All Forum Posts by: Jeff Stephens

I always advocate for going off-market, and talking directly to sellers--it's often far more possible to work out something creative (ie using little cash) when you're working directly with the seller, rather than working through agents and competing with the listed MLS market. Also, as @Billy Davidson, seller financing is an amazingly powerful option, and one I always recommend (and pursue myself).  Seller financing is also far easier to accomplish off-market rather than on the listed MLS. 

Matthew, you could always go and find a private loan to place in second position on the property, instead of a bank loan or HELOC product. When you're working directly with regular people, all the terms are negotiable.

Devan, yes, you will receive a pro-rated return on both taxes and insurance for the unused days. The taxes should be pro-rated and the refund calculated on your closing statement through escrow, whereas your insurance will likely be refunded directly to you once you call and cancel the policy after closing.  

Devon, yes, you will receive a pro-rated return on both taxes and insurance for the unused days. The taxes should be pro-rated and the refund calculated on your closing statement through escrow, whereas your insurance will likely be refunded directly to you once you call and cancel the policy after closing.  

@Aaron Peterson I wanted to take a moment to dissect your question differently.  You asked "Should I put return labels on them?" but what I hear is actually questions on two different issues:  

1) should I provide a return address?

2) if I provide a return address, should it be in the form of a label?

First and foremost, it's important to note that there is really no single right answer for your marketing decisions, because each of your decisions can only be made relative to YOUR unique objectives.  

Every little marketing decision (and there are dozens, even in direct mail) comes down to this: when someone receives your letter, what experience do you want them to have, and what conclusions do you want them to draw about you?

For me, I do personally provide a return address.  Part of it is a practical issue--as @McKinley Crowley mentioned, it will help you keep your list updated when letters bounce back. But the other reason is a calculated decision on my part about the impression I want recipients to have. I want them to feel I am a straightforward and transparent regular guy (not a business), and I feel omitting a return address would run counter to that objective. So I include it. Other related questions that come up are: Should it have my name, or just the address? Should it have my personal name, or business name? Again, these are all decisions only you can make because only you know your objectives. I personally put my first and last name and a private mailbox (like @Account Closed mentioned) as the address; I personally definitely do NOT use a business name on mine, because I don't want to come across as a business.

As for whether that return address is a label (vs. being written), again it's a matter of what impression you want to give and how you want it to be perceived.  For years I've had the return address hand-written onto my envelopes, but I have started experimenting with printed labels recently to see if/how the response differs.  I haven't been able to come to any conclusions on that experiment yet.

I hope that answer is helpful in looking at the bigger picture. Feel free to DM if you want to chat further.  Good luck!

@Account Closed  Do you "have to" have a professional inspection?  No, definitely not.  But I personally ALWAYS do--here's why.  

As a wholesaler, your role in the big picture is to identify and secure a purchase opportunity that you can deliver to your buyer, so that THEY CAN MAKE MONEY. If you can deliver a deal to them that will be profitable for them, they will pay you for having delivered it to them. You are creating value for the buyer--that's the name of the game.  

That said, if you want to have maximum success as a wholesaler (get the biggest assignment fees, close the most deals, have the fewest problems, etc.), it's important that when you present a deal to a buyer for their consideration, you instill in them the utmost confidence that your deal will be a successful and profitable project.  

So, the big question is this:  how do you give them that utmost confidence?  

The simple answer is that you show them you've thoroughly vetted the property and the deal, and that your findings, repair estimates, comps, etc are rock-solid.  Personally, I always hire a professional inspector, so that I have an objective report I can show the buyer.  

Obviously, this means you'll have to spend some money, but the results are worth it (in my opinion, and in my market).  Just this week I closed an assignment where I spent about $1,000 on due diligence, but my assignment fee was $20,000, so it was worth it to me.  

Feel free to DM if you want to discuss further!

@Robert Larson I'd suggest we distinguish between two different ideas:  "disclose" it, and "discuss" it.  Based on my strategy (that I call Relationship Wholesaling), when you're building a strong relationship with the Seller and really crafting a custom proposal that meets their needs, there's little need to "discuss it" with them (ie talk about it at length or make a big deal of it).  Eventually, before closing, you will need to "disclose it" to them, but it's very possible to do so in a way that they won't even care; it will be a technicality to them, and nothing more, because you've done an excellent job delivering them the exact solution they needed, and they trust you.  It doesn't impact the deliverable to them in any way.  

An important and relevant note is that in Relationship Wholesaling, once you complete your assignment agreement to another buyer, YOU continue to be 100% of the face of the transaction to the Seller...you don't hand them off to your buyer and walk away.  Your buyer stays behind the scenes and just prepares to close, while you maintain the customer experience for the Seller.  

Feel free to DM me if you'd like to discuss further!

@Marissa Perez Congrats on getting started and working hard to get things figured out!  As I read your question, I was struck by the thought that so much of the content about "wholesaling" out there is really tactical...and not enough big picture. It's easy (and unnecessary) to get lost in in all the percentages, formulas, etc.  So let's step back and take a look at he bigger picture for a moment.  

The general idea is that ultimately, a person will buy a property, often will fix it up, and then will do something with it that will create a profit for them (often sell it, but maybe just rent it, etc.).  The context of most wholesaling talk is that the buyer will fix it and then resell it, so let's use that example.  As a wholesaler, your role in this big picture is to identify and secure a purchase opportunity that you can deliver to this buyer, so that THEY CAN MAKE MONEY.  If you can deliver a deal to them that will be profitable for them, they will pay you for having delivered it to them.  You are creating value for the buyer--that's the name of the game.  

With that in mind, wholesaling all starts with this question:  "at what purchase price would my buyer be able to buy the property, repair it, resell it and make a nice profit?"  That's your ultimate wholesale price to your buyer. Then, your job is to negotiate the actual purchase price lower than that.  The difference between the price your buyer will pay you, and what you've negotiated with the seller, is your wholesale fee.

So here's an example of a single family home:

After-Repair Value:  You feel it will be worth $300,000 fixed up

Repairs:  It will take $25,000 to fix it up

Costs to Sell the Property:  Perhaps around 7% of the $300k sales price

Holding & Financing Costs (varies by buyer, based on their funding source):  Let's pencil in $10,000

The Profit Required By Your Buyer (this is why you need to know your buyers well...what profit do they require to make a deal worth doing? This too varies from buyer to buyer):  Let's say $50,000

So....based on their model, the most they could pay to buy this property is $194,000 ($300k minus 7%, minus $25k repairs minus $10k repairs minus $50k profit).  

In other words, they'd be happy to pay $194,000 to buy the property.  So now, your job is to see if you can negotiate the purchase price to be LESS than $194,000.  Let's say you negotiate to buy it for $180,000, that means you'd be handing your buyer the right to buy the property for $180,000, even though they'd be willing to go as high as $194,000.  That means they can pay YOU the $14,000 difference for the value you created for them in creating this deal for them.

I hope that zooming out and looking at the bigger picture helps the specifics to make more sense.  Feel free to message me if you'd like to chat further.  Good luck!

Brendan, hello from down the road in Portland...

I believe the answer comes down to how you want to position yourself.  If you want to come across as a "house buying company," then something like a website would support that.  However, I'd encourage you to question the assumption that being "a professional house buying company" is the only option...or even the right option. In my experience it depends on who you are as a person, and how you want to do business; only you can decide. I call this "finding your voice" as an investor.

For me personally, I've chosen to deliberately NOT position myself as a house buying business. Instead, I prefer to position myself as a regular guy--relatable, approachable, and professional but not "a professional."  That fits with me and who I am authentically, so that's the path I've chosen, and it works well for me.  

You may make a very different choice than I've made for myself, but the important point is this:  it's critical to start with some self reflection on how you want to be perceived, and how you want to position yourself. Despite what perhaps many of the mass guru education on topics like wholesaling may tell you, there is no one single "right" way to do it; the "right" way is the way that genuinely fits who you are and the type of business you want to have.  Once you decide that, you will reflect it in your marketing, and it will "pre-frame" your audience and set their expectations about how to think of you before they ever pick up the phone.  

Good luck! Branding and positioning is a favorite topic of mine, so feel free to DM me if you want to chat more.

Avi, if I'm understanding the scenario correctly, the answer is that it depends on what type of "owner financing" they are wanting to and willing to provide.  If it's a normal sale where title transfers to you at closing, and you give them a Promissory Note and Deed of Trust, that will pretty much eliminate their 1031 exchange. However, if by "owner financing" they mean something like something like a lease option (where you take control of the property but don't actually become the owner at first...you're just leasing it until you decide to exercise your option), that would allow your seller to *feel* like they've sold the property now, but not actually sell it until later, and do a 1031 exchange at that time you actually buy it.  Plus, that structure would allow you to do your flip--once you got the work done, you could exercise your option to buy it and then immediately resell it.