I'm done with Wholesalers, I'm taking it in house... Suggestions?

Wholesaling
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I'm done with Wholesalers, I'm taking it in house... Suggestions?

Justin PiercePro Member
Rental Property Investor · Woodbridge, VA · Member since 2008 · 543 posts · 121 votes

I don’t want to criticize anyone. I’m sure there are some good wholesalers out there. I just haven’t met one yet. I have, however, had a lot of my time wasted by many self proclaimed wholesalers.

I find that wholesalers are trying to push homes that really aren’t deals or they have a huge buyers list and they bid the buyers against each other until all the profit margin is sucked out of a deal. I had a wholesaler once ask me how much I would pay for a home. I gave him my rough numbers and he went and bought the home for $50k less than that and then sold it to me. He made $50k from the deal and after 5 months of rehab and marketing I made $16,000.

I have many more stories like this but the point of my post is to say that I am taking my wholesaling in house. The MLS has pretty much dried up out here so I'm going grass roots. I've hired a personal assistant and these are some of the things we're doing to find deals.

-Sending out about 500 mailers a week to target areas (specifically people who bought their homes over 20 years ago)
-Reworking my website
-Created a feeder website to rank higher on search engines
-Tried putting out bandit signs but got a ticket.
-Searching craigslist, newspapers and for sale by owner sites.
-Driving neighborhoods

Any suggestion? What are we missing? Who is the leading guru real estate marketing and wholesaling.

Again, if you’re a good wholesaler I don’t want to criticize you. This is hard work and you deserve to make some money.

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Jon Holdman
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
13y

And the problem here is what? The wholesaler brought you exactly what you wanted and you made a profit. Are you upset that the wholesaler made more than you? Or that you overpaid? This seems like a case of "be careful what you wish for, you might get it."

Or, do you just mean this as an example that to justify putting in the time, effort and money to find you own deals?

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  • Jerry PuckettPro Member
    Wholesaler · Fort Worth, TX · Member since 2010 · 1k+ posts · 1k+ votes
    13y
    Originally posted by Justin Pierce:
    Again, if you’re a good wholesaler I don’t want to criticize you. This is hard work and you deserve to make some money.

    Ahhh, now that's sweet music to my ears, and I agree with you one hundred percent. Never understood the guys that were happy with their deals......until they found out what I made.

    I don't know about guru, but for at least the last six months I've been preaching the value of Investors learning to market and negotiate like wholesalers in forum and blog posts. The MLS has dried up all over, and I've helped several make the transition.

    It sounds like you're doing all the right things. You mention your mail campaign only generally, so I can't really critique it, but 500 a week is impressive, and in my market would bring good success.

    I would also need to see your website in order to give you intelligent feedback. Optimized correctly (and specifically) for PPC, a small amount of your marketing budget could fund a very effective AdWords campaign.

    How's your phone technique and negotiating skill? Even a great campaign can be brought low if your fulfillment system is not up to par. Whoever is handling answering your phone should be using a script that you set up for them and using it consistently and persistently. Record those conversations and learn from them.

    Lastly, follow up. That's where the true gold is. If you have no system for follow up, get one, or you'll be throwing away at least 50% of your business.

    3Reply
  • Dev HornPro Member
    Flipper/Rehabber · Arlington, TX · Member since 2013 · 1k+ posts · 2k+ votes
    13y

    Again, I think Jerry's experience shows in the post above - he hits on two things that we find frustrating - poor handling of incoming calls (letting them go to voicemail - arrrggh! - and "we call them back within 24 hours" - double arrrgghh!) and poor follow-up. People pay money to generate leads, they immediately toss out 80% of them, and they have no system to follow-up.

    Someone that tells you they want full-price now may be motivated and willing to take less in the future, especially if they realize their house is not going to sell unless some costly repairs are made. Call or email them every 3-6 months to let them know you are still interested. There is a reason they contacted you in the first place.

    But, BACK TO THE TOPIC. Justin Pierce - here is an off-the-wall idea, just to give you a marketing concept that others may not share.... how about purchasing a used panel truck and putting huge signage on the sides and back with your "Fast Cash for Houses, As-Is" message and contact info. Then park it near busy intersections in your target neighborhoods, especially on the weekends, and move it around a couple of times during the weekend. And you could loan it to people that purchase or rent one of your houses. For the price of a single billboard for 3 months, I bet you could purchase a truck and the graphics. BTW, 1-800-Got-Junk franchisees do exactly this - their trucks ARE their billboards. Just an idea! Wishing you much success! =)

    1Reply
  • Anson YoungBusiness Member
    Flipper/Rehabber · Denver, CO · Member since 2009 · 1k+ posts · 726 votes
    13y

    You havnt met a good wholesaler? The guy who found you the property you were looking for at the price you asked for it, I'd call him a good wholesaler.

    You are on the right track with your action plan.

    Podcast Guest on Show #235
    1Reply
  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    13y

    And the problem here is what? The wholesaler brought you exactly what you wanted and you made a profit. Are you upset that the wholesaler made more than you? Or that you overpaid? This seems like a case of "be careful what you wish for, you might get it."

    Or, do you just mean this as an example that to justify putting in the time, effort and money to find you own deals?

    5Reply
  • Bill Mitchell
    Mansfield, TX · Member since 2013 · 207 posts · 26 votes
    13y

    Jerry Puckett Hey Jerry I had a question about follow up. How often do you try and keep in touch with sellers? Do you typically follow up on a monthly basis?

    Thanks

    0Reply
  • Justin PiercePro Member
    OP
    Rental Property Investor · Woodbridge, VA · Member since 2008 · 543 posts · 121 votes
    13y

    Jerry Puckett that is very good info. I'll take a look at your posts and make my assistant read them... see if we can't get our juices flowing.

    Dev Horn that too is good idea. They're really sensitive about big trucks in my county but I've been thinking about things like that myself.

    0Reply
  • Tanya S.
    Rental Property Investor · Arlington, VA · Member since 2013 · 121 posts · 46 votes
    13y

    Justin Pierce, I actually just saw a truck like that parked outside of the Arlington Library near Ballston. It's the first one I've seen in the NoVA area. So... apparently they do exist. Interestingly enough, no one seemed to mind, even though the truck was parked right in front.. and carrying a rather controversial political message, not a commercial advertisement.

    On a separate note, I am a huge fan of your real estate column in The Washington Post. Been reading it since it first started and I read the new articles as soon as they are posted. Keep up the great work :) Also saw you in Kiplingers as well - congrats!

    1Reply
  • Justin PiercePro Member
    OP
    Rental Property Investor · Woodbridge, VA · Member since 2008 · 543 posts · 121 votes
    13y

    Jon Holdman no the problem with that situation is, like many wholesalers, I find it a bit underhanded. I am honest. When he showed me that property I could have just contacted the seller myself but I respected him and his need to make a reasonable profit. He showed me just a picture of the property and I gave him my best number believing he would negotiate based with my best interests in mind. When I saw the home it had many issues and I knew I needed it at more of a discount. But, he stuck firm on his price. There is no team work mentality in the business. He went with a partner and bought the home. So, he probably spent several thousand in closing costs then he split the profit with a partner. Had he assigned the property to me he probably could have saved thousands of dollars and cut out the partner. He probably would have made more money and I could have had the breathing room I needed. The total bill on this home was nearly $400,000 so a $16,000 profit is a dismal return on the investment.

    My point is that I opperate in good faith. I find many wholesalers do not. Also, if wholesalers are going to squeeze you for every last penny just like any other seller does then I don't see much reason to work with them.

    But, yes, this is also good example of why the cost savings is worth taking the task in house. Everyone has to perform for their clients. If wholesalers continue to disregard their value for their end buyers they will find that more buyers like myself starting doing as I do and they just might find there is no more industry for them. If that happened there would be less competition for me out there... a double bonus.

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  • Justin PiercePro Member
    OP
    Rental Property Investor · Woodbridge, VA · Member since 2008 · 543 posts · 121 votes
    13y

    Tanya S. thanks so much for the kind words and thanks for reading my column. Yes, we live in a strange area. You can post any vile political thing you want but for goodness sake don't try to make a profit. Haha.

    What kind of investing are you doing in our area?

    1Reply
  • Justin PiercePro Member
    OP
    Rental Property Investor · Woodbridge, VA · Member since 2008 · 543 posts · 121 votes
    13y

    There is a real problem with the industry. Several people have commented that this wholesaler that I mentioned did a good job. No, it was unethical and underhanded. There should be a team effort with wholesalers and buyers. I gave my very best number in good faith based just on a picture because the seller lived in the home and let him negotiate. I protected his claim to the property. He used the information I gave him against me. If wholesalers are going to act like any other seller then there just isn't much reason for buyers to work with them. We can get squeezed directly by sellers and cut out the middle man.

    Right now the prevailing mentality in the wholesaling world is anything goes. If that persists then the business is in real trouble and I say to the real estate investing industry that it's not OK and we don't have to accept it.

    But, I'm beyond that. Right now I'm just looking for ideas for marketing.

    0Reply
  • George Beale
    Real Estate Investor · Manassas Park, VA · Member since 2013 · 20 posts · 0 votes
    13y

    Mr. Pierce,

    Even though I am a wholesaler myself, currently, I can certainly understand where you are coming from. Around our area (I am in NOVA, Manassas Park to be exact), as you know, the homes up for grabs are anywhere and everywhere.

    My mentor in this business, is actually a wholesaler himself, and does quite well. I think what sets him apart from the rest, is he views himself and his company as the end buyer. He really networks with his buyers to find out what exactly they are looking for, and goes after those types of properties.

    I know most wholesalers and Bird Dogs only look at the smaller picture which is "how much money can I make off this deal".

    One well known wholesaler that I follow is Steph Davis from Tampa Florida, and one thing that I learned from her, and a few others, is you will get rich on skinny deals when you are not real greedy.

    I have had several investors state that they dont care what I make, as long as the numbers work for them to get the profit they seek. Whether I am making $2,000 or $10,000+.

    I feel the wholesaler you dealt with, messed up. Yeah, he made $50,000 but he probably screwed up a chance to have much repeated business from you.

    Hopefully the next deal between you two (if there is one) is better than the last.

    0Reply
  • Mike LaCava
    Real Estate Investor · Buzzards Bay (Bourne), MA · Member since 2012 · 208 posts · 28 votes
    13y

    Nothing wrong with taking in house Justin Pierce. Especially if you're not getting the results you are looking for. I do it both ways. I work with wholesalers and do in house marketing to get deals directly.
    You can also train new wholesalers to get your deals on a first look type of arrangement.

    1Reply
  • Jerry PuckettPro Member
    Wholesaler · Fort Worth, TX · Member since 2010 · 1k+ posts · 1k+ votes
    13y
    Originally posted by Bill Mitchell:
    How often do you try and keep in touch with sellers? Do you typically follow up on a monthly basis?

    This depends on several different factors, the key for me being my gauge on their level of motivation. Generally speaking, they go into one of 3 baskets: 1 month, 3 month, or 6 month. If I accidentally get someone with a listed property, I reach out to them again a week or two before their listing is set to expire.

    I use a Google Docs Spreadsheet for my Lead Tracker, and it's formatted in such a way that the status cell turns yellow the week before next contact, green the day the contact should happen and red if I miss it, not updating the "next contact" cell.

    Justin Pierce, one other easy no brainer, especially since you have an assistant. Post Ads on Craigslist regularly that point to your website. If you check out Sharon Vornholt's blog, she gives good tips on both using Craigslist and training an assistant.

    0Reply
  • Bill Mitchell
    Mansfield, TX · Member since 2013 · 207 posts · 26 votes
    13y

    Jerry Puckett Thanks for the reply Jerry!

    You mentioned posting on craigs list, have you ever had any luck doing this? I just started doing it regularly but I find the vast majority of the people that contact me are tire kickers, much more so than a direct mail campaign. Also do you typically post in the "real estate for sale" or "real estate services" section? Maybe thats where I am messing up. Thanks Jerry

    0Reply
  • Ben Hughes
    Investor · Cypress, TX · Member since 2013 · 403 posts · 59 votes
    13y

    You are right, there are very few honest wholesalers out there. Most of them inflate ARV and underestimate repairs.

    1Reply
  • Justin PiercePro Member
    OP
    Rental Property Investor · Woodbridge, VA · Member since 2008 · 543 posts · 121 votes
    13y

    Jerry Puckett thank you. Yes, I forgot to mention that we do post on Craigslist. I have my assitant repost my add every week to keep it near the top. Are there any other craigslist type sites out there that anyone is having success with. I did get one nice deal this way.

    George Beale thanks. Yes, it sounds like you're doing it right. If there is not at least a team mentality then I don't have much need for them.

    I certainly know it's hard work finding these deals. I'd be very happy to pay someone else to do it if I could keep my pipline filled and make a decent profit.

    You know, the other thing is this is just basic business necessity. I am having to squeeze my contractors, suppliers and realtors to get costs down to make numbers work. It's just getting harder to make the margins needed to pay yet another person. I can pay a full time assistant to work for me for 2 years for what I paid that one wholesaler.

    0Reply
  • Justin PiercePro Member
    OP
    Rental Property Investor · Woodbridge, VA · Member since 2008 · 543 posts · 121 votes
    13y

    Does anyone go door to door? Are you having any luck with that?

    0Reply
  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    13y

    Justin Pierce I find your attitude dumbfounding. The wholesaler brought you exactly what you asked for. You choose to buy it. Then you found out the wholesaler made more money that you expected. Because of that, you call the wholesaler "unethical and underhanded". Because he made a profit? Because you were willing to pay too much and he sold it to you anyway? If your expectation is that he should have said "here's what you wanted, but I'm making a LOT of money on this, so I'll sell it to you for $40K less" then I think you're going to be seriously disappointed in everyone.

    If, in the end, you believe you overpaid, that's your issue, not the wholesaler's. At worst, the wholesaler found a gullible newbie willing to over pay and took advantage of that. For you to expect anything less is naive on your part. Caveat emptor.

    I read your expectations that the wholesaler should have, under the umbrella of being a "team effort with wholesalers and buyers", given you a gift of $30-40K. Rest assured that if you find an owner willing to sell, and you offer $50K more than what they're really willing to take that they're going to say "yes". They aren't going to say "oh, lets make this a team effort, we'll take less."

    If you're willing to pay $100K for a property, and the seller says "I'll take $75K" are you going to say "no, no, I'm willing to go to $100K, so that's what I'll pay you"? I seriously doubt it.

    6Reply
  • George Beale
    Real Estate Investor · Manassas Park, VA · Member since 2013 · 20 posts · 0 votes
    13y
    Originally posted by Justin Pierce:

    George Beale thanks. Yes, it sounds like you're doing it right. If there is not at least a team mentality then I don't have much need for them.

    I certainly know it's hard work finding these deals. I'd be very happy to pay someone else to do it if I could keep my pipline filled and make a decent profit.

    You know, the other thing is this is just basic business necessity. I am having to squeeze my contractors, suppliers and realtors to get costs down to make numbers work. It's just getting harder to make the margins needed to pay yet another person. I can pay a full time assistant to work for me for 2 years for what I paid that one wholesaler.

    Well one thing that I have also learned is most wholesalers, if they are making over $5,000 on the deal, with do a simo, so therefore the investor wont know what they are really making.

    For me, I rather just be fully transparent about it all, and let the investor decide if they want to deal or not, instead of wasting money on a transfunder, but that is me.

    0Reply
  • Randy McFeeley
    Garland, TX · Member since 2012 · 1 post · 0 votes
    13y

    As a Wholesaler, I understand your frustration to point. But understand that we do all the advertising and dealing with the sellers.
    I can't understand any Wholesaler needing to make $50,000 on a deal. But if you told him what you would pay, you set yourself up for that. Not all Wholesalers are crooks. I believe that old boy must have a ton of overhead. I make $5000 to $10,000 and my Investors are estactic that I'm bringing them deals.

    0Reply
  • Jerry PuckettPro Member
    Wholesaler · Fort Worth, TX · Member since 2010 · 1k+ posts · 1k+ votes
    13y
    Originally posted by Jon Holdman:
    If you're willing to pay $100K for a property, and the seller says "I'll take $75K" are you going to say "no, no, I'm willing to go to $100K, so that's what I'll pay you"? I seriously doubt it.

    Justin Pierce,

    Also curious....if you had had an offer on your rehab substantially higher than what you sold it for, would you have turned it down? Would you have said: "in the spirit of team play, I should only make 16k, you're offering way too much".

    I doubt it. I think you would have taken the money with a smile on your face knowing that the laws of supply and demand work everywhere in every business all the time. Business people, whether they be wholesalers or rehabbers are in business to make a profit, and no business succeeds by leaving money on the table.

    What you referred to as an "anything goes" mentality may be nothing more than the laws of supply and demand working themselves out. Right now, there is a ton of money flying around the market. I need more buyers like I need a whole in the head. I'm running a business; who should I sell to? Mr. Hedge Fund that will pay double what my normal buyers pay? Or should I, in the spirit of team, willing reduce my profit margin in order for you to enlarge yours?

    Justin, if that wholesaler was your employee, a partner, or a JV, I'd say you have every right to be upset. But if his was a business you chose to patronize, all I can say is that it is your right to shop elsewhere or not to buy.

    1Reply
  • Justin PiercePro Member
    OP
    Rental Property Investor · Woodbridge, VA · Member since 2008 · 543 posts · 121 votes
    13y

    Alright everyone. This was just one example. The market is full of this sort of underhandedness. Now, as soon as he showed me the property I could have gone to the seller and offered him $275k for the property and everyone here would have thought that would be underhanded.

    I gave him my very best number and expected him to go negotiate in good faith. I couldn't see inside the property because I believed he was like most wholesalers going in there negotiating like he was the buyer. When I saw the property I realized it probably wasn't worth as much as I originally thought and it needed more work. But he then used the information I gave him essentially against me. If I did that to a wholesalers I would be the devil.

    Again, the mentality is to squeeze every penny out of any deal without any regard to future business.

    This is just one of many stories. The killer on this deal is he could have made more money had he worked with me rather than against me. The bottom line is that 90% of wholesalers don't really have a deal, they inflate numbers, or they don't control the property and subject you to fishing expeditions. Another 9% bid you against a huge buyers list to again squeeze the buyer.

    If you want to work with this then by all means. I'm done funding my own competition. I can get squeezed by banks and sellers just fine. I can chase all my own dead ends. In the end we all have to provide value.

    It was wrong to even include an example in this post. What I was looking for was marketing ideas.

    Bless all those out there who are working hard to make a living. Nothing bad against that. However we all have to provide value and if our costs outweigh our value then the need for your services will run out.

    0Reply
  • Justin PiercePro Member
    OP
    Rental Property Investor · Woodbridge, VA · Member since 2008 · 543 posts · 121 votes
    13y

    Jerry Puckett you're right and that's exactly what I'm doing. I only included this example to illistrate that wholesalers are just not leaving any meet on the bone. So, I'm only choosing to take the process in house. I get the majority of my deals myself anyway. I just need to ramp that up a bit.

    0Reply
  • Patrick L.
    Real Estate Investor · Saint Petersburg, FL · Member since 2013 · 1k+ posts · 951 votes
    13y

    Another lesson here is never be the first one to throw out a number. Tell him you'd be interested in the house and tell him to see what type of deal he can work out with the seller. That leaves him motivated to work out the best deal possible with the seller and when he comes back he'd probably be asking less than what you paid him for it based on what he was able to lock it up for.

    2Reply
  • Justin PiercePro Member
    OP
    Rental Property Investor · Woodbridge, VA · Member since 2008 · 543 posts · 121 votes
    13y

    Since many see no ethical issues here lets just put it in business, economcal, supply and demand terms.

    With just half of what that particular wholesaler made I can fund a world class advertising campaign and likely yield many more than just one property.

    Another benefit is that I don't have to pretend to be a contractor or a partner of the wholesaler who has told the buyer that he's the prime buyer (become party to a deception.) I don't have to sign noncompete agreements for properties that I have not seen. I don't need to send in my buying criteria or sign up for mailing lists. I don't have to sort through the miss information and I don't have to compete with a long buyer's list.

    This is just a good business decision.

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