All Forum Posts by: Shawn Clark

I’m looking to close my first wholesale deal. I just purchased my first vacation cabin and it’s absolutely CRUSHING it. Now, I want 50. (Haha!) I’m looking to acquire larger sums of cash to do so and I see wholesaling as a valid strategy.

I’ve taken courses on it and have a pretty good grasp on it. So far, I’ve tried a BIT of several things in the Phoenix valley.

- put out 20-30 bandit signs (zero calls)
- ran some FB/AdWords ads (I own a marketing agency, so I’m very fluent in this and still had no luck)
- knocked on 30-40 doors of people in pre-foreclosure

One avenue I haven’t done, but would be happy to invest $500-$1,000 in, is direct mail. Have you had any success with direct mail?

What numbers do you have on it?
Who should I target with my list-buying?
How many pieces should I start with?

I have designers on staff, so I could easily have beautiful cards created. Please help! :)

Curious what you ran the FB ads to. A website? A landing page? Did you get clicks but no conversions/calls? What was the actual result?

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Originally posted by @John Thedford:

Originally posted by @Shawn Clark:

In 2012 I had 4 out of 6 turnover in a 6 month period. One in a month, but of the other three, two were vacant for 5 months and the third was vacant for a year. Plus the costs of turnover, which was in the thousands per unit. Then a couple years later I had back to back sewer collapses. One in November and the other in February. That was another $5,000 total gone.

Five month vacancy? Why? Pricing? The longest I ever had was 3 months but that was due to a remodel, MY lack of advertising, and being sidetracked with other things going on. It was NOT the prime season for renting as well. I make all new leases expire in May or June to get the most potential new tenants. At the time this problem was occurring I had 10 of 12 rented and debt service is nominal. It wasn't enough to hurt me, but of course we all want 100%. I now have 11 of the 12 rented and leasing is through an agency near the property. It still sits vacant but I have no debt service on it which helps.

It took two months to get the work done that was needed. And then two months to get a tenant in there. I think that one was actually 4 or 4 1/2 months.

Another one was actually commercial RO zoned and I just couldn't get someone in there. I was getting $3,200 before and this time could only get $2,500 which I kept rejecting until I came to terms with it. I lost $500 per month until I could refi a couple years later. Now I make $200.

The one year vacancy was a combination of patch of smelly carpet in the basement I didn't realize (my sense of smell was terrible back then) and probably a bad property manager I was using for tenant placement.

But even the one that turned over in a month took $4,000 in turnover costs and that was with me doing most of the work. It needed new carpet.

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Originally posted by @Nick Pascale:

What do you think about buying investment properties from wholesalers?

Thanks

I bought my first two rehabs from wholesalers. Only because I didn't know how to find them on my own at the time. Actually, I thought that WAS finding them on my own.

I made good money on both. But you can't blindly trust them. The second one tried to take advantage of me. Always do your own numbers. Never take their word on anything.

And for getting into rentals, I recommend doing your own renovations and not trusting what others have rehabbed. Just my experience.

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Originally posted by @Jay Hinrichs:

have no bearing on who your turnkey provider is.. this can happen to anyone at any time...

how to keep this from happening is to NEVER put carpet in your rentals.. put in the new lino's that are on the market.. carpet in rentals just gets trashed.

and double your reserve numbers.... most folks simply underestimate reserves.. having owned over 400 of these.

I use 50% of rent for costs.. out of the remaining 50% pay mortgage. and what you have left over is your NNN cash flow. if you do better over a 10 year run thats great.. but in the rental business its better to be conservative up front and there is nothing wrong with having a nice balance in your reserve accounts..

Amen, amen, amen. I totally agree. I heard some young kid brag about his 50% cash on cash return (from a different business podcast unrelated to BP) and I thought, "yeah, right, it'll be 5 years before you have any idea what your real COCR is."

50% for costs seems too high, but like you said, better to be conservative. If you end up with a new tenant every year, the cost can be pretty high between lost rent, turnover cost, and maybe tenant placement cost.

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People talk about X percentage that their rentals make, but I often wonder if they are really taking into account all the costs involved with maintenance and vacancies and turnovers. One turnover can costs $5,000+ if you combine the lost rent with the cost of getting the unit ready. That destroys the year of renting. Then if they don't stay multiple years, good luck. And if the units are fully leveraged, it can be a recipe for disaster.

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Personally I wouldn't mind this coming from my own phone, but I would like to bulk text large numbers of leads (100+) which take too long one by one.

Basically, Slybroadcast but for text.

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Originally posted by @Aaron Phillips:

Hello BP,

My name is Aaron, some of you may have seen me around the forums. I have been hardcore studying up on Wholesaling for months, BiggerPockets being the most useful source of information. I've tried my hand in it by diving in, and got a couple properties under contract. My goal was to do 3+ Wholesale Deals a month. One of the deals was such a nightmare, it really discouraged me to move forward because of how things panned out.

What had happened was I got this property under contract, and I let the seller know ahead of time what I was doing. I let him know I was going to connect him with one of my partners (e.g. the Cash Buyer) and we would be able to close in 30 days. Once I spoke with my cash buyer, the cash buyer informed me that the area the property sits on is notorious for flooding, and he wasn't interested. To make a long story short, I wasn't able to close and I tried to let the Seller know that ahead of time, and gave the reason why. He was very unpleased to say the least, and it was an extremely embarrassing situation for me. I didn't want to be known for the guy who can't close. So instead of continuing on, and finding other deals I decided i'd sit back once again, and keep on studying Wholesaling by reading books, learning from others mistakes, taking advice from the BP community, connecting myself with others, and listening to podcasts.

I'm here today to ask for advice on how I can prevent something like this from happening again? Before I get a purchase agreement in place should I ask the seller what their biggest problem with selling has been? Should I ask if Floods are an issue? I don't know what the appropriate questions would be to prevent this.

***Also, I know Wholesaling is one of the more looked down on methods of Real Estate. So let me make sure I'm not completely foolish here... You do not need the necessary funds to buy the property you are getting under contract? You are just assigning the contract to a cash buyer who does have the necessary funds to do it? I have NO INTENTION of buying any property right now. My intentions on wholesaling is to build enough capital to buy rentals, but that's my long-term goal. I just want to connect the Seller to the Buyer and collect an Assignment Fee for it. Now am I alright to do this?

Do you only have one buyer? You didn't shop it around to others? Were your comps wrong (they were not in the flood zone) or was your one buyer just being picky?

As someone else said, if you only have one buyer, then you better take them with you to see the property before you put it under contract. And you definitely want to learn how to think like a rehabber. If you wouldn't be willing to buy it yourself, then don't expect others to.

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Originally posted by @Preston Gealy:

Hey everyone, I'm starting to get into flipping and I have a real estate agent helping me to find deals in my area but they are just not coming in fast enough. I'm thinking of contacting a wholesaler to do additional work to find a few deals. Is there a good place for me to go to find a reputable wholesaler?

There's no easy way to tell which ones are reputable, but look for the ones advertising to buy properties in your area. Look for bandit signs. Google "sell my home fast in X state or city". Those are your wholesalers. Buyers of properties are also sellers. That's how I found my first two rehabs.

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Originally posted by @Mike Snyder:

Sure. Simple idea for a rule of thumb. Take 70% of the after repair value if the house (what it's actually worth when fixed up), subtract what repair costs are involved, and subtract the assignment fee you want for wholesaling it and this is your max allowable offer. Ex:

$100,000 ARV

$70,000 is 70%

$20,000 cost of repairs

$3,000 assignment fee for you

$47,000 is your MAO

You may start out offering $45,000 though. That is the basic idea. Of course if your ARV and repair estimates are off, that fouls things up. :(

As a rehabber, 70% seems pretty solid to me. I think a rehabber needs at least $20,000 in profit to make a deal worthwhile because of the risk and headaches and time. In your example, that's 20 of the 30%. The other 10% is for selling costs and perhaps some carrying costs and at least partial hard money.

However, I think you need to think like a rehabber rather than just use a flat percentage. If you were going to buy and rehab it, what would YOU want to get it for? Think like your end buyer (perhaps by networking with them and asking them what they want, or by doing some rehabs yourself) and then offer what you need to. It all comes down to whether the seller will accept, and then whether the buyer will accept, and you need both or you have no deal.

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All Forum Posts by: Shawn Clark

Shawn Clark has started 1 posts and replied 183 times.

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