Joining the 1%
Rental Property Investor · Manchester, NH · Member since 2013 · 447 posts · 81 votes
I've seen it written that 99% of people that come on here and claim they are going to try wholesaling do not do one deal. Not the best of odds. I'd like to think I have a few things going for me that will increase that odds.
How or why do you think the 1% make it?
Success in Wholesaling is 80% marketing for deals. As Curtis C. points out, its a numbers game. Let's say for every 100 pieces you send out you generate 1 lead. And let's say for every 50 potential leads you look at, research, or make an offer on, you get 1 deal. Well then it'll take sending out 5,000 pieces to get a deal. If you only send out 1,000 pieces, then on average you will NOT get a deal. You can use the same type of ratio figuring on REO's, foreclosures, pre-foreclosures, short sales, etc.
The 1% understand the numbers game and actually generate enough volume on the front end to get a product at the back end. Most people fail at wholesaling because they suck at finding deals. They suck at finding deals because they don't work hard enough at it. Consistent and persistent action is required for success in Wholesaling and also in EVERY area of life.
Let's say I told you I would give you $5,000 to find a needle in a 3 ft cubic pile of hay. If you pick up one handful of hay, glance through it, and give up, you're an idiot. The needle is there and you could have it, you just have to stop being so focused on instant gratification. Its called W-O-R-K. And as you go to work, you will figure more and more efficient ways to sift through the hay. It may take you 7 months to find the first deal. SO WHAT! It took me TWO YEARS to figure out how to make money in this business. The second deal will come in less time, maybe 5 months, and then 3 months, 1 month, and then deals will come every week or even twice a week.
Its just a numbers game. Consistently and persistently.
I've wholesaled hundreds of houses and multifamily's. Consistent and persistent marketing (and not just with mail outs) was the key to my success.
Maybe the 1% actually have a business plan and the gumption to stick to it. I wouldn't mind trying wholesaling, but I know I don't have the passion for it to stick to it, so it's better I don't get into it right now. Know thy limits.
I'm not a wholesaler, so I can't answer your question directly, (but I did just close on my first rental property last week).
I'd go so far to guess that of the 99% their dream is to live the life of a successful wholesaler but when it gets down to it, they don't have a real plan, feel inadequate to take upon the task (not enough funds, knowledge, connections, etc, etc).
But I think that goes for the public in general too. I'd guess that the vast majority of people (perhaps not 99%) are doing what they don't love to do in life (their job is not their dream job). The security of settling with the job they have now is too much to risk on the idea of their insecure dream job. Often not only their own sub-conscious talks them out of it, but also friends, family, significant others... call them crazy to give up the job they have now (especially in THIS economy) to go out and take control of their life.
If it was easy, everyone would do it, and the rewards would be less. No doubt it takes some amount of a "leap of faith" to change your career path and can seem daunting. It is in all actuality going to be a life changing experience.
A common theme I have seen with wholesalers (and other types of real estate investors for that matter) is vastly underestimating the amount of work required. I think this is most common with wholesaling because it pitched as a quick and easy way to make money with no funds invested. Some people are primarily attracted with the easy part, so when they find out how hard it is, they are not willing to follow through.
I will tell you why. I have wholesaled over 20 properties in a 2 year period. Much of it is the guru approach, quick money with little time effort or marketing dollars of your own.
You need to commit to sending out at least X amount of marketing pieces every month.This costs MONEY every month whether yellow letters or postcards. I started with a $1,000 budget every month. It can be $300 a month whatever your BUDGET can afford just commit to doing this for at the bare minimum 6 months. Im not going to lie It was tough the first couple months dropping the marketing money and not having anything to show for it. Unless your lucky and happen to get someone when they are motivated, its going to take several contacts before you convert the lead. Many times, people will buy the list and market for 1 or 2 months and then give up . This is a business and it takes awhile to gain momentum. But as you stay consistent your marketing machine becomes more and more reliable. Took me about 7 months to get my first deal and then consistently do deals from then on out.
In addition to that. You absolutely need to know the rules. If you don't know what your doing, understand the contracts how to determine ARV or ERC your not going to get far. If you havent rehabbed homes yourself, take some contractors out to lunch, estimate rehabs on REOs with a contractor, get their PDF itemized list and figure out each individual cost. Then be super conservative with both your ARV and ERC.
Dont have such a pessimistic with this 1% attitude. If you stick it out, and have a good lead source you will get deals its as simple as that. If you get started quit after month 1, 2 or 3 thats where the problems happen. I think the idea thats so pervasive here that "1%" of wholesalers is due to both this and people on this forum labeling themselves as wholesalers that have yet to even take action.
I'm a wholesaler and the only way you can fail is to quit. But some wholesalers take longer to close deals than others because they: 1) don't realize how hard it is
2) they're afraid of failure
3) they're afraid of rejection from buyers and sellers
4) aren't wiling to do the required marketing
5) don't have the money to put into marketing and other expenses
6) choose the wrong partner
7) laziness (including the unwillingness to do the required research)
Remember: The most difficult part of a trip to the moon is getting off the ground.
You should charge $1,000 for this because this is the key right here. I can vouch for this as it was true for me. I used to spend $50 to $100 of my paycheck a week on postcards to different lists. It's consistency that is what separates the unsuccessful wholesalers from the successful ones. Sadly a lot of people simply don't have it.
Thank you so much!! All very strong insights.
Also, I should add that you have to have the ability to manage leads. You don't have to be a pro negotiator, just develop minor tactics, but you have to be able to follow up and track the status of each lead efficiently because if you're good at marketing you'll have more than your memory will be able to handle.
Follow up, follow up, follow up, follow up, follow up, follow up.
Thanks David
Success in Wholesaling is 80% marketing for deals. As Curtis C. points out, its a numbers game. Let's say for every 100 pieces you send out you generate 1 lead. And let's say for every 50 potential leads you look at, research, or make an offer on, you get 1 deal. Well then it'll take sending out 5,000 pieces to get a deal. If you only send out 1,000 pieces, then on average you will NOT get a deal. You can use the same type of ratio figuring on REO's, foreclosures, pre-foreclosures, short sales, etc.
The 1% understand the numbers game and actually generate enough volume on the front end to get a product at the back end. Most people fail at wholesaling because they suck at finding deals. They suck at finding deals because they don't work hard enough at it. Consistent and persistent action is required for success in Wholesaling and also in EVERY area of life.
Let's say I told you I would give you $5,000 to find a needle in a 3 ft cubic pile of hay. If you pick up one handful of hay, glance through it, and give up, you're an idiot. The needle is there and you could have it, you just have to stop being so focused on instant gratification. Its called W-O-R-K. And as you go to work, you will figure more and more efficient ways to sift through the hay. It may take you 7 months to find the first deal. SO WHAT! It took me TWO YEARS to figure out how to make money in this business. The second deal will come in less time, maybe 5 months, and then 3 months, 1 month, and then deals will come every week or even twice a week.
Its just a numbers game. Consistently and persistently.
I've wholesaled hundreds of houses and multifamily's. Consistent and persistent marketing (and not just with mail outs) was the key to my success.
OMG OMG, Ryan Webber is back in the house, y'all!
So glad to see you here today and hope you have time to stick around. Great post, btw. Love the haystack analogy.
Sean Brennan 1 reason – we do not accept failure!!!
You need to commit to sending out at least X amount of marketing pieces every month.This costs MONEY every month whether yellow letters or postcards. I started with a $1,000 budget every month. It can be $300 a month whatever your BUDGET can afford just commit to doing this for at the bare minimum 6 months. Im not going to lie It was tough the first couple months dropping the marketing money and not having anything to show for it. Unless your lucky and happen to get someone when they are motivated, its going to take several contacts before you convert the lead. Many times, people will buy the list and market for 1 or 2 months and then give up . This is a business and it takes awhile to gain momentum. But as you stay consistent your marketing machine becomes more and more reliable. Took me about 7 months to get my first deal and then consistently do deals from then on out.
In addition to that. You absolutely need to know the rules. If you don't know what your doing, understand the contracts how to determine ARV or ERC your not going to get far. If you havent rehabbed homes yourself, take some contractors out to lunch, estimate rehabs on REOs with a contractor, get their PDF itemized list and figure out each individual cost. Then be super conservative with both your ARV and ERC.
Dont have such a pessimistic with this 1% attitude. If you stick it out, and have a good lead source you will get deals its as simple as that. If you get started quit after month 1, 2 or 3 thats where the problems happen. I think the idea thats so pervasive here that "1%" of wholesalers is due to both this and people on this forum labeling themselves as wholesalers that have yet to even take action.
Thanks Curtis I really like this post. Gives me an idea of what to realistically expect!
Ryan Webber another excellent response! Thank ou so much. BTW I really liked your BP Summit workshop... I wasn't there but I've listened to it a couple times already.
BUMP for awesomeness.
Thank you to @Jerry Puckett for introducing me to @Ryan Webber 's work (hey...I'm new here) via the "what's wrong with wholsalers?" post.
Great stuff @Ryan Webber !!
I wish I could find someone like you in my target market!
BUMP for awesomeness.
Thank you to @Jerry Puckett for introducing me to @Ryan Webber 's work (hey...I'm new here) via the "what's wrong with wholsalers?" post.
Ryan is sorely missed here. He never would put up with any of that wholesale hating crap and used to dive in and take them all on. Here's a good place to start looking into his legacy:
http://www.biggerpockets.com/forums/56/topics/9330...
After that you might want to read through the thread I quoted from today:
My biggest problem with wholesalers is most just tie up sellers properties without any intention or ability to actually close. They then proceed to pitch this retail priced home as a "great investment". Basically they are just acting in the capacity of a dishonest unlicensed Real Estate agent.
If you want to sell other peoples homes and get paid for doing it, get your RE license. You can charge whatever commission you like, and actually build a reputable and sustainable business in Real Estate. If you have the salesmanship and hustle to go solicit people into letting you middle their real estate deal then you would undoubetedly be a outstanding Agent. Finding and putting together real deals is a art form that is well compensated regardless of title.
I've been actively buying for 5 years now and have encountered numerous "wholesaler's". The only one that has brought me a deal worth buying was a fellow flipper. He had the funds and intentions to close on the deal, but was more interested in pursuing something else.
To me wholesaling is a tool that can be effectively used by a experienced RE investor when the opportunity and circumstances present themselves, but it's a horrible way learn the RE business.
sigh....here we go again.
There are many circumstances in which an Agent is unequiped to handle a Sellers needs. A wholesale situation happens when a Seller is perfectly willing to trade some of their equity for something thats more important to them, like the speed and ease of the transaction.
I'm not surprised you don't know any good wholesalers, (wholesaling is not easy, but the good ones you'll never even know about ) but I would be shocked if the number of them you did know constituted MOST of them as you say. There are good and bad wholesalers like there are anything else....even Agents. I personally know some extremely unethical agents....
You know...I had no idea that Ryan had passed, but I did sense something ominous regarding his lack of involvement over the past year.
He was just a little younger than me...so sad.
RIP Ryan, may your legacy here at BP live on for all to benefit from.
The first step ... is to take the first step. A former coworker and I used to discuss real estate every day. We both had the desire to start a real estate business and would discuss the pros and cons of different strategies. He would come in to the office many mornings and tell me about a webinar he watched.... seven years later he still hasnt pulled the trigger.... and I still hear about the latest webinar/strategy...
Jump in with both feet and don't stop kicking until you reach land...
sigh....here we go again.
There are many circumstances in which an Agent is unequiped to handle a Sellers needs. A wholesale situation happens when a Seller is perfectly willing to trade some of their equity for something thats more important to them, like the speed and ease of the transaction.
I'm not surprised you don't know any good wholesalers, (wholesaling is not easy, but the good ones you'll never even know about ) but I would be shocked if the number of them you did know constituted MOST of them as you say. There are good and bad wholesalers like there are anything else....even Agents. I personally know some extremely unethical agents....
Sorry about that Jerry- should have read "most I've encountered"
I'm sure there are some exceptionally talented wholesalers out there that offer a great service to both investors and sellers. I have all the respect in the world for those that succeed.
I just think it's a bad path for someone that is new to the RE business. Hence the reason so many are unsuccessful.
I've been in the real estate industry for a little under 5 years now and I have learned a few things that I hope can help out the "new" wholesaler...
1. As a wholesaler you are in the marketing/negotiation business. While you do need to understand basic real estate laws, how to evaluate a property correctly (rehab, ARV) etc...you need to become an expert on marketing. Your "job" as a wholesaler is to find good investments for real estate investors who don't have the time or expertise to find them on their own.
2. Learn what a good deal in your market is. Know what the cash buyers in your market are actually buying the properties for. By bringing actual deals to these investors...you become an asset to them and in return these investors have no issue paying a little extra for the property. It's the wholesalers who think they can go on craigslist or the mls and mark up a property and hope an investor will buy it from them. If a property has been sitting on the mls for awhile...its most likely not a good deal. This leads me to my next point....
3. Wholesaling is SIMPLE in concept but not EASY. You do need some money to wholesale...while its not a lot...you do need money for a marketing budget. Without a marketing budget and consistently marketing you will not turn your wholesaling dream into a business. It takes work...and a good amount of it. If it was easy everyone would be doing it on some beach in the Bahamas from their laptop.
4. Know your numbers...all of them. Cost per lead, ARV of the property, rehab estimate, comparable sales, closing costs, taxes, insurance, etc etc. The investor will ask you most of these questions before they buy the property anyway and do their own due diligance.
Anyways..I could go on and on but just know if you work hard and are consistent you can become a successful wholesaler...and be the go to wholesaler in your market.
I am exactly one of those people this post is about basically but I am just starting out. I can tell you first hand the books pump you up and if I were a bit more naive, I would believe the hype. I haven't even closed on my first deal yet but am 8k in the hole getting my first marketing pieces together, web sites built, domain names purchased, call center set up, postal permit, printers, vanity number rented, bandit signs purchased, etc, etc. Its a lot of dough for a newbie and I can't see doing without that investment.
I happen to have another business that does well so I am fortunate to be able to finance the real estate operation but I am certain not everyone has the means to do that. I also have a ton of marketing expertise from the other business ranging from television and radio commercials to magazines to internet marketing. These are skills that took me 20 years of grinding in a competitive business to achieve.
Time will tell if my prior experience in unrelated work will help but I am fairly certain I will be part of the number that succeeds. I guess everyone does.
I am, however, putting out 6000 mail pieces a month....my first large volume batch of letters are being printed right now. I am hoping that kind of volume brings me something.....anything to at least get me started. Taking the plunge is what stops people. My risk tolerance because of where I am at in my life and my other businesses also helps. I couldn't do this 12 years ago. Its not easy for a kid out of college to get started without all that support, regardless of his or her determination. It does require other things....money.....marketing expertise........and determination.
A common theme I have seen with wholesalers (and other types of real estate investors for that matter) is vastly underestimating the amount of work required. I think this is most common with wholesaling because it pitched as a quick and easy way to make money with no funds invested. Some people are primarily attracted with the easy part, so when they find out how hard it is, they are not willing to follow through.
Best answer yet!
Being a wholesaler is not easy. It is SIMPLE, but not EASY.
I think the amount of money to invest in marketing plays a big role. Maybe 75% of those starting out say "I don't have any capital so I want to start wholesaling" (I know because I get calls weekly from new wholesalers looking for cash buyers, it is always the same pitch).
The fact is that you cannot get enough free leads coming in to sustain a business. I suppose if you just post on Craigslist all day every day eventually you would get a deal, but most people would probably become discouraged quickly.
Websites cost money, web marketing cost money, direct mail costs money, billboard cost money, radio and tv ads cost money, heck even bandit signs cost money.