Livin La Vida Luna

With baby bro on the way, Luna is starting to help out with household chores.

If I Had To Start From 0...

What you're about to read is a draft script for a future YouTube Video.

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If I had to start real estate investing from scratch (absolute zero) this would be my plan to hit $1,000 in passive income per day in the next 6 years.

This is a simple three step plan that needs to be recycled 100 times to succeed.

The hardest part will be not getting distracted by shiny object syndrome.

Off-Market Lead Generation:

The first stage is to consistently generate off-market leads.

The best way I currently know how to do this is by leveraging a combination of data aggregation, direct mail, and an inbound call center.

I use an online service called Propstream to find homeowners in distress. I typically look for people who recently inherited property, were involved in a divorce, or had a lien (tax, utility) placed against their property.

After downloading that list, I send the names and addresses to a mail house that puts together hand-written letters for me.

The letter basically says, "Hi [Name], I'd like to give you a cash offer for your home at [123 Main Street] in [Town], [State]. Please call me at xxx-xxx-xxx if you'd like to discuss this further."

I will get 1 call for every 100 letters I send (1% response rate).

These calls are routed to a call center to ensure I'm not wasting any bandwidth on tire-kickers. The call center tries to identify the seller's motivation as well as details on the property.

Once I have all of that information stored in my CRM, we call the homeowner back and make them an offer with the information we have.

It'll generally take 10 calls to lock up 1 deal. That's a final conversion rate of .1% (1,000 pieces of mail ➡️ 10 calls ➡️ 1 deal).

Revenue Generating Activity:

The second stage is selecting one of two monetization strategies

We can either:

Wholesale the property - or -
Fix and Flip the property

Wholesaling means selling the contract to another person.

For example, we might put a home under contract for $100,000. Then find another investor or retail buyer that's willing to pay $150,000 for that same home. We assign our contract to the new end-buyer and take the $50,000 spread as a "finder's fee".

This is the quick nickel vs. the slow dime dilemma.

There's probably more money to be made (double or triple) if we fix and flip the property ourselves. But sometimes we have to prioritize the velocity of money over the amount of money.

Sending Money Out to Pasture

The third stage is reinvesting as much of the revenue generated in stage two as possible.

My strategy is to reinvest as much as I can into Class A shares of large multifamily real estate syndications.

Class A shares are great because they combine the best parts of debt and equity.

Like debt, the return is fixed and its position in the capital stack is second only to the purchase money loan. Like equity, Class A investors enjoy tax benefits (negative tax returns with positive cash flow).

What It Takes (By The Numbers)

I have an audacious goal to generate $1,000 per day in passive income in the next 6 years.

Class A shares in real estate syndication typically pay a 9% coupon annually.

$360,000 divided by 9% is $4,000,000.

So I need to reinvest $4M to reach my goal.

Let's assume I'm able to reinvest 80% of all revenue generated in stage 2. That means I need to generate $5M ($4M divided by 80%) in revenue from my efforts in stage 1.

Assuming every deal I execute nets an average of $50,000, I'd have to do 100 deals to generate $5M.

To lock up 100 deals, I need the phone to ring 1,000 times. To get the phone to ring 1,000 times, I need to send 100,000 pieces of mail.

That's a little more than 15,000 pieces of mail per year for the next 6 years. Considering I just sent 5,000 pieces in April 2022 alone, I like the odds of achieving my goal.

SSS #136: If I Had To Start From 0, This is What I'd Do