Real Estate Investing Strategies with Derek Williams – Real Estate Real Fast EP16

Episode Summary

Aaron Jistel interviews real estate investor Derek Williams about his experience in the business and strategies for success. They discuss topics such as flipping houses, finding partners, bank financing, lead generation and motivated seller tactics, a tight buy box, and listing on the MLS.

About Derek Williams

Derek Williams is an experienced real estate investor who has completed over 100 deals in the past decade. He started out investing in foreclosures and soon realized he had a knack for finding underpriced properties. Derek was willing to take risks and put his chips in the middle in order to increase value, which led him to great success. He now focuses on the first-time home buyer market for real estate deals.

Episode Highlights

1. Strategies for real estate investing
2. Maximizing profits when selling a home
3. Flipping a first home with no prior knowledge of the market
4. Managing properties and time management—how to grow your business
5. Importance of knowing the cost of home projects
6. Why building good partnerships in real estate investing is important
7. Utilizing bank financing to invest in real estate
8. Lead generation strategies and motivated seller tactics
9. Why you need to have a tight buy box

Episode Takeaways

[00:01:23] How Derek started his real estate journey

Derek Williams got into the real estate business by accident. He had been in the oil and gas business, but when he tried to start his own investment shop, he was unsuccessful and had to move back in with his parents. While looking for something else to do, he stumbled across a neighborhood in East Dallas and decided to buy a foreclosure there with his family’s help. He got the “bug” for real estate investing and has been doing it for nearly a decade since. His first deal was very risky, but he took the plunge and it worked out.

[00:02:10]-[00:03:24]

“It was a great way for me to kind of blend my love of business. And I’ve been in numbers and accounting and finance before that and it was kind of a fun blend of the business side but also getting to be creative and go in there and drop the floor plan.”

[00:05:56] Derek’s initial approach to flipping

Derek was a total novice when he first began flipping houses. He treated it like his oil and gas projects when it came to budgeting. He got five bids for every trade and was surprised at the spread. During his first flip, he learned that first time home buyers value extra bedroom space more than having a separate dining room.

[00:06:27]-[00:07:02]

“The only way that I found that worked was just going into the market and getting bids.”

[00:08:40] Real estate investing lessons from a decade in the business

Derek says he wishes he had outsourced more responsibilities in his real estate business earlier on. He was initially focused on saving money by doing as much as he could himself, but soon realized it was not worth the negative energy and the time it took away from focusing on growing his business.

[00:09:01]-[00:10:24]

“I would have had other managers and I also would have brought in other contractors and stuff to handle the fix and flips for me sooner instead of trying to GC it all myself and be all over the city of Dallas.”

[00:15:57] The value of knowing the costs of home projects

Aaron emphasized the importance of knowing the basics of real estate investing, such as budgets and costs, to ensure that you don’t get taken advantage of by contractors. Derek added that he was able to gain a lot of knowledge from getting multiple bids for each trade and having a knowledge base that he could rely on to make sure he wasn’t getting ripped off.

[00:17:11]-[00:17:50]

“I do think it’s important for all investors to know how, in principle, to do a lot of the work that’s happening in the house. They should absolutely know how much everything costs. They should know how to build a budget.”

[00:20:41] Derek’s history with partnering for real estate deals

Derek has had two capital partners in his business over the last ten years: his parents, who invested cash into his projects, and a college friend, Cody Meeks, who helped him get bank financing. He also has a friend from high school who provided expertise in rural markets. He emphasizes the importance of finding a good banking relationship, as well as putting yourself out there on social media.

[00:22:53]-[00:23:10]

“Having a good banking relationship, I would say, is tremendously powerful partnership. It’s not the more traditional partner that you’re talking about, sure, but finding a community bank that knows you personally, that believes in, I found to be my biggest kind of tool in my belt that a lot of other investors don’t have.”

[00:26:30] Importance of having a long-term banking relationship for real estate investing

Aaron and Derek discuss the importance of having a long-term banking relationship for real estate investors. Doing so allows them to have a line of credit that can be used to buy fix and flips or rentals, giving them the flexibility to close more deals or jump on opportunities as they arise. Having a reliable bank relationship also eliminates the need to pay back a short term high interest loan, which can be a burden for new investors.

[00:28:05]-[00:29:01]

“It’s a long term banking relationship where they trust you and you’re using their money wisely and you’ve got a history of being able to make those payments in a timely manner.”

[00:31:11] Real estate investing lead generation and motivated seller strategies

Derek said he used to just drive around looking for deals, but since the market changed in 2019 he had to start looking for new strategies. He now uses Batch Leads to draw polygon shapes around certain areas and filter properties by criteria that suggest a motivation to sell. He also sends texts and calls potential sellers to let them know he’s real and discuss their problems and potential solutions.

[00:36:14]-[00:36:52]

“The faster that you can get connected with that person and talk to them, let them know that you’re a real person, it’s important. Other people have folks calling from the Philippines and stuff with virtual assistants now, and those don’t seem to be very effective in my experience.”

[00:37:13] Importance of having a tight buy box for real estate investing

Aaron believes that the most successful investors know exactly what they will and won’t buy, and have a tight buy box. He recommends avoiding the luxury market, and sticking to a lower price point where the unit economics work better and there are more options for exit strategies. Derek himself has found the most success in the first time home buyer market, as buyers are less picky and he can help to revitalize neighborhoods.

[00:38:45]-[00:39:07]

“The people that tend to do best are buying at a price point that always sells super fast. That usually is going to hug like the median for that area.”