How to outsource real estate wholesaling activities? Once you learn this is frees you up to do higher paid activities.
Notes: Double close is cleaner. Buyer won’t know if you made 10k on a deal. Does that bother you?
It may depend on the amount i.e 2-3k is a bit different to just give you a check and hope you show up @closing than 10k.
4 components: The direct mail piece, the message that’s on that mail piece, the list, and the mailing campaign.
The message that you give to a probate or a pre-foreclosure is very much different than what you give to an absentee owner. Gotten my absentee owner list from List Source, and places like that. Some of the postcard companies will also go through the list companies and get your list.
I.e houses with 50% equity. Get your list and then you set up your direct mail campaigns. Put it up on the wall. You know, if you’re going to mail on the first of every month then I think you need a great big wall calendar and you put absentee owner mailing down when you want it go out. Then you back up from there, and you put your print dates, or whatever you have, or if you’re calling a mailing service put it on a calendar. Get it scheduled, and then it will go out!
Two favorites are absentee owners and probates. Absentee owners may take a while to become motivated, but almost all of them will become motivated to sell at some point in time. I only mail to absentee owners out of state, and that’s because I live in Kentucky, and Kentucky is a relatively small state so you can get anywhere in three hours, just about, here. Now, if I lived in California or Texas I think—what I tell people is you have to figure out what—how far away do you have to be to evoke the pain in the neck feature? I think it’s about 3 to 3 ½ hours, maybe a little bit more. People within that window will still drive in to take care of a property, but you get out 4, 5, 6 hours then it becomes a real challenge unless you have a management group to manage your properties. So, that’s what—that’s kind of my criteria. So, I do out-of-state absentee owners and probates. By and large the probates— the houses are always going to get sold out of the estate with few exceptions. They’re almost always very motivated.
a low response rate generally in the industry is considered about 1% and average about 3 and anything above that is good. But the thing with direct mail is that your actual purchases, your actual deals, will go up with subsequent mailings.- remember put feeling/belief into your letters!
after the fifth contact you will get 81% of your deals. Now not calls— deals
you did this every month” and that’s why I get the call… now could it be every 6weeks?
let’s say you get 10 deals this year from direct mail. 81% of those deals will come about after the fifth contact!
“gee I’ve got the house listed so I don’t really—I just wanted to let you know that” in which my response is always “well, if it’s okay with you, I’m going to keep you on the list just in case that doesn’t work out or your circumstances change. Is that okay with you?” and they always say yes. Several times a year I get a call from someone who’s had the house on the market a year, fifteen months, eighteen months, and then they are motivated. They just want to be done!?!
my goal is, and I don’t always hit it, is $10,000.
About 4 years ago, I was noticing that it was just coming up to be about $7,000 and then I started trying to raise that up a little bit because— maybe you’ll make $12,000 on one and you might have to cut down to $8,000 or $7,000 on one because it doesn’t sell as quickly, or you find out it has a problem that you overlooked, I like to leave some leeway in there, but the thing of it is my end buyer is always going to get that deal the way he should get it; 70% of the ARV less repairs. If there’s going to be anybody that’s gonna get cut dwn on, it’s going to be me. So, my challenge is to buy the property so that I get what I want to make out of it, and sometimes I don’t make that much. Deal is a deal…who’s going to turn down $3,000 or $4,000?
Certain skill involved in even getting the deal, but in the end, my buyer, that’s why they buy from me over and over again. They get the deal with the 70%. You know, I work the formula and I put in what I call a fudge fund, a what if I don’t, you know, didn’t find it originally or it shows up that they buy from me time and time again because I give them good deals and I don’t try to fudge on their end. If I have to fudge on something, it’s my fee that gets cut.
Probate: First question they’re going to ask you is how did you hear about me? So, I like to just put it out there and say “ I’m sorry for your loss. I understand that you’re handling the estate” and then the next time I might say something like “I’m checking in to see if you’ve gotten started, if you might be interested in selling the property” and it kind of goes down to where I get, you know, I’ll say “well, you should be getting ready to finish the estate now” it’s just kind of a natural progression. It’s the same letter, but with the words changed, and with absentee owners I don’t vary too much from that letter.
Go over what their pain is, you know, I have a house and I live 7,000 miles away or hit upon, maybe, the different situations. If you’re sending out a more generic letter it might be “how can I help you with this situation. Are you an absentee owner? Have you inherited a house you don’t want? Have you lost your job? Did you relocate and you’ve got two houses?” So, you have to hit upon the pain and the pleasure. What are the benefits that you can provide them so that they can get rid of their pain, whatever that pain is?
Sharon: Well, whenever possible you meet with the person. With absentee owners unless they happen to be in town they’re probably gonna give you a contact to go and look at the property. I’ve looked at the property, made an offer, they’ve accepted and I never meet this person. I talk to them on the phone and all the documents are sent out, FedEx-ed or UPS-ed overnight. They sign the documents, and close easily within a week if I’ve had a buyer on hand. But with probates it’s a very different conversation. You have to acknowledge that this is a tough time for them, and it is gut wrenching for them to look at their mom’s worldly possessions having to be disposed of, which really are nothing, you know, they have no monetary value.
always try to ask whether it’s an absentee owner or a probate. I mean, in addition to money there’s always something else that they want. Maybe they need help cleaning out the house or they’ve got back taxes.—I bought a house once that had a $3,000 lean from code enforcement on it. So, I always try to find these things out, and they will usually tell you. “What is your situation?” Just keep asking better questions, and once they tell you “gosh I don’t have any money for closing and I have a $3,000 lean on the house from the code officials” then you know your offer has to be $3,500 less than what it would have been because you’re going to offer to pay for those. You know, whenever you can just tell the seller what they’re going to net out of the deal then that’s easier for them to understand than all of your figures with the closing costs and the I’m going to pay this and that.
deals that have less equity. You can maybe do a lease option scenario. they often give you a price and that’s just a price. I often say where did you get that price? “Oh I just thought it up” or “the house down the street sold for this”.
I’ll say yeah, but I see in the comps that it’s completely renovated. They really know, but you can’t blame them for throwing out a ridiculous price. You gotta try to bring them back into— “adjust their expectations”, and it’s a process. If I think that I can turn it into a deal, then I’m going to start on the phone. Once I get out to the property then I’m going to continue that conversation and I’m going to continue to just ask them questions. Find out What is their motivation? Money is certainly always part of it. But they may need something else. They may need you to say I will clean out this house that has two feet of stuff everywhere.
If you’ve paid way too much for a wholesale deal you’re going to be stuck. You may sell it, but you’re probably not going to make any money. I think learning how to buy it for the right amount of money, is one of the things that nobody, knows in the beginning. Possibly not the best strategy to start with in that You don’t know what a good deal is.
Align with an experienced investor, that you can learn what a good deal is. I’ve had people call me with properties that didn’t even know what the 70% formula was. They bought it $10,000 under retail and they thought they had a great deal. So, if you can find a mentor from Reia or Bigger Pockets. You can say “I’m looking at buying my first property and I don’t have a clue what I’m doing” and people will jump in and they will help, but I think education n’ practice. You just have to make offers.
Mentors: Find successful people in your local area who are out and about doing it. Wholesalers, rehabers, landlords, investors.
Learn: filling out the paperwork, then it was on the formula for the offers, then about lease option, wholesaling,
Plan on spending two hours a day marketing. Now, maybe you don’t do that every day. You might do it on Saturday in the evening, but you find your list. You get your mail piece going if you have to handwrite them, or order them, and get a deal!
Hobbies: traveling, beach, art fair, reading, spending time w/kids/grandkids.
Don’t quit, when the goin gets tough. Be a lifelong learner and change with the market. “I sold and bought real estate when interest rates were 17% and where they are now. Change what you do and change your marketing as the market changes” –very successful.
Pay the right price and have a buyer’s list.
REA group or B.P and actually call them up and say “gee, I don’t know what I’m doing wrong” or “what am I doing?”
Find a guy like me in your area who can close in a couple weeks and say “Hey, what kind of deals do you want? What are you looking for?” I’d say “Yeah, I’m going to want this, this, this, and here’s how you’re going to go find it”, etc
Ask: where do you buy, what price range do you buy, where won’t you buy? And I get that criteria down which is how they get the call.
Marty: I was wholesaling—I started out as a birddog. I would just assign the contract. I would write to the contractor, the home owner, and say my LLC is the buyer and then I have an and/or signee’s clause on the contract. Then I would assign it to this investor I was working for and he’d give me $3,000, $4,000, $5,000 bucks. And eventually when I had done enough of these, I had family and friends who would see my success I was having and they started investing the money with me. So I was able to do that and start taking these deals down on my own.
I knew it was worth between $140,000-$150,000 all day and you needed about $20,000 in rehab. So I bought it for $85,000 and I actually put an ad for it in the newspaper, The Arizona Republic—this is going back to 2008.
I put the cross streets of the house and the details and I sold it for about $10,000 and he said, before you call anyone else, you call me. I’ll buy every one of these you’ve got. And there was about two or three other guys who called me on that house. And it was from one newspaper ad that cost me about $200 and those guys bought just about every home I bought over the next two to three years.
Read books on real estate investing, learn local property management laws, and attend your REIA, you will invest your time shrewdly, and not pay alot.
3rd Party Payee http://allservicing.com/Contact_Us.html Contact: Melissa $25 set up, $15 per month PI to bank Taxes and Insurance (could use this for land contract)
my business plan: Little equity, either buy on sub2 or wrap, and rent out or lease option and assign for 3-5% Big equity – pretty house buy on terms – sub2 and a note Big equity – needs work – wholesale or retail flip No loans – buy on installment sale and rent out.
figure out where the buy and holders and fix and flippers are in your market and ask them “what do you want?” Explain to them that you want to get started in wholesaling and are looking for some direction. You need to know their preferred acquisition price, rehab budget, desired rate of return, tolerance for risk, etc.
Find them here:
- The courthouse steps – bidders there are usually looking for deals.
- A title company – chances are their escrow managers work with at least 1-2 real estate investors.
- Realtors – some may have clients that are investors.
- The tax assessor’s office – search the tax records in your area and look for buyers that purchase more than 10-15 properties a year, or more. Contact them by mail, phone, etc.
9 Reasons You Couldn’t Find A Buyer
1. Priced The Deal Too High
Overestimated the ARV – comps are actually comparable and that the data is recent (within the last 3 months is best).
Underestimated the Repairs – Ask an experienced investor to show you. If you can’t get one to show you by taking them to lunch first, find a contractor. It’s important to find a contractor that has worked for other investors (house flippers, landlords, etc.). These guys will know what is typically paid for things. Investors usually pay less for their rehabs because they are often able to keep the contractor busy. If you estimate repairs too high, you will then offer less for the properties and buyers will love you for this good deal.
Asked Too Much For The Wholesale Fee – You want people begging your for more deals, not begging you to stop insulting their intelligence.
It can be difficult to push a deal out with a high price and then lower that price. Sometimes people would have bought at the lower price if it was priced that way from the beginning, but will ignore the price change and the deal altogether if lowered later.
2. Didn’t Have Enough Buyers On Your List
- at the courthouse steps (foreclosure auctions)
- from their advertising (bandit signs, phone book, newspaper ads, websites, etc)
- at your local REIA (real estate investor association) meeting
- here on Bigger Pockets
- by tracking down who bought investment properties with cash from the MLS
3. Didn’t Have The Right Buyers On Your List
Screen them correctly, don’t play 101 questions with them.
You want buyers that make decisions quickly and do their own due diligence. It also helps to find buyers that are interested in properties in areas that you are focusing on. Many investors don’t like certain areas of town. Find more of the investors that are looking for what you are selling (or going to be selling).
4. Didn’t Approach Your Buyers Correctly
treat the very serious buyers with extra courtesy. Guys that do make decisions quickly, pay cash, usually only ask for price, address and lockbox code, and have a history (or capability) of buying a lot of houses.
Usually busy and will simply ignore an email that looks as though it was a mass email blast. They just don’t have time to look at stuff that has the potential to have a lot of competition. Sometimes, I just feel that if it was an awesome deal, they probably already called their serious buyers and are now just sending it out to their list. If they didn’t want it, I probably don’t want it either. I understand how flawed that thinking is, but it’s just what happens when we get busy and tired of chasing after deals that are likely to be bid up by other investors. We want to know that we have dibs, that it is a good deal that is worth spending time on.
Call your VIP’s individually and give them 12-24 hours exclusive access to the deal. If they don’t want it, you will call the next one down your list. Once you’ve exhausted this short list, then send out the email. If you have a small group of so-so investors, you might want to send individual emails that are personalized to them, even if you are sending several of the emails.
5. Didn’t Handle Access To The Property Correctly
It’s important to be able to give access to as many investors as possible.
Occupied: Get as many pictures, or some video, of the house. If someone is very serious, you would then schedule with who lives there to view the property again. Have the potential buyer represent himself as a contractor or a business associate.
6. Demanded Too Much Non-Refundable Earnest Money
The problem is when the deal doesn’t close for reasons outside of the buyer’s control. He/she would then have to get you to pay back the earnest money and a lot of people just don’t want that hassle. Have the non-refundable earnest money paid to the title company if you are asking for a lot.
7. Didn’t Give Yourself Long Enough
Get as much time as you can. Try to get 4 weeks if you can. You don’t want to be continuously going back to the seller making excuses to get the closing extended.
8. Didn’t Market the Property Hard Enough
Marketing it anyway so that you can be building your list. Nothing builds lists quite like having inventory.
Stick bandit signs all over the area where the house is (if legal in your area.) Of course, if you don’t want the sellers to know what you are doing, don’t include the address on the sign.
You could also put some ads on craigslist.org, push the deal at your local REIA, put an ad in the major and smaller newspapers. Get creative.
9. Didn’t Start Pushing It Immediately
Signed contract and you have it safely receipted at the title company, you need to start your blitz to get it sold. Don’t wait until Monday if you get the deal signed up Saturday morning (unless you are worried someone will try to steal the deal from you because you haven’t receipted it at the title company yet).
Time is of the essence. Use it wisely. You might find it harder to find a buyer than you thought.
Sellers want to count on us to do as we promised. Follow the 9 above and sleep well my friend.
The A to B closing is where I buy. The B to C closing is where I sell. I am B in both closings; I am the wholesaler selling (always) to another investor. My investor buyer (C) knows I am double closing. There is only about a 5 minute difference between the two closings.
If you print the letters in house, $500 will get you about 1000 stamps and paper.
rehabber, wholesale a few deals each year to build up some extra cash to have on hand for rehabs; for those times when things don’t go exactly as planned. Landlords can pay off their properties much more quickly if they would wholesale a few deals a year.