Episode #72 – What To Do During The Next Market Correction, with Frank Heron

You're listening to the REI Marketing Nerds podcast, the leading resource for real estate investors who want to dominate their market online. Dan Barrett is the founder of Ad Words Nerds, a high tech digital agency focusing exclusively on helping real estate investors like you get more leads and deals online, outsmart your competition and live a freer, more awesome life. And now, your host, Dan Barrett.

Dan: Alright, everybody. This is Daniel Barrett. I'm here with Frank Heron from SWFLCashBuyers.com. That is Southwest Florida Cashbuyers.com, but just with the initials there. He is a real estate investor in Southwest Florida. He's been basically ... we were just talking about this…buying this huge area, from Marco Island all the way to Sarasota. Basically, if you are anywhere near Southwest Florida, there's a chance you're going to run into Frank. Frank, welcome man. Welcome to the show. I'm super happy to have you. [0:01:10.9]

Frank: Thank you. I appreciate it.

Dan: : Let's get started the way we typically do. Walk me through how you get started, how you got started specifically in real estate investing because investing is kind of a weird part of the world. Right? What was your in to this whole industry that we're both part of?

Frank: Back in 2001, I had a bunch of buddies that were doing this business and I was dying to get into it, probably like a lot of people are now. They were flipping, I mean, they were flipping 20, 30 houses a month and I was like, guys, just let me get it - just let me get in - just let me get in. They got me in. They taught me the business and then I flipped my first house down in Fort Lauderdale, probably 2002 and I made $7000 and I thought I was a millionaire. Although 7000 was a lot more in 2001 than it is now. Then I think I took that money. I parlayed it into two other, you know, we're talking like $40,000, $50,000 purchase price deals and with hard money lender and then I just grew that into 6 months later, doing 7-10 houses a month because back then our primary area in Fort Lauderdale was just this little area with cheap houses where you would get them for 40 and you're flipping them for 100, 110… [0:02:24.3]

Dan: Wow.

Frank: Bread and butter down there.

Dan: I'm assuming that that went through a pretty significant change around 2008, right, because you're saying in 2001 is when you got started?

Frank: Yeah. I had been down for about 5 years and then I started flipping a lot of houses and you know, my motto was why should I flip 10 small deals when I can flip 1 big deal in the Oakland Park Manors area. Then I just started doing 1 or 2 or month, high-end properties where we were pulling out a ton of money. Then of course, I mean, I seen the market changing around '06 or '07 when we were trying to flip these houses to people and they couldn’t qualify and they did away with the no stated, no document income loans. I was like, oh boy. It just went downhill quickly and thank God I didn't have a lot of properties so I kind of made it out… [0:03:12.9]

Dan: Did you …so it's interesting, right, because I talk to a lot of people who went through that time, right. It seemed like your spidey sense went off. You could sort of tell something was happening. Did you consciously diminish the amount of properties you had and risks that you had or was it just kind of, you know, did you see that coming, or was it more just kind of luck where you're like, oh…

Frank: Well I seen it coming because if you can't move your properties, I mean, you know, you're in big trouble. I mean, buying them is one thing but getting rid of them is another and we were just having a real problem getting people financed. We just stopped buying altogether.

Dan: Right. Yeah, yeah.

Frank: Stopped buying and stopped flipping, whatever. We weren’t wholesaling back then, of course. It was just purchasing and I mean, it went downhill quick.

Dan: Yeah. That's wild, man. Walk me through that time, because I mean, I don't know - sometimes people don’t like to talk about it. I think we, everybody has a little bit of PTSD from it, but what was it like getting out of that and sort of getting back to normal because we could flash forward a little bit. I mean, you are a very successful investor. You're investing all over Southwest Florida. [0:04:13.9]

We were talking about this before. You do every kind of possible type of deal type. You have been there and done that. Right. So what was the process like going from what you had done to that kind of post 2008 landscape?

Frank: When it started going down, I mean, we were, of course everybody was doing, if you were active in the market back then, I mean, you could just fall into 30, 40, $50,000 profits. I took a lot of that money and I bought some small businesses, cash businesses. Thank God that got me through the rough period, but getting out of the market, I mean, it was hard. There was a lot of upset people. You know, we were holding some houses for people. So many people were going bankrupt and including those properties in their bankruptcy and again, I didn't have any properties in my name back then, but we were managing a lot of properties, kind of doing the property management for people. [0:05:04.2]

I don't know, it just got pretty ugly. Of course, when you're making money for people back then, they loved you to death. But they absolutely thought '07 was my fault, you know, like I controlled the market or something. I owned two businesses. I owned a juice bar and a tanning salon. I was doing very well at those, even in the recession period and then in '08, I had somebody come to me and I started the medical business, which I ran that medical business for about 10 years and I was very successful at that. Then in 2012, somebody started talking to me about wholesaling and short sales. I was like, come on, man - that doesn’t work. That might have been like '10, '11 because I think I got back into it '11 or '12, right around there. All the way up to my first deal, which I believe was in '11, I'm talking about first wholesale deal, my wife did not believe that wholesaling worked. She was like, why would somebody sell you a house at this and you be able to turn around and do this and that, and I remember standing next to Sean Terry out at one of his events in 2012. I was like, Sean, I just got my first deal, man. It's like a $27,000 deal, and it was quite funny. [0:06:13.5]

Dan: It's funny because I also, I mean, when I got my first client that was wholesaling as a, you know, I was an online marketer, just kind of working with whoever, the first investor that I worked with, I had the exact same reaction, where I was like, this is totally a scam - I don’t understand…

Frank: It doesn’t work, no way.

Dan: I want to ask about this. So you, I mean, this strikes me as something really amazing, right, where you felt kind of cash tightening. You bought these other cash businesses. Right? The juice bar, the tanning salon, medical business. So I am really curious - like you are pretty unique, I think, among a lot of investors in that you’ve been successful in a lot of very different business types. Right? I am really curious about why do you think that is? What is it about your approach or your personality or what is it that allows you to kind of jump from these very different businesses and have a lot of success? [0:07:13.2]

Frank: Number one, and I'm sure everybody knows about the four different personalities - I mean, I am red to red. I mean, just 100% red. I bought into a HomeVestors, you know, we buy ugly houses, in 2012 and I was so red, I didn't even think they were going to let me join into the business because it was down to the point where like I wanted to change the rules, and why are you guys doing this. They are a very successful business, of course. But I swear, I was so red, I didn't know if they were going to let me join, you know. I wanted to join them because, of course, I thought they were going to give me all the leads. Okay, so why do I think I'm successful in businesses? I think I have good foresight. I think I can see what is coming down the road, you know, and I kind of think we're getting to that point again. A lot of people that are just getting into the market tell me I'm nuts, there's no way market is on fire, there's no way it could go down, and I'm just sitting back going, I'm telling you - it's coming. It's coming. [0:08:10.2]

Dan: Yeah, well it's funny, man. I am in a mastermind with a lot of investors and to me, the pattern that I noticed was the longer the person had been an investor, right - so the longer that they had had success, the longer they'd been in the market, the more that they were concerned - this was last year - about a market correction this year and the next. Right? So I was like, oh, that's a very noticeable pattern - the more experience one has, you know, and I don’t even want to say the more concerned they were about it, it's just the more that they realized that that's a possibility. I think a lot of people, if all they've known is a certain kind of market; it's kind of hard to imagine how quickly that can change.

Frank: That's my point, exactly. They tell me like you know, they're like, how can it go down? How this...I'm just like, well first of all, it's supply and demand. [0:09:02.9]

I mean, you keep having buyers at this prices and these prices are so outrageous now, I mean, and it's …I'm not in a good market. I mean, Naples, there's zero distress over here. It seems like everybody's rich and I don’t even really do proper…I don’t even purchase properties. I'm doing like seven a month now, maybe eight a month. I'd say I get one every two or three months in Naples and make most of business is from Fort Meyers to Sarasota and Manatee County and I don't know, we're just so topped out and new construction, because there's tons of land over here on the west coast of Florida, but new construction is hampering how high the flips can go. I mean, you're buying properties, say three years ago just for a little bit less than you're buying them now but they can't go any higher. Because why would someone pay 200 grand for just say a house in Lehi Acres over here when for 220 they can get a brand new, gorgeous new construction, you know? [0:09:59.6]

Dan: You know, it strikes me as…there's this repeated pattern that humans go through where they underestimate the probability of something unexpected happening. Right? It's like the thing that got pointed out to me and I was like, wow, that's really true is …if you look back in history, it's every worst, every worst earthquake in history, the worst tornado in history, the worst tsunami, whatever - the most destructive event, before that event happened, nothing like that had ever happened. People would look back and say, well, we're never going to get a tornado this strong because that's never happened in the history of humanity. Right? I'm like, but there's always a first time for everything. Right? It's any specific thing might not be likely, but something is likely and so this whole question of well how could it possibly happen, I'm I don't know, just the fact that maybe it hasn’t happened in the past doesn’t mean it can't happen in the future. We fall into that trap a lot. You know what I mean? I think that's a very natural thing for people to do. If they…they just haven’t thought it through very much. [0:11:07.4]

Frank: Yeah. I'll tell you, the first time, again in '06 or '07, I had buddies putting… so a big thing down in Miami was flipping condos. Right? So you were taking your 10, 20% down and putting it on a condo and then 2 years, by the time it was ready, you were making 100, 200, $300,000 profit. I had a good buddy that was taking all this money and putting it in condos and I was like, I'm not going to say nothing, but I was like, man, do you realize that condos are not moving right now? Because so many people did that three years ago, now there's this thousands and thousands and thousands of condos on the market and sure enough, I have a buddy that lost probably $500,000 on condos. I mean, the hard cold cash, you know what I mean? Not just one buddy, I mean… and it's kind of going, I think it's kind of happening again in Miami and that really brought the market down. [0:11:57.2]

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Dan: Let me ask you. So, and I'm really interested about, I'm always fascinated by people…I live in a world, the online marketing world, right. There's a lot of coaches out there and one of the things that you learn very quickly is that a lot of the people who want to teach marketing or whatever, they've never done it. Right? They learned it and now they teach it and they make their money from teaching it, but they never actually made any money from actually doing it. Right? I'm always fascinated by people who have a repeated track record of success and so now you were successful in real estate, successful in the juice business, right and successful in all these different businesses, successful again in a very different real estate market. [0:13:10.4]
I'm curious, and it sounds like maybe the medical business was the one you ran the longest - what did you learn from those other businesses that you now think about or apply inside your real estate?

Frank: I don't know. It's kind of tough.

Dan: It's a tough one. It's a stumper.

Frank: Yeah. Like I said, I think I just had good foresight and I try to, you know, as you get older, I mean, when you're in your 20s, you're just reckless. As you get 30s and get married and have kids, I mean, your whole world changes. I have a great lifestyle now, but I've definitely gotten more conservative as I've gotten older, not just a knucklehead. I mean, I honestly can't wait for the market to correct and go down because the knowledge I've gained over the last seven years, I mean, I just can't wait to be buying properties for 20 and 30 cents on the dollar when the market goes down and tanks. You know? I don’t think it's going to tank like it did, but I mean, it's definitely going to correct and who knows what it is 20, 30, 40% - we don’t know, you know. [0:14:08.9]

Dan: It's the whole thing, right? It's buy low, sell high, that's the whole idea and I think if you can have money ready to go, that's the person that makes all the money in the correction. Right? The person that's got money out of the market that they can put in the market at the right time, if you're a super overleveraged and the market goes down, well, you're one of the ones that people profit off of. Right? Which is…

Frank: Yeah. A lot of people call me and want me to be, you know, train them and you know, all these different things and ask me questions. I said listen man, it comes down to buy cheap and sell high. All real estate is.

Dan: Well it's easy when you say that, but, yeah…but it's…

Frank: That's what it really all comes down to.

Dan: I know and I mean, so let's talk about how you run your real estate investing business today. We were talking about this before, before we jumped on, before we started recording. Again, I highly recommend if you're listening to this and you're an investor and definitely if you're a seller, but you know, if you're an investor, go check out Frank's website. It's at SWFLCashBuyers.com. So, SWFLCashBuyers.com. [0:15:15.8]

We were talking about, you have this little cartoon caricature of yourself, which is really cool looking and it's like neat. I was saying it really gives a lot of personality to this site where I think a lot of investor sites have almost no personality. We started talking about marketing and you were saying, you think of yourself as a marketer first. Can you talk to me a little bit about that? When you say that, what do you mean?

Frank: Yeah. I mean, you know, if you're a wholesaler, because not a lot of rehabbers market for profits. They pretty much buy them all off wholesalers. If you're a wholesaler, you need to of course, set yourself apart. Like you said, if you Google right now, I mean, 9,000,000 people have, what is that called…InvestorCarrot… all of them pretty much the same. You've got to kind of set yourself apart, you know. Then, on all my mail and on postcards, I was doing more of the corporate look, the picture you had said?

Dan: Yeah. [0:16:09.6]

Frank: A lot of people think you're a realtor and I've started putting myself on that cartoon. I started putting that on my mail now and on all my marketing. I think it just sets me apart a little bit. You've got to be good at marketing to set yourself apart, to get these deals because they're so hard to get right now.

Dan: I love the little note that you just said about you don’t want to look like a realtor. I never really even thought about that, but that's super true. Right?

Frank: Well it depends how you market yourself because a lot of people now in competitive cities, like just say Miami, they're not even marketing themselves as the buyer. They're marketing themselves as they'll bring you a buyer. You know what I'm saying? So it's okay to look like a realtor if you want to do that, but I'm representing myself as a cash buyer and I don’t know, I just like the cartoon look a little more now.

Dan: Yeah, well and also you do a really strong visual anchor and I think a lot of it is just who comes to mind. When you get into the situation where you need to sell, you are motivated to sell, right - who comes to mind in that instance and I think the cartoon does a great job of kind of anchoring it. [0:17:12.3]

Again, if you guys are listening to this, I highly suggest you go check it out so you can see what we're talking about at SWFLCashBuyers.com. You can see it. It's kind of in the lower right hand corner as I'm looking at it. It'll be somewhere on the page. Talk to me a little bit about, you’ve been in this game a long time. obviously the marketing game has changed a lot. What have you noticed in terms of what kind of marketing is working for you and we don’t have to talk about specifics but I'm talking about more like the approach. Kind of what do you think about when you're putting together marketing?

Frank: Well, I mean, when I started in 2012, I mostly did I guess SEO, which was very easy back then because there wasn’t a lot of competition. PPC was extremely easy. I couldn’t even spend my budget if I wanted to, and it was like, you know, back then maybe $150 a day. I couldn’t spend it if I wanted to. Now, you know, and of course, mail was pretty responsive, I guess back then even though it sounds horrible. It was a 1% response rate. Now I'm up to 50,000 pieces of email and I probably get a 0.4 or a 0.5 response rate, which is horrible, but you just have to send so much mail to get the same amount of leads. [0:18:23.4]

My budget now on PPC is probably $350 a day. I've actually stopped that this month because I just feel like the only people clicking on ads now are other people clicking on your ad to see what you're doing because they're not getting the leads we used to get, you know. And then as far as SEO, I mean, that's become I think the experts in this business, they realize that SEO is where the money is at right now because a lot of people, especially your serious sellers, your probate people, I don’t mean your person that's fallen behind on the mortgage and their house is going up for auction in two days. People are doing research now and if you're doing your job on SEO, I think it's a great way to get leads now. I'm actually signed up with two guys on SEO. [0:19:10.7]

Dan: I think, again, that's another reason for people to check out the site. I think you do a good job of providing resources to educate the seller, but I do think that there is a noticeable difference there between in lead quality between the person that's spending a little bit more time on the site, they're reading a little bit more, they're looking into things versus the person that's just clicking the ad and filling out as many forms as humanly possible because the mob is coming to their house tomorrow and they're going to kill them and they need to sell. You know what I mean?

Frank: It's so competitive now and I mean, those aren’t even the good leads anymore, to be honest.

Dan: Yeah.

Frank: Because there's always a rookie or two in there that will go way over what they're supposed to be spending on it and it just gets out of control really.

Dan: Yeah. I think we're definitely in a market where the forms of online marketing are getting significantly more competitive and so, you know, for me, it's really become an issue where there's not that…obviously, I still believe in online marketing. It's all I do every day. Right? [0:20:08.0]

So it's … I know that it works but it's much more, hey, we're going to do five different things, you know, like five different channels and we're splitting our budget among them because no one thing is going to be the big thing that's going to bring us everything that we need. Right? Really have to be diversified. I think, you've done a really good job on that. I do think SEO is, you know, I said this year and I think it's going to be even more true next year - I think investors have really ignored SEO and done a lot of really low quality SEO because hey, I could throw 100 bucks at it and hey that'll be fine. I just don’t think that's going to cut it at all. You know, the kind of marketing that we're getting into where the kind of market we're getting into where the margin is so critical and the ROI is so critical, SEO is just going to play a bigger and bigger part in that world, I think. So, yeah, I think you're basically, you know, five or six months ahead of everybody else, which is pretty sweet. [0:21:05.7]

Frank: Yeah. I mean, SEO this year, I mean, I probably have two $50,000 deals, probably two or three $40,000 deals and a bunch of you know, a bunch of real good ones in there. The PPC ones are just like I said, it seems like they're getting smaller and smaller because they fill out five or six different forms, you know.

Dan: I think it's certainly true and you know, everybody knows this, but obviously, it's market dependent and all that stuff, but I think we're saying it right now - I'm going on the record - 2020 is the year of SEO for real estate investing. You said it. I said it. We're official. You want to be on my 2020 SEO committee? I'm putting you on it, man.

Frank: I'll keep track of the deals I get on SEO.

Dan: Alright. Perfect.

Frank: All the new guys, actually.

Dan: Yeah, yeah. Beautiful. So alright, man. I mean, I don’t want to…I kind of want to keep talking to you, but I don’t want to keep you super long. One of the things I wanted to ask is, you know, this is what everybody is going to wonder, and I know you get this question all the time. Right? [0:22:07.9]

If you're a real estate investor that doesn’t have the experience that you've had - you've been through the ringer. Like you were saying, you've done like every possible deal type. If you're kind of a newer investor starting right now, you're listening to this podcast, and they're listening to you talk about like hey like there's market correction coming - if you were in that person's shoes, what would you do. You can be as general or specific as you want. What should that investor be thinking about, if they haven’t had this experience of going through this kind of tighter times before?

Frank: Well, I mean, there's a couple of tips I can give on how to be I would say a better, I don't know, I'm not going to say salesperson…I guess better investor or wholesaler or whatever. Number one, I mean, to me, 90% of the money is in the followup. I mean, I consider myself, my wife calls me a grinder - other people call me tenacious - other people call me annoying, you know. If you're not following up in this market, I guarantee I'm taking your deal because I mean I go from I guess daily to every other day to weekly to monthly sending them mail. [0:23:13.2]

You know, a lot of people will get the lead and it's not a right now deal, oh, I'm going to sell in January. Well guess what? I'm calling them in December. I'm sending them mail in December. I have a real nice brochure I send them with all my mail about my title company, my Better Business Bureau and about me team, you know me and my wife and everybody that's on my team. So they have that there and when they're ready to sell in January, if I can't get them, trust me, they're calling me. A lot of people, I think, aren’t following up and as the market is so tight, you have to follow up with these people. A lot of people…I've been in sales my whole life …a lot of people are scared to hear the, no I don’t want to sell right now. You know?

Dan: Yeah. I'm 100% on board with you, and I would even go so far as to say people who think they're following up probably aren’t following up nearly enough. [0:24:04.2]

Frank: That's what I mean. Like I go from daily to every other day, you know, as we go further back to monthly to you know, I've got drip campaigns through all these ho-dio investor views. I got my own drip campaign idea if they come in through PPC or SEO. I've got email…I'm sorry.. a video five minutes after. Then it goes to the next morning. Then two days later. Then three days later. And it just keeps going. I mean, you just got to stay in their head.

Dan: I love that, man. I think that is, that's such a critical piece of advice and I'm 100% with you and yeah, man…I'm actually just going to leave it there because I'm sure you could keep going but that's such an important piece of advice that I kind of just want to leave it because I don’t want to distract from it. I just feel like…it's just like you said, man, it's like, hey you're already generating leads. You're spending money on the marketing. If you can just close a couple extra percentage points of deals, I mean, it would just change your business. Right? So I think that's … [0:25:01.7]

Frank: A lot of the good guys say that - you don’t need more leads. You need to convert the leads you're getting.

Dan: Yes.

Frank: Dig into those more and follow up more and that's where it's at.

Dan: Well, Frank, I know your last name is Heron, but today, you are my hero and now, alright. That was pretty bad, but for everybody listening to this, is there anywhere you want people to catch up with you online? Do you do like Facebook or Instagram or anything like that?

Frank: My Facebook is, you know, the slash and then my real options. Twitter is FrankJHeron.

Dan: Alright, cool.

Frank: or @Frank J Heron or whatever and then what else… I don’t really use a lot of social media. I'm kind of an old school guy. I mean, I go like put stuff on there once a month. I also do the Instagram. I put some of my deals on there. As I'm leaving, I'll put a little teaser ad on there or something.

Dan: Alright, cool. Are you, let's see, I think I got…well, no. This is a different Frank Heron on Instagram, I think.

Frank: It's real, I only do the business. It's Real Options…

Dan: Oh, okay.

Frank: RealOptionsInvestments.LLC. [0:26:06.6]

Dan: Alright, cool. So, for people that are listening to this…Oh, yeah. I got you right there.

Frank: .llc.

Dan: Okay, cool. The…yeah…because there's a…some other surly guy named Frank Heron, Jr that's not you. So what I'm going to do is people can go to AdWordsNerds.com/podcast. You can find this episode with Frank. I'm going to have all the links to Frank's website, which is again, is SWFLCashBuyer's.com. We have the links to the Facebook, which is Facebook.com/MyRealOptions. The Twitter, Twitter.com/FrankJHeron, and of course, we'll do the Instagram as well, which is Instagram.com/RealOptionsInvestments. Yo, Frank, this was amazing, man. Thank you so much for this conversation. I really appreciate it. I got to say, I just really appreciate your take on this because you've … you've been through it all and yeah, I really, really appreciate this.

Frank: Thank you for having me. I appreciate it.

Dan: Alright. Cheers, everybody. Thanks. Take care.

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