All Forum Posts by: Dev Horn

So true @Curt Smith. And the other thing is the idea that you can somehow "automate" this business and it will just spit out cash. We use the best technology and lots of tools and processes, but all that is to enable sellers (and buyers) to reach US and for us to reach THEM. If you try to automate the "human part" of this equation with VAs or Ruby Receptionists, you WILL fail as you'll lose a lot of your calls as they are mishandled, making your cost per deal EVEN HIGHER and a decent ROI harder to achieve.

The systems we use should automate the things the seller never sees.  The goal should be to maximize our ability to engage with sellers on a very personal level.

 Out of town sellers often respond to our marketing because the cost of maintaining a house remotely can be high, especially if the house is vacant.  I ask them about the situation - why are you interested in selling NOW?  and when they mention they are having to pay a yard guy, and utilities, taxes, insurance, a mortgage, etc. I add that up and say wow, you're burning $3,000 a month just holding on to that house, I BET you want to sell it ASAP!  So i like to really understand the motivation and their PAIN POINT.

I then frame my offer as a SOLUTION to that pain point.  Talk about how we can get this done is 2 weeks, where if they list it, the house might sit on the market for 5 months and that's ANOTHER $15,000 OF YOUR MONEY just BURNED.  And the reason the pitch sounds good is, it IS good for a lot of sellers.  I talked to a woman this week in Phoenix who has been paying the bills on her mom's house her in D/FW for 2 years after her mom passed and she inherited the home.  2 years of paying for lawn service, pool service, utilities, security alarm, and property taxes... it was THOUSANDS of dollars just because she wasn't ready to do anything.  Now she is.  She's endured the pain long enough!

I also talk about how I'm here, I can go by and check on the house, I'll take care of things on this end until we get the transaction done.  If you establish good rapport, the seller will see that there's a huge benefit to having you there to guide the process along to make it much easier & less stressful on them...

100 deals will require 1,500 to 2,000 leads, as you'll find that you can only flip about 1 in 20; MAYBE 1 in 15 if your lead quality is super good.  Many in this business use the 1 in 20 metric.

You're in Chicago where you will need to market aggressively to capture that many of the motivated sellers to contact you.  Expect your cost per web lead to be around $80 and your cost per phone call to be $120 (those are conservative figures for a major market).

Let's assume you generate 1,750 leads (the average of the numbers in the first sentence), half web and half phone calls so your average cost per lead in $100.  Your marketing budget needs to be 1,750 x $100 = $175,000.

For a wholesaler who can make $5,000 on a flip, minus the $1,750 marketing cost to generate the deal, they can net $3,250 profit.  Do that 100 times and you will be one of the top wholesalers in the country with a PROFIT of $325,000 after making an investment in marketing of $175,000.  This is the scale of business that you are talking about, and it could take you years to get to this level, at which point you'd quit buying houses and offer a guru course because you'd be one of the top investors in the country!

I want to encourage you - you don't need VAs, you need a TON of marketing $$.  Put every PENNY into marketing and answer your own phone.

@Ray Mulli gave you some good advice above.  These are pretty common questions for a new wholesaler.  You need some sort of training/education.  I highly recommend J Scott's FLIPPING & ESTIMATING books; they are like the textbooks that you need.

In addition, I have a 3-video "Wholesale Accelerator" course that I give free to colleagues on BP.  It's a couple of hours of video with an experienced wholesaler, and we also give you sample contracts for purchase and assignment.  Again - free to BiggerPockets members only who request it (PM me with your email address).  The videos definitely answer those questions and a lot more.

You won't get arrested, you'll get FINED.  And some of those fines can be significant.

The permits are only for approved-use signage, and those bandit signs are almost never included in the approved forms of signage, in most communities.

P.S. I know Orem very well; stayed for months in Provo at the Marriott while working on a consulting gig.  LOVE Sammy's Burgers & Fries!  =)

Look into the price of smaller billboards, not on the highways but on the side streets.  If you can get them at the right price, will be legal and more productive than bandit signs.

This is REAL real estate investing.  Love to hear these stories.  You are following your plan and getting results that appear to be building up to a sustainable business operation.  Great work!  Thanks for sharing!

What started out reading like a cloaked advertisement for coaching services turned into a rather spirited debate.  Cool!

In regard to the idea that there you cannot know ARV and your cannot know repairs needed - man, that is a recipe for DISASTER.  This is one of the big problems in this business - people are sold the idea that the realities of real estate don't matter to you if you want to "flip houses".  Do this for a while and you will know how wrong that assumption is.

You'd better know recent comps to get a median price per sq. foot to get you an ARV. And you'd better understand the basics of looking at an HVAC unit and knowing if it's in good shape or 100 years old and non-functional. If not, you will get your head handed to you on a platter in this business, OR....

just do what most naive wholesalers are doing and just write up offers that you cannot move to a cash buyer because you have no idea what you're talking about.   Deals with bad numbers are non-starters that waste EVERYONE'S TIME and especially hurt the seller who thinks an "investor" is buying their house...

Who has the EMD? Seller or your title company? Always give your EMD to the title company.

Look, I think you know this deal is not worth $39K (as was suggested above) because we don't just subtract the repairs from ARV to determine value. The default REI "formula" is (ARV x 70%) - REPAIRS = OFFER.  So IF the house was really worth $59K ARV and IF the repairs are only $20K, an investor (cash buyer, rehabber)) would value the house at $21,300.

If you got it at $8K and the other numbers are real, you would have a heck of a wholesale margin on this deal.

BUT it's not selling, even at $15K.

The problem is not your price being too low.  I'm guessing your numbers are wrong or there's something you don't know about this house that others do.  What's the history of it (what did it sell for last & when)?  What's the tax appraisal value?  There are some UGLY NUMBERS somewhere that people are finding when they research the house.

What you've discovered is this house needs a lot more work that you thought and it will sell for a lot less than you thought.  You need to go back to the seller and tell them you need to back out because the numbers don't work and your partners are unwilling to fund the deal.  Tell the seller and title company that you are canceling the deal based upon the property failing your post-agreement inspection - or use whatever other contingency you have in the contract.

Sellers understand that sometimes the numbers don't work and deals fall apart as a result. They won't like it, but most are not hard asses about keeping your token EMD. If so, lesson learned.

Of course, I hope you find a local buyer, but...

If you need to back out on the seller, my policy is (generally) not to use the inspection clause or some other out, but rather to just call them and be honest about the situation.  Something like:

"I'm sorry to have to call and tell you I'm going to have to cancel the contract I made with you on your house.  My business is dependent on my partners, and they felt that we would have difficulty working with a property so far from Atlanta.  As much as I wanted to do this, it's just going to work out...".

Our - you can relate it to the standard inspection clause contingency and say, "Once we got to looking at it we realized it needed a LOT more work than I thought...".  And with $50K estimated repairs, there could be a lot of TRUTH to that statement!

 I could not agree MORE with Derrick here!  Join me in clicking the little VOTE link in the upper right on his post above.  I also can't back up his assertions with data, but doesn't what he said above make sense to you as a "consumer"?

"I wouldn't feel that I an individual who couldn't kick out 20+ bucks for a printed sign has the capital to purchase my home."  BINGO!

Others will argue that the hand-written signs worked for them.  What we don't know is if they had used printed signs, would their results have been better, worse, or the same.

P.S. One of our licensees in West Virginia did a hand-written vs. printed shoot-out in their market (same # of each with different ph #s) and the printed signs generated more calls and higher ROI.  The higher pull of the printed signs may have been the result of the our branding (logo), which appeared only on the printed signs, of course.  (So we can't say they were better just because they were printed.)