Need advice on selling first wholesale deal. HELP

Larry Lee · 2011-10-06T08:06:32-07:00

I've just placed my first property under contract yesterday. I sent out an email to my buyers list yesterday as well with pics and info on the deal. My inspection period is 15 days but I'd like to have the deal assigned long before then if possible. The details are below. Any advice would be appreciated. I have Property under contract for $83,000 Tax value of property is $153,000 Estimated Repairs needed $25,000 After repair estimated value $180,000 My asking price is $88,000 The property is a 2700 sq. ft. lake front home sitting on half an acre of land with great lake views. My buyers list consists of 64 local investors but I plan on placing the property on craigslist if I dont get any bites by monday. After another 5 days or so Ill let other wholesalers know about the deal and just split my profit with them. Can any experienced wholesaler give me some advice on this deal. How long should I wait to get an offer from my list before placing it on craigslist or should I go ahead and place it there now? Is partnering with a local wholesaler a realistic last minute option? I'm just a bit anxious as its my first time going thru the process. Any advice would be greatly appreciated.

Darren McAfee

Wholesaler · Hattiesburg, MS · Member since 2011 · 21 posts · 0 votes

15y

First off, is this an area where your list of investors are looking to buy?
If this deal is as good as it looks, you shouldn't have any problem finding a buyer with a list of that size. Network with locals on this site as well. But, if I were you, I'd look for the first investor/buyer that can put up good earnest money and close quickly. As far as partnering with other wholesalers, that could also be an option, just make sure that both of you (wholesalers) have a solid agreement to ensure both of you get paid. Good luck, and can't wait to here how the deal pans out.

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Jerry PuckettPro Member

Wholesaler · Fort Worth, TX · Member since 2010 · 1k+ posts · 1k+ votes

15y

Hi Larry,
If all your numbers are accurate (and what the hey, I'll just assume they are), that's a pretty hot deal. I would have no trouble asking (and getting) 93-95k here in my area.

I would ask a little higher, then begin reducing your price if you're not getting the offers you should. Make your headline on Craigslist "Price Reduced!!" What are the average days on market for that area? That will play heavily into your buyer's plan. Lakefront property doesn't always move fast around here.

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Manny Cirino

Real Estate Agent · Winter haven, FL · Member since 2011 · 572 posts · 336 votes

15y

I say if you already sent out the blast call them directly tell them it is not list and tell each person they are your fist choice also. What I have found is that a good deal is gets you instant calls of interest. What I have found is that if you break down the numbers(not your purchase price obviously)in the email and list the repairs need an experience investor will instantly be able to compare you repair estimate to the repairs you listed, this right here is the deal breaker.

My first deal I told the guy everything wrong with it I means huge problems I know would kill the deals, I was nervous but the way I seen it was if I lie he will buy one time but will never buy from me again. He looks at me and says I appreciate your honesty, I don't any investor every told me the truth like you did. Then he says what title company do I leave my deposit at.

The best way to succeed is to build relationships with people. Email blast are great but you must follow up I know most investor(me especially) receive so many emails daily that some time we over look some.

Another thing I am big on is text message marketing people ignore emails but not text.

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Andy M.

Investor · Farmington, UT · Member since 2011 · 314 posts · 179 votes

15y

I agree with Manny, I hate email blasts. To impersonal. I would rather here from someone directly, at least that way you will know why they are or aren't very interested. You will learn a lot more and start to build relationships. That said, once you are established in the business and people know your deals are for real then an email blast might get you multiple interested parties and a highest and best situation.

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Larry Lee

OP

Real Estate Investor · high point, NC · Member since 2010 · 59 posts · 11 votes

15y

Thanks for the advice. I can see how an email blast would be impersonal and maybe even get overlooked. I'll start making calls tomorrow. I checked my stats and 47 people out of 64 opened the email so hopefully someone's just doing research and will get in contact with me soon.

The reason im not asking more is because its my first deal and to be honest I just want to get my first check out of the way, dont really care if its only 2 or 3k. Once i've gone thru the whole process once I think each deal after will be easier. Mainly because I will of got to know some of the investors on my list and also because the fear of the unknown will be gone.

I got a second deal set up today. Tax values $54,000 and he's willing to take $30,000. Property doesn't really need any repairs as he's kept it in good shape and is simply tired of being a landlord he says and is ready to retire. Only issue is there's a tenant in the property. Its renting for $545 a month and he says they pay on time and have been there for 3 years or so. I had him send me 6 pics of the inside and it looks good. Not sure about showing the property and having potential buyers walk thru so I havent placed it under contract yet. I'm thinking I can just put all of the pictures on my site and be specific that its occupied and only serious investors should go to view.

Anyway im off topic. Ill let you guys know how calling and talking to people works out. Thanks again for the advice.

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Larry Lee

OP

Real Estate Investor · high point, NC · Member since 2010 · 59 posts · 11 votes

14y

Just wanted to drop an update. Since I started calling investors last week i've gotten alot more interest in my lakefront deal. Had someone do a walk thru today and we spoke after he left. Basically he just asked what was the rock bottom price i'd take for it. After we spoke on price a little he said he'd think about it and if he was interested he'll call me with an offer. Not sure if ill actually get an offer from him or not but its one step closer to getting the deal assigned and its added experience for me. I'll update again when something new occurs. Thanks again for the advice i've gotten.

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Alex Jefferson

Real Estate Investor · White Plains, NY · Member since 2011 · 44 posts · 5 votes

14y

Good luck man. Please keep us updated on the progress.

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Tommy R

Wholesaler · Orange County, CA · Member since 2011 · 42 posts · 0 votes

14y

Why aren't you selling it 70x ARV - repairs?

You could make like 15 grand more! (right now you're only shooting for 5 grand??)

-yeah I would go to real estate meetings and pitch your property man.

-as for your 2nd property, made me laugh :) You have a good tenant inside? awesome.
a lot of people would like that, it's already ready to go!
to value that property you want to figure out the cashflow and divide by 7-15, 7 being if its in a nice area, great tenant, towards 15 if its like a trailer park type situation.
-check out loopnet.com for more, but assuming its about a 10% cap rate.
Say $450 net cashflow is $5,400 yr, x by 10 and it comes out to your same property value of $54,000. Just so you know, IF you got a tenant in there paying more the property value would increase, thats another way to make bank.

good luck.

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Manny Cirino

Real Estate Agent · Winter haven, FL · Member since 2011 · 572 posts · 336 votes

14y

Chances are he won't call you back so follow up with him(don't harass him) be prepared to drop you price. Always remember what you will make in profit in a real estate deal most likely still be more than what you make at a 9-5. Be flexible and get it done.

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Larry Lee

OP

Real Estate Investor · high point, NC · Member since 2010 · 59 posts · 11 votes

14y

Quick update. The lake front home didnt sell. The offers I was getting where between 62k and 65k, When I spoke to the owner about getting a lower price he said he still owed 73k on the property so that ended that deal.

The second property which was the one that is already rented out and doesnt need any rehab I had under contract for 30k with a tax value of 54k. Its renting for $540 a month. The highest offer I got was 23k so I went back to him and tried to get the price down to 20k on our original contract. He said the lowest he could go was 25k and I said my funding partner wont pay above 20k. He said he'd think about it and talk to his accountant and let me know in a couple days. Thats basically where im at now.

Even if I dont assign the second house i've learned alot about my market and what type of deals my local investors are looking for. The advice about calling them instead of simply emailing them was golden. Ill update again if im able to assign the deal.

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Joe O

Investor · Las Vegas, NV · Member since 2011 · 92 posts · 25 votes

14y

You should be able to get 30k on that, leaving you 5k profit. At 30k it almost meets the 2% rule (and exceeds at 25k), 10.8% cap rate @ 30k (13% at 25k) using the 50% rule. Numbers seem good, the buyers will come.

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Tommy R

Wholesaler · Orange County, CA · Member since 2011 · 42 posts · 0 votes

14y

Im surprised your first property didn't sell, if the ARV was really 180k you should have easily got 70% ARV - repairs.

Things I would look at are:

1) Are your ARV and your repair estimates correct?

2) Do you have a large enough network of buyers?

Money chases good deals

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Larry Lee

OP

Real Estate Investor · high point, NC · Member since 2010 · 59 posts · 11 votes

14y

Just wanted to give a quick update. It took some time but the owner of the rental property agreed to take $20k and I just got the signed contract back from him today. I'm going to offer it to my list at $23,500. I'll send out a broadcast tomorrow morning and call some of those on the list that I've spoken with. Again its renting for $525 a month and tax value is $53,700. Ill update again once im able to assign the contract or if I have issues.

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Steve L.

Investor · Rancho Cucamonga, CA · Member since 2008 · 1k+ posts · 684 votes

14y

I would offer it to your list higher, 25k or 27.5k. You can always negotiate...

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Luigi Ontiveros

Wholesaler · Del Mar, CA · Member since 2011 · 58 posts · 17 votes

14y

Congratulations on having the courage to GET STARTED!!

Looking forward to seeing how your first deal pans out.

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Keith Saunders

Real Estate Investor · Pittsburgh, PA · Member since 2011 · 60 posts · 17 votes

14y

Hey Larry,

Can't understand why nobody would want that lake house if all the numbers were right.

How are you determining your ARV?
How are you determining your repair costs?
Are you actually buying these homes or just getting them under contract in hopes of assigning them to another buyer?

Also, don't put any faith in what the tax value of the property is. I just bought a house who tax value is listed at $21K while the market value untouched is $90K.

Im guessing something is wrong with your numbers. Either the repair estimate is way low or the ARV is way high.

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Larry Lee

OP

Real Estate Investor · high point, NC · Member since 2010 · 59 posts · 11 votes

14y

I used the owners last appraisal, which is of course many years old, as my ARV on the lake house. The number fell in line with the high comps for the area. My repair estimate was low. The guy who came out told me it would be more like 40k to repair and I had the repair estimate at 25-30k, anyhow I made several mistakes any number of which could be the reason why it didn't sell. Several people I spoke with said they were only interested in smaller deals right now so thats what ill attempt to focus on. Anyhow I learned what I needed to and on to the next one. Ill keep trying till I get it right. Also im not buying them, just putting them under contract in hopes of assigning to an end buyer.

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Larry Lee

OP

Real Estate Investor · high point, NC · Member since 2010 · 59 posts · 11 votes

14y

I sent out the info and pics of the property to my list and still no ones contacted me. Can one of the more experienced wholesalers take a look at my profile page for the property, its the exact same thing I sent to my list. Did I do something wrong?
http://www.nccashdeals.com/propertydetails.aspx?pid=5431&sid=5811
I priced it as low as I could to give myself room to negotiate even a small profit just so I can get my first deal under my belt.

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Jerry PuckettPro Member

Wholesaler · Fort Worth, TX · Member since 2010 · 1k+ posts · 1k+ votes

14y

Just a few stray thoughts....

Who are the buyers on your list? Do you have rehabbers and buy and hold guys? This is a buy and hold with the tennants in place...most flippers would be annoyed by them unless they were looking to do a slow flip.

Do you have or can you get MLS access? Sometimes when I'm stuck, I search out the other landlords in the immediate vicinity by checking out the recent cash sales. You can also check the tax data base for out of area owners who have bought property in the last year.

Also check Craigslist for landlords...call and ask if they're interested in more properties at a great discount.

Throw out a few bandit signs around the neighborhood....

But the BEST way is to know what your buyers want first, then go out and find it. Hope this helps.

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Larry Lee

OP

Real Estate Investor · high point, NC · Member since 2010 · 59 posts · 11 votes

14y

Jerry,
I built my list by locating all of the cash buyers from the past 5 months in the city the property is in, I sent all 900 of them a postcard basically stating I was a wholesaler and had other properties near the one they own that they could view. The postcard had my squeeze page address info and when they got to the website they joined the list, I stipulated on the squeeze page I was a wholesaler and only dealing with cash buyers, which im sure all 65 of those on my list are as thats all I marketed to.
I do have access to the mls and I've allready contacted my agent and gotten the addresses of those properties that were recently paid for with cash. I looked them up and found the buyers contact info and sent a hand written letter to each. I got 1 call back but the person wasnt an investor. They just paid cash for the property.
I havent tried craigslist so i might check that next. If I dont get any bites by tomorrow ill let the other wholesaler that I met know about the deal, He's more established and might be able to help if I agree to split the profit.

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Will BarnardPro Member

Moderator

Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes

14y

I just saw this thread, hence my late response. It appears as if you have figured out what went wrong with the lake House, but in case you are not sure, let me be crystal clear for you.

1. NEVER use or even factor tax values.
2. Never rely or use any seller's appraisals (they can be manipulated)especially one that is 2+ years old.
3. Learn how to properly factor your rehab costs.

Many of the common mistakes newbies make while trying to wholesale are intentionally or non-intentionally misrepresenting exit values (ARV's), not properly evaluating rehab costs and showing lower numbers to buyers than the actual. Doing these things will lose your credability with your buyers.

The moment I read your numbers on the deal listed in your first post, I was 99% sure they were inaccurate without even knowing any other deatils or knowing your area (which is clear across the country from me). The reason I knew that is that at the price range of $80k or so, it is very difficult to find deals at 60% of exit value (that is acquisition, plus rehab, divided by ARV).

Lets assume the exit value is more like $160k and the rehab is $40k, investors at those price ranges will likely be looking at the deal like this:
$160k X .7 (70%) = $112k minus $40k repairs = $72k max offer. So if you are the original buyer, you now know that your buyers will need to purchase this property at approx. $70k which means you would have needed to lock it up at $65k or less for your profit margin.

Hope that helps, now incorporate what you have learned and go find more deals (and more buyers)

Podcast Guest on Show #130

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James H.

Investor · Fort Worth, TX · Member since 2011 · 1k+ posts · 450 votes

14y

When it comes to marketing, cast your net wide and fast. I don't care if you are in RE or not. I say this because I noticed you were waiting to list your property on CL until your buyer's list people had some time (even though only a small amount of time). I would put the add on CL first thing so that add can be doing work while I call the investors. If a deal is a little better than good, it will move right off CL. Calling 65 people is NOTHING. Make no mistake, no matter what you are trying to sell, you need to make as many "touches" as possible.

If you can find a way to access the Spanish speaking market, you might be readily surprised how many more people than you thought have 25K waiting to buy a house.

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Rob Gillespie

Specialist · Cleveland, OH · Member since 2011 · 1k+ posts · 852 votes

14y

congrats Larry!!!
GET IT ON CRAIGSLIST NOW!! don't wait, this is what builds your buyers list! Lots more to discuss, but don't hesitate, get it in the paper and all over the web fast!!!! :mrgreen:

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Larry Lee

OP

Real Estate Investor · high point, NC · Member since 2010 · 59 posts · 11 votes

14y

Quick update. I checked my messages and had 1 voice mail from someone on my buyers list. I called and he said he wants to view the property this afternoon. Also I placed the property on Craigslist this morning so ill see how that pans out also. If nothing else hopefully it will add to my buyers list.

Ill be studying up on figuring proper rehab costs and After repair values also. Don't want to make the same mistakes twice.

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Will BarnardPro Member

Moderator

Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes

14y

Now you are on the right track!
Let us know how it turns out.

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Need advice on selling first wholesale deal. HELP

Need advice on selling first wholesale deal. HELP

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