229: Finding Your Strategy and Your Niche

SHOW NOTES FOR EPISODE 229: FINDING YOUR STRATEGY AND YOUR NICHE

All too often real estate investors get caught up the many great strategies for making money with real estate.  However, the most successful investors find one key niche and one key strategy and learns to master both.  In this podcast episode, real estate entrepreneur and marketer Erik Stark shares how he built a successful real estate business that did well but didn’t soar until he found his niche and strategy.

What You Will Learn

• Why it’s important, early on, to identify what you enjoy most and do best in real estate, before jumping in
• How an opportunity can appear when you least suspect it – so always be ready and always be looking
• Why it’s important to find and master your niche and strategy
• How a shift in strategy can double your profits overnight
• The power of targeted direct mail, understanding your customers’ buying patterns and human psychology
• Why Michigan has some of the best deals in the U.S. right now
• The value of the right partnership

About Our Guest

Erik Stark

Erik Stark is a Real Estate Entrepreneur, Educator, Marketer, “Ubercool Dad” and Dedicated Husband of 14+ Years.  Some highlights of his young career include:

• Assigned his first deal at age 24
• Purchased over 400+ properties since including single and multifamily, apartments, commercial, vacant land and developments
• Raised millions of dollars in private capital for acquisitions
• Studied and created some of the industries greatest marketing pieces
• Helped dozens of investors do their first deal
• Turned his house flipping hobby into a brick and mortar company with his business partner Steven Mills by age 26
• Acquired $1,000,000 in real estate by age 30
• Runs a local young professional men’s ministry near his home in South Florida
• Active member of the community supporting Habitat for Humanity, Sheridan House Ministry and Homeless Voice

More About Erik

• Born in Michigan
• Always wanted to work in real estate
• The day he graduated from High School, he went into a Real Estate One brokerage office to respond to an ad for free real estate training and he signed up
• 48 hours later, he received a call that the class was cancelled because not enough interest. His dreams were shattered
• Ended up getting a job in an auto detailing shop, moved up to partner. Ran into an old friend from high school who had moved into the mortgage business
• Moved on into buying, reconditioning and selling used cars
• Left used cars and joined with friend with mortgage background to both get their real estate licenses
• Within 3 months, realized they were horrible realtors, but they loved the investment side of real estate
• Left brokerage and sought out to buy real estate
• Bought Steve Cook’s home study program called “Wholesaling Houses for Fast Cash”

First Real Estate Deal

• Sept, 2007, his wife had job as a care giver and her client passed away and she was devastated
• Wife was left some items from the estate
• When they went to claim the items, Erik was wearing a “We Buy Houses” shirt someone gave him at a local REI club
• A guy there ended up pulling him aside to talk about a house he had for sale
• Erik scrambled to find a buyer and ended up putting the house under contract
• Made $5,700 assignment fee
• Realized it would take 3 months to earn that same amount of money through his car-related businesses

Creating a Business

• Worked with a number of investment companies
• April 2008, formed a partnership and real estate company with his old high school buddy
• Went on to do 35 wholesale deals (assignment/REO deals) in their first 8 months of business
• Profited over $250,000
• 2009, did 80 rehabs and wholesales
• 2010, did low 90s
• 2011, did mid 90s
• First few years – high volume, low priced deals, quick turn, “splash and dash” assignments and some renovations
• It was moving very fast and they felt a need to slow down and get control

A Shift in Strategy

• In 2011/2012, wholesale inventory was starting to dry up
• 2012, started to employ more direct mail
• Saw patterns happening
• Moved into a holding business pattern
• A person responded to one of their mailers who had an off-market old farm house located in the middle of two lots
• They were going to get it for $65,000, maybe to renovate
• Erik texted one of their buyers and he said he would buy it for $66,000
• Erik drove by the property and noticed a large bulldozer on property near the farm house, land grated, big signs near the land saying “New Homes for Sale”
• Erik called the number on the signs and presented the farm house to see if the developer was interested
• The guy called back and offered $115,000 for the property
• He went to his partner and his partner said, “This is easy. The developer is going to bulldoze the farm house and put up a home for $650,000.”

Finding Their Niche

• Erik and his partner saw a new opportunity
• Began looking for every double-lot property in a specific area to pursue more deals like this one and this would be the new focus of their business
• Created “hyper-focused targeted mailers”
• Mailed only 5,000 targeted mailers to people in specific corridors, neighborhood-specific, in-demand location, with minimum zoning requirements they were looking for, where they could take a property to a higher and better use
• Abandoned their previous mass mailer strategy to catch any and all wholesale activity
• Erik’s role is no primarily that they have money and deal flow
• His partner’s role is to handle all the renovations, building, development and everything involved in taking the deals vertical
• Assignment deals were now ranging from $40,000 to $140,000
• His partner started learning building and zoning and they became developers
• Focused more on multifamily and commercial development more today
• Still do single family assignments because the payment is quick. With developments, there’s a longer wait cycle before you see the profits (average 18 month time frame)
• Are continuing this same strategy today

Biggest Mistake

• Not keeping the first 400 properties they bought and sold
• If they would have held on to even one quarter of their first deals, they would be set today
• They bought homes in B and C class neighborhoods that ranged from $10,000 to $50,000 dollars that, today, are selling for $100,000 to $225,000
• He likes being a landlord and the buy ‘n hold model
• Today, they take the good ones off the market and rent them out

Biggest Success

• His love for marketing and human psychology
• Loves to see what makes people tick and what it takes to get them to respond
• Why do people say yes after direct mail letter number 13 and not letter number 6?
• Loves the life real estate investing has made possible for him and his family
• In 2013, moved his family to South Florida but still flies up to Michigan once a month where his partner and business are maintained

Thoughts on Michigan and Detroit Area

• Detroit has had hard times but is turning around
• Corruption, major slump and many people moved out
• Detroit has radically transformed – vibrant and booming
• Dan Gilbert, billionaire owner of Quicken Loans and owner of the Cleveland Cavaliers, has been at the center of transforming the city
• Has hired hundreds of his own privately-paid security guards in the city to help people feel safe
• Some of the accomplishments: Big skating rink, “number three best lunch” in all of America to eat at Campus Martius Park, knocking down old buildings, encouraging tech business to come to Michigan – big tech hub
• His company is focused on investing in A and B class neighborhoods – places “you feel comfortable taking your spouse out to dinner.” – Very safe areas
• His office is located 1 mile north of Detroit – 9 mile and Woodward Avenue

Advice for Old Dawgs Interested in Real Estate Investing

• Quote from Frank McKinney (see episode #119 ) – “Risk sooner and more than you are comfortable.”
• Quote from Internet marketer Rick Shefron – “Stop chasing opportunity and work a strategy.”
• Find your niche/strategy and stay focused

Future of His Business

• He has a partner that is passionate about being the visionary, taking deals vertical and to their highest and best use
• If Erik didn’t have that kind of partner, he would probably just be more of a landlord or a wholesaler
• He sees his role ahead as building a media company, where they can get ahold of certain kinds of data, find algorithms, identify buying habits, so they can get a pulse on where there next major opportunity will come from. How can they create profits on-demand, but do so, knowing what they are getting themselves into?
• To keep their eye on marketing and be at the forefront new technology and discoveries that help understand why people react to specific types of marketing

Rap-It-Up

• Favorite real estate book: Don’t Get Voted Off Real Estate Island by Mike Cantu
• Favorite business book: Oh, the Places You’ll Go by Seuss Geisel
• Most valuable web site for success (other than your own): The Gary Halbert Letter
• Favorite app: Sleep Cycle
• Favorite quote: “To whom much is given, much more is requires.” Luke 12:48
• If you had to start all over, knowing what you know, and you only had $1,000, what would you do to launch your real estate investing business? Get back on the streets. Start learning at a street level. Use his communication skills, put it into a letter and start rebuilding assets. Then focus on building a team.

How You Can Reach Erik

• Blog: www.therealerikstark.com

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