Recipe for Wholesale Success (short and sweet)

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Recipe for Wholesale Success (short and sweet)

Thomas Burnett
Wholesaler · Portland, OR · Member since 2017 · 40 posts · 96 votes

Investment Info:

Single-family residence wholesale investment.

Purchase price: $186,000
Cash invested: $4,000
Sale price: $215,000

Purchased wholesale course for $1000. Followed course, and sent out mail to DFD (driving for dollars) list. After about 3 months of consistent action - (still working full time) - found motivated seller. Total costs: program, $1000, direct mail postcards $2500, miscellaneous system fees and gasoline. Put property under contract and marketed contract to cash buyers - Cash buyer property inspection, offers by end of week. Contract assigned for $29,000 and nearly 10x my investment!

What made you interested in investing in this type of deal?

Gaining the knowledge to make money repeatedly is worth infinitely more than the actual cost and profit.

How did you find this deal and how did you negotiate it?

Direct mail. Seller called me after receiving postcard. I returned the call asap and talked to him about his situation and did not ask about price until I understood why he called.

How did you finance this deal?

The purchase was taken over by the investor and I did not finance anything.

How did you add value to the deal?

The seller needed to sell to solve a problem. I listened to understand the problem. I offered a solution that would benefit him. The contract price was a value to the investor who purchased it.

What was the outcome?

I now have an enlarged image of the check I received from the deal that I have altered. The signature was removed and that line is now in very fancy calligraphy text to display the word 'Persistence' to signify that persistence pays off for $28,323.66 and is hanging above my work space.

Lessons learned? Challenges?

Wholesaling is simple to understand, but that doesn't mean it's easy. It took me 3 months of spending all my free time during the summer when I wasn't working to be out driving for dollars and looking for houses that needed some love. I wanted to quit more than once when I would get a lead that would dissolve and not finalize, or when money started getting tight because of all the postcards and marketing that I was spending.

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Bryan Eltzroth
Investor · Cincinnati, OH · Member since 2017 · 15 posts · 19 votes
6y

@Steve Morris

I understand @Thomas Burnett and his attorney may not have been completely aware of brokerage details in OR but there's no need to stomp all over his deal. He hustled and solved a problem for two parties. The seller may not have desired to deal with an agent along with the commissions and contingencies that go into a normal transaction and the investor was looking for a deal. 

Functionally, it's no different from any other investor looking for off-market deals or steals on the MLS. If a BRRRR investor sent out the same letter, talked to the same seller, and closed the deal themselves, would we be ostracizing them for this deal? Unlikely. We would be celebrating the hustle and determination.

Looking outside the legal ramifications, I feel like wholesalers serve a valuable purpose in the industry. They charge a fee for finding deals and there is nothing wrong with that. It's easy to say investors are more than capable of finding their own deals but we all know that's easier said than done. 

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  • Thomas Burnett
    OP
    Wholesaler · Portland, OR · Member since 2017 · 40 posts · 96 votes
    6y

    @Steve Morris I don't think you'd believe me if I told you, but I admitted to the seller in the beginning that he would get a lot more money by listing it with an agent.

    He acknowledged and said he didn't want to list it again.

    I gave him every other possible scenario to sell his property and he said he wasn't interested in any of them.

    1Reply
  • Steve Morris
    Real Estate Broker · Portland, OR · Member since 2019 · 4k+ posts · 2k+ votes
    6y
    Originally posted by @Thomas Burnett:

    @Steve Morris I don't think you'd believe me if I told you, but I admitted to the seller in the beginning that he would get a lot more money by listing it with an agent.

    He acknowledged and said he didn't want to list it again.

    I gave him every other possible scenario to sell his property and he said he wasn't interested in any of them.

    OK, great, however, you arranged the sale of real estate in expectation of a fee without a license in OR.

    Easy enough to determine the legality of that and shut me up with notice to the REA.

    0Reply
  • Nate Sanow
    I​nvestor & Agent · Tulsa, OK · Member since 2016 · 1k+ posts · 1k+ votes
    6y

    @Steve Morris

    Touché

    But if I take your bet and raise you 20, I’d say not all brokers actually do get sellers the most value. Many situations that get listed at x6 months to the sellers time on market minus commissions and fees... I know I’m not supposed to say that but it’s hard for that to always be ethics. So many agents have no clue how to help a distressed seller, just like a lot of wholesalers suck at it too. Anything that is a blanket generalization is open to a margin of error.

    6Reply
  • Steve Morris
    Real Estate Broker · Portland, OR · Member since 2019 · 4k+ posts · 2k+ votes
    6y

    "I’d say not all brokers actually do get sellers the most value."

    Believe me, there's unethical brokers and I've had people not happy with me for the price they got.  However:

    1) I'm a licensed broker in OR and

    2) If I get a higher price than list, seller gets more money and I don't pocket it all more than extra comm %.

    0Reply
  • Account Closed
    Flipper/Rehabber · New York, NY · Member since 2019 · 340 posts · 122 votes
    6y

    @Thomas Burnett I am still perplexed in this day and age of technology and internet people are still driving for dollars. Makes no sense. I end up in front of motivated sellers because just as much as you are googling “best chicken recipe” people are also googling “how to sell my home fast” or “how to avoid bankruptcy”. Just my two cents.

    3Reply
  • Thomas Burnett
    OP
    Wholesaler · Portland, OR · Member since 2017 · 40 posts · 96 votes
    6y

    @Ray Danishyar Websites are awesome and youre totallynrigjt about some people being quick to consult the web..

    I also believe that it took a little more than two cents to put together a website, and a brand, and a logo, and a few other things that cost a bit more than driving around, putting your eyes on the actual property, and getting a sense of the neighborhoods you're marketing to.

    I am thrilled to be where I'm at; for taking the action and getting a result.

    I know that the web is another channel with enormous potential, and I plan to capitalize once my capital and proof of concept is justified =)

    5Reply
  • Bryan Eltzroth
    Investor · Cincinnati, OH · Member since 2017 · 15 posts · 19 votes
    6y

    @Steve Morris

    I understand @Thomas Burnett and his attorney may not have been completely aware of brokerage details in OR but there's no need to stomp all over his deal. He hustled and solved a problem for two parties. The seller may not have desired to deal with an agent along with the commissions and contingencies that go into a normal transaction and the investor was looking for a deal. 

    Functionally, it's no different from any other investor looking for off-market deals or steals on the MLS. If a BRRRR investor sent out the same letter, talked to the same seller, and closed the deal themselves, would we be ostracizing them for this deal? Unlikely. We would be celebrating the hustle and determination.

    Looking outside the legal ramifications, I feel like wholesalers serve a valuable purpose in the industry. They charge a fee for finding deals and there is nothing wrong with that. It's easy to say investors are more than capable of finding their own deals but we all know that's easier said than done. 

    9Reply
  • Darryn Oliver
    Real Estate Agent · Slidell, LA · Member since 2018 · 28 posts · 11 votes
    6y

    @Thomas Burnett consistency is key i’m in the process of getting my direct mail campaign started. Thanks for sharing your story!

    0Reply
  • Thomas Burnett
    OP
    Wholesaler · Portland, OR · Member since 2017 · 40 posts · 96 votes
    6y

    @Bryan Eltzroth thanks for the support man. #respect

    3Reply
  • George Munoz
    Real Estate Agent · Fort Lauderdale, FL · Member since 2018 · 360 posts · 213 votes
    6y
    Originally posted by @Steve Morris:

    You can't find what you're not looking for...

    OK, so you're looking for someone doesn't know the value of their property and is willing to sell for 15% below market to an unnamed true buyer?

    Got it.

    I take it you're not a licensed broker in OR and expecting a fee for arranging the sale of real estate in OR?

    As per my quick (Google research, the majority of the pages regarding if is legal or not wholesaling in Oregon doesn't say is) and I dare to say like any of the states that is legal , the board of RE has an ambiguous terms. 

     I think You are assuming Thomas  did trick and did take advantage. We dont know ... And he specifically said the seller had a problem (distressed) therefore and probably need it to sell fast and with cash. He made a simple offer as a buyer and simply transfer the right of contract..   

    As far as the trust, I guess he stablished the trust buy understanding her problem. ( probably she received countless letters from different people  and she connected with him.( she trusted that he was going to deliver)  

    As far as the % I am pretty sure he got it for we below that, Because Is pretty uncommon that a Cash investor will buy market value. 

    And by the way he can either Assign the right of contract or Double close ( meaning closing first, and then resell immediately ) ( some private lenders do that for a small fee ) is called transactional funding for a double close...

    5Reply
  • Anthony Golden
    Investor · Portland, OR · Member since 2020 · 14 posts · 4 votes
    6y

    @Thomas Burnett

    Solid work man. Sounds like there’s some old school territorial folx spewing a bit of false hatred. The only state where wholesaling is “illegal” is Illinois.

    Deal Machine is so powerful! I’ve been on it heavy!

    Absolutely agree, you can’t find what you’re not looking for. I like that!

    Keep it up man! Let’s stay connected and keep helping people out of their distressed situations!

    3Reply
  • Steve K.
    Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
    6y

    @Thomas Burnett You should be proud of your success, as most that attempt wholesaling don’t achieve what you have. If you put the same amount of effort into becoming an agent, I think you’d easily make more money. You wouldn’t ethically be able to take a 13.5% commission like you did if you were a licensed agent of course. But seeing as you’re determined and hard-working, and must be good at sales, you should be able to achieve above average results as an agent as well. In a market like Portland where the average home price is around $500k and the average agent probably closes about one to two deals a month, you could easily be making better money even by being average (which I don’t believe you are). Just sayin!! You could have gotten your license for less than that course. Also look into what Jay and Steve are talking about regarding the legality of wholesaling in OR. Illinois is not the only state where wholesaling is illegal, people have been popped for it here in Colorado as well in cases of egregious equity skimming. It’s a gray area at the very least, and why risk it when you could be making more working as an agent above board anyway? Congrats on your success, I hope it continues. I could see you being a top agent if you wanted, and I think you might enjoy it more than wholesaling too!

    1Reply
  • Miles Stripling
    Rental Property Investor · Laguna Beach, CA · Member since 2020 · 1 post · 0 votes
    6y

    @Steve Morris

    I don’t know the details of the property exactly, but there are sellers who have a hard time selling for anything at all even with a broker. A wholesaler looks for sellers who are having trouble selling their property. The wholesaler provides the service of quickly selling their property and in return, the seller “pays” for that service by selling at a discount. In reality, the wholesaler sells the contract to an investor, individual, or broker for a fair price. Nothing about these types of interactions is unethical and everybody wins. I hope my analogy helps explain how this actually benefits the seller if time is a priority. Feel free to ask me more questions and I’d love to answer.

    0Reply
  • Brittany Sheppard
    Lender · Denver, CO · Member since 2020 · 11 posts · 6 votes
    6y

    @Thomas Burnett

    You are a true inspiration and a wonderful example of persistence, hard work and most importantly never giving up! What are your long term goals moving forward? Thank you so much for sharing!

    3Reply
  • Stephen KeigheryBusiness Member
    Rental Property Investor · New Orleans, LA · Member since 2018 · 717 posts · 555 votes
    6y

    Nice work @Thomas Burnett. Don't listen to all the negativity in this thread. BP isn't very wholesale friendly and there are lots of agents who believe a realtor is the answer for everything. Go to your REIAs and hang out with investors and you will find that you are valued. Keep going and growing.

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    4Reply
  • William Stewart
    Rental Property Investor · Fort Mill, SC · Member since 2019 · 76 posts · 24 votes
    6y

    Awesome! What course did you take @Thomas Burnett

    0Reply
  • Bryan Eltzroth
    Investor · Cincinnati, OH · Member since 2017 · 15 posts · 19 votes
    6y

    @Stephen Keighery

    This is a great point. On BP, there is a lot of poo pooing of wholesalers but at any REIA event I've been too, wholesalers who actually close deals are top commodities.

    Even here on BP, how many times have we seen the "There Are No Deals on the MLS!" thread? Direct mail marketing, driving for dollars and Deal Machine and others like it are talked about all the time, but if a wholesaler is the one using those strategies, it's frowned upon.

    I think a lot of the bias comes from people’s past dealings with unscrupulous wholesalers, who are certainly out there, but in the end, the onus is on the investor to run their own due diligence and determine if this is a good deal. Even when people mention that wholesalers take advantage of sellers, many times they ignore those same points when they bring in the deal themselves.

    I’m certainly not here to put down agents in any way shape or form! A good agent is a critical member of the real estate team and can work miracles at times. I just also feel that good wholesalers serve a purpose in the funnel in that they provide a service just like a realtor.

    In the end, real estate isn’t a zero sum game and we can all coexist peacefully.

    2Reply
  • Thomas Burnett
    OP
    Wholesaler · Portland, OR · Member since 2017 · 40 posts · 96 votes
    6y

    @William Stewart I purchased a course by Zack Boothe called driving for dollars mastery. His price has since gone up.

    1Reply
  • Steve Morris
    Real Estate Broker · Portland, OR · Member since 2019 · 4k+ posts · 2k+ votes
    6y

    I understand @Thomas Burnett and his attorney may not have been completely aware of brokerage details in OR but there's no need to stomp all over his deal. 

    Well, if Mr Burnett feels he's giving due service to the seller, he should be all for disclosure and telling the seller he's not listing the property for max exposure, he's not the real buyer and needs to hide that and the effectiuvely 15% comm he's making (using his math) and sharing none of the upside with the seller.  As broker's in a standard deal, sellers get any upside (as in multiple offer scenarios) and brokers are duty-bound to maximize the clients return, NOT their commission.

    Functionally, it's no different from any other investor looking for off-market deals or steals on the MLS. 

    Sure it is - If you do deals on the MLS, it's not off-market.   To use MLS, you need a RE license (at least in OR).  To write an offer in expectation of a fee on real estate, you need a license in OR.

    Looking outside the legal ramifications, I feel like wholesalers serve a valuable purpose in the industry. They charge a fee for finding deals and there is nothing wrong with that. 

    Well, I think, as noted that any upside goes to wholesaler and NOT seller, that's not very valuable to the property owner.  Since it is illegal in OR, you can't justify any transaction by saying you found a deal and then say there's nothing wrong with that by ignoring the illegality?  The whole "looking outside the legal ramifications" is nonsensical.  Laws are what we have to stop activity that is illegal.

    Basically, if we see illegal activity or exploitation of property owners, don't you feel we should stomp all over it or is looking the other way the best way to deal with it?

    I'm no saint, but have turned in other brokers to the REA for obvious violations.  Brokers already don't have that great a rep without condoning behavior by looking the other way.

    0Reply
  • Steve Morris
    Real Estate Broker · Portland, OR · Member since 2019 · 4k+ posts · 2k+ votes
    6y

    the onus is on the investor to run their own due diligence and determine if this is a good deal.

    Puh-leeeze, you're looking for owners that do NOT know the FMV of their property, otherwise, there is not enough margin for a 15% slice like Mr Burnett.

    99.9% of licensed brokers will provide a CMA or BOV with reasons why to educate an owner on what he can get for his property.

    0Reply
  • Thomas Burnett
    OP
    Wholesaler · Portland, OR · Member since 2017 · 40 posts · 96 votes
    6y

    @Brittany Sheppard my goals moving forward are to grow a business that will serve me. A business that I can keep the best and wholesale the rest; where I and working on my business and not in the business.

    I'll need systems and a team, along with a strong support network of positive people with proactive can-do mentalities

    1Reply
  • Steve Morris
    Real Estate Broker · Portland, OR · Member since 2019 · 4k+ posts · 2k+ votes
    6y
    Originally posted by @Miles Stripling:

    @Steve Morris

    A wholesaler looks for sellers who are having trouble selling their property. 

    Slight correction - They're looking for sellers that have no clue what their property is worth.  Why do you think they use the dual escrow ruse to hide what the true buyer is paying?

    0Reply
  • Steve Morris
    Real Estate Broker · Portland, OR · Member since 2019 · 4k+ posts · 2k+ votes
    6y
    Originally posted by @Thomas Burnett:

    I'll need systems and a team, along with a strong support network of positive people with proactive can-do mentalities

    Total disregard of the OR REA and laws would help also.

    0Reply
  • Thomas Burnett
    OP
    Wholesaler · Portland, OR · Member since 2017 · 40 posts · 96 votes
    6y

    @Steve Morris THANKS! All the energy will be an invaluable and limitless source for driving my success.

    2Reply
  • Steve Vaughan
    Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    6y
    Originally posted by @Nate Sanow:

    @Thomas Burnett

    It’s a good post for motivation for sure.

    It’s an interesting debate that has since ensued.

    I’m licensed and similar jurisdiction is in play in my state I’m very curious about.

    I always wonder if simply put double closings are a better solution than regulation and brokerages trying to run what wholesalers do - most brokers (not all) have little understanding and it seems like something to be afraid of and angry about because there wasn’t a listing on their mls to try to get a commission from....

    I wonder if, moving forward, companies who "wholesale" can simply have intent and ability to close, get POF, back that up beyond an internet printout, and do a double close if necessary.

    When I ponder that... the only stopping of that is saying you can’t buy a house at 9 am and sell it at 10 am same day. I’m equally unsure it’s ethical or fair to put a stop to that as much as I actually dislike a lot of what wholesalers have done (lowball, back out during inspections, etc). But trying to just say it needs to be illegal or ran through brokerages entirely is another animal to me and if it goes that way I’m curious how in fact one can regulate.

    Nate you have some great points. Refreshing to hear from a licensed agent  I agree a hybrid wholesale model where the good faith portion of a purchase contract isn't a lie should be the goal.  They are qualified to and intend to close.  Bam!

    Thomas, congratulations on this deal.  You were honest with the seller and gave them additional options.  The seller had tried to list before and it didn't work, after months and months of being locked into a contract and not being able to sell to anyone else. Listing it is not the end all be all for every situation. Sheesh.

    Most of my dozens of purchases have been from 'had it with agents and the status quo' sellers as well.  They usually have an odd property amd they like to work directly with the buyer.  Not every property or situation fits neatly into a long-term listing agreement. 

    I offer what a landlord cash buyer would offer you as a wholesaler and I close, but usually with seller financing.  The big difference is I have the ability and intent to close.  That's where most of the problem lies on here.  

    Anyway, well done and thank you for being honest to your seller. To me that's most important👍

    2Reply
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