All Forum Posts by: Account Closed

Somebody from NJ posted this in a separate thread about 21 days ago and I meant this thread to be a one-stop place to gather information on good wholesaling practices, so I am going to link to the thread I took it from and copy the text below. 

https://www.biggerpockets.com/forums/93/topics/1194082-5-tips-to-create-a-real-wholesaling-business-and-not-a-chop-shop?highlight_post=6805306&page=1

5 Tips To Create A Real Wholesaling Business And Not a Chop Shop

Jonathan Greene POSTERP REMIUM

#1 Starting Out Contributor

• Specialist
• Mendham, NJ

Posted 21 days ago

I am generally not a fan of wholesalers. I find the majority of them to have low repair costs and high ARV. I see way too much daisy chaining. But...the good ones are fantastic. The good ones use some or all of these tips to run their business.

1. Realize you are in the people business, not the real estate business. Your job as a wholesaler is to provide the best solution for a seller's problem. Each problem is different and can't be solved with cash. People want you to solve their problems, not read them a script. If you build relationships with people, the real estate gets disposed of, but it won't always be by you.

2. Do not send the same message to every potential seller. An old person who just lost their spouse, a person in pre-foreclosure, someone going through a divorce, and an absentee landlord all have different levers to pull. You can't market to them all the same way.

3. Start micromarketing; stop spray-and-pray unless you have a marketing budget. Build different marketing for different lists instead of batching the same thing to everyone in a geographical area. That's a lousy spend of money. If you have the budget to do spray-and-pray and have the call receivers to handle the poor intake, it will work, but most wholesalers do not.

4. Run your business like a business. Have a good business name. A real business name. Have a face of the business. Have bank accounts. Have proof of funds or hard money letters readily available. Have a business address. Have a business profile. Most people don't want to do business with Bobby from out-of-state, they want to do business with a local homebuyer team who they are familiar with.

5. Be transparent. Yes, I'm serious. Explain how wholesaling works. Counter the objection to you earning income on finding them a secondary buyer in advance, not later when the deal fails because you withheld information or lied. You are a conduit to their best buyer because they don't know anyone and don't want to sell on the market. You get a fee for being the connector. They shouldn't worry about your spread if you've explained how it works as long as they get their number.

* The best wholesalers are usually real estate investors who are exceptional marketers and generate too many deals so they start wholesaling their overage to their friends.

** Use a contract that has been vetted by a local attorney who knows what wholesaling is.

*** Make sure you know how to estimate repair costs. Befriend a contractor. Make sure you have proper access to run ARV and make sure you know how to do it. Your numbers are the key to your sustained success.

Feel free to add your best tips or questions as well.

Zen and the Art of Real Estate 

Quote from @Annie Seurer:

Unpopular opinion: I don't think you can scale wholesaling as many try to do. 

 Annie, do you think it's a limited opportunity business , even for a good, professional wholesaler? In a sense that you can't make close more than 2-3 transactions per months, no matter how hard you try? Or that $80000-$90000 is a limit on how much you can earn as a full time wholesaler (as some data sources indicate)? If answer to above questions is YES, could you share why this is so? Is it because you can't run nationwide campaigns (must be local, see sellers face to face to get good deals), or some other reasons why this can't be scaled? Just curious. 

Quote from @Lydia R.:

I've done both. It depends on the situation. When my wholesale fee is over a certain amount ($20K-$25K) I tend to double close to keep from ruffling any feathers on the buyers side. The cons of this are that you will have to fund the A-B side of the transaction. And cover the closing costs. So you need to be getting a higher fee in order to offset the cost. With an assignment, its much simpler and there are no costs for the wholesaler. If you are in a state like Illinois, you will have to double close if you arent a licensed real estate agent. 

Are there any circumstances under which you would find it advantageous to double-close when you had a cash buyer willing to buy assignment from you? Of course with the exception of States where it is illegal to assign a contract without REA license, like in IL. 

Quote from @Bob Stevens:

How? Simple, KNOW what you are selling. Know the reno and the market. RE is nothing but numbers, just know them. So many send me deals and do not have a clue what they are talking about. Just a waste of my time. Heck, I had a clown try and sell me my own property YES one I already owned.!!

Get to your local RE meeting , 

Good luck 

Thank you for input, Bob. I learned about property values when I was looking to buy them to fix and flip. This was before COVID. I would recommend prospective wholesalers (if they are absolutely clueless about the property valuation, don't have REA who can run comps on MLS, don't know what ARV is, can't figure the cost of repairs and don't know about short-cut $30-$35/sq ft rule, 70%-75% rule and etc.) to pick a property they consider to get under contract and contact a local HML. HMLs have financed hundreds of fix and flip projects and won't touch a deal if there is no profit to be made, if it's overpriced or in is an area of low demand. They do all your homework for you and explain along the way WHY it's not a good deal. Rule of thumb for newbies: if HML won't finance it don't offer it to investors.

Quote from @Lydia R.:

I've done both. It depends on the situation. When my wholesale fee is over a certain amount ($20K-$25K) I tend to double close to keep from ruffling any feathers on the buyers side. The cons of this are that you will have to fund the A-B side of the transaction. And cover the closing costs. So you need to be getting a higher fee in order to offset the cost. With an assignment, its much simpler and there are no costs for the wholesaler. If you are in a state like Illinois, you will have to double close if you arent a licensed real estate agent. 

 Is it legal in IL to double-close and essentially wholesale without a REA license?

RE: Licensing and regulation. I figured I have at least until October 1st, 2025 to do this under current MD law, without REA license. If one year from now I see this is a viable business that makes me an income that can at least sustain my life at 70% of what I can make working for someone from paycheck to paychek, and see potential for growth and reason to do this full time, then I can take 60 hr course, pass MD exam and get a Broker to sponsor me as REA. Thank god there is still a window and time to try this, without having to spend 60 hours of valuable time, money to sign up for a course, pay for exam and effort to find a Broker willing to sponsor. It will be tougher for future wholesalers who will be required to do all this before they can figure if wholesaling or RE is something worth investing their time to sustain their living needs.  

Quote from @Caleb Brown:

I don't wholesale but as an agent cold calling or texting was the best. It can be scary but it's not pricey and it's the best way to start. You can skip trace and target a certain area, street, type of property, etc. 

Thank you for your suggestion, Caleb. What is your conversion rate on cold calls? Do you close after making 1000, 2000, 10000 calls to potential sellers? The leads are relatively cheap, you can access data on Propstream and skiptrace to call. But it certainly takes time (and costs add up too, with each skip and time spent on the phone with each prospect, or paid to VA to do it for you). So, my question would be: realistically, how many cold calls you make to get a deal? And since you don't do wholesaling I wonder how relevant your results would be in this line of the business.

P.S. Eight years ago we would have dozens of replies under this thread in a single day, I think fewer people are spending time on public forums after COVID)))

Quote from @David Ramirez:

I completely understand the frustrations with bad wholesalers. So many people underestimate what it really takes to build a solid wholesaling business. The way it's portrayed online brings too many unethical people into the business, giving the good ones a bad reputation. I actually love that regulations are coming into place, to be honest. I'd love to jump on a call to share my experiences and discuss what has worked and what hasn't in my business. Feel free to reach out to schedule a time. Looking forward to connecting!

 Thank you, David! I just sent you a DM. 

Quote from @Don Konipol:

1. Sufficient capital to fund the marketing campaign resulting in deal flow

Thank you for your valuable contribution, Don. What would you consider a "sufficient capital" to fund the marketing campaign? Wholesaler @Chris Piper based in IN suggested what I have quoted below in his initial post about Wholesaling 101 4 years ago (see here https://www.biggerpockets.com/forums/12/topics/862964-wholesaling-101-how-to-wholesale-for-beginners).

Do you think 4 years later, in summer of 2024, under current market conditions in Maryland/East Coast it's still a viable method to start marketing?

Any thoughts are appreciated!

GET LEADS: You do this by using free methods such as driving for dollars or networking if you don’t have any money to spend. If you do have money to invest in your wholesaling business, then you can pull lists from Prop Stream or List Source and skip trace them, use bandit signs, social media advertising, Google/Bing ads, Direct Mail, etc. More details on marketing later in this post.

MY RECOMMENDATION TO GET STARTED

#1 Way to Get Leads: Facebook Ads

If you can afford to run Facebook ads, it has worked VERY well for me. Plus, it gets people coming to you looking to sell their house instead of you chasing them. The cost to run Facebook ads depends entirely on what you can afford. You can spend as little as $5 a day, or as much as you want to. I ALWAYS just set a daily budget and let the ad run continuously. I never set a start and end date.

I always run at least 2 different ads when I start an ad campaign. I usually use one image for both ads, but use different text in each ad. I also let Facebook optimize the ads for me. That way, Facebook will run both ads, and if one is doing well and the other isn’t, it will start spending all of your daily budget on the ad that is doing well and stop spending money on the ad that isn’t doing well.

#2 Way to Get Leads: Bandit Signs

They can be a hassle sometimes, take a lot of work, and it does get irritating when they keep getting taken down by the city, but they work very well. They are definitely the fastest way to get your phone ringing with motivated sellers.

If you don’t want people to see you putting out the signs or don’t have time, just run an ad on Craigslist for someone to do it for you. People typically pay people $1 per sign to put them out. You want to put out at least 25 signs and up to maybe 200 depending on the size of the area you are wholesaling in. You can either staple them to telephone or light poles, or you can get wire H-Stakes when you order your signs. You slide the sign onto the stake and then stick the stake into the ground. Using stakes will probably double your cost of signs, but if you don’t have a lot of wooden light poles or phone poles in your area then you may need to use the stakes.

#3 Way to Get Leads: List Pulling and Skip Tracing

This is another FANTASTIC way to get leads, and you can get a LOT of them quickly. Of course this may not be cheap, but it’s very effective. You can pull a list of 1,000 people from Prop Stream or List Source in just a few minutes. Then, you get them skip traced either within Prop Stream or from a 3rd Party website such as Lead Mining Pros or batchskiptracing.com

Once you get your skipped list back, you can start texting or calling your leads. Keep in mind that most skip tracing companies get contact info for about 70%-80% of the leads you send them. No company can get you contact info for EVERY lead you send them on a list.

If you aren’t big on the idea of calling or texting all those leads, then just use someone like Lead Mining Pros to do it all for you. All you have to do is contact the person and close the deal. They will get all the info for you from the seller on the property and such, you just have to negotiate and lock in the deal. It’s a HUGE time save if you can afford to spend the money to pay them to do it for you.

Quote from @Ian Walsh:

Learn your market and learn to market.  Wholesalers that put out good deals get a good reputation.  Most put out deals that they don't know aren't deals because they don't know their market.

Thank you, Ian. The question is how to best strategize your marketing campaign in the beginning. What is the best way to spend. let's say, $5000 to get leads that will potentially result in at least one deal closed, so you can get your money back and reinvest. With so many options out there and with big guys spending $25000 or more per month to market to sellers, it's really easy to burn a lot of cash and end up with nothing but a massive loss. On the other hand, you can't market for free, unless you believe gurus who claim that you can do wholesaling by looking up MLS, Zillow, Redfin and etc. I personally don't believe there are investors with hundreds of thousands of dollars to spend that couldn't think of doing the same, going to MLS and finding a wholesale deal. It may work for rehabbers, but in this business you better find off market properties if you really want to succeed. How you do that with the minimalistic approach that is also efficient and realistically can yield results?