Here we are again from Clearwater Beach, Florida at The Collective Genius, the premier group for real estate investing. You have to be doing at least 50 deals per year to be a part of this premier group. Today we're with Justin Johnson, who exited a healthcare business and hit the ground running with real estate wholesaling. Discover this one thing that is the reason why existing business people, when they come to wholesaling, hit the ground running doing multiple deals in their first few months and never look back. It's the one thing that an established business person knows that a beginner struggles with. So listen to this if you want to take the next steps in real estate wholesaling. So Jersey's my main market. So born and bred and raised South Jersey. South Jersey is so close to Philadelphia. When I got into the real estate business, I couldn't get enough. It didn't seem like I could get enough deals in my own market. The affiliate was so close and the real estate was booming at that time. I just started doing deals in Philly. So it made sense. Nice. Did you have any mentors that helped you along the way get started? I mean, I had plenty of people that I talked to to bounce stuff off of, but most of it was podcast to be honest with you. Really? Yeah, yeah. Which podcast? For me at first it was Bigger Pockets. Same. Yeah. So it was Bigger Pockets. I was listening to that. I had already had stepped my toes into the landlord game, but I was working in another business. And then I started listening to Bigger Pockets and I was kind of getting burned out in that other business. That's what decided. I kind of decided to jump full time in real estate. I was just listening to Bigger Pockets all the time, me and another friend of mine and another CG member actually. He was working full time too. And he was doing some real estate stuff when we were just sharing podcast back and forth. Nice. Yeah. But he was already in CG? No, no, he wasn't in CG. He's in CG now. Yeah. Yeah. Yeah. Yeah. He's like the genius now. So what were you doing when you were listening to those podcasts? What was your job? So I worked in healthcare before it specifically behavioral health is what I was in. So I own some outpatient facilities. Oh, wow. It's already in business. Yeah, I was already in business. That's pretty cool. Yeah. What drove you to do something completely different? The business is tough. Being emotionally involved with people. I feel like I'm an emotional person to begin with. I'm very empathetic. So dealing with clients, especially with addiction and mental health stuff, it was really, really close to home. And real estate was cool for me because it didn't talk back. There was no like, you know, there was no like the real estate didn't die, you know what I mean? Like, and I don't mean to sound like morbid, but like, you know, it was just a tough business to be in. Yeah. Right. You know, you see friends and they really imagine. Yeah. So and then real estate was great because it was just numbers for me. It wasn't, I didn't have to be emotionally involved. And then the numbers were really good, you know. So I was huge. Actually, deal machine is and when deal machine first came out, when I first got started in the business, and I was door knock. And when I first got started and we were, I did all deal machine. So just me personally running around door knocking, using deal machine, taking pictures. And that was like, so it's pretty funny. We come full circle. That's awesome, man. Yeah. Sure. What was that, by the way, that you got 2018? Oh, not too long ago. Yeah, yes. 2018 is when I jumped in full time. I was obviously doing stuff prior to that. But full time, I started elite home buyers November 2019. So I guess what is that now? Seven years, six years ago, six years ago. Yeah. Do you door knock now or have anyone do that? No, we don't do any door knocking now. That was kind of when I first started my business, it was all boots on the ground. So we were just door knocking, free lead channels. Again, we were, we were using deal machine to look up owners information, call calling each person individually like super, super niche. I was doing it by myself before I hired somebody, finally when I hired somebody, you know, they started doing it as well. But yeah, yeah, all boots on the ground to start got it. So what did you say when somebody answered their door? Just would you like an offer in your house? Yeah, I would just I'm a local real estate investor, you know, hey, I don't mean to bother you or come off or or alarm you. But you know, I'm a local cash buyer. I'm looking for houses that we buy and fix or buy it, right? Just seeing if you'd be interested in selling looks like, you know, I don't mean to hurt your feelings, but it looks like the house needs a little bit of work. You even went there? Yeah, correct. How do people respond to that? I mean, I think me as a person, I'm naturally disarming. It's about the delivery. Yes, correct. I'm naturally disarming. So people would, a lot of times people would open up to me and you know, they'd say either I'm not interested and I could, you know, keep moving or my first deal I did was a doorknob. You know what I mean? So it works for sure. You've got to respect that because it's raw. There's nothing about it that is delaying the hard work. Yeah, that is the hard work. Yeah, yeah, that's cool. And it was cool, especially in the beginning, I wish we could I wish I could scale that model. It's a little harder to scale. But in the beginning, we were getting really good deals because, well, the market was a little bit different back then too. There was a lot more vacant houses and stuff. But, you know, I was actually going toe to toe with the customer. We were going face to face. Like, so they knew that I was real. I wasn't sitting around waiting for them to come to me. I was going to them. So it was a little bit different. But, you know, it was definitely a good time. How much did you make on that first deal? Remember? I think I made 15. Oh, my first assignment deal. It might have been a little bit less because I think I put a deposit down and I didn't know that I was supposed to get refunded deposit. So, you know, it's a little hazy, but I think it was about 15 is what I mean. That's a great first. Yeah, yeah, it was good. How did you find... So I know how you found the deal. Yeah, store knocking and it had some paint peeling or some work that needed done. Yeah. How did you find the buyer for that? I knew a couple people that were already in the business, right? I knew a couple people that were flipping. So I just used my sphere of influence, you know? Does anyone look at, you know, would you be interested in your next flip? And, you know, I shared this before talking about my story. But my intention wasn't really to wholesale that in the beginning. I didn't really know what assignments where our wholesaling was. My intention was, okay, I'm going to buy this property at the right price. And then I'll figure out how I'm going to get the money and how I'm going to flip it. I don't know how I came across finding out about an assignment that I could assign it, but I was just doing some research. In fact, that I could make a couple quick bucks. And it made sense for me at the time. So I ended up just kind of muddling through it and figuring it out. It was funny because that first deal, the seller had an attorney, the buyer had an attorney. I had no idea what I was doing. And somehow I ended up making it work, you know what I mean? Just muddled through it. Now, is it like New York? As I understand where you have to have an attorney? No, okay. So that was unusual. Yeah. So New Jersey split kind of like, it's almost like two different states, North Jersey and South Jersey. North Jersey's pretty much all attorneys, South Jersey's pretty much all title companies. So in my main market, say the thing with Philly, Philly's all title too. So in my main markets, we don't really deal with attorneys too often. It's very rare that we do. Unless we're doing a deal in North Jersey. But this deal in particular, they both had attorneys. Got it. So I don't know how I made it happen, but I just did. I love it. Yeah. So what did you do after you collected that 15 or so thousand dollars? Did you still have the behavioral health facilities at the time? No. So I was going through, I brought on a partner and that was part of my reason of the burnout, right? Because I brought on a partner and we just were not aligned at all for the health facilities. We're not aligned. He was just, you know, without going into too many details, we just were not aligned ethically and morally and I decided to sever that relationship. You were out of that. Okay. Gotcha. I got out. Cool. So you had some time and that 15,000 was probably nice. Yeah, it was definitely nice. Yeah, well received. Yeah. And it was a proof of concept on how real estate could work and how I could duplicate these transactions. How did you know the flippers in the business? Just from knowing people that were doing it. Yeah. You know what I mean? And I had been in business so like when you work for yourself or when you're self-employed, you know people. You know what I mean? You're just naturally around people that have some things going on in their life. Were you in any type of business owner groups or anything like that? Well, not at the time. I just knew a couple people who were buying and selling houses. Got it. So I just immediately went to them and said, hey, would these numbers work for you? Yeah. And we negotiated a deal and I said, well, how do I, if I close on this, I'm not going to make the same amount of money that I think I would. And then I learned how to do an assignment, you know, and the deal made sense. Got it. What did you do next? Keep door knocking. Yeah. So a lot of boots on the ground at the beginning. We were door knocking, hanging bandit signs. I wasn't pumping a ton of money into it because the business that I had just left, I had put everything I had into it and I was pretty much at the point of almost bankruptcy. Yeah, right. So it was like either make this real estate thing happen or make it happen. There was no other choice for me. Yeah. Right. So once I figured out that I could do that assignment, I knew that if I continued to put them same efforts in, you know, I could multiply it. So my first six months or so was door knocking, texting, and there was no texting platforms at the time yet that I knew of. So we were just texting one at a time, cold calling one at a time, and then hanging bandit signs. About six months in after we had gotten a couple of subtraction and had a few deals going, we're probably doing three or four deals a month consistently. Wow. That's pretty soon. Yeah. Yeah. I think my first year, we did 78 deals my first year, and it was mostly boots on the ground, door knocking, cold calling, but not like through a dialer. Again, it was just all manual labor. I find that in this room, I've interviewed a few people on podcasts and there's multiple people who burn the boats. Yeah. Right. They just went all in to make it happen and totally believed in themselves. Another thing I realized was having been a business owner in the past, you probably didn't struggle with knowing that it will take like 400 door knocks to get a deal. Correct. Yeah. Yeah. That's pretty awesome and why you were able to probably get to three, four a month. Sure. Within three months. Yeah. I originally burned the boat, burned the, burned the boats in 2012. I was in a different business and I was working full time and I made decent money in that business, but I was a W2 employee. I was a young father and I decided to go out my own originally. So I burned the boats in like 2012ish and I knew that at once I did that and I knew like my life took off from there, you know, it's just a matter of a business is a business is a business, you just need to find a way to make the numbers work. Right. And that's why it was a little bit easier for me. Yeah. Absolutely. That's great. Sure. So you've expanded now. What does the business look like today? We are. We're, I mean, it looks a lot like it did then, except for now we just have systems in place. We have people in place, you know, full-time salespeople. I believe we're at nine or 10 right now, employee-wise. We have a few lead managers, a few sales guys, but that doesn't include our construction crews. We should exit like 40 or 50 flips this year. Whoa, that's a hard thing to scale. Yeah. So we're doing a lot more flips. We should exit about 120, 130 whole South deals. So we're staying pretty consistent. We, there was a point in 20, I was actually just talking with a guy in the Uber on the way here who's also in the business. Oh, really? Yeah. Yeah. So about the same thing. 20, 20, 22ish, when the rates started going up, I think I had like 20 or 21 people. We were, I always pumped a ton of money into it and things started flux waiting for us. So Philly specifically, right, we were heavily invested in Philadelphia and that market was booming. Like right, like all the markets were booming right after COVID, but Philly specifically, again, my main market was New Jersey, but Philly had kind of taken that over for me because that market blew up. There was hedge funds, there was a ton of landlords, there was people coming from New York, like things were appreciating over in Philly, really good for us. And we were doing a ton of deals in Philadelphia and that market, when the interest rates started going up, really took a hit before the suburbs did. I don't know if the suburbs took a little bit of a hit, but not as much as Philly. So we had like a year in my business where it was like, holy shit, what are we going to do? Right? Because we couldn't sell stuff. You know, there was a lot of times we couldn't dispose stuff. Sellers expectations were higher than what we could offer. We didn't even know what we could offer. And it was a real struggle for us in Philadelphia for about a year. Well, that's crazy. Yeah. So when you're flipping, the value of the house is changing. Yeah. And I'm talking just during the time it takes to flip it too, right? Correct. And I'm talking just from a wholesale standpoint, right? So we were having trouble even wholesaling stuff. I never flipped that much in Philadelphia. Okay. Right. I prefer to flip and hold in the suburbs, because I just know that market a little bit better, but for the wholesale wise, we really took a beating. So when you say you had 21 people and now you have 11, right? Yeah. We're at represent right now. You were doing 200 wholesale deals back then? Yeah. So we were doing probably a rep. Well, actually, it's not true, because we're probably doing around the same amount of deals now, as we were doing then, we're just more profitable, right? And we're a tighter team. I was scaling up to try to do that. Yeah. Right. At that point. And then we kind of got the rug pulled out from us at during that time when that market shifted for us. So when the rates go up and you're talking about wholesaling, did that just kind of remove the certain number of buyers? And so it was harder to sell those deals. Correct. So we had hedge funds and stuff. So we had probably two hedge funds that we sold a lot of stuff to. They both had pulled out. And then there was a lot of landlords who were pulling out too. So most of the stuff that we sold, especially in the city, were to landlords, right? So we're buying whole guys and a lot of them pulled out. And I think that's really what happened to just stop buying, right? Or they need to buy deeper than we could require the properties for. Cause sellers expectations were still high. Yeah. Yeah. Well, the thing about wholesaling, just kind of observing and doing deals, direct to market, direct to seller myself on a limited scale is there's always these things that happen is that they can't pay their mortgage or something bad happens to the house or whatever. So there's always that need to have people buy run down houses. But it's on the buyer side that sometimes the demand fluctuates with the market. Yeah. Well, we used to just bought, we would be able to, we would be able to acquire to it, throw in the MLS. Like we were doing a lot of stuff putting the stuff on the MLS. It was just flying off the market. Next thing you know, during that time when an interest rate started going up, like nothing was selling for us. How did you become more profitable? Obviously, you reduced staff. So that's part of it. Yeah. Was there anything else that you did? We do a lot, we get a lot of referral business and we started flipping a lot more, right? So where before our average deal size, I think in 2022, our average deal size across the board was like 32,000 bucks, right? Which is really good. That's awesome. Which is really, really good. But and then that following year, our average deal size went down, right? And I had all the staff. Now that we've started flipping, like we, instead of up me assigning a deal, right? So where we're at my business now, instead of me assigning a deal, I used to assign a deal, make five or 10 grand. Now I'm looking at that. Okay, well, if I can only assign it for five or 10 or even 15 grand, right? What happens if I buy that deal, right? Is it good enough for me to buy? Is it good enough for me to buy and be able to make 40 on it or maybe 50 or 60 on it? If I flip it and I started noticing that on a lot of my deals that I would have these deals that seem like they were tight to our end buyers or they were tight to us because we couldn't make that much money, but my empire could easily make 40 grand on that deal if they flipped it, right? And they might be able to get in and out of it in 30 to 45 days. We started buying a lot more, right? So instead of me assigning them deals because our costs to acquire these these, we got to spend a lot of money in marketing, especially in the market, I mean, it's expensive in order for us to acquire these deals, rather than wholesaling it and barely making anything or breaking even, we'll just start taking them down. Yeah. So what does it cost to get a deal? I don't know my exact numbers today. I have to take a look at that when actually when I leave collective genius where we're at right now, we're gonna, we're doing our annual planning and taking a look at that. Awesome. But last I looked, it was like six thousand bucks a deal. Yeah. So we got to make 20 grand a deal minimum in order to be profitable. Yeah. Yeah, that. So I've heard anywhere between 2500 to like 9000. Yeah. So when I first started, so when I first started in the business and we're talking about my first year, dude, we were like 400 bucks a contract. It was because you were door knocking. It was your time, right? Yeah. But even when we started texting and we started spending money on PPC, I could spend 3500 hours on PPC back then. Yeah. Yeah. And I would get 5060 leads a month. Yeah. Right. And we would sign 20% of them. We might only close 10 or 15, but we could, we could get a lot of deals. Like once you took out the title issues and stuff like that, but it did not cost us a lot of money at all. So PPC is a lot more expensive now. Oh, PPC is a lot more money for us now. And it's because we went to masterminds and told everybody at work. Correct. And everybody else started doing it too. Yeah. You know what? And also it's because all the TCPA laws, because you used to be able to call tax and do all that stuff and you could get deals fairly cheap. Once the carriers start restricting stuff, everybody ran the cold call. I mean, I'm sorry, everyone ran the PPC. Yeah. You know, so not to mention, look at where we're at. You know, like everybody selling something and they find out how good it's working. And I was fortunate and I should have spent more money when I had the chance, right, before there was a ton of competition. But I was just on easy straight at the time, right? Because I was buying leads for super cheap. I was spending money on PPC and barely any money, and we were doing a ton of deals. I could have really, really ramped it up at the time. But, you know, hindsight is 20/20. I'm sure you've seen this though. There seems to be cycles of what works well. This is true, right? So PPC is saturated. So that means they're all going to go somewhere else. Well, guess what? You know, I'll put it out there right now. For us, it's direct mail rate. Yeah. And direct mail didn't work for a while. Like everybody put out a direct mail and everybody was cold calling me a texting or whatever it was. And we did direct mail and it didn't do that good for us. Now we're back in direct mail and we're crossing it with direct mail. Right. That's great. Yeah. So it is cyclical. And I don't know why it is like that, but it is. So I guess the learning experience here is you got to have multiple sources of marketing and just always be looking at your numbers. What was the challenge or how easy was it to do a bunch of flips, right? Because moving from wholesaling to flipping is like a very different beltball game. You have contractors to manage a lot of movie pieces. It's very challenging. Time is important. Getting it done quickly. Yep. Not that and the money crunch too, right? Because with wholesale deals, I mean, you have a deposit out. You have money in marketing. With construction, this first off, a lot of times your projects go over budget, right? So you have money out of pocket there, closing costs, holding costs, all that stuff. Your monthly interest payments if you're using hard money. So the time that the money's out there, it's very difficult. And I'm not here to say like, I mean, we're full-time flippers. I shouldn't say that. We do a decent amount of deals, but I would personally wholesale everything if I could, right? But in order for the deals to make sense, it's important for me to be multifaceted and be able to take deals down, right? Because there's a ton of like wholesalers and stuff who send me deals. They don't want me re-wholes selling them. So I'll buy them and I'll resell them. Or agents who send me referrals, they want the listing on the back end. They don't want to deal with the POS house that they're sending me, right? That needs a ton of work. They'd rather send it to a guy like me. We'll make it beautiful. And then they could do their HPTB thing. And the reason why they bring it to you is because they know they'll get the listing later. Correct. If you weren't reselling it, they probably wouldn't give it to you. They'd probably give it to someone else. Correct. Yeah. Yeah. And I've made that mistake, right? Of buying a house off agents and then reselling them as is, they're like, well, what the heck, you know? So it makes sense for me and my business and my pockets, right, to buy more houses. But it's not easy. Flipping hasn't been easy. I'm actually, one of the things that I'm trying to do here in the next three days while we're at this mastermind we're at, is talk to some people about structure for a project manager. Okay. Because that is something that's been difficult. Like, because we start putting time and effort into fixing flips, right? And then the wholesale business is struggling. And the wholesale businesses are bread and butter, right? If we're not on top of that every day and making sure that the leads are coming in, the sales guys are happy, they're crushing their deals, gets difficult. You start running the financial problems, right? And that's a good thing I could see that coming before it happens. But it's definitely something that's important. I got to get that off my plate. I just talked to Andrew and he's also looking for the same thing. Wow. So I'm sure you guys will find the answers to the product management, because there's so many people in collective genius that have done a hundred flips a year, right? I have figured it out and probably have access to playbooks they'll give you. So that's great. Yeah, that's good to be a part of the mastermind for sure. But yeah, it's been a struggle, because there's been, you know, even over the last couple of months, I told my CEO, I'm like, we got to stop buying and we need to start wholesaling more, right? So I'm like, trying to find that balance, you know, and what ends up happening to, and this is what I noticed, David, from our perspective, is we end up buying like a lot of my buyers. So that was another thing that I dealt with, right? It's our buyers like, well, you flip. So you only want to sell me the deals. And then I'm like, no, that's not the case. What usually happens, Mr. buyer, is we buy the deals that nobody else wants that we can't make any money wholesaling, right? So that was a misconception as well. Yeah, you flipped it on them. Correct. Yeah, that's great. Yeah, because it's the truth, right? Because the big spread deals that we could assign and be done with and be out of them real easy and make a nice charm, we're doing that, right? It's the deals that we got to grind to make 10 grand on assigning it. I'm like, well, why don't we just buy it? We can make 40. Yep, right. That makes sense. So you mentioned something about your sales guys. And you said, if you don't keep the deals flowing, then they can't make commissions. Yeah. And then they probably going to start looking for another job, right? Correct. So well, I kind of wanted to kind of rewind back and say like, well, what was the first person you actually did hire for your company? Was it that sales or acquisitions person or? So actually it was, yes, the first person I did hire was the acquisitions person. But that was only because I knew somebody who was already working in the business and had experience and needed a job. Like I knew that person for like another real estate investor. They worked for another company that that hosts out and flipped. He had recently lost his job and I had just started my business. I don't know. I don't remember what why he left there, but it was kind of convenient because I knew the guy and you know, so he hopped in. That's great. I'm sure he just seamlessly integrated, right? Yeah. And he had experience, which was great. And that rarely, rarely happens. It's hard to find people, especially with the experience in this business because it's so niche. Right. So and how many deals had you done before you made that hire? That was probably, I think I hired him about four months in. I think I hired him about four months in and we were doing like three deals, four deals. Yeah. So around that time, yeah, yeah. So I did my first deal in December of 2000. We saw us. I opened in November 2018, just to start that deal. We did two deals in 2018. So I did one more in December, then we did a few more. So I probably did maybe six, seven deals by that time, yeah, maybe a little bit more. Yeah. And so by that time, you figured out how it works. Yeah. You've seen it seven times. Yeah. And that's the perfect time to get something off your plate. Correct. So buy back your time and then what did you do with your extra time? What's that happen? Well, when I got more deals, I just did acquisitions too. Got it. Yeah. So but no, I did more marketing, right? Because I needed to be able to feed him deals. Yeah. So in addition to door knocking, then you started whatever text messaging or direct mail. Correct. Got it. Yeah. We started, we started text messaging next. That was the first thing. First thing we did was door knocking. Second thing we did was hanging bandit signs. Third thing we did was, and we were co-calling. Because those text messaging platforms came out around 2019, 2020. Yeah. So 2019 is when lead Sherpa came out. Yeah. That's actually, that was right when I started my business. It was the very beginning of elite home buyers. And lead Sherpa was a game changer for us. Yeah. Because we could skip trace through there. We could we could text from there. And back then it was like our deliverability rate was like 97%. Our response rate was like 48%. I forget exactly the numbers, but they was really, really high. It was really, really high. And then really like you said earlier, the carriers didn't want that traffic. So it's gone down. Yeah. Obviously since then, right? Yeah. We texted a few years ago, we turned it off probably two years ago, but we were still texting a little bit here and there, but it was just the deliverability rate was low and response rate was low. And I'm not the type of person. I don't really like hanging in the gray area. So like even with bandit signs, it worked really well for me. And then I started having like a moral dilemma with it because I didn't like seeing like, I would see my signs like blown in the street. And I did something like trash. Exactly. And I was like, well, I'm supposed to be making the neighborhood nicer. And I got these signs right in the street. You know, I respect that. Yeah. So where do you want to go from here as we kind of wrap up in 2025? Oh man. So exciting time. It is exciting because I feel like the market stabilized a little bit like I was gun shy. Like when I started taking that beating in 2022 or whatever it was, I was kind of gun shy all through 23. 23 we did decent, but and then 2024, we started acquiring more. So it's been like a journey for me personally. And I feel like the market has stabilized a little bit more for us. Like we, you know, I just accepted an offer to thank God on a property that just sat on the market for three months. And this was a property. Usually that would go way over asking price. Right. And this was like a showcase house. We spent so much money on this house renovating it. I'm like, why the heck is it not selling? Yeah. And of course, as soon as I get on my flight to come to Florida, it goes into a bidding war. Like at the, oh, yeah, that's good. Very good. But you know, it kind of reminds me of when I got started in the business when like you would buy a house and it might not sell for a month or two or three months. You know what I mean? It might take a little while to get an offer. So I feel like we're a little bit more of a stable market. So I'm excited to see what that is. Our numbers are dialed in as a company as a business. Our numbers are dialed in right now. My teams dialed in. So I'm just looking forward to being super profitable for 2025, right? Yeah. Another one of the things that I do when I leave Collective Genius in December is I always get set up for my annual planning for the next year. So I'm excited to dive into that and see what that looks like for us. Yeah. I'm excited to see what impact the project management has on your business. Yeah, me too. Maybe in three to six months from now. Yeah. That'd be cool to check in. Yeah, yeah. Absolutely. What's your social media? Justin Johnson on Facebook, J3 companies on Instagram. Cool. I'm way more active on on Facebook. Okay. But yeah, that's that's it. Awesome. Thank you so much. Thanks, David. Thanks for listening to The Deal Machine Real Estate Investing Podcast. 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Justin Johnson reveals how he leveraged his business experience to jumpstart his real estate wholesaling journey and achieve rapid success.
