A Beginner's Wholesaling Journey

[Greg S.]

Hello everyone. I've been a BP member for a few months now, and I've previously been documenting my progress here:

http://www.biggerpockets.com/forums/12/topics/67333-a-newbies-birddogging-journal

I decided to start a new thread for a few reasons. Number one, although I originally planned on bird-dogging, but after really diving in, it seemed foolish to leave so much money on the table. There was one deal I had been working on a month or two back that seemed semi-promising, and I felt like I was doing all of the work I would have to do for Wholesaling, but was only getting paid as a bird-dogger. That deal didn't pan out, but I learned a lot from it.

The second reason is that I have been slacking off a bit lately, and I felt I needed to change my routine to get myself back on track. I am planning to update this thread once a week with progress updates and weekly goals. I also would eventually like to link to some audio files of me talking to sellers (with important information edited out, of course), to get some feedback on how I can improve. I tend to get tripped up on the phone, and need to improve if I really want to be successful with this.

Hopefully, this thread will help lead to some consistency in my marketing and real estate research.

This morning, I mailed out 74 new probate mailings. I pulled the data last week from my county clerk's office, and am hoping that I start receiving calls tomorrow. I plan on going back to the clerk's office on Tuesday or Thursday to gather more leads.

Ideally, I'd like to be sending at least 50 letters per week between new and follow-up mailings. I have about 180 probate entries in my mailing list, and will be sending follow-up letters every 4 to 6 weeks. I estimate pulling an additional 150 per month will suit for now. Gathering the probate data is by far the worst part of the process, but fortunately I work very close to the county clerk's office.

Along with sending the mailings, I need to update my routine to include reading success stories and forum threads on a more regular basis. I tend to do this in bursts, where I read a ton of success stories, get super motivated, put a lot of effort into investing, and then end up slacking off. Reading about other peoples' successes on a weekly basis will help to keep my eye on the prize. Does anyone have any recommended blogs? I used to read Flipping Junkie, and was sorry to see that the site was taken down.

Goals for this week:
Gather 50+ more probate leads
Print the next batch of mailings
Read-up on some success stories
Build my buyer's list

[Account Closed]

Greg I've also enjoyed reading your journey. All hard work brings a profit and in due time you will reap if you don't give up. Here's a tip about estimating repairs and negotiating with sellers that has helped me in my wholesaling business when meeting with homeowners. If you're meeting with someone they should be motivated. Never go see anyone you haven't qualified over the phone.

1. When you get there remember one thing, in the sellers mind all they know for repair pricing is retail, retail retail. They don't know what a rehabber is going to pay for repairs. So when you formulate your repairs list and you're going down the line you can ask them what they think all this costs? They know if they need a new kitchen, 2 new baths, roof work, plumbing, etc they're looking at a crazy number that in most cases they can't afford. A retail kitchen alone could be over 20k. So you add up everything and tell them a retail price, then come back with the statement "now I can do the work a little cheaper because I have my own team" then they know that from a retail standpoint there house needs $60,000 in work. Doesn't matter if you can do it all for $30,000, they can't. You now shock them into reality. Always estimate repairs higher, remember all they know is retail, so if it would cost them 60k when you're making your offer use 50k. You know in the back of your mind that you could probably get it done as a rehabber for the $30k but you leave yourself room to negotiate.

2. Make sure you mention to the optimistic seller that if they list the house for $150,000 that's not what goes into their pocket. No one in this market pays your asking price, they also are entitled to a sellers concession and you'll pay 6% to a realtor. Add to that they're going to hold the property for another 3-6 months best case scenario, in NJ our taxes aren't cheap, that could be another 3-4,000, plus utilities, ins, etc. so if the buyer of their home asks for a 10% discount, 3% sellers concession and they have to pay a realtor, what % of their asking price do they really end up with 81%. If you deduct their holding costs for the property even if there's no mortgage (probably common with probate) they're probably going to net 79% of their asking price, WOW. So much for that $150,000. Now for the big tip...

3. Also emphasize that in this market, houses are not selling unless they're perfect. Wives want new kitchens and bathrooms, there is so much inventory, the houses sitting on the market for over 150 days are 1. Overpriced or 2. Not updated. Now they know if they don't bring that house to that condition it's not going to sell, when they think about it, it's $75,000 that they don't have. And the best part is if beautiful houses in the neighborhood are selling for $150k then that's your ARV, that's for a perfect house. If theyre really motivated then theyre not delusional trying to get top of the market, theyre probably trying to get closer to $100,000 if they listed it. So their number they hoped to get is $100,000, your ARV is $150,000. Here's how we bring this home, let them know they're only going to net $79,000 off that $100,000 sale. Your offer is based off of 65% of $150,000-$30,000 in repairs or $67,800. Write those 2 numbers next to each other then you say we're only $11,000 away from a deal. This is when you begin to look very good.

So to summarize, it's important that you do all these things and work them into every meeting with the seller. If you're just making offers at 60% of fair market value you might come off as a jerk, but if you do this,i guarantee you when you leave that house, if you don't buy it they will know they're going to have a heck of a time trying to sell it on their own and that's what you want. You want them saying to each other, "do we really want to go through all this for a few bucks more" that my friend is how you justify your offer. God bless you on your journey.