It's safe to say that this is one of our most motivating and instructional episodes of wholesaling we have had. Our guest was able to net over $1 million in wholesaling last year, and he talks about how it all started. Hear his step-by-step case studies and what he did to grab over $20,000 on his first deal.
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Matt Garabedian Real Estate Background:
- Owner of Royal Realty, a full service Real Estate Brokerage, Buyer Representation and a Full Service Property Management Division
- Wholesaler and Flipper and creator of Matt Buys Houses Cash
- Recently started a new brand Phenomenal Investor, that is just rolling out
- In 2016 did just over $1mm in profit
- Based in Fresno, California
- Say hi to him at http://www.rrfresno.com
Click here for a summary of Matt's Best Ever advice: http://bit.ly/2nkixYe
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Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I'm Joe Fairless, and this is the world's longest-running daily real estate podcast. We only talk about the best advice ever, we don't get into any fluff.
With us today - Matt Garabedian. How are you doing, Matt?
Matt Garabedian: Hi, Joe. How are you doing?
Joe Fairless: I'm doing well, and boy, am I excited to talk to you, because... Well, Matt did over one million dollars in profit last year. He is the owner of Royal Realty, a full-service real estate brokerage and full-service property management division. He's a wholesaler and flipper, and creator of Matt Buys Houses Cash. He's based on Fresno, California. With that being said, Matt, do you wanna give the Best Ever listeners a little bit more about your background and your focus?
Matt Garabedian: Sure, thank you. Yes, I've been in real estate since 2009, and kind of a funny story... I remember getting into the business - this is right after the markets essentially crashed and the values were depressed, and there were foreclosures everywhere. I remember I was excited to get into the business, but a couple people, just in discussing it with them, were asking me, there were saying, "Matt, why the hell would you be getting into real estate right now? Everyone's making a mass exodus out of the industry and out of the business, and who's gonna buy real estate?" So it kind of hit me by surprise, and I was thinking "Am I making a bad decision here?"
At the time I couldn't really afford to make any bad decisions, because I was pretty much broke. But I really focused on getting into the business, and I trusted my instincts and I really felt that this is where I belonged. I got into the business on the traditional side, as a regular broker, and quickly figured out that driving around and showing people houses and talking about neighborhoods really wasn't my cup of tea, if you will.
So I started looking into selling properties to investors, where you're looking at apartment complexes, and I enjoyed putting together a net operating income and talking about cash-on-cash return and cap rates. I enjoyed those conversations more because the guys were focused on bottom line, as opposed to a neighborhood or the layout of the kitchen or something esthetic. I really enjoyed that, and did that a few times in terms of selling some good deals on our apartment complexes... But I started asking myself, "How do I get on the other side of the closing table?", if you will.
The guys that I was selling properties to were finding these deals, cash, and I asked myself, "Can I ever get to their side of the table where I was buying property?" At the time I was selling properties that were a good-sized deal with maybe $600,000, and I wasn't selling those consistently; the average one was $200,000-$250,000. And although those were pretty decent commission checks, when you start reverse engineering it, I would have to do like a hundred Escrows a year to save some money to be able to be in that position to buy a property.
So I started researching other options, and we've all come across videos and guys like Preston Ely, or these other guru guys, if you will, and I started researching wholesaling. At that time, that lead me to a fortune builder, and it's kind of ironic that those guys were all originally from Fresno, as well. I think they had just moved back from Connecticut to the San Diego market and just started launching their fortune builders mastery programs.
I got on the phone with one of the sales reps over there and they're telling me about how they could teach me all of these practices and principles of how to become a wholesaler, but the [unintelligible 00:05:56.07] was gonna be $12,000, and I didn't really have $12,000 to spend on any more education. I went home to my wife after really getting excited about it, and I said "I think this is gonna be a great opportunity for me to learn about another strategy where I could make some good money and possibly be able to get into the investing side of the business."
She said, "Well, why do you need to spend money? You're already a broker, you kind of know how to do deal." I said, "Yeah, but this is different." I had never heard about this strategy before, and I see guys posting these enormous checks; I've got all this real estate knowledge, but I'm just getting commissions. So I kind of got her blessing in a sense, and I scraped and scratched some money together and I bought into the mastery program.
To be honest with you, it was really great content, but I never really immersed myself in it, because I kind of went back to the "Let me get comfortable just making my commissions." I didn't pursue that and dive wholeheartedly into the wholesaling side until about 2012. I remember this like it was yesterday - I was just up late at night, just kind of pounding my head against the wall again, and really wanting to get into something that was gonna create a future for me... Just looking online again and seeing guys that are posting these big checks and having success. I said, "You know what? I'm just gonna do it."
I went out, did my first direct mail campaign - I think I sent out like 300 letters, got a call from a guy... And again, I probably wouldn't recommend this advice now, but I remember someone telling me "If you're comfortable with the offer you're making, it's too much."
I remember sitting in front of this house - I really had no idea what I was gonna offer the seller, but I kind of forced myself to make such a ridiculously low offer that I was uncomfortable telling him what I was gonna pay. I had to work up this courage to give the offer, and I think I ended up offering this guy $18,000 for his house. I kind of felt that the property was worth (fixed up) maybe $60,000. So I worked up the courage to give him the offer, and he told me "Well, that's not gonna work, but how about we do $24,000?"
I was so excited just to get a counter... I said, "Okay!" and I wrote up the deal, got it under contract, and then I asked myself, "Boy, now what do I do with this?" because I didn't really have the cash buyer for that particular property type, or I didn't know who would be interested in buying it. So what I did, because I was a broker, I had access to the MLS and I kind of researched the neighborhood and I found a couple comparable properties that sold recently, and looked on the data and it showed that it was a cash transaction. I couldn't find the actual buyer of the property - they just had the tax record just show the address - but I had the phone number to the agent that sold the deal.
So I called the agent and I said, "Hey, I noticed that you sold the property in the area recently. I have a house right down the street - do you think that this particular buyer would be interested in another one?" He said, "What have you got?" Knowing that I had the property under a contract for much lower than what the comps were, I kind of just shot for the moon and I said, "Well, I could sell this property for $52,000."
I remember he told me, he said, "Don't tell anybody about this property. We'll have the money in Escrow in a week." I said, "Oh my god, one call, one kill...? Like, one shot, one kill deal? This is too good to be true. This is not gonna really happen."
Joe Fairless: It happens every time, doesn't it? [laughter]
Matt Garabedian: Exactly, right! So I remember stressing and sweating... I was like, "Is this guy gonna show up with the money in Escrow? Is the seller gonna actually show up to the title company and sign the deed?" So I'm calling my title rep, they're supposed to be here at two o'clock, and I tell them to let me know if they show up." I remember at about 2:30 she e-mailed me, seller came in, signed the deed... I said, "Did he ask about any of the profs that I was making?" She's like, "No, nothing came up."
I learned that in my area the titles companies send out two different closing statements: one for the seller and one of the buyer. So the buyer is the one that really sees the assignment fee on there, and the buyer was due to bring in the money the next day. Sure enough, he came in and funded it, and I ended up making like $24,000 on that first deal, and I never looked back. I said, "Wow, this is amazing." I never thought that could get this type of deal done. That was late 2012, and I've been grinding at the business ever since.
We just finished our 2016 year as just so blessed and profitable and excited... I'm giddy, I love the business.
Joe Fairless: On that first deal, also, were you asking if the buyer had mentioned anything about the assignment fee that you were making, and how concerned were you about that?
Matt Garabedian: Oh my goodness, I was stressed. I had heard people that would walk away from a closing if they saw what you were gonna make, and I had heard advice from people online that if you were making more than ten or fifteen thousand just to close Escrow and resell it. I didn't have the money to close anyway, so I just figured "Hey, I'm gonna give it a shot."
But I quickly figured out after that transaction and several more that if you are delivering value to the buyer, then it really didn't matter what I was making. If I was making $200 or $20,000, if it was a good deal for them and they had an opportunity to acquire it, then it's a good deal for them and they're happy.
Joe Fairless: Do you still use the tactic of reaching out to cash buyers in the area where the house is that you have under contract to find your buyer?
Matt Garabedian: I still will do that from time to time, but over the years I've been able to develop some great relationships with cash buyers. I hear a lot of people saying "Go out and build your cash buyers list and get 500 names." I did that, but I think the honest truth is most of us do our deals with two or three guys; that works for me. I've got a huge cash buyers list, but I'm consistently showing my deals to two three investors that I have, and they're friends. We go to lunch and I tell them, "Here's what I've got... What do you think? Here are the numbers", and we usually do deals over lunch. Sometimes I'll just send a text message and say, "Hey, I've got this deal. What do you think?" and I send them pictures. "Yeah, we'll take it."
So it's gotten to the point where I've got relationships now so I can make these deals happen pretty easily.
Joe Fairless: How much negotiating goes back and forth between you and them when you send them an opportunity?
Matt Garabedian: Well, sometimes we negotiate, but for the most part, if I have a guy that is a friend and I've sold six deals this month already, and they all went to one guy, we'll go and look at each deal, and if I can help him out because he's buying volume from me, I'll take three, four, five thousand dollars off of a deal just so that he feels like he's getting value from me. I like to do that, because it's much easier for me to sell them to a guy that I know a) he's gonna close, b) he's gonna show up and get the paperwork signed, I'm not gonna stress about him bailing on the deal or having his money fall through, or have a change of heart or trade price with me at the last minute... So I rarely have to renegotiate once we strike a deal.
I do a very good job up front doing my due diligence, I understand my comps, I understand my ARVs... I've flipped properties, I'm a property manager, I'm a landlord, so I've been on all sides of the table, if you will, so I can kind of put together a realistic rehab budget that's pretty on point. So when I present a deal, it's pretty accurate as to how it's gonna go down. I don't really have to trade price too much.
Joe Fairless: How did you meet the person who has bought the six deals this month from you?
Matt Garabedian: Well, this particular company - it's two guys that run the company, and one of them I've known since I was 16 years old. We actually played baseball on traveling teams together, so I had a relationship with him from back when we were young guys. He got into the real estate business a little bit before me, and in my area in Fresno we're a big agricultural farming community, so he does a really great job at selling agland, and he developed relationships on that side of the business. So I've always known him, and for the fact that he was in real estate, and a few years ago I found out that they were buying properties to buy as rentals or to flip, so it was kind of an easy partnership, if you will, because we had some history and known each other.
Other guys that I didn't have a relationship with before, it's a matter of just picking up the phone and introducing yourself and telling guys, "Hey, I've got deals. I'm interested to know if you'd like to hear about them." It's really as simple as that. I think money follows the deal. If you can concentrate on acquiring good deals, I think the money part usually will just be attracted to that.
Joe Fairless: And just to hone in on that a little bit... You said you have 2-3 people that buy the majority of your deals; we just heard how you met that one individual, since you were 16 years old... Let's just think of the next person who's bought the most amount of deals from you - what was the original meeting place for how you got introduced to that person.
Matt Garabedian: Well, I do some of my research, and I'll find guys that are what I call "professional investors." These are guys that are buying property on almost a daily or a weekly basis. When you start to see repetition and the same LLC or the same entity buying properties, you know that they're in the business and they're professional in how they build out their business. I've done a couple things - one thing I've done is I've actually showed up to the auction, and I would go up and introduce myself to that particular person and say, "Hey, I'm a wholesaler in the area, and I come across great deals. I know you're at the auction consistently. Here's my business card, can we have a cup of coffee?"
Another one would be just sending a letter and introducing myself and saying, "Can we meet up and talk?" I like meeting face-to-face and getting to know people, and explaining what it is that I do, what kind of value I can bring to them. It's just a natural relationship at that point because you know that they're looking for deals and I'm looking to sell deals, so it's not a hard relationship to establish if you're truly bringing value to the table.
Joe Fairless: If you had no buyers at this point, and you have a deal - what would be the number one way that you would go find your buyer?
Matt Garabedian: I would go straight to the auctions. You know that a) these guys are cash buyers, b) they're actively looking for property because they're standing at the courthouse steps every day, fighting over a few deals that end up going to a third-party, and they're amongst competition. So if I have a deal under contract, I think that's just the natural way, to go directly to a buyer. You can pull courthouse auctions; for my area I use Property Radar, and Property Radar will give you the actual location and time of the auction date. If you get there 20-30 minutes prior to the auction starting and you just go up and introduce yourself and pass out cards... Or I'll do like a one-page brochure of the potential benefit to the buyer.
Say "I've got a property on a one, two, three main street; here's the ARV. I'm selling it for this. The rehab is this. Give me a call" - I think that's an excellent way to get in front of a cash buyer right away.
Joe Fairless: You started out by doing direct mail - is that the number one way you're getting these deals, or is there something else?
Matt Garabedian: Yeah, direct mail is my bread and butter, absolutely. I do deals from my online marketing, but I would definitely say direct mail is the go-to source for me.
Joe Fairless: For someone who's looking to go from good to great in deal flow via direct mail, what would you tell him/her?
Matt Garabedian: Know your KPIs. That took me a while to understand that. It's never advisable just to throw money out the window without being able to track your response rate. You need to be able to track inbound calls, appointments, contracts and closings. Those are the main KPIs that I track. It all starts with having a proper CRM. I've spent thousands and thousands of dollars to develop my CRM. We use a custom Podio, and I've integrated CallRail, and other sources to be able to properly track. I can split-test my direct mail now and see based on what type of mail piece I'm using... For instance, if I'm using one mail piece to an absentee owner, I'll split-test it with even the color of the letter or the postcard to see what's getting the best response rate.
If you could dial in a) your CRM and b) your KPIs, which are both equally important, I think that's gonna be a huge advantage to anybody out there that is competing against other investors or wholesalers or other investors in the area, because you're able to look at your KPIs and say, "Well, I've sent out x amount of letters to this mail type and I've sent x amount of letters to split-test sample B, and sample B for whatever reason is returning much more. So I'm gonna focus on that and maybe look at what I could tweak on sample A to get a better response rate."
Joe Fairless: And for anyone not familiar with KPI - key performance indicator, and Matt just went through what he looks for with those, what indicators he looks for.
Last question, and then I'm gonna ask you the money question. The last question is what type of direct mail piece have you found is most effective? You said you do split tests for colors of the card or the letter and all sorts of things... What's you bread-and-butter direct mail piece look like?
Matt Garabedian: Well, that is a little proprietary, but I use three or four different direct mail pieces. The biggest thing that I've learned about a direct mail piece is it's meant to extract the potential caller, if you will. I never wanna buy a piece of property over the phone, and I never try to buy a piece of property on my message on my direct mail. I want that person to be intrigued in us, to call me.
I think that is where I've been able to separate myself, because if you look at a typical yellow letter, if you will, it's "Hey, my name is Matt. I'm looking to buy properties cash. I buy it as is. I'll close within ten days. Call me." Those are a dime a dozen, because anyone can send those out. If you can kind of tweak your message and have that person pick up the phone because they're intrigued, then I think you're putting a leg up against the competition. I'm sure I've got competitors in my area that are sending the typical yellow letter or a postcard. The yellow letter is not as effective as it was five years ago. I think it's kind of played out now, and so if you can tweak your message on your direct mail piece, then it's gonna stand out from your competition.
Joe Fairless: What is your best real estate investing advice ever?
Matt Garabedian: My best real estate investing advice would be to be aggressive, but always have an exit strategy, and be okay with the worst-case scenario. So if you analyze the deal and you assume that all hell was gonna break loose and the numbers were gonna go the opposite way of what you hope and anticipated, you're still okay with the deal and you have an exit strategy once you figure out how you're gonna go about your disposition.
Joe Fairless: Are you ready for the Best Ever Lightning Round?
Matt Garabedian: Let's do it.
Joe Fairless: Alright. First, a quick word from our best ever partners.
Break: [00:23:05.12] to [00:23:47.02]
Joe Fairless: Best ever book you've read?
Matt Garabedian: Two of them: Secrets Of The Millionaire Mind by T. Harv Eker, and The One Thing by Gary Keller.
Joe Fairless: Best ever personal growth experience and what did you learn from it?
Matt Garabedian: Getting a mentor. I like to call it leveling up. I have a mentor and we're a part of a mastermind group from very successful real estate investors all across the country. What I learned from that is you never want to be the smartest or the most successful guy in the room. When I became a part of this particular group I was amazed by the amount of golden nuggets and knowledge that I was able to take from very successful people. I recommend anybody out there that's looking to level up - get around guys that are doing better than you, because they're gonna help and force you to stretch, to push yourself, to dream bigger, to have bigger goals, to expand your business, and it's awesome to have that type of accountability for guys that are in the same industry.
Joe Fairless: Can you mention which group you're in?
Matt Garabedian: Yeah, I'm in a group with a guy by the name of Mark Evans DM. They call him the Godfather of virtual wholesaling, but he's in the turnkey industry. It's a private group, there's about 15 guys in the group now. I definitely would recommend anyone to explore that if they're looking for a mentor; Mark is one of the best in the game.
Joe Fairless: Best ever deal you've done?
Matt Garabedian: The best ever deal I did was a 17-unit apartment complex. I did the deal subject to... The scenario was the owner was an absentee landlord. They were in NOD, and they were basically on their way to losing the property. I was able to structure the deal subject to the existing loan, and it was one of those deals where everything lined up perfectly. The mortgage balance was 50% below market, the interest rate was excellent, and they were motivated. They were over 120 days delinquent, and I was able to provide a win/win scenario by paying their mortgage currents, paying their taxes currents, and then giving them some cash to do the deal. It worked out that we acquired the property for just under $560,000; total cash out of pocket was $25,000 and total rehab was about $100,000. After about 14 months we sold the property for just over a million dollars.
Joe Fairless: Wow, that's a good one.
Matt Garabedian: Yeah, yeah.
Joe Fairless: What is the best ever way you like to give back?
Matt Garabedian: I love to give back to my family. I grew up in a middle-class family; my parents did the most that they could do for us, but we certainly were never in a position to get ahead or to invest in real estate or to put money away. It was kind of a paycheck-to-paycheck deal. My mom is the hardest-working person I've ever met. She's worked every day of her life and never complained about it once, so last summer I called her up -- it was actually on the 4th July, and my mom always drove kind of like a beater, if you will.
She had this Ford Taurus and it was always breaking down on her. I never liked the fact that it was just like an unreliable car for her, and I've got two little boys, so I wanted her to have something that she could take the grandchildren around and take them out or whatever they wanted to do... So I just called her up and I said, "Hey, I'm gonna come pick you up" and I drove her over to the Honda dealership in town and I said, "Mom, I just wanna let you know that I appreciate everything you did for me and I wanna buy you a car. Whatever you want, please pick it out."
For me, it was a blessing to be able to do that for my mom, because at that point her whole face lit up... She couldn't fathom the idea of being able to go and pick out any car and not have to worry about the price or the payment. That for me was just a total enjoyable experience. So my big why in this business is to take care of my family and set up a generational opportunity for my kids. That for me is why we can get up every day and do this business.
Joe Fairless: What's the biggest mistake you've made on a deal?
Matt Garabedian: Biggest mistake I've ever made on a deal...? To be honest with you, I've never lost money on a deal, thank goodness. I thought about this question, and I think the biggest mistake I've made earlier in my career was not understanding my value that I was bringing. I would tend to give away a lot in the deal just to please the other person or approve my worth to others.
I think now as I have gotten more entrenched in my business and learned more of the value that I bring, I'm a little bit more apt to negotiate and make it a two-way street, if you will. I try to provide value at all times to my clients, but I never want to give away too much.
Joe Fairless: How many people do you have employed with your company?
Matt Garabedian: Right now I've got three. I've got acquisitions, dispositions and marketing. Now I'm looking to hire a CFO.
Joe Fairless: What is the best place that the Best Ever listeners can get in touch with you?
Matt Garabedian: The best place - I'm on Instagram at @phenominvestor. I constantly update stuff that I've got going on on my Instagram account. They can e-mail me at matt@phenominvestor.com.
Joe Fairless: And your website, just in case they wanna check that out?
Matt Garabedian: I've got several, but you can find me on FastCashCloser.com.
Joe Fairless: Perfect. Matt, thank you for being on the show. I really enjoyed your story that you talked about. You told us how you were starting out and your a-ha moment, and then how you were able to get the cash buyer by looking at who bought a property, who was buying a property in that area, and got the deal done... And how with your direct mail you want the person to be intrigued enough to call you. That's an interesting differentiation.
Then also having the approach of, if you for whatever reason lost all of your buyers, then the next thing you would do would be go straight to the auction and find the buyer for your wholesale deal, assuming you had a deal.
So thanks so much for being on the show... Lots of really good insight. I hope you have a best ever day, and we'll talk to you soon!
Matt Garabedian: Thanks for inviting me, Joe. I really appreciate being on the show as well. I really enjoy listening to your show, it's really well put together.
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