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David: So you want to be a wholesaler?

Mike: All right. All right.

David: Let's jump on in guys. Today, we're going to be talking about people that are brand new and they're thinking about getting into wholesaling and some of the things that I think and believe are really necessary to understand from the very beginning. Also some of the mindset that you kind of need to embrace and take on if you want to be a wholesaler. So first and foremost, the wholesaling business is more of a marketing business than it is an investing business, and the reason is because we are marketing to find motivated sellers. Once we get those properties under contract., we are marketing to sell those properties and ideally when we wholesale, we don't have any of our own money invested, maybe some earnest money, right? But sometimes not even. The goal with wholesaling is to flip houses with little to no money and it's very possible to do deals with little to no money, Mike and I do it all the time. However, the caveat is- and this is what most people out there that are doing this business, especially those that are guru-ing and coaching neglect to say is that the leads cost time and money and that's where the expense comes into play, right? So can you flip houses with little to no money Mike?

Mike: Yes, we have been doing it together for about four or five years.

David: Thank you for the coffee.

Mike: No problem. The reason I say we've been doing it with little to no money is cuz we reinvest almost everything man. We don't pay ourselves a lot, we like to reinvest, we've been building a nice rental portfolio and it's kind of the Step 2 of the real estate investing career business.

David: That’s right.

Mike: We're always looking to kind of move forward in our investing and our career. So, the topic though today was what does it take to be a wholesaler right Dave?

David: Yeah. Absolutely.

Mike: You had mentioned it's a mindset thing and that you need to understand, you were- you're going to be marketing, you're going to spend some money on marketing, not necessarily investing per se in real estate but you are investing in your marketing or is an expense to it. One of the things that I like to talk about with mindset when I first started wholesaling, I was working a nine-to-five and I had the employee mindset where you basically you show up and you get paid, like that's what most people expect to happen is like hey I go put in work and then I'm going to get paid. Well, that's not true in wholesaling. That's not true in the entrepreneur mindset or the business owner mindset. You can work and work and work and work and if you don't do the right thing, you don't get paid.

David: You don't get paid.

Mike: So again, it's not only learning that you are a marketer and learning that you need to get your message out there to accepting the fact that if you don't provide value to the market, if you don't do something that is worth something of value, you may not get paid. So it is a very difficult lesson to learn and a lot of people who get I'd say frustrated with wholesaling or even have ups and downs in wholesaling, is they forget that is if you have to bring value.

David: That's such a great point.

Mike: Yeah, so hey what are the ways that wholesalers bring value then? Let’s touch on that real quick.

David: Yeah, absolutely.

Mike: It's pretty simple and we can go and we can talk about this probably for hours on end as well. Wholesalers bring value in a few ways, one is they’re cash buyers, so you come in and you're able to help someone liquidate an illiquid asset, so a house is not very liquid but you're able to help them sell it quickly, so you provide liquidity to them. Another way that wholesalers add value is they buy the property as-is so that a seller who may not have money to bring in and fix up a house to get that full retail, the full price out of the property, we're able to help somebody sell a house that isn't in nice shape. What's the other way Dave? Is uh-

David: Quick!

Mike: Yeah, so quick, so it’s a liquidity thing is really- I mean, that's a big portion of it.

David: I mean the three things I always look at is it's quick, it's cash and it's as-is.

Mike: Quick, cash, as-is.

David: Those things kind of blend together a little bit, you know, I get that but quick, relatively quick, and when I say relatively quick, I'm talking about three weeks, maybe four weeks because traditionally speaking, selling a property is going to take you 3 or 4 months, right? I mean just on average. As-is, you know not required to make any repairs or do any cleaning or even cleanout, no updates, no paint like just as it sits and then the cash goes into the quick, it's part of it but that does matter though because traditionally speaking, you- it's going to be very difficult to get a loan on a property that needs a lot of work, especially if you don't have experience already or you know, capital or something else to put up as collateral. So, the cash is very important because a lot of properties, no bank will lend on them if they're just really really destroyed or you know, need a ton of work so the fact that you know, we have cash and quick, they kind of blend together I get but they're two totally separate things, right? but Mike, you are absolutely right. As a wholesaler, you have to understand that you are going to- your main goal is to offer convenience and in return, you have to demand a discount, and I know it sounds weird saying, okay well if you demand a discount for everybody you talk to, most people are going to tell you that that's not going to work. Well that's okay, that's the business actually. This is a numbers game, and you have to make offers that align with wholesale pricing, right? You can't sell a deal to somebody if it's not a good deal so that means that you got to get in at a great number and you're basically just you know, making that spread. So, the thing that I really just wanted to touch on in this particular episode here Mike or with this topic is you know, so you want to be a wholesaler. Well, that's great, but you need to understand that if you want to be a wholesaler, that you are going to be entering a marketing business and if you decide to cherry-pick, we love cherry-picking. Great, to rehab, to rent, to rehab the flip or whatever that might look like, to Airbnb, whatever that might be. Once you buy it and you start taking some risk, guess what? You're an investor now, but when you're in the wholesale mindset, the wholesale game, you are a marketer and that's just the main thing that I think everybody needs to understand. So, with that being said, right? You have to understand that a) you're a marketer and then b) what kind of marketing do you plan on doing and go do it, and that's the biggest I think disconnect. People say, okay, I get it. I'm going to be a wholesaler.

Mike: 100%

David: I understand that this is the marketing game and then nothing happens. Why is that?

Mike: What's funny Dave is I was actually really listening to you, you know sometimes we kind of tend to- we hear each other but we're just kind of like in our own worlds waiting for our turn to speak or whatever? It really hit me how important that is just now, is that you are not investors and we're not saying that to say oh, you're not an investor. We're saying that as a wholesaler don't think of yourself as a real estate investor think of yourself as a marketer. It's not necessary that we're trying to say oh you're not an investor like we are better than you cuz we buy rental. No.

David: That’s not the point.

Mike: Not at all. All we’re saying is in your mind you have to materialize the fact that what you do is market, what you do to wholesale properties is advertise, is spend money or time finding leads-

David: And most of the time both.

Mike: Yeah, usually both. Finding motivated sellers, finding people who need your service. So that is- that’s just huge, hugely important, really stuck out to me today, I don't know if it's just the way you said it but again, it just really clicks on why that's important and again, it's not- we're not saying you're not a real estate investor, we're saying you're in this instance, need to think of yourself as a marketer because that is what you do.

David: That’s what you do.

Mike: Super-super important

David: That's right.

Mike: I don’t know how many different ways to say it to really, I don't know, to emphasize that it really just is driven home in this portion of our business too.

David: So here's why it's so important: you make your money when you buy, you get paid when you sell and we say this, I think it's even in the intro or the outro of this podcast, right? But that's- that is the most important thing: you make your money when you buy, you get paid when you sell. So, when I first started investing, you know, 15 years ago, 16 years ago at this point. I was paying retail for properties, I didn't know better. I was getting loans at, you know 80%, putting down 20% and I was parking money just because I'm terrible at saving and I thought it was a great strategy and it was, but about five, six years ago, I realized that there were these people out there that were motivated to sell and that they would trade you a discount for a ton of convenience and ever since that I learned that and I started buying at a discount. I will never pay retail for a property again. There's just no reason to do that.

Mike: You can't make money in this business doing- I mean again, with real estate what's so cool is that if your timeline is long enough, so like as a rental investor, you can cover up some of those little bumps and those extra expenses. If your timeline is long enough with real estate, you're going to make money. I mean it's almost- it's almost a guarantee, again, there's no guarantees in life yada yada yada, but in the short-term, I mean to Dave's point, to make money from day one, to successfully wholesale a deal, to successfully BRRRR a deal and get all your money back or to successfully flip a deal, you have to get a discount. You have to get a good price.

David: You gotta buy at a discount.

Mike: You cannot pay retail add- I mean again, very very rarely you're gonna be able to pay a full retail price with the commission's on top of it with all this other stuff, put in a new kitchen, flip it up and then sell it retail again and make a profit.

David: Yeah, the reason is it's very difficult Mike, and I know you know this very well. It's very difficult to increase the value of a property solely on the rehab alone. Now, of course, you're going to increase the value, you put in 20, you're hoping it's going to be worth 30, put in 50, you're gonna be hoping it's going to add an increase of value of 80 or 90. Absolutely, we get that but what you had just mentioned brought a lightbulb up in my head. What ends up happening is yes, you increase the value over what you spend but a lot of that increase value gets eaten up by the commission's and the seller concessions and time, right? and cost of your money.

Mike: Absolutely.

David: Right? So, you can still make profits paying retail or close to it, but you're basically limiting your ability to make a profit and at the same time you're not doing anything to mitigate your risk, right? So to me, buying at a discount is the easiest way to mitigate your risk because you're still going to increase value by updating but you don't have to rely on that and that alone. When you buy at a discount and you fixed, you have two things on your side. You have the updates, right? But you also have the fact that you didn't pay retail to begin with and that I think is one of the most important aspects of wholesaling because a lot of people, they just can't grasp that and they think that they want to be in the wholesaling, but then whenever it comes to actually doing the marketing or spending the money to do the marketing, they are absent and then they wonder why they're not getting deals or doing deals and that is why. It's because they are not doing the marketing physically by cold calling, texting, door knocking, networking, whatever that might be or by spending money on marketing like sending out mail or doing bandit signs or you know, radio advertisements or whatever that may look like, billboards even right? postcard, letters, you name it but they need to do those things to get their phone to ring and here's the simplest way to look at this Mike: you either pay to get your phone to ring or you and your team have to ring phones. I mean that's like- it seems so stupid, right?

Mike: Yeah, I like it.

David: Like that is the most common-sense thing but guess what? People don't get it. They don't see that, right. So, if you're not spending money to market your message to get your phone ringing, this thing needs to ring for you to get paid and do deals, right? If it's not ringing then you either need to do more marketing which is going to cost money or you need to trade time, which is totally fine as well but you need to trade time doing something out bound to make somebody else's phone either ring or receive a text or an email or whatever that might be and that's really it, right? so I don't want to beat this to death but so you want to be a wholesaler. Let's just wrap this up. Understand, please understand that you have to take in the mindset that you are in the marketing business and it's- that's it. And what do we do? We trade convenience for a discount, and I tell my students all the time: if the seller isn't willing to give you a discount, maybe they're going to give you a slight discount but not a great discount. Well, it doesn't mean you shouldn't work with them, but you shouldn't go out of your way to provide all this crazy amount of convenience either. It's got to be an equal playing field. It's a two-way street.

Mike: Yeah, well said.

David: Anything you want to end on with that note?

Mike: Let me think. I don't think so, man. I mean again, you guys can be investors but when you're a wholesaler, you are a marketer, you are a salesperson. That is you're primary task as a wholesaler.

David: Don't forget it guys. This is the marketing business. Signing off.

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