Recipe for Wholesale Success (short and sweet)

Real Estate Deal Analysis & Advice
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Recipe for Wholesale Success (short and sweet)

Thomas Burnett
Wholesaler 路 Portland, OR 路 Member since 2017 路 40 posts 路 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 路 Cincinnati, OH 路 Member since 2017 路 15 posts 路 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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  • Steve Morris
    Real Estate Broker 路 Portland, OR 路 Member since 2019 路 4k+ posts 路 2k+ votes
    6y

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

    Really?  I missed the part where he told his seller he's not the buyer and that he pocketed 15% of the sales price (or actually it sold for 15% more than what he gave the owner).

    Lack of disclosure is the main issue I have with these people.

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

    It's also called a lack of disclosure, something legitimate brokers don't do.

    0Reply
  • Steve Vaughan
    Rental Property Investor 路 East Wenatchee, WA 路 Member since 2014 路 10k+ posts 路 16k+ votes
    6y
    Originally posted by @Steve Morris:

    Really. He told the seller what he would be doing and even mentioned to the seller he could probably get more for his house listing it.  

    I know there are a lot of shady no earnest money and lots of out clauses wholesalers out there.  I don't think Thomas is one of them. 

    0Reply
  • Steve Morris
    Real Estate Broker 路 Portland, OR 路 Member since 2019 路 4k+ posts 路 2k+ votes
    6y
    Originally posted by @Steve Vaughan:
    0Reply
  • James Baker
    Real Estate Investor 路 Cedar Springs, MI 路 Member since 2015 路 39 posts 路 10 votes
    6y

    @Thomas Burnett

    Keep up the good work.  Brush off the haters.

    3Reply
  • Grant R.
    Rental Property Investor 路 Fort Wayne, IN 路 Member since 2019 路 132 posts 路 51 votes
    6y

    @Steve Morris

    You're acting very poorly, Steve. Based on your recent postings - full of both attitude and assumptions about investors - I wouldn't do business with you. I'm saying this to you with encouragement to take a 24-hour pause and evaluate how you'd like the professional RE community to see you. Once you land on a conclusion, we welcome you back to hear thoughts that help that community.

    6Reply
  • Nick Webb
    Investor 路 Lahaina, HI 路 Member since 2018 路 11 posts 路 3 votes
    6y

    @Thomas Burnett

    Well done 馃憤馃徏

    0Reply
  • James Hamling
    Real Estate Broker 路 Minneapolis, MN 路 Member since 2011 路 5k+ posts 路 6k+ votes
    6y
    Originally posted by @Thomas Burnett:

    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.

     You have 1 giant failing to your math on how "great" the $25k was of a return, labor costs.

    You say it took "all my free time for 3 months", by my conservative math that comes to 360 hours, and most likely more. $25,000 / 360 = $69.44.... Now, to some this might be amazing money, to the majority this is either a pay cut or of level we could think of many things that would not only be more profitable but with certainty and not gamble of success. For example, in my area average handyman can easily get paid $65-$85 per hour, key words average and handyman. 

    Now before all those chasing rainbows frip a lid about how I am poo-poo'ing fantasies and dreams, I will say I applaud the effort and any entrepreneur. That said I must correct the very root cause why 85% of all business's crash and burn in a flaming heap of bankruptcy between year 2-5 and not 1. It's for this very flawed math, inserting labor time at $0.00. Soooo many people get the delusion that they have a business going and that it's making money, because they are using slave labor, their own slave labor. 

    Step 1 in any business; proof of concept. Can it actually generate business. 

    Step 2; profitability. Can it actually do said business AT A PROFIT. With flawed accounting, $0.00 labor, well garbage in garbage out. The only way a business will ever work is to first know if it can be profitable, when and how. 

    1Reply
  • James Hamling
    Real Estate Broker 路 Minneapolis, MN 路 Member since 2011 路 5k+ posts 路 6k+ votes
    6y
    Originally posted by @Thomas Burnett:

    @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

     Not to mention you will also need an actual legal business to operate as the one you described here is definitively illegal. 

    Let me guess, your reply is going to be how this reality and fact hurts your feelings.... Yeah, thing is Lucy i don't give a damn, suck it up, if your gonna brag to your criminal profits don't bi#ch out when called on the criminal enterprise of it all. 

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

    @James Hamling I like the breakdown and getting very specific on the actual investment return. Tracking key performance indicators is essential to know if your efforts are well placed. I learned that everything that is tracked improves, and of course I want to know what can make the biz more efficient (=

    Your assumption that I was spending 30 hours a week on this first deal is enormously out of proportion! I suppose I didnt disclose how many hours it actually took me or what sort of time investment I had made. So here it is...

    Because I was still working full time (50 hr/wk), I could only squeeze out 10 hours maximum per week. Often it was less because of life events and obligations.

    I would bet that since purchasing the course: All the study time, implementing ground work steps to set up systems, driving for dollars and all the miscellaneous phantom time expenses. 8 hours a week would be 96 hours. To make simple math and use found numbers... if it took me 100 hours, I think that works out to be just over $280 xhr.

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

    @James Hamling you certainly stand out as a positive can-do personality. Thanks for the encouragement.

    2Reply
  • James Hamling
    Real Estate Broker 路 Minneapolis, MN 路 Member since 2011 路 5k+ posts 路 6k+ votes
    6y
    Originally posted by @Thomas Burnett:

    @James Hamling I like the breakdown and getting very specific on the actual investment return. Tracking key performance indicators is essential to know if your efforts are well placed. I learned that everything that is tracked improves, and of course I want to know what can make the biz more efficient (=

    Your assumption that I was spending 30 hours a week on this first deal is enormously out of proportion! I suppose I didnt disclose how many hours it actually took me or what sort of time investment I had made. So here it is...

    Because I was still working full time (50 hr/wk), I could only squeeze out 10 hours maximum per week. Often it was less because of life events and obligations.

    I would bet that since purchasing the course: All the study time, implementing ground work steps to set up systems, driving for dollars and all the miscellaneous phantom time expenses. 8 hours a week would be 96 hours. To make simple math and use found numbers... if it took me 100 hours, I think that works out to be just over $280 xhr.

     If that is the math of your time investment that helps greatly, your a hobbyist. You specifically said before that you devoted ALL of your free time, then say that's 8hrs per week????? 

    You missed the point on what I detailed because your too busy talking and letting your ego run wild with 1 whole deal under your belt. You did not profit $25K, remove labor expenses and then review profit. In that same time I am willing to bet my holding funds 10X your profits. See, that's how an investor looks at things, digs for accurate data, review and weigh data to score the venture, adjust and move forward NOT just blindly plow forward because "Guru" blah-blah-blaaa said so. 

    0Reply
  • John Carpino
    Member since 2020 路 22 posts 路 26 votes
    6y

    Awesome work!

    1Reply
  • Tony Kim
    Rental Property Investor 路 Los Angeles 路 Member since 2018 路 844 posts 路 1k+ votes
    6y
    Originally posted by @James Hamling:
    Originally posted by @Thomas Burnett:

    @James Hamling I like the breakdown and getting very specific on the actual investment return. Tracking key performance indicators is essential to know if your efforts are well placed. I learned that everything that is tracked improves, and of course I want to know what can make the biz more efficient (=

    Your assumption that I was spending 30 hours a week on this first deal is enormously out of proportion! I suppose I didnt disclose how many hours it actually took me or what sort of time investment I had made. So here it is...

    Because I was still working full time (50 hr/wk), I could only squeeze out 10 hours maximum per week. Often it was less because of life events and obligations.

    I would bet that since purchasing the course: All the study time, implementing ground work steps to set up systems, driving for dollars and all the miscellaneous phantom time expenses. 8 hours a week would be 96 hours. To make simple math and use found numbers... if it took me 100 hours, I think that works out to be just over $280 xhr.

     If that is the math of your time investment that helps greatly, your a hobbyist. You specifically said before that you devoted ALL of your free time, then say that's 8hrs per week????? 

    You missed the point on what I detailed because your too busy talking and letting your ego run wild with 1 whole deal under your belt. You did not profit $25K, remove labor expenses and then review profit. In that same time I am willing to bet my holding funds 10X your profits. See, that's how an investor looks at things, digs for accurate data, review and weigh data to score the venture, adjust and move forward NOT just blindly plow forward because "Guru" blah-blah-blaaa said so. 

    I'm a bit appalled at the way the OP is being treated. What exactly am I missing here?

    Did the OP state that he earned $25,000 profit? I don't recall him using that word. I believe he just said he made $25k on his first deal. There's no need to be pedantic about how to classify that $25,000 margin. It's very common for businesses to be very labor intensive when you first start out while earning very meager revenues. When I purchased my latest multiplex in Los Angeles earlier this year, it was the culmination of many hours of work for almost a whole year. I spent countless hours on it. So do I need to adjust my cash flow parameters to account for all those hours?  Maybe..or maybe not....I don't really GAF. All I know is that I'm earning over 10% on what I invested and it's local with potential for huge appreciation.

    It's one thing to post about your ethical or legal concerns with wholesaling and then move on (the way Hinrichs did). However in this thread, a lot of the posts are really coming across as vitriolic and for some reason feeling the need to tear down what I consider a pretty good accomplishment. If you want to post vitriolic stuff, perhaps just limit it to one post and then move on. The repeated negativity is nothing more than good old-fashioned bullying. It's only the incredible maturity and poise of the OP that has prevented this thread from turning into an all out flaming session. All wholesalers need to put in a lot of hustle and effort and hours to close their first deal. That's how they start...one deal at a time. As they get better and start gaining more connections and their network expands, that's when they start implementing efficiencies and ways for them to leverage other people. This will then free up their time so they can concentrate on implementing their bigger picture vision for the company. I just don't understand the need to tear down this initial accomplishment with so much vigor.

    Thomas, based on what I've seen so far, I have no doubt that you will eventually build a successful growing enterprise. Just ignore the negativity. Let me send you something via DM. I think you'll like her story...it's about someone who started off wholesaling and has now grown her business into a very big, active enterprise with several employees. 

    5Reply
  • Jake Peetz
    Jacksonville, FL 路 Member since 2019 路 43 posts 路 76 votes
    6y

    @Thomas Burnett love this response and am happy to see hard work and Persistence lead you to this end result!

    1Reply
  • Brittany Sheppard
    Lender 路 Denver, CO 路 Member since 2020 路 11 posts 路 6 votes
    6y

    @Thomas Burnett You couldn鈥檛 have said that any better as I completely understand! You will reach your business goals in no time! 

    0Reply
  • Steve Morris
    Real Estate Broker 路 Portland, OR 路 Member since 2019 路 4k+ posts 路 2k+ votes
    6y
    0Reply
  • Charlene Garrison
    Investor 路 Detroit, MI 路 Member since 2015 路 32 posts 路 12 votes
    6y

    Great story!  You are a true inspiration to me.  I too am starting out as a wholesaler and sometimes when you don't get the success you wanted from your effort(s), it can make you feel like giving up.  But, as always, giving up will never help you succeed.  Success stories always have a chain of "less glorious" moments.  Keep those tough times in perspective and continue to hand in there.  Congratulations!

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

    "I wouldn't do business with you. I'm saying this to you with encouragement to take a 24-hour pause and evaluate how you'd like the professional RE community to see you. Once you land on a conclusion, we welcome you back to hear thoughts that help that community."

    That's fine, I probably wouldn't do business with the OP either.

    As a broker, I have the best interest of the principals in a deal and not about how much of a fee I can wangle out of them so I can post-and-boast on a blog.

    I just don't do business without full disclosure and seek out ill-informed buyers without telling them the FMV of their property.  I don't hide who the true buyer is or what he paid from a seller.  I also follow OR REA rules and have a valid license if I'm expecting a fee for arranging the sale of a property.

    In sum, I'm no saint nor perfect, however, I'm trying to respect people and be open and honest with them.

    0Reply
  • Jay Styles
    Investor 路 Los Angeles 路 Member since 2020 路 34 posts 路 8 votes
    6y

    Thomas, congratulations on the deal and finding a investor. Did you have a lawyer write up the contract and was there a clause in the contract to protect you if you were not able to find an investor?

    0Reply
  • James Hamling
    Real Estate Broker 路 Minneapolis, MN 路 Member since 2011 路 5k+ posts 路 6k+ votes
    6y

    Blind leading the blind..........

    0Reply
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