Whats More Profitable? Marketing To Sellers/Buyers

Wholesaling
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Whats More Profitable? Marketing To Sellers/Buyers

ED Russo
ft Lauderdale, FL · Member since 2010 · 68 posts · 4 votes

I have been marketing to sellers which cost $$$I spoke to a local wholesaler that markets others deals to her buyers list. He told me he spends most of his time marketing for buyers. In fact there two big wholesalers that do this locally. Whats more profitable? thank You

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Jerry PuckettPro Member
Wholesaler · Fort Worth, TX · Member since 2010 · 1k+ posts · 1k+ votes
14y

Okay, hold em up there a minute and think this through. It looks like this has been on your mind for some time by looking at your last few posts.

It sounds to me like you're looking for a different way to skin a cat. But a wholesaler is someone who markets for deals...finding a real deal is the bread and butter. Your value as a wholesaler is your ability to find that deal. It's NOT easy, it DOES cost money. But as you know is highly rewarding.

Marketing other wholesalers deals? The way that tends to work is that wholesaler 1 sets a price, wholesaler 2 (in order to get paid) must mark it up a little more. If it ever was a deal in the first place (and I question that because it's not tough to find a buyer for a good deal) by the time it gets marked up and sent around, there is nothing left for the investor.

Believe me ED Russo, you do not want the reputation of a reseller. If you can find the occasional deal with enough meat to mark up, or if someone comes to you specifically asking for a buyer, nothing wrong with that. But don't peddle crap. Better to partner up with someone where one does acquisitions and the other does sales.

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  • Gary Parker
    Real Estate Professional · Salt Lake City, UT · Member since 2010 · 609 posts · 163 votes
    14y

    Do you have the deals in hand to market to buyers?

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  • ED Russo
    OP
    ft Lauderdale, FL · Member since 2010 · 68 posts · 4 votes
    14y

    Right this minute I do not have any deals. just closed my last one from my marketing efforts. I am on several email list and I noticed the same houses appear on all three list. Which leads me to believe there must be money to be made even if you market other wholesalers deals.

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  • Jerry PuckettPro Member
    Wholesaler · Fort Worth, TX · Member since 2010 · 1k+ posts · 1k+ votes
    14y

    Okay, hold em up there a minute and think this through. It looks like this has been on your mind for some time by looking at your last few posts.

    It sounds to me like you're looking for a different way to skin a cat. But a wholesaler is someone who markets for deals...finding a real deal is the bread and butter. Your value as a wholesaler is your ability to find that deal. It's NOT easy, it DOES cost money. But as you know is highly rewarding.

    Marketing other wholesalers deals? The way that tends to work is that wholesaler 1 sets a price, wholesaler 2 (in order to get paid) must mark it up a little more. If it ever was a deal in the first place (and I question that because it's not tough to find a buyer for a good deal) by the time it gets marked up and sent around, there is nothing left for the investor.

    Believe me ED Russo, you do not want the reputation of a reseller. If you can find the occasional deal with enough meat to mark up, or if someone comes to you specifically asking for a buyer, nothing wrong with that. But don't peddle crap. Better to partner up with someone where one does acquisitions and the other does sales.

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  • ED Russo
    OP
    ft Lauderdale, FL · Member since 2010 · 68 posts · 4 votes
    14y

    thanks Jerry

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  • Michael Quarles
    Flipper/Rehabber · Bakersfield, CA · Member since 2008 · 3k+ posts · 3k+ votes
    14y

    @Jerry

    What the heck is wrong with reselling property? The reality is that wholesaing is the most expensive form of investing...

    And when reselling for maximum gain the investor has more money for more marketing thus more money ..

    To Eds question. When bought correctly selling is somewhat easy. I dump everything I buy on the MLS as soon as I have it under contract. Since buyers think agents work for free and 92? use an agent then I need my product there the buyers are searching

    And if I buy at 70? I can pay 6%.

    1Reply
  • Jerry PuckettPro Member
    Wholesaler · Fort Worth, TX · Member since 2010 · 1k+ posts · 1k+ votes
    14y
    Originally posted by Michael Quarles:
    @Jerry

    What the heck is wrong with reselling property? The reality is that wholesaing is the most expensive form of investing...

    Michael, Resellers have the worst reputation in my town for the reasons I listed above. Nothing left of the deal. That's why they're always having to find new buyers.

    As I said, if you can find deals that have enough meat on them (and those will be few and far in between), or find someone willing to pay you out of their profit without another mark up, nothing wrong with that.

    What I objected to was peddling crap. Surely you share that objection? You also stated that properties must be bought correctly, and I agree that when they are, they are pretty easy to sell.

    Part of your MLS answer I didn't really get...


    I think there were typos...

    Also:

    Color me stupid, but if I'm reading this correctly, you buy at 70% and since you're going to pay 6% you're marking it up how much? I can't sell anything around here for more than 70%. Maybe just a tad higher to buy and hold types, but I've never really tried to reach the retail market.

    If I'm totally off base in my understanding, please enlighten me, I love to learn.

    1Reply
  • Randal McLeaird
    San Antonio, TX · Member since 2010 · 93 posts · 32 votes
    14y

    back to the original question - if you don't have a deal to sell what are you selling? So, if you're going to wholesale, I'd market to sellers. Work on your marketing pieces and test everyting you're doing. If it doesn't work - dump it.

    I agree with the crap people put out in my town. If a 'wholesaler' gets a deal from another guy and adds his fees - the numbers will rarely work. Their numbers rarely work as it is. So many of them are inflating their ARV to guys who don't have access to MLS and they just keep burning their buyers so they have a very high turnover of their buyer's list.

    My advice would be to get a deal and the buyers will follow. Don't get sucked into swindling people if you have to alter numbers.

    1Reply
  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    14y

    Jerry Puckett I'm curious about your objection to "crap peddling'. Why does it matter what someone else is selling if you don't want it? The MLS is full of overpriced REOs. FSBOs are often being sold by people with pie in the sky pricing. No one objects to that, we just ignore it or make offers that work for us. Is it the wholesaler's marketing that is so objectionable?

    This has been covered on another thread, but isn't a bad deal from a wholesaler just a push of the delete button?

    All sales, except new construction, are re-sales. Why does anyone care how many times it's been sold previously if you are buying right for your purposes. If the deal is thin, then you wouldn't buy it. I've never bought from a wholesaler, not because I care about re-selling, but because no wholesaler has ever brought me a deal that was good for anyone, let alone re-selling. That being said, I've been doubled flipped more than once. My buyers knew they had buyers that would pay more. I didn't know that or thought I was at max value, so they made the difference. They don't have a bad reputation.

    I'm with Michael Quarles on this. If I'm buying right, I can put it on the MLS and pay 6% or 3% for a flat fee listing. I have a couple of repeat buyers that get first dibs at my asking price, but if they don't take it in a day, it goes to the main market place. The market place where no one cares if I'm "crap peddling". :)

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  • Jerry PuckettPro Member
    Wholesaler · Fort Worth, TX · Member since 2010 · 1k+ posts · 1k+ votes
    14y

    K. Marie Poe,
    So, Okay, I'll try this one more time....

    In regards to the O.P.'s question, Do you believe that peddling overpriced "deals" (which is what I call crap) is particularly profitable? Think you're going to have buyers beating down your doors? I don't. I am not answering from the perspective of someone who has been burned by or is tired of wholesalers. But hey, if anyone wants to spend time floating junk around and not having anyone buy it, by all means, have at it.

    The qualifier that you, me and Michael Quarles all seem to agree on is the "If I'm buying right". And in my experience, from the resellers around my town, the "deals" have no room in them.

    So again, if you find a "deal" worth peddling, resell it! If not, don't waste your time!

    0Reply
  • Michael Quarles
    Flipper/Rehabber · Bakersfield, CA · Member since 2008 · 3k+ posts · 3k+ votes
    14y

    Jerry Puckett

    Sorry for the typos... BP doesn’t work 100% on an android...

    I ran a count on my market for the last 3 months. Here are the numbers

    Total Properties Sold 1693
    Total Properties Sold using MLS 1445 (85%)
    Total Sold all cash 519
    Total Sold to Investors 314
    Total Sold to Investors who bought more then one property 16

    My model markets to a majority of the 1693 (85%), yours at best markets to 314 and in reality a ton less. Which means I have a 5 time better chance of selling then you do at worst case.

    My model allows me to make 21.75% of the resell value (I know historically 8.25% covers expenses) yours at best is 10% of the potential profit. So lets assume a 100,000 dollar deal being bought at 70k. I make 21,750.00 you make 3,000.00.

    You cant sell for more then 70% because youre a wholesaler... Learn how to buy houses and make the rest of the money. The key reason people wholesale is because they dont know where the money is.

    With that said there are plenty of investors doing both very well. They cherry pic their deals, keeping the great deals and wholesale the marginal deals.

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  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    14y

    K. Marie Poe - You are certainly correct that hitting the delet button is easy, what Jerry is trying to get across (I think) is that by peddling garbage, you generate a bad name for yourself and if and when you ever do get a good deal locked, it is likely that some of your potential good buyers have removed themselves from yoru database or simply hit delete without even glancing at the deal expecting it to be crap. That is the danger and the reason why many of us warn not to do this.

    IF you want to work with other wholesalers and market their deals, arrange to split the current mark-up, not add more mark-up. You must leave enough room for the buyer or you have not got a deal.

    I don't know Michael's techniques (other than he is one hell of a yellow letter marketer) but it seems to me that if you could find a good deal with room in it, all you need is a buyers list to sell that deal to. I don't exactly get why you would want to add in costs of marketing the deal on the MLS with agent fees. Perhaps I am missing something.

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  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    14y

    Michael Quarles - That is interesting Michael, so if I get your strategy correctly, you buy homes that are in a condition good enough to then sell to an end retail buyer who is likely paying full market value, correct?

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  • Michael Quarles
    Flipper/Rehabber · Bakersfield, CA · Member since 2008 · 3k+ posts · 3k+ votes
    14y

    Will Barnard

    In most cases I buy As Is and sell As Is... I dont consider ARV...The condition doesnt matter. And frankly the worse the better. If you look at my market numbers almost 1/3 of the houses sold are sold for cash so financing doesnt matter.

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  • ED Russo
    OP
    ft Lauderdale, FL · Member since 2010 · 68 posts · 4 votes
    14y

    Way to go Mike!!! Numbers don't lie!!! Thanks for breaking the numbers down for us.

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  • Rusty Thompson
    Real Estate Investor · Salem, OR · Member since 2011 · 422 posts · 149 votes
    14y

    Michael Quarles

    Would you mind going into a more in-depth description of what exactly you are doing? If you are re-listing, are you remedying any deficiencies that would keep them qualifying for conventional? How many time have you had to deal with irate customers when they see their house on the MLS?

    I second that this site does not work well enough on Android. Still crashes my browser intermittently.

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  • Jerry PuckettPro Member
    Wholesaler · Fort Worth, TX · Member since 2010 · 1k+ posts · 1k+ votes
    14y
    Originally posted by Michael Quarles:

    Total Properties Sold 1693
    Total Properties Sold using MLS 1445 (85%)
    Total Sold all cash 519
    Total Sold to Investors 314
    Total Sold to Investors who bought more then one property 16

    My model markets to a majority of the 1693 (85%), yours at best markets to 314 and in reality a ton less. Which means I have a 5 time better chance of selling then you do at worst case.

    Okay, totally get this part. Makes a lot of sense

    Originally posted by Michael Quarles:
    My model allows me to make 21.75% of the resell value (I know historically 8.25% covers expenses) yours at best is 10% of the potential profit. So lets assume a 100,000 dollar deal being bought at 70k. I make 21,750.00 you make 3,000.00.

    You cant sell for more then 70% because youre a wholesaler... Learn how to buy houses and make the rest of the money.

    This I'm fuzzy on. Maybe because I'm a wholesaler. I have yet to talk to a cash investor who will pay more than 70% of ARV. (while you may ignore ARV, I haven't met any buyers who do.) I wish you would start another thread like the Mary Letter thread where you lay it all out, because I sure would like to learn how to buy houses and where the money is.

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  • Jon Klaus
    Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
    14y

    I think Michael is talking about retailing now, not wholesaling? Buy it for 70% of value, sell it for 100% of value, subtract cost of sales and holding, and keep near 20% of deal.

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  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    14y

    Jerry Puckett Thanks for your reply. I guess I read the OPs original question differently. I didn't hear him ask about peddling or re-peddling crap. Rather, that there might be room in one of the wholesale props he's seeing being offered and that he might be able to better market it and then profit from it. He realizes that it would be cheaper (free!) to sort through a list of wholesale props than it is to market to sellers. I thought it was a good question actually. Marketing is expensive. If there is one wholesale deal with enough equity in....say 25 props being offered.....all you've lost is a little research time.

    Will Barnard You asked why spend 3-6% on marketing a property when you can just sell it to someone on your buyer's list. Right now my buyer's list buyers are not paying what the market will bear. And I have no way of knowing what the market will bear without the MLS. Lots of out-of-town investors, people just trying to place cash, newbie IRA investors, exchange buyers, etc are looking for props. Many of them will be one time purchasers. They are not buyer's list material. They wouldn't ever buy directly from a seller. They pay more and they use the MLS. The MLS is the number one place to find the highest bidder. Investor props bought with cash don't have appraisal limitations, so what a buyer is willing to pay sets the price, not a lender. Imagine if most retail buyers in your market had cash and could buy the house they want as opposed to the one the lender will loan on. Well, it's kind of like that right now for me. I'm sure you are seeing this where you are....newbie rehabbers or landlord buyers making offers on REOs that make no sense. They aren't using the formulas you or I would use. Sometimes it looks like they are using no formula at all. I

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  • Jon Klaus
    Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
    14y

    ED Russo Answer to the original question: SELLERS. You make your money when you buy right.

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  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    14y

    Sounds like that to me too, only his end buyers are also cash buyers because in his market, 33% of them have cash to close so like he said, who gives a crap on condition, in fact, the worse it is, the better spread he can likely get. Such a strategy would not work in my local farm area as the percentages are not the same and the cash buyers are mostly investors, not end users, plus I do not live in a landlord friendly environment because the cost to buy vs the rent does not make sense.

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  • ED Russo
    OP
    ft Lauderdale, FL · Member since 2010 · 68 posts · 4 votes
    14y

    thanks Jon

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  • Jerry PuckettPro Member
    Wholesaler · Fort Worth, TX · Member since 2010 · 1k+ posts · 1k+ votes
    14y
    Originally posted by Jon K.:
    I think Michael is talking about retailing now, not wholesaling? Buy it for 70% of value, sell it for 100% of value, subtract cost of sales and holding, and keep near 20% of deal.

    I thought so at first except that he said this:

    Originally posted by Michael Quarels:
    In most cases I buy As Is and sell As Is... I dont consider ARV...The condition doesnt matter. And frankly the worse the better. If you look at my market numbers almost 1/3 of the houses sold are sold for cash so financing doesnt matter.

    K. Marie Poe

    Originally posted by K. Marie Poe:
    ....there might be room in one of the wholesale props he's seeing being offered and that he might be able to better market it and then profit from it.

    Which I agree with, and have from the beginning. Just thinking that likely he'll have to sort through hundreds to find a good one, because most of the good ones are gone within hours.

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  • Michael Quarles
    Flipper/Rehabber · Bakersfield, CA · Member since 2008 · 3k+ posts · 3k+ votes
    14y

    Rusty Thompson

    I have only had one seller voice concern. Most are happy with the deal. And I actually tell them what I am going to do...

    The following is in my agreement

    XIV. RESELL: Seller authorizes the Buyer to enter into a sales agreement to resell the property during this escrow period. Seller is aware that Buyer intends on reselling the property for a HUGE PROFIT. All profits made by Buyer during this transaction relating to the reselling of the property are the sole interest of and solely owned by the Buyer.

    XLVII. MARKETING: Seller authorizes Buyer to market property during escrow for Buyers benefit. Marketing is defined as, but not limited to, placing the property for sale in the Real Estate Multiple Listing Service (MLS), advertising in the Newspaper or other periodical, and placing a for sale sign on the property.

    You can download the entire contract at http://www.yellowlettermail.com/Calls.html

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  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    14y

    Michael, in such a scenario, have you ever had the situation wheer you did not find a buyer and if so, what did you do, cancel contract, or close with your own cash?

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  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    14y

    Jerry Puckett While I'm busy trying to write where I'm coming from, Michael Quarles showed you numbers for my area that I didn't even know. I'm coming at the issue of reselling totally from recent experience with no data. I'm not imagining it. There's a lot of cash buyers. The formulas that you and I use to determine profit is simply not being used by all cash buyers.

    Why not test it where you are? Take your next deal and go directly to the open market.

    Of course, there are reasons besides profit to work with regular buyers. I have one buyer and his crew that will show up for me and help anyway they can and have for 10 years. They haul and clean and paint. He recently GCed a minor rehab for me. I offer him all props in his price range first because we have a relationship. But there's a lot of stuff that doesn't fit his criteria so why not find out what others want to pay.

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