Washington DC, Washington D.C. · Member since 2011 · 25 posts · 25 votes
I wholesale deals in the Washington DC, Maryland, Virginia, Market, I enjoy doing deals and helping others get started. Just wondering if anyone is running into roadblocks starting thier wholesaling business. Lets start a discussion
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
13y
Even with an S-corp, this SET avoidance may or may not work, and may or may not matter.
If you make, say, $10K a year from your business, and a reasonable salary for the job you're doing would be $20K a year, then you won't get away with paying yourself $1 in salary and distributing the other $9,999 as dividends. The salary is subject to SET, but dividends are not.
OTOH, if you make $40K a year from your business, and a reasonable salary is $20K, you could distribute $20K as dividends and other $20K as salary and pay SET only on the $20K salary.
Yet another factor is there is a limit on the amount taxed for social security (the bigger portion of SET) of $110,100 in 2012. If you have a good day job, and make that much or more, you won't be paying the social security portion of SET on your RE income in any case.
My response in your other thread, Cara Smith was more general. New investors often get wrapped up in setting up LLCs, thinking up company names, building a "power team", designing business cards and other minutiae. Doing all that stuff makes you feel like you're accomplishing something. But it really doesn't mean squat. What matters is looking at properties and making offers. Get out there and buy something, or at least work toward making deals.
Jonathan E., if you're paying tax on your gross earnings, regardless of your entity structure, you need a new CPA.
Washington DC, Washington D.C. · Member since 2011 · 25 posts · 25 votes
13y
I generally will do any deal that will turn a profit. I very rarely will turn any deal down. My average deal is between 5K to 10K, but I'll unashamedly say that Ive done a deal as small as $500.
One reason I don't mind doing this is because Im able to outsource alot of the process (which I do especially on smaller deals i.e. showing the property, marketing the deal online etc). Everyone has thier own preferences but I prefer to concentrate on volume rather than huge checks. Don't get me wrong huge checks are nice, I just haven't had one in a while lol. I'll take 5k -10k for now.
Rental Property Investor · Atlanta, GA · Member since 2012 · 256 posts · 64 votes
13y
i have a few questions...
what's best way to find accurate value of deal and how do u get real comps? In other words, how do u tell instantly if it's a deal or if you'll be sitting on it wasting your and seller's time?
Do u do your own repair estimates? If not, what is cost to get this per property?
How much marketing budget should be put out monthly for direct mail/signs etc to get good deals to come your way?
Do you invest or do jv partnering in Atlanta area?
Washington DC, Washington D.C. · Member since 2011 · 25 posts · 25 votes
13y
The value of a deal is always based on what Cash buyers are willing to pay for it, sure ARV can be factored but the best practice (if your in an area with investor activity, which you should be) is to find out what other investors have paid for on similar properties.. The best way to get this info is to partner with a realtor and ask for Cash comps in the area. Its a quick search and most realtors wil be willing to do so if you feed them leads that you can't wholesale. Best place to find them is your local rei or investor forums.
There are other products (which I won't mention) that give access to cash comps. If there are no cash sales in the area, first question if the neighborhood is conducive to wholesaling. If so, I normally calculate 65% of the ARV-Repairs -assignment and offer to the seller.
The repairs I run are extremly rough and prices can very depending on what neighborhood your in. I give a general figure but leave the exact number to my end buyer. I got better at estimating repairs by sending video walkthroughs of properties to local contractors to analyze and advise me on. It cost me nothing but I promised to give them $200 for thier time if I closed the deal. I simply found them on craigslist.
Your third question is tough to answear, it depends on how much liquid cash you have to spare. I find that almost every 20-25 leads equals a house under contract, so you've got to do enough to get that going. It really depends on what type of marketing your doing and how good you are on the phone.
Rental Property Investor · Northern, CA · Member since 2012 · 5k+ posts · 5k+ votes
13y
With all the wholesaling questions asked on here on almost a daily basis by new wholesalers and those who want to be wholesalers, I'm surprised this thread isn't on fire right now.
Regardless, that's pretty cool of you Bruce to offer to share your knowledge with others here.
Property Manager · Gilbert, AZ · Member since 2009 · 1k+ posts · 451 votes
13y
I'm getting ready to start up a direct mail campaign and I'm looking for a letter or letters/cards and a list or lists. Any recommendations on letters and lists for wholesaling purposes, it's the sellers I'm looking for, I'm not so concerned about buyers. I've used Sales Team Live in the past and thought they were kind of expensive.
Washington DC, Washington D.C. · Member since 2011 · 25 posts · 25 votes
13y
A few lists that I like are
Probates
Inheritance List
Out of State Absentee Owners with Purchase dates before 2000
I really like the yellow letter with a simple message that says My name is _____ and I'd like to Buy your property located at ______ if your interested in selling, give me a call today at ___________.
Ive learned that no sales copy, no matter how great can create motivation. If a seller is motivated he/she is going to call (as long as your message is reasonable). The key is budgeting enough to consistantly touch your list, and actually answering the phone or getting back to them when they call.
In my opinion if you have limited leads its best to answer or have them respond after a very short voicemail greeting instead of having your sellers jump through a bunch of hoops to talk to you.
Several popular courses teach otherwise, but they're based on the Guru's system thats producing him 200 + leads per month. This is a people business. So talking to people is key.
Property Manager · Gilbert, AZ · Member since 2009 · 1k+ posts · 451 votes
13y
Thanks for the input Bruce.
With a smaller budget I'm thinking of sticking to one list and I'm leaning towards the Absentee Owners. I like the short yellow letter, I've tried the the big guru methods now it's time to streamline a little bit. I've also used an answering service and would prefer to streamline that as well.
Washington DC, Washington D.C. · Member since 2011 · 25 posts · 25 votes
13y
Thats tough to answer because every situation is different. The main thing you need to determine is the seller's motivation. If they have no real reason to sell, you won't have a wholesale deal no matter what you say.
The only reason a seller agrees to selling thier property far below market value is that it has become thier best option....... or rarther thier least worst option. When you talk to a truly motivated seller you wont have to do much convincing, you'll know within a few minutes of the conversation.
Once you determine why they need to sell, your job is to explain why working with you can solve that problem.
As far as numbers go, you can always point them to similar properties that have sold to investors recently, and let them know what investors are buying for. Of course repairs are also a negotiatiion point.
But the best method of getting sellers to agree to your price is helping them realize what will happen if they don't sell.
Pending forclosure
Property liabilities
Delayed Cash
Continued Mortgage Payment etc
You can' create motivation, your job is to find it.
Rental Property Investor · San Diego, CA · Member since 2011 · 1k+ posts · 1k+ votes
13y
Originally posted by Bruce Duval:
You can' create motivation, your job is to find it.
This right here folks, pay attention. You can get caught spending way too much time with a seller who has zero motivation. Follow up, but don't hold on to it. Move on to the next lead.
Washington DC, Washington D.C. · Member since 2011 · 25 posts · 25 votes
13y
lol just saw a typo in my post... Just to be clear, what I intended to so say is that "you CAN'T create motivation, your job is to find it"...... Im in the middle of building a website cut me some slack lol
Structural Contractor · Leesburg, VA · Member since 2012 · 4 posts · 1 vote
13y
Hey Bruce
I appreciate you putting up this thread, I stumbled onto this site and have found alot of helpful information.
I have been contemplating getting started in wholesaling, and fix & flip for a month now, I've been doing as much homework as I can and have a pretty good grasp of the concept. Lead generation is key in my mind to establishing a profitable venture, but I could probably use some help with structuring my business correctly as well. My concern is finding the most cost effective strategies to accomplish these tasks.
I am a contractor in NOVA, & DC. I'd love to find people in the business to network with.
Landlord · Dallas, TX · Member since 2012 · 505 posts · 34 votes
13y
Bruce Duval
Why are you a strong proponent of yellow letters? Why not post cards, you could reduce your marketing budget and use that larger budget to throw a wider net. My assumption is, if the seller is MOTIVATED it shouldnt matter how fancy your marketing piece is, as long as your getting the message out to them be it yellow letter or post card.
I am thinking about buying a couple months worth of yellow letters to see what the response rate is like. Either way im eager to give yellow letters a try.
Washington DC, Washington D.C. · Member since 2011 · 25 posts · 25 votes
13y
Chris Langston sounds good, as a contractor you would have a great headstart as far as evaluating repairs. We're in the same market so Im always available.
Samantha M. I guess I just go with what I get a better response rate from. A few things to consider though. Most people who call (unless they hang up or curse you out lol) have at least considered selling thier house, many of them however are just not ready yet, or at least not ready for your terms. Once you connect with them and collect basic info, you can follow up and when they are ready they will sell to you. With that said yellow letters generally produce more calls and more opportunities to build a relationship (through my autoresponder of course lol).
In addition, since they are much cheaper, the majority of wholesalers will use postcards, therefore your We Buy Houses postcard just goes in the pile with everyone else's. If that seller is motivated they will just randomly pick a postcard and call. Hopefully it will be yours! In my experience absentee landlords get more posctcards than yellow letters (ask me how I know!) I actually use both postcards and yellow letters but I prefer yellow letters.
Landlord · Dallas, TX · Member since 2012 · 505 posts · 34 votes
13y
Bruce Duval Thanks for the informative reply. When you say auto responder how does that work? Does it try and pre qualify incoming calls for you so you can deal with people that have are motivated/have equity etc?
Is there some service out there where I can buy an auto responder or it a smart phone app?
Brighton, SA · Member since 2012 · 8 posts · 1 vote
13y
@Bruce Duval
I am new to real estate investing in the USA but looking to purchase auction sales in Dallas and Atlanta. Do you buy in auctions? Can you recommend any teams that can help with research in these areas?
Washington DC, Washington D.C. · Member since 2011 · 25 posts · 25 votes
13y
Samantha M. An auto responder is attatched to an email service where you can send out a series of predetermined emails over a period of time. These emails are designed to remind or inform potential clients about your business or in this case your offer. If you have been doing any research in real estate I guarantee your on at least three of them already lol.
Matthew Philipchuk I don't buy at auctions because of the strategy I specialize in (wholesaling). Im not sure of any teams or folks who are doing auctions in Dallas or Atlanta. You may want to find some investors here on biggerpockets who are in those markets and start networking.
Landlord · Dallas, TX · Member since 2012 · 505 posts · 34 votes
13y
Bruce Duval Great stuff, thanks again!
Also I wanted to ask you. How long did it for you earn enough money to transition to wholesaling full time? Also if there is one or two things you wish you would have known when you first started, what would they be?
Washington DC, Washington D.C. · Member since 2011 · 25 posts · 25 votes
13y
Samantha M. your welcome!
Actually I don't wholesale full time, I run another business as well which I love also! (not real estate related at all) One thing I wish I knew when I first started was NOT TO BUY A BUNCH OF OVERPRICED COURSES! I wish I had known to stop trying to learn everythhing and just start marketing.
You don't make money learning, you make money taking action. If you get stuck, just get on Bigger pockets and ask a question. Network with successful people and they won't let you fail (especially if you partner with them and they have something to gain by helping you). Work smart not hard and leverage other people's expertise.
Property Manager · Gilbert, AZ · Member since 2009 · 1k+ posts · 451 votes
13y
Bruce Duval "One thing I wish I knew when I first started was NOT TO BUY A BUNCH OF OVERPRICED COURSES! I wish I had known to stop trying to learn everythhing and just start marketing"