The JNBG Equation: How many buyers should you have.

[Jerryll Noorden]

I often receive the question how many buyers should you have.

So instead of answering this on someone else's post I figured I'd share here for anyone that wants to use this method... they can.

So this is how I do it. Not saying this is the best way, but it is the best way for me for sure.

Let's say you want to wholesale 4 deals a month.

So you then would need 4 cash buyers right? Assuming they are serious, legit, have the funds and are eager to buy.

Now, the first month is covered.

Now, the next month... you want to wholesale 4 more properties.

So now your 4 buyers from last month assuming they can only flip 1 house at a time, are all happy and busy flipping the house they got from you...

As they are not yet done with their flips...  you need 4 more serious buyers. (the first 4 are still busy with their flip and can only buy again from you after their flip is done, sold and got the cash back)

OK so thus far you need 8 serious buyers on your list.

For the next month (the 3th month) you want to wholesale 4 more houses again.

Chances are that one flip for a serious buyer would last 3 months... meaning the 4th month they are busy selling the flip and waiting till it sells and wait for the paycheck to arrive. That could take about 2 months.

So each buyer needs 6 months before they can buy again from you... assuming:

1. they only buy 1 property at a time
2. they take 3 months to flip said property
3. it takes 2 months after the property goes on the market for them to get the paycheck.

See where I am going with this?

So for each of the 6 months you need 4 buyers. This is 24 buyers.

After the 6th month, your first round buyers are ready again to buy an other property from you.

Now, a lot can go wrong for the buyers, and some buyers may do something wrong, stupid, and drown, die, loose their money, explode, internally combust, turn into smurfs... and can no longer continue investing. So you need to account for losing a buyer or 3. 

So when that happens, you need to have spare buyers on standby to jump in. Like a spare tire, if you have a flat, you switch to the spare tire while you fix the real tire... just like that you need spare buyers so you can still sell your contracts while you fill in the empty spot with a new buyer.

In order to have these spare buyers ready we have to deal with a factor of safety. Since flipping is a relatively high risk adventure, lets do a factor of safety of 3.

So now the total buyers you need to wholesale 4 properties a month is 72 (3 x 24).

So now lets turn this into an equation so that everyone that is not as pretty as I am, can calculate how many buyers you would need.

I call this formula, the: "JNBG Buyers Equation". (Jerryll Noorden Boy Genius Buyers Equation), or JNBG for short.. or just Jerryll Noorden Boy Genius, for the satisfaction of it rolling off the tongue. Either way...

So first the variables. You can put in the numbers that work for you. If you want to make 10 deals a month your DPM = 10.

DPM = Deals per Month

TTF = Time To Flip

TTS = Time To Sell

FOS = Factor Of Safety

NOB = Number Of Buyers.

DPM x (TTP + TTS) x FOS = NOB

Now when you are using this equation, you have to tweak the Factor of safety as you go. How you do it, is by paying attention how fast buyers do something stupid and can no longer support house flipping, so you tweak this till you achieve equilibrium!

And voila!

See why go through all this trouble ...

See, I don't WANT to be dealing with 1000 buyers. Why? You WILL have tire kickers, and you WILL lose deals because one of these tire kickers couldn't close in time, and you want to have less stress dealing with buyers. Buyers are pricks man OMG. The suck! Selfish, always causing trouble, and they care too much how much you are making. Don't wan to be dealing with 15 walkthrough appointments when we all know 90% are wasting your time. And do you really want to be spending your time finding 1000 credible buyers?

I use this equation and my life is peaceful, buyers know how privileged they are being on my list as only one of the view. Now when we have a contract out, they buy first and ask questions later :D

Now for every category of buyers you need to have this equation. If your buyer only buys multis then have 2 sets. One for SFR, and one for MFR

Yay!

Hope this is helpful!

[James Hamling]

@Jerryll Noorden First off I must say thank you again for putting out actual intelligent, useful, actionable content for all the sharks and sheep, much appreciated. And as always, so humble, like Napolean or Steve Jobs, lol. 

That said, as an experienced flipper who heavily relied upon a network of wholesalers I can whole heartedly endorse this approach of an equilibrium in buyers to deals, NOT the "let's blast each deal to the entire universe", which is no kind of relation, it's an annoyance, one that has us flippers looking for a replacement wholesaler in like kind. 

I would add the 1 important factor of building an accurate correct pricing strategy, one that leaves enough "meat on the bone" so it is worth the time and risk of the flipper. 

I have delt with so many hack wholesalers who pitch me on total BS ARV comp's, watered-down rehab estimates, all pumping I will make a whopping whole 20k if everything goes right with their fantasy numbers, and it takes me about 90 seconds of research to see this carp has about 80k of their own profit. THAT is why and when the whole debate of BS profit margin comes into conversation, trying to screw me. A) I will take special interest as to who you are as I will happily share with my associates the experience and word gets around. B) I will never look at any future deal, ever, your loaded into spam engine and "poof" annoyance solved. C) I will never refer you a wholesale deal which yeah, guess what, we as flippers do that, we get a lead and as tieing up a deal isn't our thing we will shoot it to our "go-to" guy to chase it down wrap it up in a bow and all we ask is we get first choice on the deal. At least I did/do this, a lot, did it this week actually.

It's really important for a wholesaler to know and honor that it's gotta be a win-win, if not and it's just a "screw you fight to the death against all others", well, then, screw you back and I am gonna take my cash and hire some tech-nerds and build a lead gen program and side step you all together, it's just that simple. 

Thats all I am saying, win-win, is that asking so much, that's all I ask in pricing, from there I couldn't care less what a wholesaler makes big or small as I care about my $ and the risk/reward calculations making sense. Simple.