Similar to what so many have done before, I plan on using this forum post as step-by-step outline of the steps I take until I close my first few deals. First a little background on myself:
I am a 26 year old guy living in Manhattan, working a full time job that frequently requires me to be in an office for upwards of 70 hours a week. Beyond that, I'm in a self-study course for a test that requires 300+ hours of studying (the test is in June). I have a girlfriend that requires my attention and no car in the city. Long story short, this is a LARGE uphill battle.
I've always had an interest in investing in both equities as well as in real-estate. I have liquid cash, but not nearly enough to put towards a project like a rehab yet - I just don't feel comfortable yet. With that said, Wholesaling was the avenue I wanted to sharpen my teeth on.
I've started about a month ago. My first step was purchasing a list - came out to approximately 400 handwritten (yes, by me) yellow letters. I did this mostly while at work (20 a day), I would typically get in an hour early and write them as quickly as possible, and however many I had left I would do sporadically throughout the day when there was down time. About 200 of them have been sent out, with the other 200 just waiting to be stamped and mailed. Thus far, I've received 16 calls. No warm leads, no deals, just people wanting to find out more information. Beyond that, I've just created my website, www.cashfornjhouse.com - also yet to deliver any leads. Finally, I've also utilized craigslist as a marketing source and I've spoken to a number of home owners, again mostly people that would sell "for the right price." I did, however, have one guy that was motivated - his tenant just moved out and he subsequently had a leak in the kitchen that he doesn't want to deal with. The problem is he refused to budge on his asking price. He was asking for $105k with the house across the street listed for sale at $115 (bigger and doesn't need a whole new kitchen). I wanted my first deal so I told him I would see what I could do. No one wants anything to do with that house at that price, for obvious reasons.
I've since moved onto pre-foreclosures as, in my opinion, that's where the low hanging fruit is. After sending out my first 50 yellow letters to this list, I did some digging on BP and it seems like I could get in some serious trouble for sending them out? I sent it out to NJ and I really hope that that is not the case.
My marketing plan is as follows: 1) Month 1: 400 letters from List 1; 2) Month 2: Create website and start Google adwords campaign (done), 400 letters from List 2; 3) Month 3: 400 letters from List 3; 4) Month 4: Go back to list 1 and send a 2nd round to all 400 investors, repeat for Months 5 and 6 with lists 2 and 3, respectively; 5) Months 7/8/9 will be sending post cards to the first 3 lists (pay someone to do this), while starting on list 4.
Hopefully at that point I will have closed a deal or two and can outsource some yellow letter marketing. My goal is to have someone send out about 600 letters/month for me, with me still doing my 400/month.
I hope this wasn't too long.
Looking forward to updating everyone along my journey.
I can wait to see how this goes!
So far this week I have written and sent out 100 pre-foreclosure letters. I sent a few on Wednesday, with the remainder having gone out yesterday. So far I've received 1 phone call from a guy who's house is going into a short sale as he is underwater. Outstanding mortgage > $400k, with the house only being worth around $250k - so for obvious reasons, not feasible for me to help him.
Next week, I move back to absentee owners. The one issue I have marketing to these pre-foreclosure guys, is their time table. A lot of them I won't be able to hit more than once, and as everyone teaches you, it takes upwards of 5 touches prior to a sale...
Until next time.
Week of 2/9 Update
My first deal has been resurrected! Prior to divulging, I continued on my quest and wrote and sent out 100 letters to absentee owners. With that said, I also received about 8 calls this week, none of which were qualified leads...all just called to get more information.
Now back to the deal..
I met this guy on craigslist a few weeks back as he recently had a leak in the kitchen and wanted to get rid of the house. However, his price was SET at $100k (his mortgage was right around there) with comps in the neighborhood going for $113k. He had at least $10k in rehab costs. I showed the house to two separate investors about 2 weeks ago - neither bit as there wasn't enough margin (I agree). Then luckily enough, today, I received an e-mail for someone asking to see the property. Low and behold, he made an offer. It was for $98k, so I asked the seller if he could go down to $96k - I'm awaiting his response. For my first deal, or for any deal for that matter, I will gladly take a $2k spread. Obviously not huge money, but it's a start. The only thing I'm toying around with now is (assuming the seller agrees) to try to negotiate a purchase price a bit higher. He knew my asking was $102, so if he could come up to $100k, that would be a nice bump in profit. Thoughts? Comments? Concerns?
Oh, also, I never got this house under contract. The owner has the contract, we've been in constant communication, but we never actually signed it - that shouldn't be an issue, should it?
Great post, Todd! We're in similar situations as far as wholesaling. You're about 5 weeks ahead of me, as I've just sent out (via Yellowletters.com, that is) 460 yellow letters. It's been about 8 days, and no phone calls yet. I'm hoping I didn't mess something up. I want to at least TALK with some prospective sellers!
Keep up with the great post. Thanks for letting us peak into your journey.
Looking forward to reading how everything pans out!
Hope the leaky house is a WIN for you!
@Todd C. - keep the update posts coming (if you can) - these are by far my favorite types of BP threads! Anyway, but of luck with that deal and I'm sure if you stay on top of it and manage both sides there will be some money to be made there.
Best of luck!
Thanks for this great diary. My 2c:- If your Buyers Offer is conditional (ie. they might walk away at the slightest pretext), then you will need to make sure your Contract with the Seller is at least as conditional (allowing you to walk away if your deal goes south). You should be very firm with yourself as to the highest amount you will Offer (and even be firm about the amount you want to pay yourself). Given your scenario, I suggest don't offer the Seller more than you have already, and yes, maybe try getting the $100k (but in my experience, Buyers will feel happier with their deal if they can get it for LESS than a round number; in this case, say $99k). Cheers...
Thanks for all the replies - greatly appreciated! So I just spoke to the buyer. He sent over some interesting terms and I was wondering if/how I could profit from this. He said he would be willing to raise his offer IF the owner would allow him to start repairing the house between signing the purchase contract and the closing date. He said he would offer to pay $2k as a "rent" while performing the renovations. Is there a way I could structure this so I could profit regardless if he closes on the property or not? My worry is he'll start the repairs and decide he no longer wants it.
Some of the issues you just raised are exactly why wholesalers usually expect more out of a deal than your originally proposed $2k. A lot of "what ifs" in there. Might it also get a bit tricky keeping your Buyer from directly chatting with the Seller at some stage? In the meantime, if you can come up with an agreed Contract price from the Seller, there is probably nothing stopping you from asking if you can lease it from the Seller (for a smaller sum than what you could sub-lease it to your Buyer for) until closing. Then, even if the Buyer (and thus you) renegue on closing, both you and the Seller have at least something to show for it [no legal advice given]...
It's been a while since my last post. So without further ado, here we go.
Key highlights include:
I wasn't able to find a buyer for my first deal - I knew the asking price was too high, but he couldn't go any lower (he had a pretty high % of debt/home value).
Moving towards marketing, I believe I bit off slightly more than I can chew when I took on this project. Full time job, debts being paid off have to take precedence here. With that said, I decided to scale back my website for the time being. I don't have the appropriate funds to allocate towards a site and without them, that marketing route is a waste of money in my mind.
I've continued with my 400 yellow letters a month. Have been receiving calls but mostly people asking how I got their information, with a few nibbles here and there, but mainly people wanting retail $ for their properties.
I'm keeping my head high and don't expect to hit my first sale until June (6 months post first starting my yellow letter campaign).
Since I've now locked down a budget that I can comfortably spend on this business, I have outlined plans as to how I will grow the business once revenue starts coming in.
Again, considering I have a full-time position, it is becoming increasingly difficult to write 20-30 letters a day. My #1 priority is to employ a yellow letter service and ramp up my yellow letters to 1,000 a month. If my calculations are correct, assuming an 8% call rate, a 4% deal rate (of the calls) and about $7k in gross revenue per deal, I can gross about $21,000/month once everything is up and running. Does that math seem sound? Keep in mind that is GROSS REVENUE. Not accounting for any costs or taxes whatsoever.
What happened @Todd C. , I just started reading your post and I see you haven't updated your post in over 11 months. I hope you haven't given up.
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