Newbie here, please critique my business plan!

[Joshua S.]

Hi everyone,

My goal is to launch my wholesaling business in January and hopefully snag my first deal. I've been doing lots of reading and listening to podcasts, trying to get my bearings and really understand how this business and its systems work. I think things are starting to come together. I was hoping to get some feedback on my plan, get a few questions answered, and see if I'm missing any critical pieces of the puzzle--

Main objective: Obtain contracts on single family homes in my area, and flip them to cash investors who intend to rehab or rent. (I may branch out into seller financed deals and lease options and other creative strategies once I get several deals under my belt, but for now I think it would be wise to stick to clean and simple flips)

1. Begin building my list of buyers. I have compiled a list of about 100 different ways to find them, but here is where I will start:
a. Use listsource to find recent cash transactions by in-state absentees
b. Attend local REIA meetings and network
c. Attend courthouse auctions and network with the buyers

2. Market for motivated sellers. Meticulously track all results.
a. Yellow letters. Begin with 300/month
- Use listsource to target a niche
- Handwrite with red ink on yellow legal paper
- Stuff in invitation envelope, use a real stamp
b. Post ads on Craigslist, Backpage, and Kijiji
c. Future plans, when I have a bigger budget:
- MORE yellow letters
- Bandit signs
- Squeeze page with SEO

3. Take calls from advertising.
a. Take control of the conversation, answer their questions with questions
b. "Tell me about your situation," shut up and listen.
c. "What do you want to have happen?" Shut up and listen.
d. "If we were able to come to an agreement, how soon would you want to sell?" --Listen for motivation!
e. Set the appointment if it sounds like a winner
***Credit to Matt Theriault for the above script. I love it because it seems like it will be easy to remember when I'm nervous, and it seems like a great way to get all of the necessary information while simultaneously building some nice rapport.

4. Attend the appointment and get the deal.
a. Do some research, and make sure I "know my stuff" beforehand.
- What the house is worth
- The most I can pay for it (guesstimate repairs, if possible)
- Have purchase agreement already filled out
- Have print-outs of the cheapest comps in the area
b. Meet with prospective seller, begin building rapport immediately
c. Walk-through house. Point out flaws/repairs
d. Sit down at kitchen table, begin talking numbers only once rapport is established
e. NEVER be the first one to give a price. Ask them what they want and shut up.
f. Continue the back-and-forth negotiations, remind them of the repairs, show them the low comps, repeat "Is that the best you can do?" etc
g. Once an agreement is reached, shake hands, and sign the contract.

5. Send the paperwork to a title company?
- I'm not 100% clear what to do at this point. I'm in Oregon, and when I Google title companies or escrow services, I get results for lots of "title insurance companies." Is a title insurance company the same as a title company? Also, is a title company the same thing as an escrow company? Would it be a good idea to go ahead and schedule an appointment to sit down with a rep at one of these companies and see if they're "investor friendly?" Will some of them turn their nose up at assignment contracts or double closes?

6. Market the property
a. Take pictures, upload them
b. Send out email blast to my buyers list
c. Make ads on Craigslist, Backpage, and Kijiji
d. Put up signs
- This might be a silly question, but how do sellers normally react to their houses being marketed like this? If they're still living there, and I'm sticking a sign in the front lawn, will they be upset? Especially if they were under the impression that I would personally be paying with my own cash and then rehabbing the property after they moved out? I guess it doesn't really matter what they think since I have the contract, but I'd still like to be prepared and know what to say. I would prefer everyone to "win," and everyone to feel positively about the transaction.
- How are owner-occupied deals usually handled, anyway? I'm guessing they're given 30 days to move out? Are funds withheld until they've moved? What if they request more time? What if they don't actually move when they're supposed to? And are cash buyers ever reluctant to purchase homes currently occupied by the owners?

7. Obtain a buyer, close on the property, and collect my check!

Anyway, wow, that ended up being way more long-winded than I intended! Thanks for reading, and please give me any pointers that you can think of.

[Jon Holdman]

If you've done a good job on 1., only 6.b will be necessary.

OO deals typically state possession at closing. When the deal actually closes, they have to be out. If I were your buyer, I would inspect the house immediately before closing. If the seller was still there, I wouldn't sign.

You've only hinted at two of the most difficult steps: determining the value and determining the cost of repairs. Without having a REALLY GOOD handle on these two factors, you won't find any deals. And you potential buyers will scoff at your deals and you're done.

There are several threads on determine value (ARV). But it really comes down to knowing the area, knowing the values and being able to come very close to knowing exactly what a house will sell for when its fixed. You need comps. You need to track the market. You need to look inside a bunch of houses (100 is the often-recommended number), both junky and nice. Track houses as they come on to market and are sold. Especially, track fix and flips. If you see a house being flipped, stop and have a look and talk the the folks doing the work.

Repairs are tougher even than value. This really comes from experience doing the work or getting it done. You may want to find a contractor or two and pay them to help you with estimates early on.

Without knowing these two number pretty closely, you're going to over pay for deals and never find a buyer, or pass over deals that are actually good.