Posted about 10 years ago

1st Wholesale fee in the bank! $7k What NOT to do with it...

I completed my first wholesale deal last year I believe in November. What a rush!

I had a list of items budgeted for and felt made sense to purchase.

$2000 was intended to be used for marketing

$500 for an iPad (Tech for business)

$1000 for a G26 (I'm wholesale in C Neighborhoods)

$1300 for a new computer (No longer using my Company's Computer)

$500 for Incorporating (Recording finances)

$700 for tithing (Give back what I owe!)

TOTAL = $6000

Leftover = $1000

I immediately put $700 away for the tithing.

I went out and bought the exact G26 setup I wanted ($1300).

Bought the iPad $536, which was the best investment I've made!

Spent $236 on Bandit signs in January and another $236 last month.

I spend $100 on filing for my business, but didn't follow through on the remaining amount...

I didn't buy a computer and I may have spent another $200 in marketing somewhere.

Including last month's Bandit sign purchase, that puts me at: $3308

Today, there is no money left in our bank account and am left to wonder what happened...

I'm aware of where much of the money disappeared to like $1000 on Christmas, $700 to help family members (justifiable), and ~$600 for unnecessary dining.

Here is what I learned and suggest you consider the following if you're new to the game.

Think about your next wholesale fee being $10,000
Deconstruct that thought:
- How long did it take you to find that deal?
- What marketing campaigns did you do to generated enough leads to find the deal within that time frame?
- How many materials did you send out on each campaign?
- Did you create your own marketing materials?
- How did you send out your marketing?
- Did you answer the seller calls or have a virtual assistant do it?
  - Which call management system did you use?
    - How many minutes did you buy?
  - How many hours did you pay your virtual assistant?
- Did you use an excel sheet to track leads or a pay for CRM software?
Put each campaign down on paper, in sequential steps, include each dollar amount you expect to spend (research the costs!), and the entities you plan to spend it with!
Take action immediately in that plan with the money you receive from your first Deal
Don't mix the money with your personal account...
- At a minimum, create a DBA at your bank and put the money into that account so you can keep track of it all
Put away 30% of whatever you make for taxes (guess who filed an extension!)
Keep 10% for yourself and put it in your personal =)

For me, mixing business proceeds with my personal account was like trying to keep water on top of a pile of sand.

I'm sure there are people out there that have no problem managing those funds, but if you are anything like me... keep things separated and make sure you push the money out into your plan as quickly as it came in!

Fortunately I've lived through this and have (2) deals in escrow with buyers plus another (3) in the oven. I won't be making the same mistake twice.

Comments (5)

Good list of things. Lots of people act like they won the lottery after making their fist deal. No reason not to treat yourself to a little something but after that plow the money back in or at least put it towards something that will also help moving you forward (paying down high interest credit cards or something along those lines) BTW if you extended your taxes but didn't pay get that done ASAP. It is an extension to file, not to pay. The fees and penalties aren't small. Better to file, pay what you can and set a payment plan up.

Shaun Reilly, almost 10 years ago
This is great! Very thorough. I'm still learning about wholesaling, but I definitely want to keep this in mind when I make my first deal!

Tony Goodwin, about 10 years ago
1. Thanks for the feedback Tony! I'm sure your first deal isn't far away! Hope your taking real action steps on your marketing.
  
  Taylor Jennings, almost 10 years ago
Just read this, I will totally keep this in mind as I contemplate what I would do when I have my first deal done( pay loans). Is $10,000 a reasonable payment, I would think that would scare some buyers off? Nathalie

Nathalie Hirsch, about 10 years ago
1. Thanks for taking the time to read and comment Nathalie! Paying off is a great way to use some of your proceeds, but think about setting a certain percentage of the profits to go toward those loans. The main focus is to make sure you are recycling the income so you can increase your marketing and opportunities to find deals. $10,000 is a reasonable payment when the numbers work for the buyer. I made $7k on a deal I put under contract for $10.5k. The buyer needed to be all in at $40k to make the profit they wanted so my $7k wasn't a concern to them. My suggestion is to ask one of two things: 1) If the buyer is going to buy and hold the property: What CAP rate are you looking for when buying a property? 2) If the buyer is fixing and flipping: How much do you want to make off each flip you do? Normally they will give you a range, 10-15% CAP or $15k-$25k for houses that have an ARV of $135k or less. Send a couple of contractors out to the house to give estimates and do your calculations. Your buyers should be comfortable paying you whatever is left over as long as they are making the amount that makes them happy. If they aren't agreeable to your fee... Find another buyer! There are investors everywhere and they are looking for inventory.
  
  Taylor Jennings, about 10 years ago