The cost of starting a lean Wholesale Company

5 Replies

So I gave myself until the end of August to officially launch my real estate company in Raleigh, NC, where I'll be wholesaling and flipping houses. 

My next actionable step is to figure out the lean cost of the startup.

So far... this is what I got: 

Website: 1 for buyers and 1 for sellers = $25 

direct mail letters: 500 = $300

Bandit Signs: 50 = $175

Driving for Dollars: 4 hours per month = $80 

Online Marketing: Free 

Networking: Joining BP pro members and my local REA = $300

Purchasing/ Building sellers list: using Listsource.com for 500 listings = $125

Building buyers list: free

Transaction Fee: free ( I plan on selling my contract not double close ) 

Setting up the system: Using podio.com to track all leads and using ringcentral.com to manage my calls = $35

Total Cost of Startup = $1,040

MY ASSUMPTIONS: 

Average lead per marketing campaign = 3%

Average deal per lead ratio = 4%

Marketing budget = 15%

Average profit per deal = $5,000

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So If I don't completely blow it, I should close on one deal in September, making me at least $5,000 minus marketing budget which comes out to be $4,250.

That's a great ROI!

If you could, please share any tips on nailing down this price. My next actionable step is to write out my business plan so I'll follow up next week with that. 

Thanks BP! 

Great job @Justin Hackney ! I have done a similar planning to start out my wholesale business. Yours definitely has a good bit of detail. Question... Did you consider the cost of forming your entity?(LLC, ...). Perhaps more experienced wholesalers can talk to this more but I was under the impression you should probably start with at least 1000 mailers.

I think you need to significantly up your number of mailers.  Your numbers:

Average lead per marketing campaign = 3%

Average deal per lead ratio = 4%

Imply you're going to send 833 mailers and get one deal.   833 * 3% = 25 "leads".  25 leads * 4% = 1 deal.

From what others write here (I'm not a wholesaler), you're more likely to need to send thousands of mailpieces to get one deal.  The 3% response rate seems about right.   But I don't think you'll get a deal out of every 25 responses.  Some of those are going to yell at you for having their personal information.  Many are going to want something close to retail for their property.  So, there's a lot of "sales funnel" between your responses to your mail pieces and an actual deal.

Hey guys, 

My reasoning for the 500 mailers is because it fits the timeline that I gave myself to raise that money to get started. I'm working on a few other projects that is slowing down that process. 

However, I think by supplementing the shortage of mailers with driving for dollars and bandit signs along with my online presence and a few other free ideas I have, I think I can come up with 1 deal. 

That 1 deal is all I need to get started. I'll take that cash and reinvest until I'm making 2 deals a month with little effort. The amount of mailers have bothered me though. I might just go ahead and up them to a thousand for my first campaign. 

Thanks again for the feedback! 

Nice organization @Justin Hackney . You are doing it! My best advice that someone told me was to find a mentor. Not someone who you pay an outrageous fortune to "learn" from. Someone in your area who is willing to take you along with them and show you what to look for. 

My mentor and I have become friends. He has really spent some time showing me how to look for deals and we started out just splitting everything we do down the middle. Sure, if you can do your own deal-more power to you (and more money!). But, if you were like me then you would rather learn how to spend the right amount of money in the right areas. 

The knowledge gained has really taken me to the point where I am actually closing on my own deals now! With my own cash and not using a bank! Oh yeah! It is all about re-investing in your business. My wife and I do not keep the money, but we just keep putting it right back into our business. 

Good luck to you! It is amazing what you can do when you put your mind to it!