The 3%-6% wholesale deal.

29 Replies

Two Observations:

1. Many BP members ask about getting a RE license...

2. Many want to start out wholesaling properties.

You might find it helpful to think of a real estate license as a wholesale deal (3-6%).

I'm an investor first and a real estate agent second... when I have a property I can't pay the sellers desired price, I list it and sell it. When I have an approved short sale I can't pay the banks approved price, I sell it (often times getting BOTH sides (6%)), when I have a wholesale deal, I wholesale it. There are not many deals I miss, not many leads I can't convert (to something) when you have "the 3% wholesale deal" as a backup.

This will allow you to only buy when the deal is really sweet... otherwise 3% is alway a nice backup.

Hope that helps!.... what are your thoughts?

How well do you convert 'We Buy Houses' leads into Listings? In many cases they don't want to deal with realtors or showings ..

Interesting post. We actually halted our marketing campaign because 99% of the leads wanted to sell but had houses in retail condition. So in our market a "wholesale only" business model stopped making sense.

Do you use direct mail? And if so what is your general message?

@Phil Z. I just recently got started with "We Buy Houses" as a licensee so I can't answer directly just yet. Outside of that I run direct mail and radio under "435-Sell-Now or SellNowUtah.com... We stay busy enough with traditional, short sales, and a few rehabs at a time.

WHEN... I end up in a home of a prospect/lead I convert better than 50% of the time, but I try to screen well to end up in the right properties.

@Russell Ponce I ran into this a few years ago with short sales. Every lead was upside down, so we started to play harder with the short sales game.

For us a property that could truly be wholesaled is about 1% of our leads. However wholesaling did account for 20% of our revenue last year. Another 20% to rehabs, and 30% and 30% with short sales and traditional... roughly.

I WISH I could wholesale FULL TIME but I can't find enough properties.

Having many tools in my belt allow me to have a business that is good and it supports me and my team. When I get a lead I want to convert them into revenue. It is probably a strengh and weakness.

@Justin Morgan Could you elaborate a little more? It sounds like you have a pretty solid system. I'd love to learn more.

@Muhammad Sharif What is it that you want me to "elaborate" on?

My system is "outwork everyone" and "never leave money on the table"... especial leads you pay for!!

@Justin Morgan So just to make sure I understand correctly, you wholesale properties but the ones you're not able to you list them and you also rehab properties and flip them? Does it ever get to be too much while doing all of these different things? Do you have a team that you work with or are you a 1 man show?

@Muhammad Sharif Yes I list, do short sales, rehab and also wholesale.

I ask myself often "is this too much". Yes I have a team... assistant, short sale processor, and buyers agent... and me. It did NOT start this way... I grew into this.

My MOST lucrative deals, with the littlest amount of time spend on the deals has been wholesaling... BUT I could never make a living doing just that in my market. So for now I do all the above until I can figure out what "really" pays well and consistent and do just that... or that might just be a pipe dream of the Guru's that sells on stage.

For now my business works and I'm always looking to make it better!

Start with ONE nitche, perfect it and if it keeps working go to the next. As @Russell Ponce mentioned... wholesaling does not work in his market right now. But there is always a niche that does work!

@Justin Morgan, how do you present yourself in your marketing pieces? As a buyer, agent, solutions expert? Just curious.

@Russell Ponce

I do Radio "We Buy Houses"... "We Buy Short Sales".

We do Yellow Letters... "I'm interested in buying your house, call me".

We do Post Cards to my Farm areas. "Sell your house NOW"... call 435 Sell Now.

Post It Notes... "fair offer for your house"... call me.

On Appointments and calls... "I'm here as an investor to buy your house, if that does not work out we can talk about listing it". (I sometime say this)

I can gage on the phone if someone is motivated and if this will be a "buy house appointment" or "listing apt"... takes some practices to read people but it pays!

Way too much work and liability for way too little money. I'd prefer to send it to another agent and get 25% referral fee.

Account Closed Liability as a real estate agent, not sure what you mean?

Buy the looks of your profile picture... you might mean liability as I'm a slave to the sellers?

I might need to rethink things as I have no time for fishing, not yet anyways!

Justin how effective do you think your vanity number and radio ads do?

@Shariyf Grevious

Just closed a $12k+ deal last week because my sellers friend remember 435-SELL-NOW a month after hearing a radio add and then telling his friend to call me. It is also the second deal I have done with this seller this last year.

I think the number is awesome... BUT... the bottom line is people need to remember YOU when they need a solution or problem solved. A name, a radio add, a postcard, a bandit sign, etc... they all do this.

Hope that helps?

Originally posted by @Justin Morgan :
@Aaron Mazzrillo Liability as a real estate agent, not sure what you mean?

Buy the looks of your profile picture... you might mean liability as I'm a slave to the sellers?

I might need to rethink things as I have no time for fishing, not yet anyways!

Real estate agents get sued all the time. Why do you think it takes an 8 page contract in California just to make an offer? It's one page of the terms of the sale and 7 pages of "I'm just the agent so if the crap hits the fan, please don't sue me" disclosures.

Back in 2007 when the market was tanking, a home buyer sued the broker who sold him a house that quickly went underwater. The buyer's argument was that as a broker, the real estate agent is an expert and should have advised him of the market conditions. Now we have the Market Condition Advisory disclosure. If you're going to start taking listings, I highly recommend you get errors and omissions insurance. I'm not saying it isn't possible to make decent income going that route or adding that to your deal flow, but it is a lot of work. I just think more money can be made with so much less work focusing on the wholesale deals and letting the retail sellers deal with someone who likes to do open houses on Saturdays working for living.

lol... Account Closed I love it... YES = California, that explains a lot!

Personally I have been tied up in litigation more times as an investor 1999-2009 than I have as an agent and investor 2009-current.

Anytime you are in the public and make money, someone will get their nose bent out of shape... I've seen this happen to wholesalers, agents and investors.

As an agent we disclose, disclose, disclose and yes Cover Our ***'ets (CYA).

The point of this thread is to give the new investor/agent a new perspective at getting a license and options to make money.

P.S. I never do open houses (wink)!

Happy Fishing!

Great business model. I am an agent and investor. I do very similar things with my marketing which is now starting to see some results. Do you disclose you are an agent in your mailings?

I have a team of 9 now to handle the real estate listings, buyers, contracts, inspections and everything else. I also do fix and flips, but I do not wholesale. I have 7 flips now and they make me more money than wholesaling so I tend to rehab and sell instead of wholesale.

Account Closed

Originally posted by @Mark Ferguson:

@Aaron Mazzrillo anyone can get sued doing anything, I have been an agent since 2001 and never been sued. I have sold over 400 houses the last three years with no complaints. Sure someone crazy might sue for no reason, but that can happen as an investor as well. I do carry 1 million in in E and O and 2 million in general liability insurance just in case. It is relatively cheap.

You're right. Just pointing out the downside so he can weigh the benefits and trade offs fully. If he can make listing houses a profitable part of his deal flow, he should do it. I've contemplated it on and off so many times, but in the end, I always choose lifestyle. I do list and sell my own houses and I dread the paperwork even on my own deals. CA is absurd with disclosures though. I'm sure with a team, it can be done with no change in work habits.

Originally posted by @Phil Z. :
How well do you convert 'We Buy Houses' leads into Listings? In many cases they don't want to deal with realtors or showings ..

I'm studying for my real estate license now, after 15 years of no interest in being an agent, because my print advertising is generating way more interest in retail sales and people ready to list. There's always the people shopping around for a retail buyer and that don't want to pay an agent. But a lot of sellers just need to be talked through the process so it makes sense. (Sell to investor as-is for cash for a discount, sell retail for max amount and it way more than covers the commission.) I think the local agents may be missing the boat in that their advertising doesn't address what some sellers want and need to hear.

Originally posted by Account Closed:
Way too much work and liability for way too little money. I'd prefer to send it to another agent and get 25% referral fee.

Aaron: how often are you able to convert your leads to the referrals that actually list? Does the referral agent always all agree to pay you 25%? My goal is once I get my license is to get enough referrals to pay for my marketing costs.

Originally posted by Kristine Marie Poe:
Originally posted by @Aaron Mazzrillo:
Way too much work and liability for way too little money. I'd prefer to send it to another agent and get 25% referral fee.

Aaron: how often are you able to convert your leads to the referrals that actually list? Does the referral agent always all agree to pay you 25%? My goal is once I get my license is to get enough referrals to pay for my marketing costs.

Very rarely. Again, that is why as an investor who is looking to buy around 50% of ARV, changing gears and telling them I can sell for 100% of ARV misdirects my whole business model and skews my message. I'd prefer they try to sell with an agent they find on their own and if it doesn't work, they call me back. Or, I keep following up with them and close them at some point in the future. I don't refer out that many leads and the majority of those that I do are short sales in which I want to be the buyer making the offer and the rest are people who owe more than I can pay, but have the equity to sell retail. If they have enough equity that I can be the buyer, I never refer those out.

I've had great success with finding agents will to pay a 25% referral fee. As an agent, I think you'd have to be crazy to walk away from a gift wrapped 75% commission.

Originally posted by Account Closed:

I've had great success with finding agents will to pay a 25% referral fee. As an agent, I think you'd have to be crazy to walk away from a gift wrapped 75% commission.

Agreed that agents should appreciate a solid referral ready to list and be happy to pay. To be clear about the math, when you say 25%, is that 1.5% of a typical 6% commission?

Originally posted by Kristine Marie Poe:
Originally posted by @Aaron Mazzrillo:

I've had great success with finding agents will to pay a 25% referral fee. As an agent, I think you'd have to be crazy to walk away from a gift wrapped 75% commission.

Agreed that agents should appreciate a solid referral ready to list and be happy to pay. To be clear about the math, when you say 25%, is that 1.5% of a typical 6% commission?

No, 25% of the agent's net. So if the agent lists for 6% on a $100K home and nets 3%, I get $750.

Originally posted by Account Closed:
Originally posted by @K. Marie Poe:
Originally posted by Account Closed:

I've had great success with finding agents will to pay a 25% referral fee. As an agent, I think you'd have to be crazy to walk away from a gift wrapped 75% commission.

Agreed that agents should appreciate a solid referral ready to list and be happy to pay. To be clear about the math, when you say 25%, is that 1.5% of a typical 6% commission?

No, 25% of the agent's net. So if the agent lists for 6% on a $100K home and nets 3%, I get $750.

So 25% of listing agent's commission. Thanks for clarifying.

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