The other night, I attended a local investor meetup in my area. There was quite a turnout, and one of my favorite portions of the night was a Q&A session. During the session, one gentleman went to the front and grabbed the mic.
Seemingly frustrated and upset, the man began in a gruff voice, “Guys, I’m a cash buyer, and I don’t know about you, but in my experience, every time I’ve dealt with a wholesaler, I’ve gotten nothing but disappointment. Every wholesaler I’ve met just spams my email inbox with crappy properties that are a waste of time! What gives!?”
He then continued on and on about how difficult his experience has been, and it got me thinking.
As a wholesaler, having relationships with reliable cash buyers is vital to my business, but there is definitely a select few that gets “special” treatment and has access to all my properties before everyone else does.
When listening to this gentlemen vent, I agreed that the wholesale industry is in dire need of change, but I also realized that there is something about earning the trust of a reliable wholesaler that can make a real difference for the cash buyer.
The truth is, as a wholesaler, there are certain types of buyers that I flat out don’t want to work with. I actually have a spreadsheet of all my buyers, and I rank them from most reliable to least.
There is definitely an “inner circle” that good wholesalers develop through relationships over time, and for today’s post, I want to teach you exactly how to get in that circle and leave you with some practical tips to help you get the most out of your relationship with wholesalers.
How to Purchase Real Estate With No (or Low) Money!
One of the biggest struggles that many new investors have is in coming up with the money to purchase their first real estate properties. Well, BiggerPockets can help with that too. The Book on Investing in Real Estate with No (and Low) Money Down can give you the tools you need to get started in real estate, even if you don’t have tons of cash lying around.
For the first step, I’m going to introduce you to a term called “reverse wholesaling.”
This is where you as the buyer tell your wholesaler exactly what you look for in an investment property.
What is your exact criteria? Do you like investing in select areas? Do you look for specific return rates or purchase prices that are within a certain percentage of the market value?
Inform your wholesaler in detail exactly what it is you look for, and then tell them you don’t want to see anything else unless it fits that criteria.
This way, your wholesaler will stop bringing you “bad” deals and will be more likely to bring you the “good” ones (or more specifically, ones that meet your criteria) first because they know they have a guaranteed buyer, and they won’t have to shop around.
Now, if you say that you will buy property that matches X criteria and they actually follow through and bring you a deal that does that, you actually need to follow through and buy it. Otherwise, you’ll end up looking like a flake.
I like to think of it this way: If someone says to me they’ll buy X and I bring it their way, if they don’t end up actually buying it (especially if they tied it up under contract), I almost treat it like a grading system (yes, my inner teacher is showing).
If on the first interaction I have with them, they don’t buy or they back out, it’s an automatic failure to me. Moving forward I’m not going to consider them a serious buyer, and they’ll be put at the bottom of my buyers list.
But if they have bought, say, nine deals from me, and then they end up backing out of one, it’d be like having an A- or 90%; I’d still work with them in the future, but not in the same way as if they were at 100%.
Your Word Is Everything in Real Estate
The biggest asset you can have in this business is your word. If you say you’re going to do something and our relationship proves that I can trust that you’ll actually follow through with what you say, that is what will distinguish you from the crowd and get you at the top of my buyers list.
In my business, sometimes I work with other wholesalers if there is enough meat on the bone and will purchase their properties to turn around and wholesale it myself.
In particular, there is one wholesaler that I’ve worked a lot with throughout the years.
Recently, there was a property he had that I made an offer on and got under contract, only to find out that there were some really serious tax issues with the house, and my margin was turning out to be about break-even at best.
Because I was cutting it too close, I began to think about backing out and actually discussed it with him.
In our conversation he said, “Brett, I totally understand if you want to back out, and I know that this isn’t typically like you. You’ve never backed out of anything with me previously. However, I do want you to know, if you make the decision to back out, I will have to take this decision into consideration in the future.”
I really value my relationship with this wholesaler, and I didn’t want to do anything that would hinder it, so in the end, I stuck to my word and ended up going through with the purchase (knowing that I may lose a little money).
My word and my reputation with him meant more to me than the risk on that deal, and if you are looking to get all you can out of a relationship with a good wholesaler, sometimes it takes that kind of integrity to make it happen.
The 4 Types of Cash Buyers You Don’t Want To Be
To break down my point further, I thought we’d have a little fun and introduce to you the four major buyers you don’t EVER want to be.
1. Mr. Backout
Mr. Backout is the guy who talks like a big buyer. He’ll come off the cuff saying, “I want to buy 50 properties a month,” and I’m like, “Wow, man! Let’s start off with one for now and see how things go.”
You see, this business, at least in my experience, is all about relationships. If I don’t know you, we don’t have history for me to trust you yet. We need time and deals together before trust can begin to develop.
Mr. Backout will then move forward on a property I send him, get it under contract, stall for a week or two and then for some random reason will back out of the deal because it wasn’t “perfect.”
Now, it’s totally fine if you need the deal to be “perfect”; I’m not bashing people looking for very specific criteria, but don’t be the guy who ties up the property for weeks and then backs out, because that makes things frustrating for everyone involved.
I’m not trying to come across as “holier-than-thou,” so please don’t misunderstand me.
I personally have backed out of a few deals myself over the years, but they were all under extreme circumstances, and all had very good reasons behind not going through with it.
Mr. Backout is the guy who backs out of contract more than he actually buys property–and for reasons that don’t really add up.
Don’t be that guy!
2. Mr. “I’ll Buy Anything You Have”
Guys, I’m going to be honest. When I hear a buyer say this, I roll my eyes.
Cash buyers talk WAY too big.
You won’t buy everything. If I send you a deal that is 100% over market value, are you going to buy that?
I get really leery when cash buyers come to me saying, “We are a huge company, and we’ll buy all you have!” People who start off our relationship that way have ended up being the biggest headaches I’ve dealt with.
3. Mr. No Earnest Money
This is the buyer who claims that because they move so quickly since they are so big, they can close in two days, and they are above putting down earnest money.
Recently I had a buyer do just that. He tied up two properties on Monday and said we could close on Thursday, and well, it didn’t happen.
Two weeks later he did finally close on one, but the other is still pending, and it’s super frustrating!
Moving forward, this buyer isn’t going to be my first choice to work with because I can’t trust that he’ll do what he says. Not something you want to do!
4. Mr. “I Want Something For Nothing”
A while back, I had a hot property that had just been purchased, and I had a buyer I have never met call me up asking about it. I said, “Oh sorry sir! That property was already snatched up,” and he responded, “Oh, man! Well, can you do me a favor?”
I was curious because like I said, I had never spoken with the guy before, but I said, “Well, what would that be?”
“Can you send me your deals first, before anyone else?”
And I was like, “Ummm. . .”
And again, please don’t misunderstand me. I’m not picking on anybody! These are just behaviors I have seen from cash buyers that really turn me off as a wholesaler, and my goal is to help bridge the gap between the two.
I want investors and wholesalers to work well together because when the relationship is done right, it’s a win-win for everyone.
But for Mr. “I Want Something For Nothing,” he needs to understand that my top buyers have bought multiple properties from me throughout the years and have earned my trust and respect. They deserve to be on the top of my buyers list.
Why would this guy think he should get special treatment from without even knowing me? Not the way you make friends!
To sum it all up this week, the two takeaways are to be a person of integrity and follow-through and to understand the importance of relationships.
If you understand these two things and you do them well, with time you’ll become the guy wholesalers go to first with their deals.
Hope this post was helpful this week!
Wholesalers: How do you choose which of your buyers to contact about deals first? Buyers: What tips or advice do you have for working with wholesalers?
Let’s get the conversation going in the comments section!