What goals should a newbie wholesaler set?
That’s a great question — and a tough question, for sure.
I started four versions of this blog post and went back to delete each one.
This one was too specific, that one was assuming too much, the other one could have been as long as a book, and the last one was terrible.
Bin it, trash it, scrap it, burn it.
It’s a tough one since I’m speaking to a wide audience with varying levels of exposure to the subject, and here I am trying to tell them how to set goals. I don’t know your budget, your marketing methods, your time constraints, or even your name (say “hi” in the comments, so I can at least check this off the list).
Not to mention, it’s difficult to set goals for a brand new investor when wholesaling can be an unpredictable beast. It’s not just “Do X and Y, and you will get $ in 90 days.” There are many more moving parts here and other factors that can mess with consistent deal flow.
It’s much too long for a blog post, anyway!
So, I’ll go up to the 30,000 foot view and tie this in to my last blog post.
Deals, deals, and more deals. If wholesaling is all about finding deals, let’s set some immediate goals for a newbie to find deals and sell those deals to an end buyer (the very definition of wholesaling!). Then let’s reverse engineer a bigger goal down into monthly sized chunks!
I’ll lean heavily on my last blog post and say that your goals are as follows:
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.
- Market Analysis: Identify 1-3 zip codes or neighborhoods to target.
- Find Some Buyers: You don’t need 100 people on your buyers list. The investors you talked to during your market analysis is a good start. Try for 5-10 QUALITY buyers who buy in your areas rather than a huge QUANTITY of buyers you have no idea about.
- Logistics: You’ll need a phone number, website, business cards — at the very minimum, a phone number, whether your cell phone or not, may be all you need in this first quarter.
This first part of the year is all about learning your market and lining up some potential buyers for when you start talking to sellers.
Time to reach out and touch some potential motivated sellers — or entice them to reach out and touch you (sounds bad either way you say that).
There are a few marketing branches here, and the one you take is up to you, your budget, and your desire to market that way. Like I said in my last blog post, make sure you have at least 6-8 months’ worth of a budget to consistently keep at your chosen marketing path.
- Choose your targets. You chose your areas during the market analysis phase. Now pull lists from online sources (like ListSource.com), or go driving for dollars in your area. You need a list of names to send mail to, so go get it!
- Choose your medium (or what your words go on). Yellow letter, post card, professional letter, or crumpled up napkin from the pub up the street.
- Choose your message, those words that go on the postcard. (Or napkin — I think I’m on to something.) Make sure your message is clear, that you list what benefits you offer the seller, and that you include a call to action, such as “call me today! 555-555-5555.”
- Choose your frequency. How often will you be mailing your list? Every 4 weeks is a good rule of thumb frequency.
- Get your first mailer together and SEND IT!
- Locations! Pre-determine where you will be going, what target intersections or highly visible areas you will put those signs.
- Ordinance! Make sure you are complying with your local city/county codes. I don’t want to bail you out of jail any time soon. Many areas have rules on what can or cannot be posted publicly.
- Message! Choose your bandit sign message, make sure it’s clear and very concise. You only have so much room on that sign, and it has to be big enough for drivers to read and get the idea of what you are communicating. It will usually be something like:
ANSON BUYS HOUES
ANY CONDITION — FAST CASH
- Get your bandit signs together and GO PUT THEM OUT!
This could be a whole blog post or book on its own, but let’s break down a few ways a newbie could get some deals rolling.
- Choose your platform.
- Post looking for motivated sellers on Craigslist. Keep your message clear and concise, and have that call to action!
- Respond to motivated sellers on Craigslist.
- Reach out to all of the “For Sale By Owner” ads you can find anywhere (Zillow, Redfin, Trulia, FSBO.com, etc.).
- Contact all of the “For Rent” ads you can find. Tired landlords may just want to sell rather than have another tenant from hell.
- Be consistent. No matter what you decide to do (many people do all of these things and more), make sure you are daily working these channels and leads.
Related: 4 Ways to Generate New Wholesaling Leads That Actually Work
Months 3-8 are to remain consistent with your deal acquisition strategy. Get better at talking to sellers, learn to evaluate deals, and always be growing in the meantime.
Let’s tie it into a longer term, big picture goal.
Your business needs to begin with the end in mind. Whether it is to close one deal, 100 deals, or use deal money to take your wife to Hawaii, the best part is that you can take that goal and then reverse-engineer it to see just how much action you will have to take to hit it. It keeps the goal within sight and shows exactly how your daily actions snowball into a much bigger goal.
Let me introduce you to a more specific formula than “I just want to make a crap-ton of money.” It’s a great way for a wholesaler to figure out how many deals they must close to meet their goal, as well as the marketing costs to meet those goals.
The below section is for a wholesaler who is using direct mail as a marketing channel.
This formula assumes many variables that you may not know at first, like response rate, conversion rate, etc. The more calls you get, the more deals you do, the more accurate you can make this formula. But in the meantime, figure out how much you want to make a year, and let’s roll with a 2.5% response rate (people who got your mail and responded) and a 5% conversion rate (out of those who responded, you turned into a deal).
Wholesaler Making $100,000 a Year
Your average wholesale deal might be $5,000 profit to you. You would have to do 20 wholesale deals for the year in order to hit the $100,000 mark:
($100,000/$5,000 = 20)
If your response rate is 2.5% and your conversion rate is 5%, that would mean for every deal, you need to send 800 letters to get 20 incoming calls from motivated sellers in order to close it:
((800 x 2.5) x 5%) = 1 deal
To get 20 deals, you will need to send 16,000 letters for the year. If your marketing cost is 80 cents per letter, those 16,000 letters will cost you $12,800 for the year.
Letters sent | Marketing Costs | Response Rate | Conversion Rate | Profit
Monthly this looks like:
800 letters = $640 marketing costs = 20 calls = 1 deal = $5,000 profit
And for the year:
16,000 letters = $12,800 marketing costs = 400 calls = 20 deals = $100,000 profit
So, I leave you with some immediate action goals and a way to reverse engineer your end of year goal down into bite-sized monthly chunks. Go out there, and get some deals!
Wholesalers: What’s your ultimate goal — and how do you plan on getting there?
Let me know your story with a comment!