Co-Wholesaling?

Question

Hello,

Wondering if BP could help me figure out how to present this opportunity to another investor/partner and if there would be any potential problems that I haven't thought about yet...

I met a guy that would like to get into wholesaling single family homes. He has personally flipped around 50 houses in the last 5-10 years but hasn't done very much as of late due to the REO inventory drying up. He was doing majority of the deals back in 2008-11 when deals were easier to find off the MLS. He heard about wholesaling recently and was intrigued by it.

He knows that I am currently marketing for off-market deals in my area and would like to partner (to fix n flip) if I happen to find another deal. But instead, I am considering how can we combine our resources to do more...

What if he funds the cost of postcards and postage. Say $1,500/month.

That would equal a little over 3,000 postcards per month going out.

My role is to create the custom lists (driving for dollars), create the custom marketing piece, address all of the postcards and send out the mail on time every month, consistently. I would also take all of the calls, do the follow up and meet with sellers to get contracts signed.

Once we have signed contracts, then either of us can use our networks to find the cash buyer for the property.

We then split the wholesale fee.

He is using his money to make money. I am using my time and sweat equity to make money.

Could this work successfully? Why or why not?

I am getting a little too excited to do this because currently I am restrained by my monthly budget as to how much marketing I can personally send out. If I had $1,500+/month to send out marketing, well then, skys the limit!

Account Closed · Answer

First, I have a lot of people that want to bring me wholesale deals to help them move them - find the buyer and get the deal closed.  When I ask them what they want, they always come up with 50-50.  Seems fair, right?  Wrong!

Finding a deal and getting it under contract is not half the work.  It's 1/4 to 1/3.  Finding the buyer. Getting a contract to purchase with them.  Collecting the deposit.  Setting up the closing. Making sure all parties follow through...that's most of the work.

If you want to have partnership deal with somebody, make sure you identify all the steps along the way, who will do what and the compensation for each one.  Just a simple I buy, you sell 50-50 split doesn't do enough.

One more thing, if you are asking someone else to bankroll the operation, that someone else should get the majority of the profit or at the very least, get all of his or her capital outlay reimbursed first (made whole), and then you allocate the splits.

When I am approached and suggest this structure, the other side often says no thanks.  My thoughts are good riddance.  That person obviously has little to no experience and knows little about wholesaling.  Last thing I want is to waste my time with a person who doesn't know that he/she doesn't know.

Adrien C. · Answer

when you say flip- are you talking about flipping contracts as in wholesaling (my original interpretation) or flip as in fix n sell?

Either way- I built up my wholesaling company for the price of $200 stamps. I combed FSBO on CL and a lot of driving. I'd mail an initial letter but if it was a local absentee owner or the mail was returned and I found them at another address- I'd go visit in person. Screw waiting for someone to call.

Toi H. · Answer

Great question Charlie!

I agree with Adrien, be prepared for those questions. He is a seasoned investor with 50 deals under his belt. I'm sure he can use his money to find his own sellers and buyers.

Combine your resources with him by adding him at the top of your qualified buyers list for when you do run across properties that meet his investment needs.

Work with multiple realtors in and outside of your area.  Let them know you are a local investor looking to buy homes to fix up and flip.  Provide the agent with your criteria (your cash buyers criteria) and they will send out a daily email hot list to you for FREE.  Before you go out to see your first property with them, you will be asked to sign a Buyers Agreement - Do NOT agree to be completely exclusive with only one agent because it will limit you; only agree to be exclusive to the properties they show you.

Here are some other free resources in addition to the one's Adrien mentioned:

- classifiedforfree.com

-salespider.com

-postlets.com

-adpost.com

-backpage.com

Also try bandit signs;  Switch up your marketing - do mailers one month and bandit signs the next month.  Check out some of the other great forums on finding motivated sellers.

Adrien C. · Answer

I sold insurance door to door for 8yrs so no big deal. It's not necessarily what you say but how you say it. "Hi, my name is Adrien and I help families here in TOWN. Are you so-so? Yes, great, you've been super hard to catch up with. I wanted to stop by because I'm interested in purchasing your property over on 123 Mian. Is that a property you'd be interested in selling?"

I send out about 100 mailings to vacant properties each month. With all the return mail and following up in person- that's enough contacts to find a deal or 2 or 3. I send a personalized letter first.

Adrien C. · Answer

Looking at this from the other guy's perspective- what value do you bring him? He has a track record of flipping houses so he knows the game. Surely he can use his money to find the sellers, flip to an investor, and make everything. Not trying to be negative - trying to help you anticipate questions/objections he may have when you propose to him your offer.

Matthew Forbes · Answer

Great thread, lots to learn on this one.

Account Closed Interesting points on the actual work.  As I am new to this world of wholesaling but are about to start sending direct mail please chime in.  After a lot of research and discussion with people in the business my current understanding of the work load in today's competitive market is as follows for wholesaling: Getting the house under contract is by far the hardest part.  Setting up the closing ect is just tedious paperwork, and finding the buyer is easy part.  When I say easy, I don't mean it takes 5 minutes, but if the house is truly priced right with the market in today's wold, finding investors is really a marketing exercise.  Given what you wrote I am starting to second guess myself, any insight from your point of view would be greatly appreciated.

Matt

Charlie John · Answer

Toi N. Great points especially about laying out the entire wholesaling process and discussing who will take each role and how they will be compensated for it. And absolutely his capital that seeded our marketing would be returned before anything is split.

Let's ignore the fact that he has done deals before -- How would like to contribute to fund the marketing machine in order to get more deals to wholesale. He funds, I do all of the rest (and that includes find the buyer). He is nothing more than a partner that provides the marketing dollars. This would not be the typical "co-wholesaling" situation where I find the contract and he finds the end buyer.

any one else have thoughts on how this could be mutually beneficial and fair?

Charlie John · Answer

Thanks for your response Adrien Schebott.

I will add that he does not know much about wholesaling or how to find off market deals. He doesn't understand the marketing/negotiating with sellers part and honestly, I don't think he would want to do any of it. But I do! That's my value proposition. Using his marketing funds, I will do the grunt work to drive the neighborhoods, collect the data (addresses and home owners name), send out the marketing on schedule, take the calls, set appts and get contracts signed. That is the value I can provide. What if we send $1,500 worth and get a wholesale fee of $10,000 that we then split. He is turning his $1,500 into $5,000 (and thats just one deal) with me doing almost all of the hard work. Does that make sense or am I just not thinking about this clearly?

Charlie John · Answer

Sorry, by flipping I mean't fix and flip.

I appreciate your hustle Adrien! I am on my way man! How did people react when you door knock/cold call and say Hi I have been trying to reach you...

I currently send out my own marketing to custom driving for dollar lists but am limited by my monthly budget. I only send about 500 post cards per month. If I could increase the amount I send per month, then more opportunities will be available and that is what I am looking to accomplish.

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