A Letter To Save Wholesalers From Themselves
Last year I jumped into wholesaling multi family homes. It wasn’t the initial plan, but i ended up working as a wholesaler.
Initially I was intending to work as an investor and buy my own apartment buildings, so I started looking for deals and making offers, but soon I found out that making money with no cash wasn’t possible for me.
I mean, I understood the no money down part, but my sources of financing will always charge me money upfront and I did not have any; so I started finding good deals and assigned them to investors. Or, put in other words, I started FAILING at finding good deals and assign them to investors ready to buy.
Now, one year down the line, and looking at how the deals that I was able to make turned out to be in reality, I want to send this out for other wholesalers or looking to be wholesalers that are struggling in the market as I was.
As you probably have noticed, the world of wholesaling is full of daisy chains (that means that at least 3 or 4 people know about the same deal but NONE of them know either the buyer or the seller i.e: no one is really direct to the seller or the buyer). This makes it very complicated to close deals, since communication from seller to buyer and from buyer to seller is clogged with 3 or 4 people that need to receive and forward the message before it can actually reach its intended destination; because of course, none of the participants wants to be left out.
When you learn a little bit more, you start signing non disclosure agreements in order not to be left out, and to let buyer and seller talk to each other freely. But here, the complication is that buyer needs to sign an agreement to pay whatever finder’s fee, to whatever number of wholesalers are involved in the transaction, without even knowing them and, heck! Without even looking at the numbers on the property yet!
So, lots of bureaucracy just to get the details of a possible investment property to a buyer, ends up in buyer moving on to other options 90% of the time.
I’m by no means a legal advisor or anything, this is just my opinion based on facts that I experienced.
At this point, I moved from actually working as an investor, to building a website; where wholesalers, buyers, and sellers could work together without these hassles, and so everyone could get paid, with the communication between buyer and seller being just as free, as if they would have found each other in the street.
Unfortunately, you will still have to wait to see that.. since now I’m focusing my energies on my investment company and can not continue to deal with the programmers and everything involving this startup.. For now…
But I thought that I still wanted to send out a hand to anyone that may need it, or people that just cannot find their way around the investment world.
Actually, to make a quick re-cap, I stopped working as an investor for around 6 months, that’s it, no emails, no phone calls, just a couple deals I had that were in their way to closing, but no extra work for me. And so I left to Europe and afterwards Indonesia to surf. So there you have my why and motivation to work as an investor. I also do enjoy being an investor, but I do it in order to have the freedom to travel, and so people that know me and that I’ve worked with for a while now, tend to ask me which crazy adventure I’m in at the moment hehe! :$
Anyways, I’m starting to come back to the working world now, and so when I was going through my 600+ unread email list (still 400200 30 to go) I started to notice all the things that I got caught up with when I was starting up. How a lot of people that did not know what they were doing or how to do it (just like me), where misleading everyone else, and so everything becomes super confusing and nobody knows where they are heading, with the actions they are taking...
Sooo I compiled a couple ideas I think that can help you score that first deal, and create a system that will generate leads that close, to eventually being able to work as a full time wholesaler and, why not then, moving into the investing arena as an investor!
Focus
Focus on ONE market at a time
Focus on one type of property
Focus on one type of deal
And finally focus on one specific deal to offer to your investors
No use to send lists with thousands of properties like:
Nail down the focus ‘til you have a good deal you to show to other investors
Learn from your buyers, but stick to your good deal long enough to realize is not good. Then use what you’ve learned to find a new good deal. You’ll get better and better.
Believe in Your Deal
Do not sell something because you’ll most likely sell it. Offer a deal you’d be eager to buy yourself.
When you offer other people something you truly believe in you become more than a salesman, you are actually giving value.
You will also sintonize with people that think of value in the same terms that you do, and that means networking with like minded individuals.
If you don’t understand why people buy what you offer, then, what are you actually offering?
Believe in what you offer ,and that will put you in the shoes of the buyer you want to become.
Don’t Work Like a Robot
As I pointed out before, it’s very easy to get caught up in repetitive work that doesn’t add up to anything, like forwarding lists of properties you haven’t even looked at, or working with buyers that are not really able to buy.
This is a waste of time for everybody involved, but of course nobody knows it.. Yet…
Know why you do what you do, have the end in mind.
Be Direct
Either to the seller or to the buyer. Daisy chains are delaying your transaction.
How to be direct to buyers?
Establish a website (do SEO and PPC), network at investor meetings, use craigslist.
Build up a sample of how one of your good deals would look like even if already sold; that will put you in the investor’s seat and get you answering questions like, what’s the exit strategy on this property, what are the prices of comparables in the area, do I buy reposition and sell? Buy reposition and hold, or perhaps no need to fix anything, maybe it’s a currently cashflowing property where the owner is willing to owner finance part of the purchase and it’s totally turnkey.
Use that brochure as a presentation you can send over to interested parties to see the structure template of what you’d be showing them.
Then double check your answers, are your returns too low? Are you underestimating repair costs? Are you considering a much higher resale value than the market shows? Are you considering unrealistic repair terms? Are you not taking into account holding costs for when the repairs are made?
How to be direct to sellers?
Build a website (do SEO and PPC), do direct mail, use craigslist, use Loopnet.
Or
Partner with someone you know for a fact are direct to either buyer or seller. Partner with them to the point you could say a potential buyer or seller that you are direct to either buyer or seller respectively.
This always while trying to get your direct connections. I cannot address enough the value of being direct to either buyer or seller.Be direct.
Price Range
Stick to a price range you see yourself closing a deal in.. There are more people buying 4plex and 5 plexes to reposition or buy and hold, than institutional investors buying 15M to 300M properties.
Unless you are already direct to a buyer looking to invest on a much bigger deal. Stick to a price range you can see yourself closing a deal in!
It will be much easier to attract a buyer to a deal you could see yourself buying in 3 to 6 months once you make some money, than to attract a huge investor with a deal that looks good to you but it just isn't for them...
Think of it this way: it’s easier to be in the mindset of an investor purchasing a smaller property, heck! One that you could be buying in 3 to 6 months, than it is to be in the mindset of a Multi-million dollar tycoon looking to expand his/her portfolio with a 20M property purchase.
This is simply because, being a 10K-500k investor you can see a 15M to 20M dollar deal as great, but at the moment you reach that point you may have changed your mindset, and what looks like value for you as a 10K-500k net-worth investor ,it just not what you would consider valuable when you are a 15M-20M dollar investor.
I know it sounds fantastic to make 200k or 300k on one deal alone, and if you are able to pull it off then, by all means keep on doing it!. However, keep in mind that deals that bring you 10k to 15k are still awesome!! What if you can do 3 to 5 of those per month!
Of course that doesn’t come from one day to the other, but if you stick to that price mentality for a year, you can realistically look into making 3 to 5 deals per month after 12 months of networking and being in the field.
You can then see yourself closing bigger deals, maybe 30k to 50k profit, or jumping even higher. Once you start having money to play, this game get’s reeeally interesting!
Build a List of Investors, Buyer Reps and Seller reps.
Even if they offer or look for something a little different than your focus deal, you may stir them in your direction by being confident on what you offer.
Network with all the community, but make stronger relationships with at least 2 or 3 other wholesalers or brokers, people you could call your team in 3 or 4 months from now.
Don’t Lose Your Patience
It’s just a matter of time until you start making money out of real estate. Just a matter of time.
If you stick to it long enough, you will get it right, and when you get it right in real estate you go up like a bubble in the water. Enjoy what you are doing, it will pay off. Stay calm and don’t, lose, your patience.
Grow Progressively, It’s Cool :-)
You can always expand your area of focus later. Start small and move your way up. It will give you more confidence, and make the transformation more enjoyable and customizable for your own why (motivation for doing what you are doing)
If Something Works For You, Keep On Doing It!
Thanks a lot for reading, and until next time!
Nicolas Feraud
CEO of Buy Multifamily Homes
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