Each week I get at least 20+ properties sent to me from wholesalers. It's Monday and I've already received more than 10.
Wholesalers are a vital source of deal flow for our operations. These folks spend a lot of time doing the heavy lifting of marketing, finding and negotiating the deals. They are an extension of our business. They bring the deal, we negotiate the final process, we close. They make it simple. Don't they?
It's supposed to be a simple process but many wholesalers have their own way of advertising, promoting, and offering information on properties. I get it. They learned one way but it doesn't mean it's the most efficient.
While I highly value wholesalers efforts to engage with me every day, expectations need to be clearly defined. When they are not aligned, distractions occur reducing overall effectiveness through poor time management ultimately leading to loss revenue. It's a cascading host of issues that affects our focus. Efficiency is the lifeblood of our operation, which is why we can do so much volume with fewer people.
In the spirit of cooperation and efficiency, I offer the following:
1. COMMUNICATIONS
Texting me an overview of your deal is fine but it lacks all the details required so make sure to send a follow up email with complete details.
2. INCLUDE THE ADDRESS
Some of you learn not to include the address because you want to generate responses. I don't have time to chase you for the address so if you don't include it, do not expect a response. Second, you may think by disclosing the address other investors will try to go behind your back to steal the deal. If you have it under contract, you have absolutely no worries unless you terminate the contract, in which case, nothing was there to steal. I suggest you keep two mailing lists. One for preferred buyers to include the address (active and repeat buyers) and the other for tire kickers who receive the address upon request. Once you convert a tire kicker to a buyer, move them to the preferred buyers list.
3. INCLUDE YOUR PRICE
I never respond to a a wholesaler who wants me to give them a number. It's an absolute waste of my time. No price. No response.
4. INCLUDE A PHOTO LINK
Dropbox of Google Drive usually are the preferred methods. A few photos do not tell the whole story. You need to make sure you take a lot of photos. That tells me you have been to the property and can discuss it in detail. Do not provide a link to video in lieu of photos. Video is nice but I cannot spend time watching your YouTube videos. I never do.
5. INCLUDE PROPERTY DETAILS
Number of bed and bathrooms and items of concern that the seller told you. That's pretty much it. Absolutely do NOT tell me your ARV or your rehab quote. Unless you have access to the MLS, can provide me with comps specific to my criteria and have a construction background, DON'T DO IT! Those that do so show either inexperience with their analysis or at worst, are being misleading. Fancy spreadsheets from Bigger Pockets or other Web sites look nice but are for evaluating your own fix and flip profit, not when you are wholesaling. Everyone has their own way of evaluating and analyzing costs. Believe it or not, your asking price is plenty sufficient.
6. CONSTRUCTION COSTS
Unfortunately, this is the weakest link in the wholesale process. In order to come up with your asking price, you need to have a general idea of costs. Wait! Didn't I just say don't tell me what the repair costs are? Yes, I did. That doesn't mean that you can't ask questions from experienced investors on their costs, hit up the Home Depot guys and start keeping a running list of general expenses. For example, you should at least know what a 3-ton HVAC unit installed with a cage will cost. Remember, the renovation costs will ultimately determine the buyer's final offer price to you.
7. ESTIMATING YOUR PRICE
An excellent topic for a future post but I will say that your buyer's exit strategy will drive their offer price. A fix and flip exit has different costs, then a turnkey flip or buy and hold. A property you are wholesaling at $20,000 most likely will bring interest primarily from buy and hold investors. That means the focus is on cash flow and they will require a certain cap rate. The cap rate will be another factor along with renovation costs in determining the offer price on a buy and hold. Price it accordingly. Learn these exit strategies and the numbers.
8. RESPONDING TO EMAILS
Rule of thumb. I don't respond to an email unless it's a property I have an interest. If I do, I will email you for the access instructions. Trying to set a time to meet at the property is impossible since I my schedule is pretty full each day. I really do not know when I will stop by the property. Put a lock box and provide the code. After I visit, I will call with my feedback and usually an offer. :>)
9. SETTING THE TERMS
Most wholesalers learn to set the terms and try their best to control the deal. However, the experienced volume buyers have their own set terms and closing process and rarely deviate. They use the same title company, same deposit amount and same number of days to close. If I had to use every wholesalers closing process, it would be a full time job tracking deposits, people, and closings.
From mid-March through April, we will have a total of 17 closings. We have one process to rule them all. Learn it, love it and we both make money and do more deals.
10. BUILD RELATIONSHIPS
The best wholesalers I work with (and you know who you are) know exactly what I am looking for once they hit my sweet spot. They track my responses, areas of interest, my exit strategies, offer prices and terms. They are the best of the best.
