All Forum Posts by: Account Closed

@Natalie Kolodij doesn't it depend on the officer's role in the business? 

I basically post on instagram, bp, and youtube for about 2 hours a day then check on metrics for marketing campaigns for my business. My employees do the rest. I take a small distribution as an ROI from my business, I have other w2 income, and my monthly cost of living/lifestyle are extremely minimalistic, even more so in comparison to the business' profits.

What I'm about to say it not to brag, but solely for the purpose of illustrating a point.

In the last 6 months of 2019, my company made 1.1M in wholesale profits on a total direct mail spend of 18k. We do have other marketing vehicles that are supplements to the direct mail- text messages and RVM totaling an additional 3k... but they all point back to a letter we sent someone. Now a big part of the direct mail's success isn't just the effectiveness of our marketing pieces, messaging, and campaign strategy- it's based heavily on having high quality owner data and targeting a product with high profit potential when pointed towards a very specific buyer pool that's been nurtured over time. 

Another interesting note: our average monthly inbound leads from DMM in 2019 Q4 was 279, with a 4600 person mailing list. That's a 6% response rate. Pretty high for direct mail. 

Do I think any traditional wholesaler can get in the game with DMM and make a milli? nah it's not that simple. I also think the traditional wholesale game is too much of a volume business- too many leads, labor and operational burden to make the same amount of money. We're working hard to push our profit per deal higher as a 1st priority (2019 avg was 35k/deal), then our deal count up as a 2nd priority. We have 4 full time employees- I've met a handful of companies with our same net prof and most are around the 20 employee mark. 

Moral of the story, there's more to it than just the mail. The marketing methodology has to be fit to your ideal customer and product profile. 

 @Jerryll Noorden, I've see you post before with a level of web based marketing savvy that's way beyond my current knowledge level. I think you could attest to the fact that quality of execution is more important than the vehicle itself. I think people who are doing traditional wholesale and new to the game should be seeking to master the methods that you're on the forums discussing. The barrier is a knowledge barrier, which I'd take all day over a money or time barrier if I were a smart newbie who's willing to put in the effort to learn. 

Now I know you said you'd like to see numbers from people making DMM work. I'm glad to share salesforce reports, or PNL's, but I don't think you'd care too much for that. Game recognize game, anyways. Keep killing it. I could use your methods to build my investor network- I'm working hard to blow that list up. It's big now, but 10k buyers that meet our ideal profile would be a game changer. 

@Kate Ellis talk to your CPA about a reasonable officer compensation. 

The payroll tax is basically your self employment tax. If you're flipping in an LLC, you're going to pay that tax on every single dollar you make. If you're flipping in an S corp of which you're an officer, you're only paying this tax on the portion of the companies income that the S corp is paying to yourself as salary. It's a huge savings if you're making good money.

You do not have to salary yourself 33-40% of the S-Corps net income. Per conversations with my accountant and business attorney on the matter the officer compensation should be commensurate to the role of the officer. I'm simply an administrator of my business, and have been advised it would be acceptable to salary myself just over 2% of my business' net income and draw distributions for other necessary expenses. Of course, don't salary yourself 2% if that means you only put $1000 in the officer compensation box. But have a conversation with your CPA on filing an S election and what they consider a reasonable officer compensation amount that will not increase your audit risk.

My accountant says that he has never seen an audit triggered as long as the officer compensation box has been filled, regardless of the number in there. Not a hard and fast rule, but a noteworthy observation from someone who has a large book of business.

@Joe Norman you're absolutely right.  Hard to represent the clients best interest and make a profit on their property's equity position at the same time. 

Hey Ashley,

There's more than one way to treat REI as a business. The most important thing you can do if you want investing to become a business for you is to focus heavily on scalability. Scalability for a new business, from my experiences, relies most on finding the activity and operational model that yields a disproportionately high financial reward with the smallest possible time, resource, and risk input.

For me, that was a marketing and sales business that was highly systematic, and fine tuned to have no real bottlenecks early in the businesses' lifespan (besides data, which takes some detective work). If you take the money and time bottlenecks out of the equation, your business will grow if you have the right systems in place. 

@Michael J Scanlon what would a buyer pay for this property if you were to wholesale it? That's a really low market value

@Michael J Scanlon does your local association of realtors require that you disclose to a seller whom you are buying from, or a buyer whom you are selling from, that you carry a real estate license? If so, and you do disclose and make it clear in your disclosure that you are not acting as an agent or providing representation, I don't imagine you'd be barred from engaging in real estate investing activities. 

I think it's best to be clear with the seller and say- hey, I'd like to buy this property myself at this price, just so there is no reason for anyone to be upset and create a mess later. 

Best source for this question if you really want to be technical is your broker (but I could see why you wouldn't want to approach them) or an administrator of your association. 

@Jacob Ashley I got you!

@Jacob Ashley I would dismiss the concerns of appreciation. In a peak market, markets that appreciate well may have a greater tendency to crash harder when a correction occurs. I would make your focus right now maximal cash flow so that you're still making money during a downturn. I would also try to pick nonvolatile markets where your equity position and rental performance don't suffer in a recession.

For the highest cash flow possible, I like secondary markets. Just try to find one with high rental demand and landlord friendly laws. There are a few counties in Indiana along lake mich that I like, as well as Wisconsin secondary markets (which can be a little more difficult but offer higher income tenants than the indiana markets that work). Don't sleep on secondary markets in KY, TN, NC, and AR as well. 

@Account Closed If you're gonna skip college you better not skip it and go slug natty ices with your buddies for four years. People throw the whole "college is a waste" thing around lightly. I'm certainly an advocate of self teaching and constructing your own platform but you need to replace those key lessons learned in college (and later on in a traditional job) with something else that provides equal or greater value. 

Please don't take this personally- but do you have the maturity and experience at 17 to say "I know myself, and I can form an alternative plan that's truly going to get me where I want to be"? I was a pretty sharp 17 year old, but I wasn't mature enough to go about things without the structure of institution before I ripped off the training wheels and did my own thing.

You have a ton of time. Go to college. Just don't do it in a fashion that gets you a ton of student debt. Come out, go to work. Think about entrepreneurship every step along the way starting today and learn of it, then dive in a little later in life. I quit my "job" at 28 and was a millionaire before 30. You're not going to be too late to the party.