Buying/wholesaling in war zones?

OP

Strongsville, OH · Member since 2017 · 28 posts · 4 votes

9y

I'm not putting cash directly into the deal, but I'm putting it into marketing to get the deal. So, the price point doesn't matter as long as the numbers work and everyone wins.

I see you're in PA. Do you invest in the Cleveland area or other areas that are sellers markets?

Jonathan Jewell

Investor · Bensalem, PA · Member since 2011 · 146 posts · 93 votes

9y

No,sorry I dont invest in that area. I get where your coming from. But just an FYI, wholesaling is not as easy as the "gurus" make it out to be. Thats my opinion, others may disagree with me. But I have never had much success with it. Question what were you planning on spending on marketing?

Andrew Johnson

Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes

9y

@Rick MacGills Okay, feel free to throw these thoughts into the trash can...

1.) You've spent $20K and you've only been in the market weeks? That seems really, really high for someone starting out. So either I'm missing something or my assumptions are way off-base.

2.) So much of finding that desperate home owner is timing. In "weeks" you might not have even had time to send out a second round of mailers. How many calls back are you getting when you send about 1,000 mailers? What are the objections? Are the objections unique (in your mind) to "good" neighborhoods?

3.) Presumably, you're also cultivating a buyers-list. What are they looking for? Are they open to a warzone? Do they want a warzone property? Usually warzone properties are cheap to begin with, how much cheaper will you be able to acquire them and still make a spread?

Just some thoughts.

4 Reply

James Barnhart

Rental Property Investor · Ocala, FL · Member since 2016 · 226 posts · 140 votes

9y

There have been many articles and comments on BP that explain why someone would want tp stay away from the war zones. It would be a good idea to read some of them.

3 Reply

OP

Strongsville, OH · Member since 2017 · 28 posts · 4 votes

9y

1. I've started building my new business in March. I've only just got everything ready for launch about a month ago: May 20th. It took time to set up the legal infrastructure and the like.

You're right that I only sent the first batch of mailers, but I was leveraging the sales tactic of reaching out to sellers from leads from the county and Craigslist.

With sales I was averaging around 5-10 calls each day to qualified leads, and I just switched to direct mail last Sunday. My campaigns were more trial sized than anything.

I sent markets to 100 unqualified leads who filled for divorce in the last 6 months. (That's almost all of the people who filed, so that's why it went so far back.)

My other campaign was sent to 3 attorneys who requested my brochures to help their clients facing divorce.

My goal is to see how effective the brochures are before I send them to thousands of attorneys in the county.

@jonathan - my first campaigns were only a few hundred dollars because of the material quality, but I'm hiring Postcard Mania soon to send 1,000 leads postcards for around $3,000.

2. I've heard lots of objections, but primarily I keep hearing that the sellers want more money. That means they aren't desperate, and the houses are usually in good condition, so I budget $15k to give them a "spit shine." (New carpets, painting, patch that nasty cosmetic whatchamacallit, etc.)

I usually try to get 25% of the price as gross potential profit for my investor, and I charge a 6% assignment fee based on what the seller makes. If it's a great deal I'll charge a bit more, or it's less than $3k for the assignment fee, I charge the $3k.

Do you see anything wrong with my numbers I'm missing?

3. I have several channels. My HML has a list of buyers; I have a list, and my REIA has an email list. From what I've seen cross the REIA channel, people will buy war zone properties. Others I've spoken with will not.

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Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

9y

@Rick MacGills my question is why would you do this at all.. your making basically real estate fee's as an agent you can build a career .. this is a dead end street 95% of the time.

you may want to think about it..

if you put the time in to be a good agent and give it a decade you will then be basically working referrals the rest of your career.. spending little on marketing.

my wife who has 25 years at this sold 15 million last year ALL referral and not one dime spent on marketing.. of course she worked her you know what off in the beginning but now its really quite rewarding.. and your TRULY helping folks buy the home they will live in or invest in.. Not having to work in the Ghetto and work with those with all sorts of personal Drama all the time..

she just handed me her escrow flow sheet today.. and she has 2.5 million closing in the next 45 days... :) I only say this to encourage you to think long term and the long game..

Great agents make some serious money..

I know I started at 18 in 1975.. not internet we had a big book with listings in it.. newspaper adds and you were big time if you had an 800 number.. but that foundation was everything.

clients I met over the years selling them property or selling property for them became investors and life long contacts and friends.. opened up many doors.

think about what kind of residual business your going to get helping some distressed seller of a ghetto dog sell their 20k run down flop house.. ?????

now you can just chuck this whole reply .. but I thought its worth mentioning.

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5 Reply

OP

Strongsville, OH · Member since 2017 · 28 posts · 4 votes

9y

@Jay - I hear ya, and later on I plan to get my license and eventually start an agency branch of my company, but it takes just as much work to start as an agent as it does as a wholesaler. I'm going to stay focused on my current goal and make this second startup successful like my first one.

Kudos to your wife in selling so well!

Ray Lai

Investor / Vendor · San Diego, CA · Member since 2016 · 1k+ posts · 949 votes

9y

Hey @Rick MacGills

You just switched to direct mail on Sunday and you are wondering why you don't have results? Direct mail takes time and it's typically at least 3+ listings usually in the 4 to 5th mailing that you start seeing good responses. Also your sample size of 100 is tiny. This is a numbers game.

You are on the right track but you aren't thinking scale, and numbers. Typically response rates are around 0.5-2% depending on the quality of the list and other factors. Don't give up so easily, it takes grit in this game.

I don't disagree with Jay that it's often worthwhile to get a real estate license as a wholesaler... as a newbie wholesaler that just started you really can't expect success overnight from just the actions you've taken so far.

How much are you paying for your direct mail fulfillment? Are you handwriting letters? There are so many factors that could possibly be hindering you.

3 Reply

OP

Strongsville, OH · Member since 2017 · 28 posts · 4 votes

9y

@Ray - My campaign was printed on resume paper sent in greeting card envelopes that were hand addressed and stamped by my friend.

I paid my friend $1 per envelope stuffed, $30 for the paper and envelopes, and $50 for regular first class postage stamps.

Cornelius Garland

Wholesaler · Charlotte, NC · Member since 2015 · 398 posts · 677 votes

9y

@Rick MacGills I think "war zones" get much more of a bad rap than they deserve. Think, these people need to sell property just like people in affluent areas. Oftentimes, this is their only asset. Unfortunately, more often than not, a Realtor isn't going to give the same attention to a seller with a $20k property as they would to a seller with a $300k property. That's a difference of a $600 commission and a $18,000 commission. Additionally, selling the $300k property will likely be a smoother process for the agent. Economically, it just doesn't make sense for the agent to direct considerable effort to the lower-priced property, and this is understandable. However, the seller is done a disservice because they aren't receiving the same treatment as the seller with the more expensive property. This is the perfect opportunity for a wholesaler to come in and provide value because a deal in this area will be worth your time.

The key is market diversification. I market to neighbohoods where the average property is worth $10k all the way up to $500k neighborhoods. As long as I can make my desired profit, I really could care less where the home is located. Once you have a system in place for screening your leads, each deal should require the same effort and you should know quickly if it's worth your time. A $500k home seller could be more of a headache to you if they aren't motivated to sell and you're trying to make the numbers work to close the deal.

There are cash buyers in your area that only focus on the problem neighborhoods; you just need to find them. I suggest conducting an in-depth analysis on these neighborhoods and seeing which LLCs have been purchasing the homes there. This will need to be done through your tax assessor's site online and cross referencing the records on the register of deeds site, if needed. I guarantee there are a handful of LLCs buying everything around the same price. I am in a similar situation. We have three buyers that purchase all of our war zone properties. They're looking to completely redesign the neighborhood in the next couple of years. I hope this insight helps you out. Best of luck in your marketing!

2 Reply

Ian WalshBusiness Member

Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes

9y

There are investors in every market from war zones to high end. You can wholesale in either but if it is your first deal, I would suggest strong rental areas as the place to connect on a first deal. There are tons of deals being done in every market every day.

OP

Strongsville, OH · Member since 2017 · 28 posts · 4 votes

9y

Excellent information, guys. I'll "taste test" a house in a war zone to see if it'll work better after sending a message to my network to see if anyone is interested.

Jonathan Jewell

Investor · Bensalem, PA · Member since 2011 · 146 posts · 93 votes

9y

@Rick MacGills Seems like you put a lot of thought into this venture, and your hustling and working your plan, which a lot of people don't even get that far so definitely cannot fault you for doing that. To me, seems to be a lot of work with very little return. Maybe I don't quite understand the full scope of what your trying to accomplish. But with the amount of drive and energy you have, I think you'll dominate any market you get in to. Best of luck to ya man.

OP

Strongsville, OH · Member since 2017 · 28 posts · 4 votes

9y

@Jonathan Jewell Thanks Jonathan!

Chris Martin

Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes

9y

Wholesale. Ohio. Some say those words shouldn't be in the same sentence. Put "Ohio wholesale" in the search box for related topics. There are a few.

Account Closed

Professional · Brooklyn, NY · Member since 2017 · 624 posts · 147 votes

9y

Originally posted by @Rick MacGills:

...So far I've stayed out of war zones because I heard investors don't want to invest there... I'm considering the war zones as an opportunity. In your experience, is that a smart place to invest?...

A smart place to invest? That might be a stretch... unless of course you were trying to get discount on crack, herbs or who knows what else. Also your definition of a war zone may be total bliss to someone else. Investors generally don't want to have to dodge or be grazed by stray bullets when trying to find out why rent was paid. It doesn't mean you can't invest there... just be prepared to deal with more issues along with the common set of challenges.

James Wise

Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes

9y

@Rick MacGills You really need to just become a Real Estate Agent. That's what you really want to do whether or not you know it at this present time. Legal issues aside it's the only logical way to make money transacting real estate sales as an intermediary. Essentially your trying to go into a gun fight with a knife right now. It's not going to work out.

Sellers who own property in nicer areas won't take you seriously as your not going to be seen as a true professional. Thus you'll probably be stuck trying to sling a bunch of unwanted inventory to a small subset of people who would buy from you on sites like craigslist or your investor meetings or what have you. The MLS touches 100's more people than those two avenues in a matter of minutes.

3 Reply

OP

Strongsville, OH · Member since 2017 · 28 posts · 4 votes

9y

@James Wise - Says the real estate broker. I'm not easily dissuaded.

James Wise

Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes

9y

Originally posted by @Rick MacGills:

@James Wise - Says the real estate broker. I'm not easily dissuaded.

Rick,

I am a Broker because it's the best way to make money transacting real estate. Take the advice or don't, but it's never a good idea to ignore sound advice from those who have climbed the mountains you wish to scale.

I wish you luck and will be curious to see an update on your real estate career in a year or two. If it works out well congratulations in advance.

James MaraditsPro Member

Real Estate Broker · Cleveland, OH · Member since 2015 · 239 posts · 224 votes

9y

My $.02:

-If you would have took your $20k and got a real estate license (which you can do online in about two weeks time in Ohio now) you would have $18k leftover that you could market your business with to sellers and buyers.

-The market has recovered greatly, and the wholesale/off market deals are few and far between at the moment. I'm seeing "investment/fixer upper" type properties listed on the MLS and sold within a day in good areas. Because of the current lack of inventory, you're going to be competing with dozens of savvy agents marketing for listings, as well as the wholesalers who've been around for years with a lot more experience and skin in the game.

-Considering these "war zones:" Have you walked these neighborhoods? Do you see value in them? Are you going to find clients who see value in them? Will these clients be happy with their decision to buy there and be likely to buy from you again or refer you to someone else?

I've subscribed to every wholesaler's mailing list I can find in the area and have yet to be impressed with any of the inventory. The only ones who seem to be successful either have a strong referral business and don't even need to market to buyers or are already agents/brokers who come across the occasional wholesale type deal.

Not trying to knock you at all, just giving some food for thought and observations that I've gathered. I wish you the best of luck.

http://ohiorealtors.org/education/ohio-real-estate...

OP

Strongsville, OH · Member since 2017 · 28 posts · 4 votes

9y

Last night I put a solid property under contract. So, yes it's possible to find deals as a wholesaler. It's all about location, you're right. With my recent research, I found buyers in those neighborhoods, so I can work them.

"which you can do online in about two weeks time in Ohio now" - Where? I've seen realtor websites say you need 120 hours, but the only place I've seen offer the classes is Hondros.

https://www.hondros.com/programs/real-estate-sales...

When I'm ready to expand my business to have a real estate agency [2 years an brokers license] then I'll get my salesperson license. However my business is nowhere near that stage yet, and I'm focused on wholesaling.

http://ohiorealtors.org/education/ohio-real-estate...

James MaraditsPro Member

Real Estate Broker · Cleveland, OH · Member since 2015 · 239 posts · 224 votes

9y

Originally posted by @Rick MacGills:

Last night I put a solid property under contract. So, yes it's possible to find deals as a wholesaler. It's all about location, you're right. With my recent research, I found buyers in those neighborhoods, so I can work them.

"which you can do online in about two weeks time in Ohio now" - Where? I've seen realtor websites say you need 120 hours, but the only place I've seen offer the classes is Hondros.

https://www.hondros.com/programs/real-estate-sales...

When I'm ready to expand my business to have a real estate agency [2 years an brokers license] then I'll get my salesperson license. However my business is nowhere near that stage yet, and I'm focused on wholesaling.

Congrats on getting your first deal under contract.

Hondros offers the classes online now. 120 hours of classroom time is the state requirement, but you can complete the online classes in significantly less time. I completed a 40 hour online class in about 10 hours. (read, click, read, click)

I'm not totally clear on what you're saying in the last part of your response, but in order to be eligible to get your broker's license, you need to have a saleperson's license for a minimum of two years, complete over 20 transactions, and complete quite a bit more education.

OP

Strongsville, OH · Member since 2017 · 28 posts · 4 votes

9y

I didn't know about the 20 transactions, but yes I know of the others.