I can go to work for local, experienced wholesaler who does a high volume of deals and wonder what I should consider upfront. Deals would be split for a year, and there is a modest fee to start. Like others have written, I'm not as good on the buyers list and contacts side of this, but realize that sharing half of the deals for a year isn't a small amount either. Essentially, all this is already in place, but I would have to develop my own buyers list to go out on my own eventually.
Although marketing approaches evolve, I know the most common ones used are yellow letters and bandit signs. There will be direct communication on an ongoing basis and I submit lead sheets and we would work on the ones that could provide a profitable deal for buyers. I realize I can't be a "lone-wolf" at this and that a coach/mentor is very useful.
Of course I want to know if a person with reasonable motivation can make a living at this, but I"m sure there are some things that I should consider, but don't have the benefit of experience in this. What might I be overlooking - before making a years written agreement?
You mentioned that there is "a modest fee to start"...
Anyone who requires you to pay them to work for them is likely more a crook than a wholesaler...
Wholesaling is a cut throat business. I wouldn't expect to make much money working for a wholesaler. I would consider any money made only as a bonus to learning strategies to go off and do it on my own. Then I'd keep all the deals. You really don't even need a buyer's list if you find a great deal. A great deal will get snatched up right off CL or at a local REI club meeting. The "seller's list" is basically what you'll be generating if you work for someone - the hard part of the deal...
You mentioned that there is "a modest fee to start"...
Anyone who requires you to pay them to work for them is likely more a crook than a wholesaler...
No fees! Run! You don't have to pay anyone up front to give them leads or split deals with them. How nice that would be....people paying me to look at their deals to see if I want them.
I'm not sure I understand. What value is the experienced wholesaler adding? Are you working for him like boss and employee, or is this a student/mentor relationship? If it's the latter, I don't think it inappropriate for the educator to be compensated for his time.
It also depends on your skill level. Are you brand new, needing to know everything? Are you able to devise and implement your own marketing campaign? Do you have all the form, contracts etc and the knowledge to use them?
I think there is a big difference between legitimate coaching and guru/crook. Not everyone who mentors is a crook, so you need to look at the value that is being added. Ever since the Denver summit, my phone has been ringing with people asking me to help/coach/mentor them in some capacity. I have no "program" to sell, or any pricing guides, but I do know that my time is valuable.
What I have come up with so far is a way to partner with folks so they can learn as they go. I do ask for some money up front: that covers my time for setting up their marketing and systems (while they learn how). It covers all the educational materials I've acquired over the years as well as all the forms, contracts, advertorials and such they will need. It also serves as "skin in the game" so that I know I'm dealing with someone who is serious and has the drive to succeed.
And I also do deal splitting (which let's me keep the upfront cost down)....with leads that arise from the campaign we're both working. If they want to stay on as a partner after that, they are welcome to. If not, I just created a direct competitor.
So, as I said, if this is education, I don't think asking for an upfront fee or a deal split is any different than paying a tennis or golf pro for lessons. I don't think you would run if they asked for their fee upfront.
Great thoughts, bottom line, I think you should try it on your own first. You should be able to pick up tips, investigate deals, find buyers fairly easily....even though you will probably fail at first, you learn by doing. A mentor should be found, but not one that captures you for a year, that sounds like a preditor to me. Yes, you could pay some "mentor" but you could also do some work for them to earn your keep. Set out signs, lick stamps, find repair costs, etc. these are things that may not make much but someone has to do it and if your mentor can do other things, that should be enough for you to tag along.
Too many out there are wannabe gurus, stay clear of them, especially those with little business experience in RE....the specialists, IMO. Good luck
I respect the presumption that one offering a program isn't forthright; I've seen many threads here where a program was offered and the automatic response was very negative toward that person, until others who had participated in that program added their more positive experiences. Skepticism is natural, especially in real estate matters.
What if the assumption was that this was a honest person instead? I have done much due diligence and am entirely satisfied, and have known the person for years, seeing his wholesale deals, and which actually have meat left on the bone for flippers, holders etc. What might I want to consider before entering into such an agreement?
I wasn't clear that it would be a student/mentor situation for a year, and the upfront fee is $1,500. I would be working with him, and not as a FICA employee. I have no experience wholesaling, buyers list, or marketing experience. I could pay a local RE attorney to draft contracts.
It also comes back to a hot and often unresolved topic - whether half of more deals is better than all of a smaller amount. I can tell you that almost any amount of deals is better than what I have now. Having one to give you a kick in the pants from time to time is hard to place a value on. This individual also has extensive local markets knowledge, which can't be obtained from a national program. I've been dinking around with education too long and can't afford my current pace any longer. I think there's a John Wayne quote to this effect.
His credibility really isn't in question for me, just how I could structure this to do better. I see again and again that negotiating is the best paying activity of all activities. Before I was to go into a deal for a year with an "old pro", I have one opportunity to improve the deal, how might I do that - assuming his is an honest and productive program. We would split deals for a year, and as said by Jerry P. above, I might be a competitor after that. He had agreed the first deal would be all mine, as a confidence builder of sorts. I respect the natural skepticism towards people unproven at BP.
I only get one bite at the apple before making an agreement. I suspect I won't get to meet his buyers, or get a copy of his rolodex, but don't expect to.
Maybe instead of an entire year, you could do a set number of deals, with you going off on your own after the first 5?
Believe me, after the first ONE, you'll have the nuts and bolts you need to work on your own. What he'll be able to offer you after that is help with your salesmanship. It would seem his true value is in the relationships and knowledge of the local market which he has painstakingly built.
My Mentor and I were done with our transaction after the first deal closed. But we decided to stay partners because we could do more deals working together; we both contribute to the marketing budget, and the return is exponential.
Personally, I believe you're making a good investment. The only thing I would want changed in the agreement is being obligated to a whole year. When I was learning to ride a bike, I needed my Dad's hands to hold me up. But once I found my balance I hollered at him to "Let GO!!!!!
Jerry Puckett You've given me to something to think about. I have no trouble with anyone charging for their time to educate and mentor. I have no doubt that your time and materials are worth paying for. In fact I think I would benefit from paying you as I am sure I could learn from your marketing and systems. It was my reading of the original post that mentioned a year long commitment to splitting deals and an upfront fee that made me want to run. Something just doesn't sound right there. Unfortunately, I know some investors personally who charge huge upfront training fees for the very purpose of keeping students in a position of need. The student will either need the mentor to buy the deal or the student will need the mentor to lend on the deal.
Thanks for describing the issue from the other side.
Yes, I also appreciate the view from the other side of the mentor contract. Making an agreement involve a set number of deals instead of being time-based is an excellent idea. It likely won't involve a single template for deals as there will probably be sub-2's and sandwich lease options, depending on the situation. So maybe the mentor would need to "hold the handle bars a little longer" and have a larger number of deals/situations and I would certainly benefit from more deals together. Conversely, I may be more than ready to stop splitting deals - I just can't know now- but having the option to extend or depart sooner is wiser.
The idea about sharing marketing costs on a continuing basis seems like a very good one. Wholesaling is marketed as not requiring cash, but large mailings etc. have real costs. I dont like to sound too corporate, but there are real synergies in sharing marketing costs.
Some say to find the part of transactions you are best at, and partner with those who are good at the other parts - though I think I've seen some differences of opinion on that.
I appreciate the discussion and different viewpoints given on mentoring. I should probably spend additional time in the mentoring forum too, though I don't see mentoring in the learning articles section. I'll bet its here somewhere, in addition to word searches.
Wow, K. Marie, what a nice thing to say. As savvy as I believe you to be, I'm not sure there is anything I can add......but I'd sure like to try! If there's one thing I think I'm pretty good at, it's getting the phone to ring.
Burt L., please let us know what you decide, and check back from time to time to let us know how it goes.
Oddly enough, I found this thread AFTER I posted my introduction to BP earlier this morning. In my post I mentioned my inexperience and my willingness to pass along ALL wholesale profit potential on deals to an experienced wholesaler / investor in exchange for legitimate wholesaling instruction. I made this offer after evaluating what value I would really be bringing to the table that would interest an experienced investor / mentor - Virtually nothing. And also from the standpoint of being totally willing to pay for an education. In the back of my mind I had thought of something like a 5 deal duration too but not a contract. I'm sure seasoned investors, especially over the past 5+ years, have seen many newbies like me come and go. Maybe this has compelled a small percentage of them to attempt to cash in on the influx of new people to investing. Not terribly ethical in my opinion. But I concede that an experienced investor's time is valuable and he could be directly creating a competitor but a sizeable upfront fee, a contract for an extended period of time, and a portion of profit potential is excessively geared for that investor. It certainly doesn't feel like a scenario where an investor is truly helping someone get started.
A few things pop out at me...
1) what is sizable? $1500? I know people who spend more than that a year on a hobby like bowling. If your passion was golf you could spend that easily on a new set of irons..(and your irons would likely not ever pay you back! :-) Check out the average price of a vocational course (which will get you set up to earn some money) and let me know what you find...
2) What is extended? That would likely be relative to how fast you learn. I've been doing this full time for 3 years now, and I'm still learning. I've been taking guitar lessons for over 10 years, and I'm still not where I want to be, though I also give lessons.
And 3) why does someone who educates investors have to be so altruistic? I hate to keep going back to golf, but you wouldn't expect the same from a Golf Pro would you? That not only does he know the game well, and is able to teach others, but that he genuinely wants to help you....as opposed to genuinely wanting to earn a living ? If I have a skill, and am able to teach that skill well, isn't that enough?
Don't get me wrong, I'm happy when people succeed, but not everyone who learns to play will go PGA. Most wont. Should that stop the pro's from giving lessons? Should they only charge the ones who will go pro?
Don't get me wrong, I'm happy when people succeed, but not everyone who learns to play will go PGA. Most wont. Should that stop the pro's from giving lessons? Should they only charge the ones who will go pro?
Jerry: Guitar lessons versus RE wholesaling lessons is a great example of the differences in education costs. Guitar teachers, even by those with incredible mastery, will charge only so much based what others are charging and what the market will bear. There are some who will take on students whose family will pay them to work full time with their little prodigy, but even then the max payment will most often be in line with an annual income that sounds reasonable. Most people paying for or giving guitar lessons do not think that the income from learning guitar or teaching guitar is limitless. Not so with REI lessons!
The reason REI educators can charge so much for courses or coaching or mentoring is that they are banking on being able to sell whatever amount they come up with to the student as an investment that will be paid back in deal profits, usually asap. That number appears to have no limit. And it's being offered by people who often claim limitless wealth from REI.
I'm with you in that you don't have to take responsibility for students who will fail. But it does beg the question about teaching because you love it as opposed to it's profit potential. When teaching's profit potential becomes greater than deal making....then we end up with gurus.
This may be relevant or not, I'm not sure where you were going with it, but to continue the analogy....I charge $20 an hour for guitar lessons. My teacher, who has a doctorate in music charges $100. The people I teach want to sit around a campfire, his students want to succeed in the music business. He makes a living from giving lessons, I'm looking to make some Christmas money.
Not sure why the question needs to be begged at all. If teaching did not pay, I WOULD NOT do it. I love to play guitar and want to make music that others will love...and hopefully buy. But in the mean time, I teach guitar because I can, and I want the Christmas money. It's not a hobby, it's a part time job, though one I enjoy. Some people improve far more slowly than others, and take more time and thus more money
I love RE also, and would love to get to that point where I'm buying my deals with cash as you do, but I'm not there yet. In the mean time, I have found myself teaching and have the same mindset as before: I do this because I can, and because it pays. Some people give up after their first round of letters, because they didn't get a deal, in spite of what I told them from the get go about it being a numbers game.
My whole point to the above post was simply to point out that 1) "expensive" is a relative term that depends more on your personal opportunity cost than the price of material, and 2) RE teachers should be no more obligated to "help someone get started" (READ: give away for free) than any other type of educator.
This may be relevant or not, I'm not sure where you were going with it, but to continue the analogy....I charge $20 an hour for guitar lessons. My teacher, who has a doctorate in music charges $100. The people I teach want to sit around a campfire, his students want to succeed in the music business. He makes a living from giving lessons, I'm looking to make some Christmas money.
My point was that even guitar teaching full time at a $100/hr is not extreme wealth so the teacher can't sell himself as example of being a full time musician making big money in the music biz when he is seeking students because he is 1) not making real money (comparatively) and 2) not performing but rather teaching full time. And he doesn't have to. We all know good music teachers will help you get where you need to go, but that you have to do the work. Most teachers don't teach you how to work in the biz, they teach you how play well.
Many REI educators are claiming to do both teach me all about RE and to teach me a business and that the investment will pay itself back asap. It's a big claim. But now that I think about it, it's not different than the claims of many trade schools and for-profit colleges these days.
You're right, teaching shouldn't require altruism. That kind of thinking is a hold over from a different time, back when teaching little kids to read used to be a low paying job. :)
I would never expect altruism from an REI educator. In fact, all I want is to ask my questions and get honest answers about their experiences and to get their suggestions. That's worth paying for and I wouldn't expect them to want to "help" me to get ahead. But that's me. Some people probably need a lot of hand holding or motivational stuff or programs and lucky for them, there's plenty of that available.
Jerry: I just noticed that you said you'd like to get to the place like me where you buy deals with cash. Usually it's not my cash! In fact right now I'm sitting on a chuck of change and paying for it and not using it. I like my deals to be more profitable than wholesaling "fees". But I certainly don't yet have anything in place that guarantees how many deals I get and which ones will close and when.
I'm what I call an intuitive marketer. I can keep marketing costs low because I have some very targeted groups. And I can solve some real legal problems, so sometimes I'm the only one going after certain props. But I'm not a wholesaling machine and never have been. I'm just beginning to wonder these past two months if maybe I need to change that. I'm guessing your phone is ringing more than mine right now.
I agree with you Jerry that anyone with a lot of experience should be compensated based on what they're able to charge. I might value my time more than someone else and charge more. It's up to the consumer to determine if my time is worth more than someone else.
If I were the OP, I would jump all over the chance of working with an experienced wholesaler. Bigger Pockets is a great resource with a ton of useful information but you being able to get experience from someone who is successful is huge.
While I have no problem with someone charging for their time/education, I do have a problem with the term "mentor" being used to denote someone who is getting paid to teach.
To me, that's an oxymoron...no different than someone getting paid to do a job, but calling themselves a "volunteer."
J Scott To be fair to REI educators, I see the word "coaching" a lot more than "mentoring" in ads and on websites. If "life coaches" charging $150 an hour called it mentoring, I think a lot of their customers would find that suspect. Not so sure about the REI customer.
I agree..."mentor" isn't a tremendously common term in REI. But, I see it thrown around a lot here on BP, and I just want new investors to realize that there's a big difference between mentors and paid coaches.
Originally posted by Shane Grimes
But I concede that an experienced investor's time is valuable and he could be directly creating a competitor but a sizable upfront fee, a contract for an extended period of time, and a portion of profit potential is excessively geared for that investor. It certainly doesn't feel like a scenario where an investor is truly helping someone get started.
(emphasis mine)
A few things pop out at me...
1) what is sizable? $1500? I know people who spend more than that a year on a hobby like bowling. If your passion was golf you could spend that easily on a new set of irons..(and your irons would likely not ever pay you back! :-) Check out the average price of a vocational course (which will get you set up to earn some money) and let me know what you find...
2) What is extended? That would likely be relative to how fast you learn. I've been doing this full time for 3 years now, and I'm still learning. I've been taking guitar lessons for over 10 years, and I'm still not where I want to be, though I also give lessons.
And 3) why does someone who educates investors have to be so altruistic? I hate to keep going back to golf, but you wouldn't expect the same from a Golf Pro would you? That not only does he know the game well, and is able to teach others, but that he genuinely wants to help you....as opposed to genuinely wanting to earn a living ? If I have a skill, and am able to teach that skill well, isn't that enough?
I apologize, Jerry, if I struck a nerve with my post but I do want to respond to your questions. Sorry for the delayed reply.
1. Is $1500 sizable? Yes, most definitely. Especially for someone who's been an employee and is attempting to transition into being a business owner/ operator and they're unsure, fearful,etc. Most folks these days are up to their eyeballs in debt for whatever reasons, right or wrong. Which is why they're looking into other things in the 1st place. So yes, a large sum up front is a significant event for most who are looking to make a career / life change. $1500 spread out over an entire year for recreation is a lot different than giving it to someone you don't know that you're trusting to give you instruction so you can guide yourself correctly into the unknown.
2. "Extended" is simply a reference to the 1 year contract mentioned in an earlier post within this thread.
3. Altruism? I personally don't expect it. In fact I expect quite the opposite to a degree. Now, more than ever, there are countless courses,programs,and books, small scale or mainstream media, that are flavored thickly with altruistic intentions and promises to "truly help someone get started" directly marketed to inexperienced people. And these people can have that opportunity as long as they are willing to part with $39 - $12000 to start the ball rolling. I think some seasoned investors can probably become desensitized to the challenges involved for newb investors because they've already progressed past that stage. On the other side of the coin though, I suspect that many experienced investors are approached by people all the time wanting help getting started. Some of which that may want something for nothing. Which is kind of the impression I got from Jerry's reply to my post. That I didn't agree with an educator making a living from instructing. Totally not the case. So again, speaking for myself only and restating what I posted originally, I expect to have to pay for an education. I also don't expect to have everything done for me and to be tucked into bed at night. So much so that, AGAIN, if a coach was willing to teach me how to properly wholesale homes for example, I'm willing to give every penny of profit from a deal or deals that I was taught how to put together back to the coach. That's not my idea of a new investor expecting an altruistic attitude from a coach or mentor.
Ah, but here's the thing Shane....I can have 100% of the deal anyway if I don't take on a student, right? So what if anything does the coach take away by taking you on? What are you offering?
Now if you want to do your own marketing, and bring in a hot lead to work, that's value added and worth 50% of the profit. But if it's my existing marketing we're talking about, ....hmmm, let me see, I pay for the marketing, I spend my time teaching you, you get a first class education....I get, well I guess I get to spend my time helping you out and keep the money I would have made anyway? Not a good model.
No matter what kind of busy work you do to try to help out, it will cost the coach his time and marketing money to teach you. So sure, I can understand your desire to get now and pay later, but that's not the way it works.
I can't think of any kind of education or apprenticeship that works that way. Schools, tutors, teachers, coaches....all get paid up front. And as I mentioned before, try looking into some vocational courses. Or look into the average start up cost for a small business. Either way $1500 would be a steal!
I wanted to chime in on this thread simply because I was actually in your shoes Burt L. When I first started wholesaling I actually came to work for a real estate brokerage that specializes in wholesaling. This is what you should look for. It took a little poking around on the internet to find them but I'm glad I did. I had NO real estate experience but I did have my RE License (which didn't put me in any better position then yourself). They way they structured the compensation was simple. The agent who bought the house got a percentage of the fee, the agent who sells the house gets a percentage of the fee, and the company receives the rest. Of course the company gets a higher percent then the two agents combined. I think it's fair because I pay for absolutely nothing out of pocket other then my license and MLS fees. The company provides work stations, bandit signs, and business cards.
I started off working on a list of buyers that I keep. When I get an investor to come in to meet me, the broker would explain our process how we get paid, and any other pertinent information. After sitting through a couple of these I was allowed to take meetings by myself. I was taken through houses, explained how we would recommend someone rehab them, how we came up with our numbers. After my experience was there I was able to start acquiring properties that we would wholesale to investors. It was a great experience. My first month I didn't sell anything but I had built up a good list of investors. The second month I sold two houses and made almost 5k. The rest was up hill.
I was very happy with my experience and continue to work for the same company to keep building my knowledge base on the rehab pricing and honing in on other skills. I'm also able buy and sell retail properties for friends and family or people that I network with for a generous 90/10 split.
My advice would be to look in to an actual brokerage who specializes in wholesaling as opposed to an investor who you may have meet; especially if they are asking for an up front fee.