Contract Flipping Blueprint: How I Close Deals Without Leaving My Home

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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The aim for most entrepreneurs is to use leverage to maximize profits while working on projects that give them purpose and passion. As a wholesaler, this is accomplished by leveraging others’ time, talents, and resources to accomplish your goal of closing more transactions.

There’s nothing more rewarding than closing a transaction without leaving the comfort of your home. This may seem unrealistic to some, but by utilizing leverage, the end result could mean another satisfied client and another closed transaction for you. This is exactly what flipping contracts can do for you.

The Strategy

I’ve recently learned working hard for 100 percent of the commission or wholesale fee is not always the best result. Without a team and systems, you can easily find yourself running around your city day after day, week and week, and even month after month to close a deal. I recently stumbled upon flipping contracts because of my inability to make it to an appointment because of my schedule. I’m currently working to build a team, but until that time, I’ve been using this strategy to close deals without leaving my house. I stumbled upon this, and now it’s becoming a common occurrence in my business.

Related: The #1 Thing You Need to Automate Your Wholesaling Business

The last few deals I’ve done, I had to be extremely resourceful in bringing them to close. This is a result of years of networking and years of talking with sellers on the phone, and I’m so thankful for starting out birddogging to build that solid foundation.

Flipping contracts takes a serious level of skill that need to be developed over time. As stated, this was not something I learned to do immediately, and the first few times, I failed miserably and considered never trying it again. Thank God for persistence and tenacity.

In this world of internet and telephone scams, people have a natural inclination to be defensive — and rightfully so. However, if you want to be successful at flipping contracts, you will have to work hard to break down that barrier and fight through other objections to effectively use this strategy.

private-money

The Seller Conversation (Positioning)

The initial conversation with the seller is similar to your normal conversation when wholesaling; however, the rapport building process is a lot longer and the trust level has to be a lot higher. So this is normally not done in 2-3 conversations with a seller. On average, I speak with the seller 10-12 times before we getting to the nuts and bolts of the contract terms.

This is a very slow play, but it works. I call it the “pen pal approach” — you do not know each other, but during these conversations, you are like pen pals writing and getting to know one another. This does not work with all sellers. You have to be able to evaluate their personalities because some people are bulls, and they only want to know the price you’ll pay and move on. This is ideal for out-of-state absentee owners or in-state absentee owners who live a slight distance from the rental.

Secondly, after rapport is built and the trust level is at a 6 or 7 (on a 10 point scale), then you can begin discussing the dynamics of the tenant or whoever is residing in the property. This is done because eventually you are going to facilitate access of the property with them. You will need the owner to allow you to talk with the tenant to gain entry. This entry is not for yourself but for your buyers.

I’m sure you’re thinking, “Well, what about the pictures of the property?” Great question. If your numbers are rock solid and you negotiated a great deal, you will have your first interested buyer to gather those pictures for you. I’ll get to that next.

At this point, you and the seller have agreed upon a price already, so that is firmly established. This is without you viewing the house. Yes, without you viewing the house yet.

The Buyer’s Responsibility

So now you have gained the trust of the seller and the trust of the tenant, and you have solidified the contract with the seller. The next step is critical. You will contact one of your premier buyers and inform them you have a deal that will be exclusively for them. Then let them know that you do not have the pictures yet and that they can go and view the property and take the photos for you. Once the buyer agrees, then you can inform the seller and the tenant one of your representatives will attend the appointment on your behalf to finally lock everything down.

Related: Contract Assignment 101: The Beginner’s Guide to Wholesaling Real Estate

Remember, all of this is done from your house. Sweet, right?

human-side-real-estate

The Renegotiation

In the event the property is in worse condition than your seller explained, then you renegotiate the contract below the price your buyer is willing to pay, then you assign the deal — i.e. flip the contract — and finally close the deal. Many landlords are willing to renegotiate the deal if you present it right. Normally, I explain to the seller the condition the property is in and that willing to provide them with pictures confirming what the buyer saw. Especially in cases with landlords who live a great distance from the property, they are often simply eager to be done with the situation.

For the sake of time, I did not mention how does the seller gets your contract. This is done by electronic (DocuSign) means if they are tech savvy or overnight mail with a return addressed envelope enclosed if they prefer traditional means.

Takeaway

Here are a few takeaways to remember:

  1. You will have to give up a portion of your wholesale fee/commission.
  2. You will save time by leveraging the time, talents, and resources of others.
  3. You will need to focus on developing your phone etiquette.
  4. You will need to be able to understand and evaluate the seller over the phone.
  5. You will need to have your premier buyers in place.
  6. You will need to be extremely patient and resilient.

Conclusion

Flipping a contract takes a level of communication skills that many people are not willing to develop. I have spoken with thousands of sellers, and those conversations were the development ground for what I do now. Work on your phone etiquette and rapport building skills, and you can add this strategy to your business.

Do you see this as a successful strategy? Do you thing you can evaluate a seller over the phone? Can you image how much more productive you can be with this strategy?

I’d like to hear from you!