The #1 Reason Newbie Investors Fail to Close Deals (& How to Fix That)

The #1 Reason Newbie Investors Fail to Close Deals (& How to Fix That)

4 min read
Marcus Maloney

Marcus Maloney is a value investor and portfolio holder of residential and commercial units. Marcus has been named the “Equity King” for his impressive ability to find real estate opportunities with massive amounts of equity.

Experience
Marcus, a high school dropout, went from G.E.D. to M.B.A. Although his education has a major impact on his investment philosophy, the real impact came from his upbringing.

Marcus thrives on completing successful transactions. As a young kid, his parents and grandparents faced many challenges; as a result, it made him think of ways he could help. His mother and grandmother were avid investors—not in the market but in people. Marcus was a recipient of those investments. And his early years were hard work growing up on a farm.

Marcus was a strategist at an early age. To relieve the burden of his family buying him clothes when it was time to return to school, he decided to make a small investment that paid big dividends. Marcus decided to purchase a small piglet at the beginning of summer, feed it until it became fat, and then sell it to a local farmers’ auction before the school year started. This was one of his first transactions and the beginning of his adventure of finding equity in every opportunity.

Marcus’ hard work continues today: He has completed over $3.3 million in wholesale transactions. Currently, Marcus is a licensed agent who wholesales virtually in multiple states while building his investment portfolio. Although wholesaling provides great money, he saw the opportunity to buy some of the deals he found and convert them into cash flowing rentals.

Marcus currently holds seven rentals, two of which are commercial units. He’s also done the unimaginable and purchased a school, which was converted to a daycare center. Again, he turns what is a marginal profit into a significant equity position. He leverages the equity by using the BRRRR (Buy, Rehab, Rent, Refinance, Repeat) strategy to increase his portfolio without any money out of pocket.

Marcus has been featured on numerous podcasts, such as the Louisville Gal Podcast, the Best Real Estate Investing Advice Ever podcast, FlippingJunkie, and many others. He’s currently a featured blogger for BiggerPockets, the largest community of real estate investors in the world.

Along with completing transactions and working to build his portfolio, he provides mentorship to aspiring investors. This is done through one-on-one interactions and through his successful YouTube channel and blog.

Marcus does utilize his M.B.A. for more than real estate. As a consultant for a successful non-profit institution south of Chicago, he uses his expertise in the development of human capital. His philanthropic efforts help existing stakeholders develop in their capacity to serve those in need of assistance.

Education
Marcus completed his M.B.A. in 2011 from Olivet Nazarene University.

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As real estate investors, there are many components of the industry that must be mastered. Depending upon the type of real estate investing you plan to go into, there are different areas you must master. If you are thinking of being a fix and flipper, you must know and understand the importance of having a reliable contractor. As a landlord, finding and qualifying tenants is critical, and as a wholesaler, finding deals at or below 70% ARV is a must. However, there is one skill that is essential and touches every type of real estate investing: COMMUNICATION.

I know you are saying, “Wow, this is so elementary — let me stop reading and find something else to read.” But wait — before you do, let me have your undivided attention and state my case.

The Importance of Communication

If communication is so elementary, why do so many wholesalers fail in this area of their business? I listen to every podcast and read a lot of forum posts, especially those focused on wholesaling, and I hear comments all the time regarding a lack of follow up. These comments may be from wholesalers regarding their mentees or other wholesalers that they know. Although this may seem elementary, it is still an area where many newbies come face to face with their fears.

Related: 4 Compelling Reasons to Always Follow Up With Sellers

The biggest fear that most newbies have is making the initial phone call with a seller — but in reality, this should not be frightening at all, as the follow up phone calls are more difficult.

The initial phone call is basically data retrieval, including getting the seller’s name and the address of the subject property, trying to gauge motivation, figuring out how much they owe and how much they think the property is worth, and gathering the specs of the property (how many bedrooms, bathrooms, etc.). That is the basic gist of the conversation. I believe we all would agree this is what you are trying to find out.

Why Follow Up is Critical

However, the follow up conversation with a seller is much more challenging. Notice I did not use the adjective “motivated” to describe “seller” because you know now from the initial conversation that this person is not motivated. So now what?!

Many wholesalers like to get the low hanging fruit and move on. They like to get those who are in distressed situation in order to quickly get them under contract, collect their couple thousand dollars and move on. This is not necessarily a bad strategy, especially if you are just starting out, and it provides you with some fuel in your engine, but I want to give you a plan for sustainability when working with sellers who initially may not be motivated.

Follow up is so critical. On average, it will take 7-10 conversations with a seller before you can get them to commit or convert them to a motivated status. Similar to mailing campaigns, you have to touch the seller nearly 7 times before your phone rings. In many cases, this may happen before the seventh touch, but on average this is the trend.

So these phone conversations are a lot different and more challenging to navigate. You can not use your scripted questions or “lead interview sheet” for this because each conversation will be distinctively different.

Why Bother With So Many Calls if They’re Not Motivated?

Your follow up will provide you with the following: the opportunity to build rapport. Since you are not just reading questions off a scripted sheet, you will have to truly listen and engage the seller in valuable conversation.

Related: Closing Deals is ALL About the Follow-Up

I always like to give real life situations, so you know I’m not just blowing smoke. As an example, we were in a position to help someone move, but they were not quite ready to sell and were looking for a premium retail offer. Well, as a wholesaler, you know that is not possible for us. I continued to engage the seller and found out that they loved sports, and their team was having an amazing run in the MLB playoffs. Ok, I’m not a baseball fan, but I love competition, and the challenge of getting this house at our price was great competition.

I would call after every game and talk ball with them and let them know that I was excited about the series — and I truly became engrossed in it, so our conversations became extremely easy. I also began to talk about other sports teams in the area. After each conversation, I would remind the seller that we still had an offer on the table very subtly. This broke down any wall of apprehension the seller had.

To make a long story short, we secured the house at 59% of ARV. Woohoo!

Follow up phone calls also gives you the opportunity to coach the seller on the transaction and what is going on in the market. Generally, if I have a long term followup, I will give the seller a quick market update. This is helpful because you are letting the seller know if you don’t sell to us, this is what you can expect on the open market. This way the seller can make an informed decision, and they also know that you are not giving them just one viewpoint. Remember that in may cases, especially with those who are motivated, it’s not about the dollars and cents all the time, so make sure you do not skew your conversation to imply that it’s always about the money.

The more touches, the higher likelihood you will get the deal. Last example (I promise): I had one seller where it took 7 months to secure the deal, and each month, I would call and make small talk and give a market update until his situation changed. Then he called me one day and said, “I just like you, and I know I could get more elsewhere, but I’d rather sell to someone I like you instead of some [email protected]#%.” What do you know — I was lined up and ready to help him out.

True wholesalers know how to convert sellers who are not initially motivated in the beginning. Your consistency in following up with them is extremely important. When they are ready to sell, the first person who comes to mind will be you.

Remember, not all worthwhile fruit are low hanging fruit. The fruit that are at the top take consistency and follow up conversation, but once you obtain them, you might find that they’re sweeter, bigger, and much more delicious.

Feel free to chime in and let me know how your follow up phone calls go or how you build rapport with your seller to secure some of the bigger, sweeter, more delicious deals.

Don’t forget to comment below!