What do I do when I have found my cash buyers
Investor · Houston, TX · Member since 2015 · 9 posts · 0 votes
Hello everybody
So I was told to find cash buyers before I started looking for the actual houses to wholesale. Which in houston I have found countless but few that are actually willing to sit down and talk with me to see what they are looking for. On the other hand I have had a few take the time to chat with me so i'm positive I can start searching for some sellers. The only issue is that I am stuck on where to go next. I know I need to market bandit signs, mailers, etc. My question is where do I start, where do I send these mailers? Should I stick in one general area or venture out? Information on this topic would be great bigger pockets!
Real cash buyers get a LOT of calls from new wholesalers - we get dozens of them calling into our corporate office every month. So the reason you might not get a warm reception is because a lot of other guys are calling them. Most - honestly - don't sound like they know what they're doing. My advice is this is to sound very confident and be very efficient. Suggest that if they have 2 minutes to answer your questions about what they are looking for, they won't hear from you again until you have a deal for them to consider. If someone might bring me a deal, I always have 2 minutes to answer a few questions, such as:
What's the ARV range of properties you purchase?
Other than single family, do you buy other property like condos or townhouses?
Is there a minimum # of bedrooms or other criteria you use?
Are you buying to rehab & flip or to buy & hold?
What is your target ROI on a project?
Ask if they prefer to be reached by phone, email or both - and get the contact info.
Marc,
I've never done this, but I've read a lot of posts on BP about direct marketing and wholesaling. From what I've read it is one of the hardest things to do in real estate. Some of the top people like @Aaron Mazzrillo have said that it takes a high volume of mail. I think he said he sends out 100 or 200 pieces of direct mail a day. Another thing most of them say is that if you find a real deal (50% ARV), you won't have any trouble finding a buyer. @Aaron Mazzrillo says he only has one buyer. You can get lists from places like listsource.com and send them to absentee owners.
If a seller said yes, would you be ready with a purchase contract and the appropriate terms?
From my experience, mailing abandoned property owners and calling FSBOs generated more serious conversations than putting up bandit signs. I personally lack the tact to do probate and divorce letters (got some angry responses), but I know some people do it well. This is something to speak with an attorney with, but I use to work with one who would start LLCs, get MLS offers accepted with the LLC as the buyer, and then sell the LLC for an appropriate amount.
Random things to think about:
- sellers are not idiots, and they know you're going to turn a profit, so be honest with them
- you're probably not the first investor who called that FSBO, so consider ditching the scripts for honest conversation
- short sales give you a lot of lead time to prepare your buyers during the negotiation phase
- it's best to know which of your buyers want what, but if it's really a great deal, it should sell itself to someone
- if it won't fit with a buyer in your list, consider reaching out to bigger wholesalers and offering them half the deal if they sell it to one of their clients
Real cash buyers get a LOT of calls from new wholesalers - we get dozens of them calling into our corporate office every month. So the reason you might not get a warm reception is because a lot of other guys are calling them. Most - honestly - don't sound like they know what they're doing. My advice is this is to sound very confident and be very efficient. Suggest that if they have 2 minutes to answer your questions about what they are looking for, they won't hear from you again until you have a deal for them to consider. If someone might bring me a deal, I always have 2 minutes to answer a few questions, such as:
What's the ARV range of properties you purchase?
Other than single family, do you buy other property like condos or townhouses?
Is there a minimum # of bedrooms or other criteria you use?
Are you buying to rehab & flip or to buy & hold?
What is your target ROI on a project?
Ask if they prefer to be reached by phone, email or both - and get the contact info.
My suggestion is you should first get educated on the actual Wholesale Process and make sure your Contracts meet the intended purpose. You should also know exactly what you are assigning as a Wholesaler as very few people actually understand this key part which, if done wrong, can lead to fines and unwanted calls from State Agencies regarding your activity.
After you have your ducks in a row as far as legal, knowledge and requirements, then ways to start finding potential wholesale deals are:
1) Driving for Dollars
2) Online advertising "We Buy Homes"
3) Meet with some local Estate Attorneys and Bankruptcy Attorneys and introduce yourself as a Real Estate Investor
4) Road Side Signs: "We Buy Homes"
5) Attend Local Networking Venues (like REIA Clubs, Meetups, Seminars, Etc.) to get your name out there and meet others in the business - Have Business Cards to hand out
Now the hard part...learning what Investors are looking for. This is where a strong Education comes in for sure. As a Wholesaler, you will be expected to know everything and prepare everything for the Investor if you want a long term business and relationship. Here is what Investors are looking to see in your potential deals:
1) The Comps used to verify an ARV/FMV - These have to fall within guidelines to actually be recognized as "Good Comps"...this is NOT a Zestimate or any other Automated Valuation guess **NOTE: CAP Rates on SFRs mean nothing IF the property can not actually Comp Out...so if the Exit is a Hold strategy, put the Projected CAP into the package for sure but only if you know what exactly is used and not used in determining a CAP to begin with or you may look silly out of the gate. If the Exit is a Flip, then be sure to include the Projected ROI.
2) You will have to know about Construction so that you can estimate the repairs the property will need to get to ARV/FMV - key here is knowledge of rehab, construction laws, material cost, labor cost, contingencies, time frames, etc.
3) You will have to estimate Holding Costs based on the estimated time-frame of the combined Construction Period as well as Average Exit Marketing Time for the area surrounding the subject...again..homework and knowledge. If the Exit is a Hold Strategy, then you should know about Seasoning Requirements, difference between a R/T and C/O Refi, DSCR ratios, OER, Mortgage U/W, Market Rents, Absorption Rates/Marketing Time Averages, IRR and Cashflow to name some of the major items related to a Hold Strategy.
4) You will have to estimate Acquisition AND Exit Costs (including your assignment fee)
5) You will have to take pictures of each room, specific pictures of all damage the property has, all of the Mechanicals (Panel, HVAC, HWH, etc.), each side of the exterior, front and back of roof from ground or interior windows and 2 street views facing both directions from in front of the property. Remember, Investors know the property is not in good shape..so don't try to hide damage as you will waste their time if your pictures and story don't match the actual property details...honesty goes a long way here.
6) Once you have done all of your homework expressed above, then the key is for you to "Control" that property at the right price so that you can actually wholesale it or do the project yourself. This is where Wholesalers fail...they try to misrepresent the property to Investors (or they simply don't know what they are doing in the first place) and when the Investor attempts to negotiate the price with them since their numbers were wrong, the Wholesaler has no room to move and ultimately losing the property over time and makes $0.
You can be building your Buyer's List as you are doing all of the steps above -OR- you can wait until you have an actual Good Deal, then post it for the universe to see and you will start having Buyers contact you which builds your Buyer's list as well IF and only IF you packaged and presented your deal properly to begin with.
Wholesaling requires the most Knowledge, Most amount of Effort, is Very Time Consuming (if done right) and contains the most liability if done wrong. Most people get into Wholesaling because they believe it doesn't cost any money to do...which is true for the most part and therefor the actual monetary risk is limited.
In closing, if you are a GOOD WHOLESALER you make a great living and have long term business relationships. If you are too greedy, un-educated, lazy, liar, lazy again, greedy again and lazy one more time, then your business will fail, you will have a stained reputation and you will spend all your time for $0.
With all that said, Good Luck!/
Man, great infomation. Thank you everybody. Right now the main thing for me is to learn as much as I can. I was fortunate enough to find a cash buyer that is willing to show me more of the houston market and kinda guide me through the process for the first few times. I do have to bird dog for a while but the way I see it is you gotta start somewhere right?
Another question I had was.. what are going to be the price ranges I should be looking at? I know the name of the game is negotiating but I need to know what some good scenarios would be.
@Marc Vargas Not sure if "Bird Dog" is Legal in TX...may want to consult with a Real Estate Attorney. Also, any type of a Joint Venture (JV) agreement should be in writing before hand. Again, consult with a Real Estate Attorney to formulate a Texas legitimate JV Agreement...not a Boiler Plate or Template.
@Account Closed I hear you LOUD and CLEAR!...lol
Hey @Marc Vargas
You may have heard this expression, but "cash will find good deals".
Great advice from @Dev Horn @Gideon Sylvan and @Fred T.
If you haven't already, check this guide out .
And listen to these podcasts:
http://www.biggerpockets.com/renewsblog/2014/11/20...
http://www.biggerpockets.com/renewsblog/2014/11/13...
My advice, find out who the most successful wholesaler is in your market. Get in touch with him/her and ask if they'd be willing to walk you through your first deal for 50% of the profits. Then go find a great deal.
Oh, and check out @Brandon Turner 's book, he delves into wholesaling along with a lot of other great stuff.
Check out Bigger Pockets "Find Foreclosure" perk @Marc Vargas.
@Marc Vargas Try to scrap what you have spent if you have been tought by the gurus. I have read they are worthless. Read some books here if you have some $ to spend --they are around $1-$30--, or the forums, or podcasts for motivation. Self education is key here.