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.

David: All right guys, welcome back to the discount property investor podcast. Today I am joined by my co-host Mike Slane.

Mike: Hey Dave, It's been a while.

David: Mike, it is-

Mike: Too long.

David: It's been a couple of months I feel like man.

Mike: Yeah, too long.

David: It's been busy. I know I've done a few episodes and you may have done a couple on your own as well here bud but I'm just really happy to-

Mike: No, I've been slacking. I've been slacking on these- the podcasts so I'm glad you've been picking that up and no, we've just been crazy busy with the market and everything that's going on. I mean, it's just- it's a crazy time to be in real estate.

David: It really is.

Mike: And you know, I manage a little bit more of the rental and some of the flip side and you manage a lot of our wholesaling and it's affected both of our business, just being with the market so hot right now and it's very rare that you can actually call it the market and kind of refer to the whole country but I've not heard from any of our students or just in any conversations that it's slow anywhere. We've got just a hot market. Decent properties are selling very very quickly. Nice properties are selling very quickly over asking price, it just seems like all over the place, right?

David: It's wild man.

Mike: It is.

David: It is wild.

Mike: It is crazy. So here I'll do a personal story and Dave you know about this, I just listed my personal property and when I bought it, I rehabbed it, we paid about 70 thousand and we spent probably 80 thousand or so on the initial rehab plus we've been living there for a couple years and you know as it goes, we're always fixing and adding and I've probably added at least another ten thousand in upgrades since then. So anyways we spent quite a bit of money on it. What's that put us in? 90 + 70, about 160 thousand, is that right? 90 and 70?

David: You said- I think you said 70 and-

Mike: Oh, 80 plus- yeah, 150 thousand.

David: 70 purchase plus 80 rehab?

Mike: Yeah.

David: Okay.

Mike: 150.

David: It's about 150 yeah.

Mike: We'll know and then we spent money along the way, so yeah I don't know, whatever. SO anywhere around 150 and again, we're living there so-

David: Probably over that, right?

Mike: Yeah.

David: Probably gonna do it for like probably 160 or 170 probably, give or take.

Mike: So at that time when we bought it, we do- similar to the BRRRR method, we'll buy it and then we'll use somebody else's money and then we'll refinance it. So we did that and we had the appraisal of that time and my wife and I were just really hoping we would have 20% equity in it at the time and we did which was great so we refinanced it and we didn't have to pay PMI. Awesome, so very very happy about that. Two years later-

David: For those that don't know what PMI is-

Mike: Thank you.

David: Go ahead.

Mike: Well, I won't explain. You started it.

David: PMI is private mortgage insurance. So basically the way it works is if you are borrowing more than 80%, you typically have to purchase private mortgage insurance and that basically helps protect the lender who is lending more than 80%, so that could be you know, 90%, could be 95%, could be 97% and some cases maybe even 100% financing, and if it's over 80%, you have to purchase the private mortgage insurance.

Mike: Oh geez, it's a crawl in my britches man.

David: It sucks.

Mike: Cuz you're the one paying for their insurance.

David: You're the one paying for their insurance, exactly and that's the thing that sucks.

Mike: It's so crazy.

David: It's not your insurance even though you're paying for it, it's the lender so if you default, they have an insurance policy because they're, you know, lending more than the 80%.

Mike: Yeah so again, we had at least 20% equity at the time so we were happy about that. Again, Corona happens and then now this housing market is just so hot and we listed it and what we'd seen happening is you know, people are listing properties and they're saying okay no showings until the state, you know they're listing incoming soon so people can see them on Zillow and start wanting to set up a time to view it and all that. We did a showing on the weekend or an open house rather. We did some showings before that and some showings after and we stated you know there's- get your offer submitted by this date, you know Sunday afternoon, 5 p.m. We did that and we had seven offers come in and by Sunday afternoon, I was kind of discouraging agents from even submitting them so I think we probably would have had 9 or maybe 10 offers if I would have just not said anything and been like yeah, please submit highest and best offer, but I didn't want people to submit offers if they didn't have a chance to actually purchase the property because as an agent, I've been on the other side of it, writing offers and writing offers and your clients get rejected. It is- it's frustrating and it takes a lot of time.

David: It does.

Mike: Anyways, I'll shorten the story up. We listed it at 209, we had offers come in, 7 offers. 209 was the lowest offer we got. We had multiple offers with escalation clauses so they would escalate up and our final contract price is 250 on it.

David: And you had asked 209.

Mike: It's 40 thousand over so I mean the only thing I'm worried about is if it appraises. The offers also- this is wild guys, absolutely wild. The offers also came in as is, meaning they're waving the inspection which is just unheard of for retail buyers. Like, everyone always gets an inspection. I mean Dave you- we've told this for years in wholesaling.

David: We lost a deal last week because we weren't willing to waive the inspection and another investor was.

I already walked it so I did the inspection but I wanted to get a sewer lateral scope because you know, if that sewer lateral's broken, that could be 15 grand and it was my- I even was willing to pay for the sewer lateral, the scope and inspection and I wanted- and I told them we could do it in the next 24 hours bro.

Mike: Yeah.

David: And they still said no, we're going with this other guy who doesn't- he's waiving the inspection.

Mike: It's wild, it's a wild market.

David: It's a wild market.

Mike: So on top of that, I mentioned I'm worried if it's going to appraise, they were willing to offer $5,000 in appraisal protection and again, this is kind of a new concept to me, I've not even really heard of it. But they said if it doesn't appraise for the right price, we'll bring $5,000. We actually countered because we had another offer with 12,500 of the appraisal protection.

David: Of the appraisal protection, I've never even heard of that before.

Mike: Neither have I.

David: So appraisal protection is a new thing guys.

Mike: I don't know what it's technically called but they write it in the special agreements and yeah. So they accepted that so now it's 250 and they're willing to do this 12 and a half thousand in appraisal protection. It's just wild, absolutely wild. So again, I wanted to tell that story cuz again, it's personal, it just happened, we're under contract ready to close, all that good stuff. It's great as a seller, t really- it's great, it's easy, it's easy to sell a house now, but where does that leave us with wholesaling Dave? Like current market on fire. Where are we at with wholesaling? It's tough.

David: Yeah, it's been tough lately to wholesale. A lot of the investors that are wholesaling deals around town and send it to us, you know we obviously want to be on the list so we can see cuz we buy from wholesalers too and I have noticed lately that wholesalers are putting deals out at just under retail or basically at retail. I think a lot of the sellers and the homeowners right now, they know that the market is hot, they know that inventory is extremely low, and they have more options, right? Some of the deals that we've gotten recently, the only reason that we were able to get them at great prices, I mean- and I'm saying recently like over the last probably three to five months give or take has been because the seller is extremely distressed and/or time is of the essence. They need to get the thing sold in like one or two weeks because of you know, a pending court case or it could be a job relocation or back taxes, maybe it's going to the tax auction or foreclosure or something along those lines and yeah, it's just been really- it's been a lot more difficult recently than it really ever has been.

Mike: Well, and in explaining that, it's been more difficult for wholesaling because of what we just said. Even these retail buyers are waiving inspections and they're using loans like-

David: What the retail buyers do is wild.

Mike: Yeah, like it's absolutely nuts. So to get a- to not have an inspection period as a wholesaler, that is extremely difficult because you are committed to buying it at that point. Extremely difficult. No, I'm not saying that it's impossible.

David: Yeah, so if you don't have an inspection, there's one of two things you can do. You can sell it on the photos or you can bring your buyers with you on your initial walkthrough when you go view it, assuming you do.

Mike: Well there's more options-

David: Cuz that may not even really be the inspection period or inspection. I mean there's probably other ways of course.

Mike: Or the third way Dave which is what we do too is be very, very transparent. Just say yeah, we're going to buy it but I want to get my partner's through so you set up kind of a showing.

David: That's setting up a showing or an inspection.

Mike: Yeah. I mean it's basically an inspection but you-

David: An inspection at some point, right.

Mike: But again, you're not necessarily being able to write that in a contract. I mean there's a lot of different ways you can do it.

David: That's a good point.

Mike: So it is, it's just been more difficult to wholesale, not to say that we haven't still been doing it because on the flip side, once we get one under contract, it is a little easier to sell it. So again, but finding those properties has always been I'd say key to successful wholesaling is finding good deals and it remains key and even more important you know now.

David: That's right.

Mike: Just finding those good properties and yeah, there's just a lot of competition.

David: So speaking of the market condition, I mean crazy, right? And inventory being extremely low, I feel bad for a lot of these buyers' agents right now, because if you are not a cash buyer, you're probably not going to win anything right now. If you are not willing to waive some inspections and/or some appraisal contingencies or financing contingencies, you're probably not going to get the deal right now. So you know, there's a hierarchy of buyers, right? So your cash buyers are typically going to be the ones that are going to get the, you know, be willing to basically offer the most, not necessarily the most but they're going to get the deal accepted easier because there's less barriers-to-entry there, it's cash. Next you have your conventional financing and then behind that you have your FHA financing and then even behind that there's like the ED-

Mike: Something and VA and all sorts of other loans.

David: There's a couple other types that are even harder and the problem is when you go from conventional to FHA or VA or even lower, there's a lot more inspections that are required. The lender often will require the seller to fix items on the inspection report versus just compensate them with cash, and the seller has to pay for those inspections. So as a seller, you know, let's say you have a property for sale and you go put it on the market and you get 10 offers and 3 of those offers are FHA type offers and the other 7 are either cash or conventional. Usually typically the agent and/or the sellers are not even looking at those FHA ones because it's going to take more time and cost more money to actually sell the deal. So I feel bad for a lot of the buyers' agents right now that are working with clients that don't have 20% to put down.

Mike: Yeah, it's crazy.

David: Cuz that is very difficult for them to be able to get positioned into a deal right now.

Mike: Yeah, so I mean it really does affect like your first-time home buyers I'd say more than anyone else so it is a lot of-

David: Assuming they don't have 20%.

Mike: Well that's most of them who don't cuz again, a lot of home owners when you're buying a second home, if you're on the selling side, you're probably going to clear a decent amount of money that you can then push into or put into the next loan, so it's definitely hard. Yeah.

David: So you know, another thing is I have a bunch of friends who are like man, I could make like 50 or 100k just like you know, you're basically going to walk with about 100 thousand which is great and that's awesome by all means but the price of what you'd go move into is up that much too.

Mike: Yup, that's exactly what-

David: So you gotta be a little careful like don't sell all your properties or even the one you live in.

Mike: You got to live somewhere guys.

David: You got to live somewhere, right. So if you sell the one you're living in and you take a substantial profit, that's awesome by all means especially if it's a primary residence and you've lived there for two of the last five years, you can basically have a tax-free gain and depending on if you're married or not, the numbers going to vary but it's like either 25o to 500k which is awesome. But whenever you go to buy something else, you're going to be paying elevated pricing on that end too, so don't count your chickens before they hatch I guess, kinda sorta though.

Mike: Well that's until it closes so it's- it doesn't really matter. I mean price, the relative price is so unimportant I would say or no, it's so important versus the nominal price. It's like just the dollar number isn't quite as important as it is in relationship to everything else. So what we're experiencing is inflation I think is the point. As all the prices go up, it doesn't really mean you're going to have that much more money, like cuz again Dave said it, you have to pay more for the higher-priced one that you get into.

David: You get more when you sell yours, but you're paying more for the one that you're gonna be purchasing.

Mike: Well that's what we're doing, we're building the house and I guarantee you, had we built this 2 years ago or a year ago, it would probably be about 50 to 80 thousand dollars cheaper. Pretty much guaranteed just because the price of lumber just went through the roof and- I mean all materials.

David: Here, it's coming back down but I'm fortunate enough to not have to be buying a ton of it right now.

Mike: I've heard that and I don't buy a ton of wood either so I don't know.

David: Yeah, I think it's still pretty high though compared to where it was probably this time last year.

Mike: Yeah, I wish it would drop like Bitcoin, then we'd be in business, you know.

David: That's right, that's right, very cool.

Mike: So what else? Current market I think is kind of the idea to talk or feel out right now. So let's talk about some ways wholesalers can kind of work with the current market or use it to their advantage or just strategies that are working and that's kind of what we're struggling with as well in our business is what do we do? How do we- how do we stand out when the market's super, super hot?  And there are- there's tons and tons of competition from- even retail buyers are kinda working on direct letter campaigns. My sister actually just got a letter from someone who's an agent said, hey I've got clients who want to live in this school district, are you interested in selling your house? Call me.

David: Wow.

Mike: I mean again-

David: And they'll be paying full retail too.

Mike: Yeah, oh for sure.

David: Wow, when agents start sending letters, that's wild man cuz all the investors are sending letters and doing lots of other stuff, right? Cold calling, cold texting, radio advertisements, SEO, pay-per-click. I mean there's a hundred different ways, driving for dollars, door-knocking, billboards, bandit signs, you name it. I mean there's a million different ways to go about doing marketing but when retail buyers are sending letters, agents for buyers saying hey we're willing to pay full price for the property. We just want to be in this neighborhood or in this school district, call us. Wow.

Mike: Yeah.

David: It makes it difficult for all the investors out here.

Mike: Yeah so again, I think that the quality of your leads unfortunately, that's just a tried-and-true method comes in the quantity. You've got to make a lot of contacts and that's kind of, I think what we're doing is just trying to get as many eyeballs on our marketing message as possible. So that means more direct mail, that means more phone calls, it means- yeah, I mean all that stuff that David mentioned is just doing a lot more which can push the margins down but like we said, because we are business and because it's so competitive, once we get a deal, we are able to sell it which is very, very handy. One of the only gripes I guess one of our guys had recently was that man, some of these title issues used to hurt when one didn't close, now it's just brutal, you know. If there's a title issue that really derails a closing, it's just brutal.

David: Yeah, we've been dealing with a lot of title issues lately and that's- you know, whenever it comes to the marketing, you know, and getting somebody to respond to your marketing or actually engage with your marketing, you know oftentimes the property has title issues, right? Not always, but sometimes and I feel like the last month or two Mike we've been dealing with, I would say probably 40, 30 to 40 percent of our deals lately have had crazy title issues and most we're able to get around or fix or work through.

Mike: Yeah, they just slow down.

David: But some you just can't. There's not enough time and it's going to be foreclosed on or go to the tax sale or there's just so much stuff and judgments and things to where the seller isn't willing to bring any money to the table and we're not willing to pay any more and it just, it just doesn't work, like there're- it just not a possibility. So I feel like we've been dealing with more and more of that lately, but I also feel like the reason the percentage of these title issue type deals has gone up is because we are working deals right now that we probably wouldn't typically work, right?

Mike: Correct, because we're-

David: Typically we would find something, it would be a good deal, we would negotiate it and we would move forward. Now we find something, it's not really a good deal, we negotiate it and we move forward.

Mike: Right.

David: And we negotiate it down into the kind of a deal territory but those often have the title issues.

Mike: Right, then we find the title issues and we're not able to- unfortunately, we're not able to get them all through to closing because of that. So yeah, it's tough.

David: It's a tough environment out there guys but we're not here to bring the doom and gloom today.

Mike: No.

David: Let's wrap this up with a couple tips and tricks-

Mike: Market's hot.

David: -on what you can do to get some deals in this super competitive market. Mike, you got a couple for me?

Mike: Yeah again, I'd say that the quality of your leads is in the quantity.

David: I like that one.

Mike: That's always been the case is that the more marketing you do, the more likely you are to find those sellers that need help or that want your help.

David: Love it. The quality is in the quantity. Love it. That's a great tip guys. Also, make sure that you're following up with your leads you know, that is the most important thing. Now, with the new current TCPA regulations and changes, I wouldn't recommend automated follow-up. Automated follow-up really got big over the last maybe 2 or 3 years and at this point in time, if you're going to be doing follow-up, you should be doing it manually in my opinion, you should be doing it yourself or hiring a virtual assistant who should be manually dialing those numbers and leaving unique voicemails. You should be manually texting, you shouldn't use templates and you shouldn't be using any sort of a robo machine. Again, the laws are changing. However, that doesn't mean you can't follow up and follow up is so incredibly important guys. You know, there's some sales statistics that we send out and talk about all the time, right? But like what? 2% of leads of deals happen on the first attempt.

Mike: Yes.

David: Then like 10% after like I think the 4th attempt and then basically 80- excuse me, 80% of all deals are going to happen between the 7th and 12th contact, and really I don't even like limiting it to 12. I would say 80% of all the deals happen after the 7th contact and here's the thing: that might not be two or three weeks of time, that could be 6 months of time, right? Mike and I's average wholesale deal from about 6 years of data, 7 years at this point even, is 4 to 6 months from when the lead comes in to when we're able to actually go purchase it.

Mike: Dave, you know what I just realized? And I mean you've probably realized it is that our tips that we're getting to and I know the next one you're going to say is be making offers, right? So mine was qualities in the quantity so do that marketing.

David: That's a lot of marketing.

Mike: You said-

David: Follow up.

Mike: Follow up, and the third one's going to be-

David: Make a ton of offers.

Mike: Guess what guys, we actually wrote a book called the three pillars of wholesaling real estate. I think it's still available for free download at discount-

David: It is, just at discountpropertyinvestor.com.

Mike: Yeah, so you can check that out but that is- it was the three pillars 6-8 months ago when we published it, it still is in this crazy hot market. It's still working.

David: Nothings changed with that.

Mike: Yeah I mean again, I think it's so funny how we can talk about so many different things and it does just come back to those.

David: Comes back to those three things. So the third thing guys, make offers, right?

Mike: Super important.

David: The number of offers that you make matters. If you only make two offers in a month, well it might take you a year to get a deal, in this market maybe longer. If you're making two or three offers a day, well then there's really no reason that you don't find something in the first month or two, right? You know maybe even sooner than that, right? It just depends. So you know, sometimes we will have five or six offers go out in a day, you know, sometimes none but ideally at least a couple every single day.

Mike: You know what- you know what the biggest thing about making that many offers is? Is just think about this from a psychological perspective. If I make one offer every other week or whatever, two offers a month and I get rejected, it's like oh man that really sucks and you let it get you down and that's what you focus on. If I make two offers a day and they get keep getting rejected day after day after day after day, I don't care anymore.

David: Yeah, so it- be consistent.

Mike: And then I get one accepted. That's the big difference is don't let these small failures quote unquote get you down. They're not failures, they're your journey towards getting that offer accepted and you're gonna make-

David: Yeah, no just means not today. It doesn't mean never, right? So when you get these no's, yeah don't let- man that's such a great piece of advice. Don't let it bring you down. You got to make offers. I mean, one of my mentors told me once that the number of offers you make directly correlates to the amount of money that you're going to make in this business and it's so true. It's so true cuz you know, sometimes we'll get busy dealing with rentals or fix and flips, and we're not out really looking at that many deals and you know, I'll notice like hey you know, we didn't really make that many offers this week or maybe two weeks go by and we didn't make that many offers. Now, we'll always have made some offers over that amount of time, but it may be just a couple and then I'll notice, man we're not- our deal flow is really low right now. We're not- we don't have anything in the pipeline and on the flip side of that, whenever were in the office and we don't have a ton of stuff going on and we're doing a ton of follow-up and we're talking to sellers and we're making verbal offers, we're sending written offers, we're even mailing people offers via snail mail, deals start to happen. So it just- you got to do the marketing, you got to follow up with people and you got to make offers guys. No matter what market condition you are in, those three things ring true. They always have and they probably always will.

Mike: Let's wrap it up man. That was a good episode and I love that we circled back to- I mean, we're kind of brainiacs here. We circled back to what we circled back to you know, it's those three pillars. Thanks for listening guys.

David: Thanks for listening guys. Don't forget check out discountpropertyinvestor.com if you want that free copy of the three pillars of wholesaling real estate, we have an eBook download as well as the availability for you to just go read it right there on the website. Thanks guys.

Thanks for listening to the discount property investor podcast. If you enjoyed this episode, please like, share, and subscribe to help us reach a wider audience to jump-start your real estate investing career, visit freewholesalecourse.com- the most complete free course on wholesaling real estate ever. We would also appreciate it if you left us a review on iTunes or Stitcher. Thank you in advance for your support and remember you make your money when you buy, you get paid when you sell. Now let's go build some wealth.