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Wholesale Q and A! Wholesale Questions and Answers! Wholesale Q & A! Solo Cast today with Mike Slane. he team has been crazy busy and finding time to record with everyone has been a challenge but we want to stay in touch and reply to some common questions we get when we first start coaching new students. In this episode Mike answers a few common first-time wholesaler questions. Hope to see you guys next week at https://www.REITraction.com
Quotable Quotes: Progress over Perfection.
If you are a first-time listener; please go back and check out the free wholesale course. You can find that at the freewholesalecourse.com. There we put together an entire course that shows you how to get started in wholesaling. We have everything you need to get started.
If you have not checked out the podcast before we also cover a lot of the basics in the first ten episodes. That is a great supplement to the course so go check those things out. It is going to give you everything you need to get started in wholesaling or investing in real estate with little to no money. Basically the wholesale way.
Another exciting thing coming up eternally is our REITRACTION event. So on November 4th, it is coming up next weekend actually. We put together a group of… ourselves and others who are going to host the event to share… the basics of real estate investing. The idea behind is it helping people who have heard about real estate investing decide exactly what it is they want to do. We cover the three main areas of real estate investing. That is wholesaling… Dave and Ray are going to be covering that. Then we have an expert on flipping. We are going to be talking with Tim [00:02:15.02 – indecipherable] going to be hosting that section. Land lording. Bill Maret is going to be talking about that one. So we are talking about the three main ways to get started in real estate; we want to help people figure out exactly how to get started. So again, if you have not checked that out, we would love to see you guys again next weekend, November 4th. It is here in St Louis at Spazios. You can register at REITRACTION.com. It is going to be a great event; we are really looking forward to that and doing more of those. Really hope we see a lot of you guys there.
Last bit of housekeeping here; we have got… I don’t know if we have ever really announced this on the podcast; we put together an app for the Discount Property Investor podcast so it is a little bit easier to listen to. That is available for free in the iTunes store or the Google Play store. So you can download that for whatever device you have; Android or Apple, go ahead and download the Discount Property Investor podcast app. That way it will keep you up to date on all the episodes.
Alright, so today I want to delve into a Q&A. This is one of my favorite things… sharing knowledge with people. I know it is one of Dave’s favorite things too so… he is a little bummed he can’t be here this morning. But I am going to answer a couple of the most common questions that we get. So I am going to glance down at my notes here.
How do I find owners when I am doing driving for dollars?
Alright, so what is driving for dollars first of if you haven’t heard of that. Driving for dollars is a great way to locate distressed properties. So you are out and driving around in decent neighborhoods, but it looks like a property might be available, abandoned, or… looks like it is in distress, the owners are unable to maintain it. So you write those addresses down.
How do you find those addresses?
The easiest way to find the owners rather… the easiest thing to do is to go look in your county assessor’s office and… here in St Louis it is very easy. You could probably Google county assessor, so type in your county then assessor. It is going to pop right up. In St Louis we have a really great system; type in the property address, it gives you a whole bunch of data about it. The county is different than the city. The county is really, really good. But all of them have the information readily available. In there you are going to find the… owner of record, so the person that is listed as the owner of that property as well as their mailing address and that’s huge. Then what most people do is take that property and… that address and mail them a letter. So you would start a letter. So how do you find the owner’s address? Or how do you find the owners with driving for dollars? Basically go look at the county records; it’s public information. One step further on that would be taking a… little bit more time with it and you can skip trace the owner. So again you go to the county’s records, find the owner’s name, then you go to another website. We use interlace(?) pretty heavily. It is a great service, very inexpensive but you can also just Google the name… there is a whole bunch of places. You can use Facebook… another way we track down owners. So you look up the owner’s name and you just try to get a hold of that person. Again, if you find a phone number that is better than sending direct mail; it is a little bit more work. But again, your whole intent of sending that letter is to get that person on the phone. So if you can go one step further and take a bit more time, get that person’s phone number and dial, dial, dial until you get a hole of them; then you have already accomplished your goal of getting a hold of that owner. So started to digress a little bit but… that is how you would go about finding the owners of properties when you are driving for dollars. I glossed over the easiest one; you can knock on the door of that property, they might be living there… if it is not completely derelict you know? Or you can go talk to the neighbors, that is another great way. I actually just went on an appointment yesterday where I drove up; I was a little bit early so I circled around. I saw a property that had… the grass was pretty tall and there was a sign on there that said it was… condemned. So I knew that nobody was living there. I got out and took a picture. Somebody came up to me and said, “Hey, how’s it going?” I said, “Hello, my name is Mike, I am looking to buy the house down the street.” She says, “Aren’t you supposed to meet me over there?” It was actually the owner of the property I was going to meet. She lived on the street and she knew about that one. So I am going to be trying to buy both properties on that street. The neighbors are a great source of information as well.
Next question. This one we just got from one of our students. If you put together a list, or you buy a list and you get the same owner, the same mailing address on the list 10-15 times, should you mail that person for each individual property? So say they own 123 main street and their mailing address is X. Well, they also have 128 main street and the mailing address is still X. So it is the same person, you know it is the same person. Should you mail that person two letters saying, “I want to buy this property and I want to buy this property”? My philosophy, my personal philosophy is that you do not need to mail them two letters. I would recommend changing your direct mail piece just a little bit to say, “Dear Mr. Owner, I am interested in buying your property at 123 main street or any other properties you might own.” Again, that puts that see in their head that you are a property buyer and you are looking for properties in that area. It is not necessarily just that property you want to own. The flip side of that is… the owners probably know the game. Chances are they got direct mail from somebody else before, and they know that you are an investor looking to buy a property. So 90% of the time if it is a multi-property owner; they have gotten these letters before. So it’s not news to them that you are an investor trying to pick up a property. On the flip side some people would say; maybe emailing them, if you keep all ten addresses on your mailing list and you are rotating through them, you are going to mail them a lot more, you might be the one they call when they decide they are ready to sell a property. So again there is two sides to that coin. We have a pretty developed direct mail system that does that follow up for us pretty frequently. I wouldn’t recommend it, I say… once you have that mailing address dialed in, and you know that you are mailing that person, I wouldn’t recommend emailing multiple… just because they own multiple properties.
Alright, next question. Where do I get proof of funds?
Okay and this is kind of a funny one, I think I have seen on a lot of the groups is… where do I get proof of funds? I am going out and… Dave and I probably talked about this in a past episode about credibility packets. The conversation on that part would have been… don’t worry about putting a proof of funds in there. Put together your credibility packet; put a contract together, put the comps together, how you came up with the officer, a little bit about you, a business card, put it in a nice folder and that is going to be enough credibility. The proof of funds; yes it is going to help you stand out. There are services out there that can provide you with a proof of funds for… just depends, a couple hundred bucks a year. But honestly, if you are not able to close on that property, why get that proof of funds. To me it is somewhat deceitful, and until you can have your own bank statement with the proof of funds on it, or the… line of credit, or something in that capacity that says you have the ability to buy the house… again, my intent, when we go out and look at a property and put a contract on it, is always to close on that property. Maybe a double closing; so we may be selling it off. But we always plan to close on the property once we put them under contract. That is our absolute goal. So proof of funds, you can go out there and get them. Do I recommend it? Not necessarily, I don’t think it’s necessary to even come up with it to… I mean again just go out and there and do some marketing, get started. That is not going to be the difference between you and the next guy… if you are able to… find a truly motivated seller you are going to be able to get that property under contract.
Alright, so how much should I offer?
This one is kind of funny because a lot of people… they say okay I have this MAO formula, the maximum allowable offer, and… I know that I have to buy it at a 70% discount rate or 80% discount rate… meaning you take the after repair value of the house, multiply it by the discount rate, so say it is an 80% area, so you take 100,000 and multiple it by 0.8, and you come up with 80,000. Then you subtract your repairs and your wholesale fee. So say it is another five and another five. So your maximum allowable offer would be 70,000 in that case. Again, you take your ARV, call it 100,000 times the discount rate, say it’s 80%. $5,000 for repairs, $5,000 for a wholesale fee. So you get to 70,000. 70,000 is your maximum allowable offer. So the question is, how much should I offer? Should I offer that 70,000 upfront, or should I offer something less? Well, again I think that is totally dependent on the situation. You absolutely have to build some rapport with the seller and determine what is right in that situation. But my recommendation is always to go in under that. If your maximum allowable offer… again just think about what those words mean; it is the maximum allowable offer. So it is the maximum amount you are allowed to offer on a property and it still be a deal. You don’t want to start your negotiation right there. If you think about that for a second, it doesn’t make sense, you are not going to be able to go back and forth and counter if you have always started at your maximum allowable offer. So there is a great book that Dave introduced me to it… called ‘Never split the difference’, and he talks about the… or the author of the book talks about the acronym method. It talks about a whole bunch of negotiation techniques. So you start off… in this case you are starting off at 60,000. They would counter whatever and we would say okay, well we can push it up to 67,000, or 65,000. So you have up 5,000 and the counter negotiations go back and forth. They say they need 69,000. Then you come back at a smaller increase than last time, really cut it in half. So instead of going up 5,000, come up another 2,500. So you started off at 60,000, then you offer your counter offer at 65,000, keep going back and forth, then you counter at 67,500. So again, you end up at something at or below your maximum allowable offer and that is the best way to proceed with negotiations. Again, how much should I offer? Always less than your maximum allowable offer, that is my suggestion. But it is always dependant on the circumstance. If you know you are in a multi-offer situation, there are other wholesalers involved, you have got to read the situation and you have to play the situation, play the hand you are dealt with.
Alright, what is a double close? The next question is what is a double close?
This is one you see all the time from the new investors because it is a little scary to think… oh man… buying a house is an expensive proposition, and I don’t have $100,000 to go out and close on this property, then re-sell it to my investor for $110,000. I don’t have $100,000 sitting in my bank account right now, how do I do that? Well, the answer is to double close. The double close is pretty simple. But it is not something you have to know. You are going to find an investor-friendly title company and they are going to do the paperwork for you. I will explain it like this; the title company is your best friend in this situation. They are the ones who are experienced in handling this and they are going to set everything up. They are going to co-ordinate the… C buyer coming into close first. By close I mean to fund the transaction and sign their paperwork. So they are signing a purchase contract. Then you are going to come in and sign your purchase agreement. So one set of closing documents, then you are going to sign your sales agreement, so another set of closing documents. Then the original seller comes in and they sign their sales agreement or settlement statement to sell the property. So again there are two sets of closing paperwork, but the title company manages it all, and they use the C buyer’s funds to fund your original purchase and then to pay you.
So you don’t need to worry about all the details; as long as you find a good title company that can help you out. Ask someone in your market; ask who they are using when you are out there networking. Just Google it, just look for investor-friendly title companies, call them and ask them if they can do a dry funded double close. If they know what you are talking about great, if they don’t know what you are talking about move on to the next one. One [00:16:05.20 – indecipherable] make sure you are talking to one of the closers or closing coordinators at the title company and not just the receptionist. It is kind of important, because they may not be familiar with what is happening with some of the other closers. Just because you have talked to one closer at a title company doesn’t mean that title company can’t do it; it just may not be familiar with it. So definitely check around and get the contact details of a closer… that you know someone else in the market is using and that is going to save you a ton of time. So a double close, what is it, how do you do it. It’s pretty straight forward and it happens all the time. The other type of close that can happen is an assignment. In that case, you are assigning your interest in a contract and that goes over to contract law. So you are originally part of the contract between yourself and the seller.
But then you assign your interest in that contract over to your end buyer and you are no longer a party to that contract. So the end buyer just goes in and closes it, and the seller goes in and closes it. So it is really just those two sets of docs at that point. The title company then pays you the assignment fee that was written or agreed to in that assignment contract. So those are the closings and a little bit about double closing.
What is the best mail piece? Or what is the most cost-effective mail piece?
Or what mail piece has the highest response?
So these are questions you get all the time, and you talk about it a lot. Our business, marketing is extremely important. We say that all the time; it doesn’t matter what business you’re in, you are in the business of marketing. So sometimes I am a bit cavalier when I say… there is no silver bullet mail piece. The fact of the matter is you just have to start doing it. That is what I want to emphasize is that you don’t have to have all the pieces of the puzzle put together before you start. You just have to start. So we use a lot of different types of mail pieces. We use postcards, we have used yellow letters, we have used letters with little pennies or buttons in them. We have used letters with pictures, then will out business cards in it, with magnets in it. All sorts of things and… I am not perfect at tracking our response rates… could always do better on our analytics. But the fact of the matter is; I don’t see a huge difference between a mail piece.
Again, this is the St Louis market, it is pretty saturated; so there isn’t a huge difference in the mail piece per se, I think the list is what is important. So you want to make sure you develop or build a good niche list. But the mail piece… which one is the best? Which one is the most cost-effective? Don’t mail people iPads. That is 100 bucks a person. I always go for the cheapest. So I always like to find the best deal on things. We used YellowletterHQ.
I will put the link in the show notes here as well. I believe we are going to have the owner here coming on in an upcoming podcast as well. He can talk a lot more about it with a lot more detail. Gosh, the volume they are doing out of their mail center is unbelievable. Ours is just scratching the surface.
So just a couple of questions on wholesaling I wanted to answer those. Without Dave here, I know it is a little briefer an episode. I tried to get to the point, Dave elaborates a lot more. Hopefully, you guys enjoyed the show. Thank you guys so much for listening. Please don’t be shy, send in your questions, they might be featured in one of our next episodes, our next Q&A podcasts. I know I enjoy doing these and… looking forward to communicating with you guys, hopefully seeing you guys at the RETRACTION event next weekend. Check it out; www.REITRACTION.com. We will leave with you with the quotable quote for today which is, “Progress over perfection”.
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