All Forum Posts by: Keith Goodwine

 It's just not going to happen in most locations.  Technically, for A to B to close, there has to be the money to close.  In a "double close," B to C would have to close first, but that can't happen without A to B closing first, so it's a Catch 22.  Rather than a "double close," you can use transactional funding for a fee of 2% of the purchase price.

Let's say you buy a home for $95,000, and wholesale flip it to an investor for $100,000.  To get transactional funding, you have to eat the cost of $2,000 to transactionally fund the house.  You also have to eat 15% in capital gains tax, approximately $600.  That leaves $2,400 left in the deal.  There may be additional closing fees as well.  Transactional funding can be cost prohibitive, but if there's enough room in the deal, you might be able to make it work.

 I previously worked as a data analyst, so I'm getting back into that!

All very good points.  I absolutely was someone hoping to make big money out of only little money.

I was convinced by a guru to skip getting licensed and to use the money on marketing instead.  That was bad advice, but that's what the guru told me to do, so I listened. 

 I followed Brock Collins, and his channel Freedom Real Estate Investing.  I also followed Phil Pustejovski.  I paid $300 for videos from Brock.  Most of the information he provides is found for free in his other media, and also in other guru videos.  The videos also came with a free coaching session from Brock, which helped me answer some questions I had at the time.  In my opinion, I should have used the money on a real estate license instead.

Brock is very good about sharing success stories, both his own, and of his followers.  His podcast is all interviews talking about success stories.  Brock makes you feel like you will be instantly rich in real estate by doing wholesaling.  Some people might have that luck, but I certainly did not.

Brock is a really nice guy, but obviously the product he is selling has some flaws.  It's not fool-proof.  All real estate investing is risky, and I felt like the risk was drastically understated.

I spent about $2,700 on marketing.  I sent approximately 2,000-3,000 postcards.  That includes lists from ListSource ($0.16 per address), as well as ugly yellow postcards ($0.41 per postcard and mailing).  I also spent money on social media advertising and a website host.

I got about 15 leads.  (The average cost per lead was $180 -- ouch.)  I made 3 serious offers (I made about 10 total but most leads were tire-kickers).  No deals were successfully completed.  One deal was upside down on the mortgage, so they weren't able to sell.  The other two thought the low offer was insulting.  I live in a hot real estate area and nobody wanted to take bottom-dollar for their house.  Even if the house was in bad shape, the land lot was worth more than my offer.

That was my experience.  Everyone else's will be different.  I'm sure some people will think I failed at x or y, and I'm here to tell you that I did fail.  Failure is a very likely outcome of anyone who starts out wholesaling.  Wholesaling is extremely risky and that's why I made this post.  In a world pumping success stories about wholesaling, I wanted to offer the other side of the story.  Seeing other people's posts in this thread has validated my concern that most people simply do not realize the risk, the failure rate, or the legal hot water surrounding wholesaling.

Postcards are what the gurus say to use.  That's why there are so many of them.  

I sent about 2,000 postcards and got about 15 calls.  I made 3 offers.  It's an incredibly low rate of return.

I got no return from social media marketing.

I got one lead from a website.

Marketing is a low rate of return anyways.  What works for you?

 I do have one rental house generating $300 a month in passive income.  My tenants are great and I'm glad I made the choice.

I highly recommend getting started in real estate with rentals.  It's much less trouble than wholesaling, and rentals are very clearly legal, as opposed to wholesaling's legal grey area. 

As the title says, I went bankrupt trying to enter wholesaling.  

Full disclosure - Part of it was deteriorating mental health and desperation.  I was manic and reckless.

Another part of it was unrealistic expectations set by REI coaches, success stories, and REI groups. I heard nothing but pie-in-the-sky income disclosures, "escaping the rat race," and independent wealth using "other people's money." When I hear commercials for REI students, I hear the same buzzwords - wealth, other people's money, easy, perfect market, etc. It's the same thing I believed myself.

I wanted to share my sage advice for avoiding the same outcome.

DON'T get into wholesaling if you are bad with money.  If you have outstanding credit card debt that isn't paid off each month, or a car loan that rivals rent prices (or both in my case), don't get into wholesaling.  You won't make it.  Your financial situation isn't one that will last.  Even if your credit score is great, your bank account probably isn't, and that's what counts.  Cash is king, as they say.
DO get started into wholesaling if you are able to plan, budget, and schedule expenses appropriately.  If you are relatively debt-free (minus a mortgage), if you plan large expenses several weeks or months ahead of time, and can control your business expenditures, you are much more likely to succeed.

DON'T start wholesaling without regular full-time employment.
DO start wholesaling if you have a back-up plan.  Self-employment is risky, even if you've been in business a while.

DON'T go into wholesaling if you aren't good at sales. This is about as hardcore of sales as it gets. Listening to Zig Ziglar or (god forbid) Grant Cardone isn't enough. You need to be a natural salesperson.
DO take some sales training classes, or get a job in sales. Starting in sales with someone else's business is much better than starting in sales with your own business.  If you don't like sales, don't wholesale!

DON'T believe you can get into wholesaling for little money.
DON'T go into debt to wholesale. Ever.
DON'T get started in wholesaling without a large amount of cash for marketing expenses.  Plan to use this money for a year.  Your cash isn't any good if it's all spent within the first month.  (I spent $3,000 in 3 weeks.)
DO use cash set aside, and budget when and how you will spend it.  I recommend starting with $10,000, and spending this over 6 months to a year.

DON'T use ListSource for mailings.  The number of returned mailings was all just money pissed away on both the mailing list and the card/postage.
DON'T blast zip codes.
DO pay a professional direct mail marketing company.  They might cost a little more than doing it yourself, but the return on investment will be much higher.  They can also target zip codes for hot areas, not just blanketing a zip code and sending to the first 1000 addresses on the list.

DON'T expect return on your mailings the first, second, or third time around.  If ever.
DO plan for about a 0.1-0.5% response rate.  Meaning if you send out 1000 mailings, you might get 10-50 phone calls.  Maybe less, maybe more.

DON'T rely on mailings alone.
DO put out bandit signs with your company name and logo.  Brand recognition is huge.  People need to see you everywhere to take you seriously.

DON'T think everyone will accept your offer because you're such a good salesman, or because your offer is high enough, or because the person needs cash.
DO realize everyone that accepts a wholesale offer is likely a senior citizen, or a person in a very desperate situation.  Maybe that's not the only people who sell to wholesalers, but primarily I dealt with senior citizens, and tried to convince them to sell their perfectly fine house for 40% below market value.  I felt like that crossed an ethical line for me that I did not see before.  I felt like I was operating a scam.

DON'T expect to succeed.
DO think about this like multi-level marketing.  98% of people who do MLM never make a single penny from it.  Some even go broke or bankrupt trying to prepare for sales that never materialize.  

DON'T buy the hype. There's all sorts of advocates and motivational speakers for MLM and REI both who try to convince you that hard work and a positive attitude are a sure path to dreams, wealth, and riches. The book "Think and Grow Rich" is the penultimate source of this. It's all based in existentialism, cosmic justice, karma, luck, superstition, etc. Just because you spend money doesn't mean it's a wise investment. It won't magically come back to you because "that's the way of the universe." The universe is infinitely larger than you.
DO have a positive mindset, but trust that your budgets and plans are the lifeblood of your business.

DON'T do this alone.
DO have business partners. Do go to REI meetings. Birddog for another investor for a while. Trying to do it all on your own, based on your own internet education, isn't a formula for success in much of anything.

...and that's all I got to say about that.

I have a bigger problem with bugs rather than toilets.  I have fixed one toilet that legitimately needed repair, not just clogged.

Being a landlord is what you make of it. 

If you buy rentals in bad condition, in bad neighborhoods, don't screen tenants before leasing to them, and don't proactively build a good working relationship with your tenants, you're probably going to have a bad experience.  

If you buy good rentals, in good neighborhoods, screen tenants, and are genuinely interested in providing them with a good living experience, you'll get fewer complaints.  

A clogged toilet is a very minor problem, and everyone knows it has the same easy solution - get a plunger and go to town.

A tenant is more likely to be happy, flexible, and proactive with repairs if they think of the house as "theirs" rather than "yours."

Bummer! 

Does the house have any carpet?  Carpet, furniture, and other cloth areas are where fleas breed. Easiest and quickest solution would be to rip out the carpet and pad ASAP.  You can also try vacuuming daily for a week.

The best flea killer I have ever used is Diatomaceous Earth.  DE is completely non-toxic to humans, but kills fleas, ants, and other insects.  You can get this at Home Depot (look for "bedbug killer") or at a farm supply store.  Sprinkle the dust over the carpet, and vacuum, preferably with a shop vac.  Conventional vacuums are going to get clogged.  Go back in a couple days and do the same thing.

As far as the yard, clean out any piles of leaves or brush.  Make sure the grass is mowed and stays mowed regularly.  If there are any standing puddles of water in the yard, make sure they get drained, and form a solution to keep them drained (French drain perhaps).  Crawl space isn't a typical breeding ground for fleas, but it could be if there is a lot of junk and moisture down there.  Make sure the crawl space is empty, and doesn't have any standing water pools.

Fleas will follow you home too.  Make sure any clothes and shoes you wear get washed immediately when you go home, and take a shower.  Vacuum your car after visits too.

Fleas require immediately, swift, unrelenting action.  The more of it you take, the better chances you'll have.  The more you wait, or the more careless you are, the more they breed.

 I can say my address is the Pizza Hut down the street, but it doesn't mean I have the right to live there unauthorized.  "Receiving mail" is an invalid argument.

I agree with others, that your agreement with them to stay until September 4th, verbal or otherwise, has temporarily invalidated your ability to file for eviction NOW.  But September 5th, it's fair game.

The pain for eviction is high for tenants.  Nobody wants that on their credit report.  But the pain is also high for you - the relationship is so sour now that they're likely to never pay rent again.  So now you have a property with a loan and no cashflow to pay it.

"Cash for keys" will give them some motivation to move out.  Agree that once they move out and turn over the keys, you'll give them the security deposit.  Or maybe a $500 payoff.  That's going to be cheaper than hiring an attorney and filing for eviction.

If they don't agree with that, file for eviction with a real estate attorney on September 5th.  You can call for consultations and explain the situation in the meantime.  The more preparation you put in now, the easier the process will be later.

In the mean time, DO NOT SELF-EVICT.  You're exposing yourself to breaking landlord laws.  You have more time and patience and opportunity for future tenants than your squatters ever do.  Use that to your advantage.