Editor’s Note: Dennis Fassett is a former corporate finance executive turned real estate investing “Cash Flow Mercenary.” Dennis specializes in single-family and multi-family cash flow properties and thoroughly enjoys assisting his fellow investors with their own strategies, including how to buy your first apartment building.
As an ongoing contributor to Mogul’s “Market News Updates,” Mr. Fassett provides us with his own unique, lively, and thought-provoking commentary on the timely industry news and events of today that are impacting our industry. And be sure to check out his other super-helpful Market News Updates. For now, enjoy...
From Dennis Fassett, Cash Flow Mercenary...
I know this... I learned it over 10 years ago when I was doing rehabs.
I’ll bet you know it too. I should have KEPT knowing it.
But I got complacent and ignored it. And it came back to bite me in the butt a couple of weeks ago.
So I figured I’d write about it.
What I’m talking about is 1 service provider or 1 partner or 1 hard money guy.
In my case, it was a partner.
Some time back I started targeting lower-end areas in Detroit. Before that I never went near those areas because I didn’t know anything about them and I didn’t know anyone I could trust to work the leads if I found some.
But as they say, if you’re marketing in my area, Detroit leads just seem to find you.
I ignored them at first, but then realized that maybe I could make a few extra bucks here and there, so I set out looking for someone to partner with.
As it happens, there was one guy who had been trained by a friend of mine and had been working leads for him for about a year. The new guy had done well, and he had grown tired of the low split my buddy was giving him and decided to go out on his own.
So he reached out to me.
Matchmaker, matchmaker, make me a match
We chatted and it was a great match. I had the leads and he wanted to work them.
Plus, he had abruptly quit his job to focus on real estate full time.
So to say he was hungry was a significant understatement because he had a wife and two kids at home. Yikes!
The guy became a machine. He called my leads within an hour of when I sent them. He went on appointments the same day. And he was getting about 1 out of 5 or 6 properties under contract.
Which was freaking awesome!
The payouts were low because they were lower-end houses. But like I said, this guy was a machine and just tore through them and we closed a ton of them last year.
He worked some leads for a couple of other guys as well. But my stuff accounted for like 90% of his deal flow. And income.
And for me, this little “side project” ended up being about 15% of my business last year.
So I was sitting there being really, really happy.
At the beginning of this year I thought I’d double down and instead of just let the leads come to me, I would go out and market to these areas.
Hey, you can’t get too much of a good thing, right?
Not so fast…
And that marketing took off. In January and February my focused marketing generated about 125 seller leads.
Not all at once. But a nice chunk each week. And I forwarded them to him.
And then – crickets.
I mean – nothing happened. He wasn’t calling them. He wasn’t booking appointments. He wasn’t doing anything with them at all.
So I booked a meeting with him. It went very differently than the first one.
It seems that his share of my little “side project” had helped him almost double his income from the year before when he had a day job.
And so - he wasn’t hungry anymore.
He told me that he really didn’t want to do Detroit leads anymore. And he wanted to hire “some guys” to work my leads for him since “we” were so busy.
So he decided rather than work all of my leads, he would pick and choose the ones HE wanted to work.
And ignore the rest.
What?
Well for me, that was a no sale. I told him specifically that he was the guy who I wanted to work my leads. Because he was truly great at talking to sellers, establishing trust, and getting properties under contract. He was an artist.
And I told him that it wasn’t up to him to refer my leads out (which he had already done I came to find out), and that if he didn’t want to work them, that was fine, but I was going to find someone else.
The crazy thing was, he was shocked that I was going to take my business elsewhere. And he was alarmed, because he had planned on my consistent deal flow.
The short story was that he got complacent.
Which was sad for him, because it cut off a really nice and consistent flow of cash. And it was difficult for me because he was the ONE guy I was relying on.
So I scrambled to find other guys..
I went through 3 numbskulls before I found his replacement. And now that he’s up and running, I’m actively looking for 2 more – and letting the new guy know I have more guys so he doesn’t end up with the same complacency disease.
The sad thing is as I looked over that list of 125 or so leads, he hadn’t contacted even half of them. So as I farmed them out to other people to work, we learned that 8 of them ended up under contract with someone else.
And I had the leads first.
It wasn’t a ton of money, but it sure was a wake up call.
And a stern reminder that 1, indeed, is the loneliest number.
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