeper problems. Typically more messy, much more messy titles, much more difficult family situations. And I believe in our line of work, we are paid proportional to the level of complexity that we're able to solve.
Mike:sure. And maybe a lot of other people who are reaching out either dunno how to solve those problems or frankly, don't want to.
Jacob:Sometimes I don't blame them.
Mike:awesome, awesome. So on your other 80% of your business, your bulk business, you're still not hitting just the high equity or just the absentee owner list from my understanding, you're staying well, can maybe just share with the audience like. What you're hitting on that side versus maybe with the difference between the, what you view as a tier one data and like a tier two data that you hit with your bulk marketing.
Jacob:So we do not hit, and I'll break it down. We do not hit any tier three marketing, any high, just high equity. For example, I don't, we don't cold call anyone like that because that's a, that's a qualifier, but it's not a motivation, it's not a motivational factor. You can get deals from calling high equity. It's just not what we prefer to do. So for us, the 20,000 records that funnel down from the 300,000 parcels roughly in Jacksonville, that is a combination of all 12 lists stacked on top of each other and then translated into three campaigns. And that those three campaigns are consistent in cult. Stacked vacant and single list we wanna pull out and focus on.
Mike:in those single lists? Is that do you pick certain lists for certain reasons? You may not call people on one list, but if they're on this other list and they're only on a single list, you may call them. Could you talk more about that?
Jacob:We, we call everybody who's not on high equity, but how it's, how it breaks down is you can't be on a single list and there's no overlap. Because if you're stacked or stacked, that doesn't include any vacant houses. If it's vacant, you're respective. So you can help stack vacant, but there's no overlap. The people won't pop up on the same campaign. And the last is basically everybody else. So if there's a code enforcement, a house is. but the house for some reason is not flagged as vacant and it's just code enforcement. That's it. That would qualify for the third campaign because it wouldn't be on the first or the second.
Mike:Got it. But it's still on a list that you view as likely to sell to an investor or more likely to sell to an investor in a discount.
Jacob:Yes.
Mike:Got it. And then a lot of people have been talking recently, obviously the market has changed a lot with interest rates going up significantly. Institutional buyers especially who were big buyers in Jacksonville for quite a long time, pulling back significantly on, on their offers. do you think that your approach to using data works in a changing market?
Jacob:Well, my approach my logic to it is the transactional nature of real. is never going to change. It's been that way since the dawn of time. But what will change is who's buying and who's selling and what people are buying for and what people are selling for. So by shifting more of our focus onto niche sequential marketing we can purchase properties at deep enough discounts that it doesn't matter what the market does. If a$200,000 house becomes worth 1 75 crazy scenario, right? Two may maybe worth one 50. Well, if we're buying that for 75,000, it really doesn't, it doesn't matter so much. So that's what we're trying to transition to. And we're also remaining liquid and we're remaining lean we have a pretty small team and I'll likely wait until Q4 before I try and onboard a new, like my acquisitions manager, someone to potentially do sales cuz we wanna see how the next month or two is gonna unfold.
Mike:definitely. So, yeah, I guess this kind of niche strategy allows you to buy deeper deals, so you're pretty insulated if the market even comes down 10, 20% you're still okay.
Jacob:That's the logic behind it. Where we struggle though is I don't have a title background. Dealing with these like very difficult seller problems has been a huge learning curve for me, like particularly when it comes to the probate process. So someone who is the rightful error to sell, but the trust document wasn't filed correctly. The attorney who was supposed to prepare and made a mistake, and now we have to do some kind of crazy legal workaround to help this seller out and sell a house that he should be able to, who is suffering at the expense of a mistake someone else made before him. And that's just been a huge learning curve for us. So they're longer to close and they're harder to close. they tend to be more profitable.
Mike:Gotcha. Guys, just a reminder, it is a live show, so if anyone has questions for Jacob throw it in there. Happy to have him answer those for you. You mentioned having a lean team. Can you share what your team looks like, and why you decided to structure it the way that you did?
Jacob:So we have four people on staff and then myself all four of them are based in Cairo, Egypt where I'm actually going next month for a week to hang out with them. Super excited for that. We have two marketing staff one lead manager and a systems slash data slash admin manager, and. There was a time like eight months ago where I thought about hiring more people, but as I got deeper into the r i sift world and Tyler Austin's the founder. I'm just, I'm a big fan of his content and sort of his methodology. I was like, maybe I should try and go deeper first, see if I can do it, and I didn't at first. It took me like four months to figure out how to go. Even as compared to, because it's easier to just go wide, right? Well, I could just include Clay County or Nassau County, but instead I wanted to go deeper here in Jacksonville. So that's our team size.
Mike:and, just said Cairo sick was there any reason for we hear I mean, people hiring from everywhere. I mean Philippines south America I haven't heard as many people hiring in Egypt. Was there any particular reason that you chose Egypt?
Jacob:So Egypt just chose me in a way. I started initially my staff was from the Philippines and I was going on five or one day because I wanted to pay somebody to do a QC of my call tool setup and make sure everything was like running and optimized. And I was one guy who said he was an Rift expert. I was like, sweet. So I reached out to him and he says, I'm not doing that anymore. I started my own small VA company and we're in Cairo. And so that's how it started. We used a cold caller from this company and she used just a rockstar. She was absolutely amazing. And then a lead manager. And we just snowballed from there. And now, as of this time, three out of the four staff members work for us directly and one still with the prior company which is totally fine. You can do it either way, but and I found when you make one good hire, they tend to know other talented people. And so every need we've had has come in organically roles.
Mike:Awesome. And someone just asked a question, veland asked what's a good place, where do you get your Egypt VAs? I mean, I know you mentioned some were re sounds like referrals based on your existing staff, but where could someone Source VAs from Egypt?
Jacob:So there are probably three or four different large companies that do VA outsourcing in Egypt. And Veland, if you want to ping me after the show or something, I'm more than happy to chat with you. So for us, we utilized one of those companies and then from there started to build organically based on referrals.
Mike:I know one thing that we wanna discuss, like he, at least at a high level today is you're very data driven. What KPIs are you tracking both in your business and also to keep your four team members accountable and rowing all in the right direction.
Jacob:So every role in the company has its own KPI sheet that translates into different calculations, and that's how we score performance. So take cold calling, for example. I break it down in. two ways. One is the part of the process that the caller that we can't control, right on our end. How good is our data? How good is our skip tracing? How good is our system? Which, for example, could be dials to correct number or dials to human connected, right? That's the first half we look at in the second half is out of the correct numbers received, how many of those were converted from correct number to lead versus not interested? And that's where the performance factor comes in. Which for us is typically around 16, 17, correct numbers to a lead, but it has been as high as 25 to 30 as the team has shifted over time.
Mike:That's on your your niche campaigns or on your bulk campaigns.
Jacob:Both campaigns, both.
Mike:Got it. So of 17 correct owners, you reach roughly, you get one person who's a lead and it's about 50 leads to a deal from the bulk, side
Jacob:around$2,000.
Mike:And then on the on the niche side, do you see those numbers change on the single line dialing side?
Jacob:So the KPIs are, I think, a bit more robust in Bulk Island because you have call tools, whereas single line dialing is more manual in the spreadsheet. So we are tracking similar KPIs. What we're noticing is it's harder to get a lead when you single line. you don't generate as many in a day because you're manually calling through three to five phone numbers on a record. So say you can get through 50 records in a day, women on a boat dial, or you can call what, 800 people 800 dials, something like that. So the lead count tends to be less, but the profitability per deal and the offer call, the quality of the offer call scheduled is much higher as well.
Mike:Got it. So the, you're getting less leads, but they convert at a much higher rate to, to offer calls and then to deals and then, and it's profit, right? Per private, per deal.
Jacob:And even if I can't, if I don't close, like it's, we're not a good fit for each other or I just, I'm not what they want, I still look at the profitability of that lead if I was the one they had chose to go with, because I think that's just as important. And they're consistently much higher on single line dialing than bulk.
Mike:Got it. And then I know you and I have discussed a little bit, a very unique lead source that you've gotten a few deals from. Can you tell us more about that?
Jacob:I certainly can. So last October where I met you actually at a conference called the Packing Live. One of the, one of the people who got up and spoke, he runs his business based on driving for dollars. That's his thing. That's what he does. And I'm like, oh, this is amazing. This is a list other people don't have. It's physical observation of houses that are need some help. And so I tried implementing that, put on an ad, and this young lady responded to it and she joined the team, drove around, put in a few records, a few houses, ultimately and she calls me one day and she's Hey, a friend of mine really needs to sell his house. He doesn't wanna live there anymore. It was a squatter situation. do you want it? I was like, obviously, yeah, let me meet him. And so we ended up closing that deal and it turned out to be a very profitable flip project for us. And in the process of doing so, we discussed a little bit about background and she had come from a difficult background where a lot of people are squatting in houses that are condemned and boarded up. And so we struck a partnership where I was like, Hey, can you introduce me to more people like Mike? Yeah, of course I know where they all are. I know where all these squatter houses are know, I was like a network of people. I was like, that's awesome. And so we worked out a great a JV system and so she's brought two or three deals and we have five or six more in, in the pipeline and it's just unbelievable. No other investors have a list of where squatters are staying. I'd like to think that's a slight competitive advantage. a crazy story, but
Mike:Yeah, it's a great story. And something that some people who are getting into the business or even people who've done, you know, 10 deals in a certain market, right? Is figuring out how to know when something is a deal and when it's not. in a market like Jacksonville and certain neighborhoods of Jacksonville, we know that there are certain streets and things like that, it's hard to understand the values. How have you been able to figure that out, and what would your advice be to someone who's maybe done no deals or maybe they done a few and they're constantly struggling to figure out what value is?
Jacob:Well, first and foremost, if you don't have access to the MLS or even Prop Stream will. get it. You need it. You need to have some way to do a quick pulse check, even if it's Zillow. If you have to, like even Zillow has fairly reliable comp data and you need to get, be able to get a gauge for what are similar conforming houses to this one. Selling for both fixed up and looking good and as is, needs to work similar. And that gives you your price range. If I were to buy it and re-list it, I'd probably get X, if I put in the work I'd get Y. And that's step one. You have to have some kind of baseline. And then the second is to JV joint venture. That's how I learned a lot of the different market nuances here. And I'm still learning I've only been here a year, but by joint venturing with other investors who are further along or who specialize in a specific asset class, like land for example, whenever I have land I can send it to a friend of mine and he'll usually get the best deal for it. And I could go out and like email blast a bunch of people. But I think it's more efficient for me to just learn how to value land first, keep doing what I'm doing, and then eventually I'll add a land buyer at some point. But I got that knowledge in exchange for splitting the fee on the assignment that's what I would recommend.
Mike:And then you know what is, maybe if you wanna talk about a recent deal, pick one of your recent deals and like how did you know that it was a deal?
Jacob:So I'll take one that was a little bit more tricky and that ultimately didn't turn out to be a deal. I think we're gonna end up canceling it. So in this fluctuating market, interest rates are increasing. Selling to hedge funds has gotten a little bit more tricky if you're a small guy. And so a house came in where the seller wanted to sell and he was offered a fairly good price, but it's a newer house, newer build. And so instead of trying to take the risk of closing on it myself, like how I could back into what its value is I went to a third party company called Flip Os that specialize in funding flips at no points, no interest, 7%, and they line up the hedge fund buyer. So they basically agree to buy the project from you. When you close on it, you just have to do the renovation. So it's much faster. There's no retail, there's no staging. And I was able to use their price to back into my renovation work and then what his asking price was, and we could work in a nice profit there. That's how I built the deal. Now ultimately, too much time has passed and due to market fluctuations, they've gutted their end value price. So the deal's actually gonna, it's not gonna work, but. That type of creative thinking is how often I have to back into a deal, because the best way to monetize, changes based on the deal. Some deals are better off just assigning them. Some are better off flipping, some should go to hedge funds, so on and so forth.
Mike:Yeah. And I think one thing that that I at least noticed from people who were newer to, to sourcing off market deals, whether that's wholesaling or trying to flip on their own, is, and we were talking about this last night when I had the fire at my house with a few people, is people often don't understand how much of a discount you need to buy a house at for it to actually make sense to flip. Do you have any insight you could share with maybe people who are newer on that gives'em an idea of kinda the expenses they go into a flip, but just also how deep they need to buy it and if they wanna make money or just wholesale it how much deeper they need to go than that.
Jacob:Well, generally speaking, you have to bake in enough buffer to have at least a$30,000 profit minimum if you flipped before, in my opinion. And that's conservative, assuming in this market, a 120 day holding instead of a 90 day holding. It takes into account your hard money. It takes into account holding expenses and then at least a 5% hedge on your renovation budget. And I'm not a flipper by trade. That is not my primary mode. But I do JV flip. If I have a deal that's at a deep enough discount, I will JV it with a one of my partners who all he does is flip. And that way we can maximize the profit and everybody wins. But if I was gonna start flipping myself, I would have to account for the things I don't know factor, since I'm not like a core flipper. So maybe someone else could get the project done for 35,000. That's what my GCs are telling me, my contractors I've put through. But I'm gonna need to back into that with a$50,000 renovation budget to account for my lack of competency in that space. Cause I'm still new. So as a general rule I like to stay away from the general percentage rule of 70% minus repairs. Cause I think you of have to look at it on a deal by deal basis. Just have a simple deal analyzer spread. know, that has those basic calculations, assuming regular hard money terms, and then back into it to where you have at least a$30,000 profit and a conservative renovation budget.
Mike:Yeah. I think where a lot of people tend to go wrong and sellers have this conversation, I have this conversation with sellers all the time, and I'm sure you do too, where they're like, well, the houses were two 50 fixed up. Obviously their renovation budget is wrong, but let's pretend it's right. They say you need to put 50,000 into. So if I sell it to you for 180, then you make 20 grand. Could you maybe share with people here, cause I think some people who are new also fall into that trap cuz they don't understand the other costs that you, some that you mentioned to doing a transaction. So can you share why that logic is maybe flawed a little bit how people should adjust their thinking for how much of a discount they do need to get to be profitable.
Jacob:The logic is missing three c. One is the cost of money. The cost of the money you pay when you close and that the interest you pay will you have the note? The second are the closing costs, which are surprisingly can be surprisingly high, and you have to pay them on both the front end and the backend. I pay them twice and in most cases, if you're buying off market, you're paying the sellers closing costs, so they're even higher than average. And the third is you're holding your insurance your utility bills if you have any tax accrual. And that's easy to overlook, super easy to overlook. And some people are like, oh, well, lemme just throw five grand extra. Take care of my flip buyers. I'll just put an extra 5K on top to make sure it's look at it as if you would flip it yourself and include all of those soft costs as well. Otherwise you're gonna end up losing 10 grand. In that example you just stated,
Mike:right? at least. Yeah.
Jacob:Yeah.
Mike:Then for you last few months big changing market what has been the biggest challenge in your business in the last three months?
Jacob:So for a while our bulk marketing channel became more and more tight and more difficult Of things we weren't doing correctly. And I think the mark just getting a little bit more constricted, cell phone carriers getting a little bit more smart which we, I think we've sort of worked past. But the biggest issue now is understanding how I can solve more complex title problems. and general seller problems. Like I don't have the skillset to, to hunt down the brother of this house who is a heroin addict and hasn't had a cell phone in two years and is a jerk. I don't, that's not my skillset. But if we wanna operate in this space, I have to either hire someone who can do it or learn the skillset myself.
Mike:Are those title problems usually come down to tracking down some individual And that's the hard part. Or is it other things that are maybe more complex on, on top of just tracking people down.
Jacob:The documentation required to obtain clear title is the bigger problem of the two, honestly. So, an example where oftentimes an estate or a trust was filed, but you know, that was done 10 years ago, 15 years ago, and nobody knows who the attorney was, who filed it. Nobody has the documentation. It's gone somewhere. and that sparks this very difficult legal process that has to occur to overcome that. And then you have to ask yourself we just had this problem on a deal the other day. We were looking at a year of time and$30,000 out of our pocket to do quiet title on a house that there was no guarantee we would be able to buy it. And those are really tough business decisions to weigh honestly. Well.
Mike:Yeah, that's a lot of money for a long time Horizon as far as mindset, right? I think mindset is huge in entrepreneurship. I mean, especially in this business where there are ups and downs and months where you do ton of deals and months where you literally eat shit and don't do anything. How has your mindset changed since you started and what have you done to improve your mindset so that can thrive in this business?
Jacob:Well, I've, I learned after the first like year and a half to two years, this whole like, brute force, discipline, hustle porn thing it kills you. Like it's not sustainable. You can't brew force away through this stuff, despite what the memes what on Instagram from influencers. So I had we had to figure out a better way and for me, Sandler helped a ton. The sales system takes a lot of time to talk about differentiating your identity versus your role and how the performance shouldn't be conflated between the two. And daily consistent action, which for me is mostly gratitude. It's mostly journaling. The first hour of the day for me is spent usually on my balcony, where I will write down my thoughts, what's on my mind, what irrational fears am I having, what am I grateful for? And that helps restart my identity in the IR equation for the day because it is so hard. And we were at a, an event ear place one time, and I think Pat made the comment, it is so hard to not look at our success on a daily weekly, monthly basis, when in reality the success of our business is graded quarterly, right? You have to be comfortable knowing that if you didn't get a deal this month, You'll get one next month, and if you spend 30 days just crushing yourself, gonna affect you or not.
Mike:Yeah, no, that's a good point. I remember I got down here maybe five, six months in things were going well, doing deals, right? And then I didn't do a deal for 30 days and I was doing the behaviors, I was doing the calls and I was sitting down with Pat at lunch or I gave him a call and I'm like, man, man, I've been hitting the phones, I've been doing everything. I don't freaking get it, man. He's just keep going. He's I bet you in a week or two Alex Carranza, who works for me, just said, the gurus lied to me, and he said, just keep going. It always comes in batch. And the next week I did three contracts. It made up, if I averaged it out over that time period, it was the same. But if I had given up at that point, which I wasn't thinking about doing, but I was discouraged. I mean, I was really discouraged. 30 days no deals. When you're sitting on my phone for four hours a day, it's it can beat you up. So I think that's a great piece of advice to look at things on a longer horizon and do the behavior needed every day versus just trying to grade yourself. Did I get a contract today? Because you feel like getting a contract 27 days outta the month, you did pretty freaking good like you got three or four contracts, so,
Jacob:and at the end of the day, it's about the profitability versus the volume. For you to lock up a amazing deal and only have one in the month instead of three mediocre deals, we, you're crushing it and you're doing a third the work
Mike:Yep. That is one thing I wanna talk about with you. And we were talking about it a little bit last night is profitability versus volume. And from what I understood last night, and correct me if I'm wrong, you were trying to shift more to a, how can I do more profitable deals and actually less versus, Hey, let me do 250 deals this year at whatever you whatever spread. Can you share more about that and why for you, you decided to go that way?
Jacob:So first of all, the thought of doing 250 deals in a year makes my, like stomach drop. But I'd like to do less deals this upcoming year at double the profitability by going deeper instead of wider, because I think it better aligns with what my goals are and it's person specific. Like the big buyers, the people who are crushing in with these massive operations, they're local to Jacksonville, like they are part of the community. Like they love, they have a beautiful office here. That's their culture. And it's an amazing one. It's really cool. But for me, I would like everyone to be virtual and my ultimate goal is to become virtual as well. Still marketing and working in Jacksonville, but I would prefer to be able to travel. That's my sort of financial freedom thing, right? That, that I'm chasing. And in order to do that, we have to build a system of a team that's smaller and can handle deal volume, but can handle it virtually. So we have to be very careful about how we who we market to and what deals we're chasing. That was sort of my backstory.
Mike:Yeah, it's definitely different for everyone based on your goals. Alex Carranza just said are you doing any creative deals?
Jacob:So I have never done a creative deal. However, I am looking at one, it's just another shiny object to me. It felt like for a while. It's great if you can I know a lot of people who just crush it with creative financing, but I wanted to do this first. With interest rates becoming higher, I think creative financing is gonna get more and more popular in our market and across the country. So I would like to, for the exercise, I'm working with a homeowner right now who does not like her mortgage servicer and is interested in doing a sub two agreement if she can stay in the house, which would be interesting, it would be a 20% equity position bought, no cash flow really. But so I'd like to try it, Alex, but it's not something that it's not our bread and butter.
Mike:Gotcha. And then, we can't get off office without talking at least a little bit more about sales and we'll wrap it up in about five minutes or so. But looking back you've obviously, I mean, even since I've known you, you've improved as a salesperson. I mean I so much. But looking back to when you were starting in New Jersey, or maybe even when you started in Jacksonville, what was your biggest sales mistake looking back when you didn't have a defined sales process? What if you could go back in time yourself, do this one thing, or don't do this one thing, what would that one thing be?
Jacob:Well, generally speaking, I would say qualification, real qualification. Instead of spending all of my time talking to anybody who answered the phone right, or who responded to the letter initially, that's one and two. realize that you, I don't, you don't need to be super excited. You don't need to be super into it. You don't have to be a best friend in order for someone to to sell to you. It's sort of a natural inclination. And I was always afraid to talk about money. I was super afraid to talk about price. Cause I felt oh, that's a like this inner part of our psyche becomes feeling rejected. And nobody wants feel rejected. Everyone, no one wants confrontation. So that was something I struggle with immensely. And since coming here, and particularly since adopting the Sandler system, the best technique that's moved the needle the most for us is the upfront contract idea. Right? Which essentially, I mean it's amazing. Basically you have to set the ground rules at the beginning of the conversation of why we're both here. That were both equals, and what does the success outcome look like? Instead of just hoping and wishing that after 30 minutes, maybe they'll sign a contract or maybe they'll do this and it, you can't get angry at a prospect for violating the rules of a game that you didn't set. Right.
Mike:Yep. Yeah, very true. Yeah, the upfront contract is huge. One of the most valuable things in sales. Let's talk a little bit about just like maybe a negotiation tactic that you like obviously you go to meet with a seller who's motivated, right? But no one's gonna just come out the gate. I mean it's happened, but no one almost comes out the gate with a price that works for you. And then would make any kind of sense, even though they need to sell to an investor it's not gonna work for them to sell retail. What is one negotiation tactic that you use to get that seller who maybe is saying they want 200? Man, I can't pay more than one 20 on this thing.
Jacob:That's pretty far disparity. Typically we will, we'll anchor quite often, and I will only anchor to a value that I believe, truly believe other cash buyers are offering on. And if I can we'll start the conversation by talking about who, it sounds like there's a lot of buzz around the house. Who else has been calling you? Oh, well, I've actually been talking to a lot of other investors that classic sales people don't matter and, I'm the one in charge here. And so it's okay, well how did it go? What happened? Because clearly if it went well, you wouldn't be talking to me. So what happened? right? And that conversation most of the time gets at least an offer that someone else has made them, even if it's too low for them, and it's not difficult to anchor to what two or three other people are saying. It's like I mean, three or four people have offered. That's probably what your house is worth. if we're talking about an off market investor transaction. So that's my primary tactic. If I believe they've received offers from other people, we'll get that out of the way up front. First.
Mike:Sure. Yeah, it makes a lot of sense. If those offers were so great, then why did they invite you over? Well, I guess you're virtual, but why did they take your call?
Jacob:From
Mike:So there's two questions I like to ask at the end of every interview. And the first one's kind of a fun one. What is the craziest or most uncomfortable seller situation you've experienced? You can pick either.
Jacob:Ooh, that's tough. There's quite a few cringey ones I could talk about. I would say the most uncomfortable situation I've been in was the first deal I. In Jacksonville actually, just because it squatter situations can be tough. It can be tough. They're tricky. And the approach to the inhabitants isn't a threatening one. It's not aggressive. Hey guys, totally respect what you're doing here. There's, we, there's nothing just so you know, we're closing on the house and it's not an issue. Now we don't own it, but when we do close on it, that's where it's gonna be a problem. And would you be open to taking cash for your departure? Cause at the end of the day, either an attorney's getting paid a thousand bucks, or you are, it's your choice. And I thought the conversation went so well. I wasn't leading it, but I thought the conversation was going so well. And then the brother, the ringleader of the. Came around the block with his shirt off and his cross tattoos on his chest and stuff and started freaking out about, Hey you guys better get outta here. Shushu and all this stuff was crazy ball. going from a corporate life of seven years wearing a suit and being in like a nice office to that was quite a shift.
Mike:What neighborhood was this in?
Jacob:this was 3, 2, 2 8. It was like Northside Biscayne Avenue. Never forget that one.
Mike:And if you could go back in time and give yourself any piece of advice when you were looking for your first deal, whether that be New Jersey, whether that be Jacksonville, what would you say to yourself knowing what you know now?
Jacob:I would probably slap myself across the face and say, calm down. You're fine. You're gonna do fine. Just breathe. Take it one day at a time and just be consistent. You don't have to create this magical solution to have the best list, to have the best mark. Like you just have to pick something and do it consistent something. That's it.
Mike:Everything works if you do it consistently, right? Every strategy works.
Jacob:Agreed. And if some people will talk about direct mail as being good or bad, or PPC is being too expensive or not, it's like they all work if you dedicate yourself to them and.
Mike:And Jacob, if people wanna reach out to you after, or whether it's sending you deals or they have questions for you, what's the best way for them to do that?
Jacob:So you can hit me up on Facebook. Hit me up on Instagram. I'm very active in the r i sift community. You can find me over there, the Facebook group. You can email me Jacob at sell to blue sky jx.com. Yeah, I'm around so if anyone has questions or they're struggling or whatever, just let me know. I'm happy to help.
Mike:Cool. Well thanks for joining me today, Jacob. This was awesome. I think a lot of people are gonna get a lot of value outta this, and thank you to everyone who tuned in. I think at one point I saw 23 people here live, which I was not expecting. Pretty cool for the first episode. And we will see everyone at 4:00 PM Eastern time next week.
Jacob:Awesome. Awesome. Thanks, Mike.