Welcome back to the Discount Property Investor podcast. Our mission is to share what we have learned from our experience and the experience of others to help you make more money investing like a pro. We want to teach you how to create wealth by investing in real estate, the discount property investor way. To jumpstart your real estate investing career, visit freewholesalecourse.com, the most complete free course on wholesaling real estate ever. Thanks for tuning in.

Mike: Alright guys, welcome back to the Discount Property Investor show. Today we are going to do a quick recap. We want to introduce ourselves again. It has been, what? 215, 220 episodes? Somewhere about there?

David: It's been that many?

Mike: It's been a lot, man.

David: Wow.

Mike: We put the episode counter on there a while back just to help us keep track and keep it in perspective. So we want to go and really just reintroduce ourselves to everyone, because it is difficult to get all the way back to the first couple of episodes. I know that when I'm scrolling through podcasts, I always want to go back and check out people's first content, and it's just difficult. I dunno, you get distracted or whatever.

David: That's a great question. When you listen at podcasts you start at one?

Mike: I do a lot of the time, yeah.

David: Or do you start at 255? If that's how many they have.

Mike: If somebody says, hey you have to check out this podcast, I will go in and listen to one or two. If I like it I will try an go back.

David: Me too, man. Me too. It's an investment, like a hundred hours in some cases. Or, in our cases like two hundred.

Mike: It's like a series. You used to be like, oh I'm a fan of Friends or whatever, back in the day. You would catch most of the episodes. Now with Netflix you can go back and watch every episode in order. Some people watch it three, four, five times. The Office is my go to. I have probably watched that thing fifty times in the background of my working or whatever.

David: Love it. So who we are, what is wholesaling?

Mike: Apparently we both like TV. So my name is Michael Slane. I am a real estate investor. I really started-- I mean I was interested probably way before this, but I started back in 2009. This is after I graduated college and go the day job, because again, you have to do that 'Rich Dad Poor Dad', thing, which is going to work, get a real job, all that stuff. Which is what I did. Then I bought my first investment property which was very exciting. Was a four family property. I bought it in 2009. I thought this is great, but I still have to work for a job, still have to work to get that loan etc. I said, this just isn't working for me. I bought another couple of rentals. I was single at the time. Just reduced my cost of living down to almost nothing. I had rental properties that payed my bills and said, okay I'm out. This is not a way to live, I am surviving, but I got enough rental income that I'm surviving, I'm out. I don't need this day job anymore, I can't do this anymore. So I quit. That was one of my bigger mistakes, guys, because I should have got more loans when I could. But again, that's retrospect, right? So I quit the day job, jumped right into wholesaling full time and said, I'm going to do this, and I hadn't wholesaled a single deal. Again, this is a mistake; don't do that, but that's what I did. So a couple of years later, fast forward a couple of years later, start working with Dave, we're wholesaling left and right, now we are crushing it doing a whole bunch of deals, enjoying our time together. We lie talking about wholesaling, we like buying rentals together, we started doing the BRRRR method together which is another way to acquire rentals. That's very cool, we will talk about that later. So that's me in a nut shell, Dave? Who are you? What's your--.

David: Good intro, Mike. Good intro.

Mike: Thank you.

David: I like that. So I have been wholesaling with Mike six years I guess at this point. Done about 500 deals together give or take. Together we have a portfolio of almost 70 properties. The door count is like 80 or 90 though. We need to kind of change that up.

Mike: We should. I call it a hundred because--.

David: In terms of doors, but we look at properties in terms of addresses but whatever, either way. I just have a passion for teaching people this business. I have a passion for teaching people how to buy at a discount, because-- I was telling a student last night. Whenever you buy a property at discount, you have a lot of opportunity at that point. You have the ability to go rehab that property, or to fix and flip, or to wholesale it, right? You have all the options, they open up. But, when you are not buying at a discount, it is very difficult to reduce your risk. That's the thing like-- when I buy a property I am not always looking at how much money I'm gonna make. I am looking at, am I buying this cheap enough to where I can screw up a hundred times and still break even? Right? It's fun at this point. You make your money when you buy, you get paid when you sell. So my passion is teaching people how to market direct to motivated sellers, so they can get a deal on a piece of property, therefore giving the the ability to wholesale, fix and flip, rental, and even do all three of those and screw up, and still make money. That's really what I love to teach.

Mike: When I started buying retail, and Dave how did you start? What was your--?

David: Yeah great question. This is who we are. I took that and I ran down a rabbit hole of course, that's what I do.

Mike: I'll keep you focused, don't you worry about it.

David: Yeah, I have been investing for going on sixteen years. I will be 36 next week. It will be sixteen years. The first ten or eleven years, I bought houses retail, one or two a year as rentals. Didn't flip anything for the first ten years. Five or six years ago, by the time I met you I learned about this motivated seller thing. There were these people out there, Mike, and they are like motivated! What! Are you kidding me! They will give you or sell yiu a house, or trade you a house for a crazy amount of convenience. I learned that and I haven't payed retail since, Mike. I started out not knowing that. If you can take one thing away from today, learn that now. Don't spend ten years paying retail like I did. Start learning how to find those motivated sellers.

Mike: One of the things my wife always says. She will send me these properties on Zillow all the time. I'm like, that's crazy high, that's too much. She's like, you can offer less. I'm like, oh yeah. I was like--.

David: Your wife is coaching you on wholesaling, I love it.

Mike: -- some secret she came up with, offer less, you know?

David: Yeah, you don't have to offer what they ask.

Mike: That is super super important, buying at discount. While we like to refer to ourselves as discount property investors, because it is so fundamental-- you make your money when you buy, you get payed when you sell. Like Dave said, it gives you all those options. One of those options which we love is wholesaling. Dave, let's talk a little bit about what is wholesaling.

David: Absolutely. What it is, man. In my opinion wholesaling is flipping paperwork. That is the simplest way to look at it, right? It is using contracts to control properties so you can market that contract for sale. You essentially secure a property with a piece of paper, or you secure interest in it I should say. Then you sell that piece of paper. This is something we talked about last night with one of the students. You see probably on Facebook, on YouTube just ads like, hey flip houses with little to no money! Well guess what? You can do that. Mike and I have done that about 450 times out of 500, little to no money. You're talking ten bucks, a hundred bucks, maybe two hundred and fifty bucks at the most. What that is, is the earnest money deposit that we have to into escrow to be able to do that deal. That's it, Mike. We have flipped houses 450 grand, 650 grand, I think the biggest one we have wholesaled would probably 700-800 grand. We literally like a hundred dollars, or two hundred and fifty dollars invested in that deal, right? However, again you hear this all the time, you can flip houses with little to no money it sounds so great. But, really though you have to buy those leads or spend time getting those leads. The leads are not free. Flipping houses is the easy part. So when it comes to wholesaling, it's a marketing business.

Mike: That's key, that's--.

David: That's where I was going, yes.

Mike: That's where I hoped you were going. This is a marketing business.

David: A marketing business.

Mike: This is something Dave says, and it took me a while to really agree. Wholesaling is not investing in real estate.

David: Not at all.

Mike: Wholesaling is a marketing business. You are marketing to motivated sellers. That is hat you have to do; you have to find someone who has a property that is a problem for them that they need solved.

David: Absolutely.

Mike: That's who you're looking for. You are marketing to motivated sellers. Getting into the nuts and bolts of what is wholesaling. Dave, you said before that you are buying at a great price, then you are selling it at a good price I think you said.

David: It's a marketing business, guys. You market to find these sellers. You make low offers. If your offer isn't embarrassing, it's too high. It has to be at least a little but embarrassing. Mike, we use a little formula called the MAO formula, which I don't even want to get into. But, essentially what it does, is that it discounts a property to about half justifiably. So regardless of the repairs, obviously that's very important, but if it needs 20, 30, 40 grand, regardless, typically we are buying properties at about half of what they will be worth. Not what they are worth today, but what they will be worth. Sometimes more, sometimes less. We use a little formula and that's what it is. Wholesaling is controlling properties with contracts. Again, we love doing this, guys. We do this all day everyday. We sell the paperwork, right? We literally tie it up with the contract, we sell the paperwork, and we get out of the way. So you don't need a lot of money to do that. But, the marketing business-- and we are going to circle back, is how you get those leads. That requires time, money, and often cases and most cases both. Right?

Mike: One of the things I like to talk about with wholesaling when you get objections, people say, well isn't that illegal? Tying something up and-- not closing on it, trying to sell it off. So the way that I retort to that, or reply to that is, think about any other business. Think about Walmart, Walmart is behemoth now, right? They buy tons and tons of products, right? So they have all this inventory on their shelves, but they have payment terms with their suppliers. So think of poor little-- let's say [00:10:50.27 - inaudible], what do they do? They say, okay Walmart, we will sell you a million tubes of toothpaste, and we will give you net [00:10:59.02 - inaudible], meaning we are going to ship them to you, and you have to pay us the amount due in 90 days.

David: Often times, Mike, they don't pay until they sell it.

Mike: That's exactly where I'm heading, Dave.

David: Yep.

Mike: Sometimes they have sold that product already, money in the the bank, then they pay for the toothpaste.

David: 90 days after they sell it.

Mike: Exactly. Walmart is very quick with their inventory.

David: Yes.

Mike: So what happens is, they have essentially bought something, agreed to buy it. So they have a contract with Crest or whoever is making that toothpaste. They say, I'm going to pay for this in 90 days, just go ahead and ship me a million tubes. So they have a million tubes of toothpaste--.

David: A week.

Mike: Probably. Probably is. They put all these toothpastes out there, consumers come, pay for the product, then they use that money that the consumer put-- payed Walmart--.

David: Payed them, right.

Mike: They use that money to then go pay--.

David: That is the exact same thing that we do with a property.

Mike: Exactly. They take out their profit. Same thing, our inventory is houses with wholesaling. You go out to a motivated seller, you find these motivated sellers who are willing to sell at a discount. You say, I would like to buy this for-- let's give a round number example. This $100'000 house, I would like to buy it, would you sell it to me for $50'000 if I can close in three weeks or less? It will be a cash offer, you won't have to worry about banks.

David: You don't have to do any painting, cleaning. You don't want to cut the grass anymore, great, walk away; I'll handle it. That's the thing. We offer convenience. That's it, that's all we're doing. Really-- let's take a step back, Mike. When it comes to wholesaling, we are basically liquidity makers for real estate right? Stocks are very liquid as long as it's a trading day and you're within trading hours you can buy and sell. Usually you have to wait three days to clear to get it out, right? So it is very liquid in my opinion. If it's Monday morning and you need money Friday, you got stocks, you can get it. Real estate is not as liquid, right? Typically you're looking at-- I'd say two and a half months minimum, with an average probably cash out time close to three or three and a half months, on average, right? Because there is a process to that. What's that process look like? Well I decide today I want to sell. I go and look and hire an agent, find one before you hire one, that's my motto here. I am going to hire myself an agent, they are going to go and take photos, they are going to make a suggested number. It's not a promise because they're not the buyer, they are just saying, we think by looking at the other data on the market that we are going to get you X for it. It may sell right away, it may not. You may have to drop the price. Once you do get a buyer, they are going to want to do inspections. They are most likely going to have a loan. What percentage of buyers don't on the retail market? 5% or less probably. They are always going to have a loan almost. Sometimes you have to pay for their inspections depending on the loan they choose. That lending process is probably going to add a month or 45 days if they are not already in the middle of it. Then it has to appraise. You have what it is called seller concessions, which means when they send their sellers in and they give you that 72 page report of all the shit that is wrong with the house, you either have to go fix all that stuff, or you have to then give them a credit so they can fix it. Depending on the loan again, a lot of those items may be required to be fixed. The bank won't even accept the credit, they want that roof fixed or that new HVAC done before they even lend. So the process is long, it is not liquid. Then of course you have to pay the agent 6% roughly, right? Not only does it take you two and half to three months on average, it could take you a year if you don't get the offers. That is best case scenario traditionally speaking.

Mike: Two and a half to three months is average today because we are in a pretty competitive selling market.

David: That's a great point!

Mike: So--.

David: When it's not like that it could be eight months.

Mike: Six months, eight months. So it takes a lot longer.

David: Great point.

Mike: Back to that example though about the inventory. So we put an offer on a house for $50'000, seller accepts it, because they want that liquidity. They want that cash today, they want to be able to get rid of this house as quickly as possible. So then you as the wholesaler go out there, you hustle, you say, hey I go this great deal on a house. It's a $100'000 house, I want to see it for $60'000. You contract with a buyer, a cash buyer for $60'000. They come in, they buy that house from you for 60, you go buy it for 50. Just like Walmart was doing with the toothpaste. So you are literally just inserting yourself in the middle. You are creating liquidity for the seller by finding that seller and matching it up with someone who is a real estate investor.

David: Exactly.

Mike: Either a landlord or a flipper. That is usually who your client is going to be. Again, they focus on the landlording or the flipping. They are not out there motivated or motivated sellers like you are. So it's just another piece in this puzzle, and it all works together very good. You create win win win situations. That is very important as well. The seller, yu are not taking advantage of, you are helping the 90% of the time I would say, our sellers are super grateful to us.

David: I would say 100%-- recently, because we tell every seller we talk to or at least I do, I know you do, Mike. I am an investor, I don't pay retail. I am buying your house to make a profit. Even if they now they are giving us a bigger discount than maybe they should, they know from the get go that we are doing this for a profit. So, Mike, we bought a hundred houses last year, like 98 or something to be exact. Let's round up because it sounds cool.

Mike: 100 is easy because that's what we shoot for.

David: Right. But how many of them did we need?

Mike: I don't know, zero?

David: We didn't need a single house that we bought. I tell that to the sellers too. Listen, I don't need your house, I don't. But If you are willing to exchange it to me at a discount, trade it to me at a discount for me giving you a massive crazy amount of convenience, well this is a win win situation, wouldn't you agree? The answer is always yes 100% of the time. If it's not, then I say, don't sell it to me. Go hire that agent, take that gamble of waiting a minimum of three to four months. In most cases it could be a year. If you can get more, great. I am not upset, I am actually telling you to go get more money. The problem with that is, there is no guarantee, the agent may require you to make repairs and paint before they even want to list it for you. Then, you are going to be sitting on the market with no guarantee. So when we say we can come in and buy a house in seven days or less, which is possible; that is quick compared to three or four months. Traditionally speaking is going to be more like three weeks. But still, three weeks compared to twelve, come on, that is great. Again, we are here to provide liquidity to the real estate market and that's it. When it comes to wholesaling, because that is the episode title, 'What is wholesaling? And who we are'. We are essentially buying great and selling good. We are not really buying, let me rephrase. We are using contracts to control at a great price, then we are selling the contract at a good price and make that spread. Wish I had a drum.

Mike: That's it.

David: That's it, it's done.

Mike: Bust out those sound effects.

David: That's what it is, and guys, that is who we are. Again, if you are just kind of catching up on this podcast, again, we are two hundred plus episodes in, we haven't done who we are and what it is in a while. So this is a really great refresher. As always, go check out Free Wholesale Course. That is where we push everybody. You are going to learn what it is, how it works, and that it's a marketing business. We are going to show you some of the marketing techniques we use in our own business every single day. Signing off.