Mike: Welcome back to the Discount Property Investor podcast, your host Mike Slane, joined by David Dodge.

David: Hey Mike!

Mike: How are ya?

David: Good morning! I am doing good.

Mike: Good, me too. Another beautiful day here in St Louis.

David: That's right. Early august.

Mike: Happy to be in the office and record the podcast. Feel like I haven't had a chance to do that as much as I would like to lately. We have been so busy with so many other things in our business. I know in an up and coming episode we are going to fill you guys in on what is going on. So pretty excited to share that. Today though we are going to be talking about; what if wholesaling isn't working? So... we obviously encourage you to start your real estate investing career in wholesaling. It is where we both started... not 100% started, but it is where we gained traction i think and some success ultimately.

David: Totally.

Mike: So again, if you haven't... go back and check out the first ten episodes. There we put together... basically the fundamentals; we talk about the basics of wholesaling as well as we put together free course for you at freewholesalecourse.com. So if you haven't checked that out, please check those out.

David: Absolutely.

Mike: Alright guys let’s dig into what we are going to talk about today, Dave.

David: What are we talking about today, Mike?

Mike: So it's really if real estate investing isn't working, what do you do next? Are there other options out there for someone?

David: Absolutely, tons of ways to make money in real estate.

Mike: Right, I would like to try and focus it on ways to make money if you don't necessarily have a lot of money. Because that usually is where most people are drawn to wholesaling...

David: Good point.

Mike: Because...

David: If you have a lot of money it is easy to make money.

Mike: Exactly.

David: Real estate, stock market, anywhere.

Mike: Go buy 20 houses and wait.

David: Buy anything that is an investment.

Mike: So I would really like to try and focus our conversation on...

David: That's a good idea, let’s do that.

Mike: ... to make money without having a lot of money. So let' talk about some other options. One thing is... so if you are doing what we are telling and you are marketing, you have got some leads, you are just kind of struggling, you haven't put a deal together... you can kind of bird dog for another wholesaler. So if there are other successful wholesalers in your market... it doesn't mean that there are too many people in your market doing it necessarily, it could be the case. But it means that oyu haven't figured out what is working in your market yet.

David: That is so true.

Mike: ... doing something slightly different. There is...

David: I do want to interrupt just for one second. What if wholesaling isn't working? And there could be several reasons. Maybe you don't have the confidence to do it. Maybe as Mike just mentioned; maybe your market is saturated with other wholesalers so the competition level is very high. I see people in different Facebook groups and online talking about... having to spend 5, 10 or even 15 grand to get a deal, however those people are on the west coast or Florida, New Jersey, New York. Areas where... those deals that once they land, they are making 50 or 60k. So they are willing to spend 10 to 15k to get those deals. Regardless, if wholesaling isn’t working you should still be marketing. Don't forget this is the marketing business as a wholesaler. Even if you pivot into doing other things that we are about to talk about; you still want to be marketing to try and get these deals off market. The only way you are going to be able to get equity in the deal, and you are going to be able to easily value add to these deals. So I didn't mean to interrupt, but I just don't want people to think that... if you try wholesaling, you give it a shot and... it doesn't work for you, that doesn't mean you should quit doing marketing to try and get these off market leads coming in, because if you do pivot and you do rentals or rehabs or so on and so forth; that is still a great lead source for you.

Mike: Sure and I think we have both said in the past, it is one of my favourite things to say; no matter what business you are in...

David: You are in the marketing business, absolutely.

Mike: If you are in real estate investing you should obviously continue marketing, because it is important if you are trying to find deals that other people don't already have out there. Try to go direct to the seller which is going to help you again, like Dave said.

David: I just bought a house yesterday that I plan on moving into. It was... just from me marketing on Facebook once every two or three weeks. Make a post that says 'hey Facebook friends, I buy houses for cash, call me.' Super simple, I copy and paste it from the previous three weeks ago and... a friend of mine called up and said he had a neighbour that was willing to sell, they are going to be listing their home here in the next couple of weeks, they were like a 70 year old couple, getting divorced, which is crazy in my opinion, a bit later in life to be splitting ways but... each to their own. I went and... just knocked on the door and say, hey I have a friend that lives a few doors down, I have been looking for a personal residence and I would love to make you an offer on it. We came up with a fair offer, not so much super discounted, but I want to live in this home; so I didn't need to get a 30% discount. I was okay taking a 5-10% discount.

Mike: Yeah, that was a conversation I had with Dave. When it is your personal residence, as an investor you are still looking to get a deal, but you are willing to pay a little bit more because it is the house you want, you family wants. Anyways we are getting a little off topic, let’s move, pivot back then to some other options for people.

David: Right.

Mike: And again, I think these are other options that may steer you into wholesaling, but again in different parts. As you become a more seasoned investor you are going to find you do a lot of different things in real estate. The longer you are in it, you may pick up a few rentals and you may do a little bit of wholesaling, you may prefer to do the rehabbing. So anyways...

David: Let's talk about that stuff. So... other real estate investing options... is that what we are getting into here, Mike?

Mike: Yeah I think so.

David: Okay.

Mike: Kind of the topic.

David: Cool let’s do it.

Mike: Let’s talk about bird dogging and what that means. I have heard people say bird dogging is illegal, you can't do that. You can't get paid for referrals and things like that. Again, there are certain ways that... you can do it legally, and there are certain things that are illegal. If you refer a lead to an agent, they can’t pay you the same way an investor can.

David: Right.

Mike: Because they are held to different standards.

David: Bound by the standards and ethics of being an agent. There are laws behind the fact they are an agent.

Mike: Correct, a broker actually has to collect the commission and pays them. They don’t even collect it. But bird dogging, essentially what bird dogging is... you go out and you have found a decent lead or a decent prospect for... another wholesaler or another investor; and you just T it up for them.

David: Land lords, rehabber, just anybody that is looking to buy some real estate to do something with... in regards to making money. Like Mike said, you just find that deal and present it to them... if it works out for them they are going to be happy to pay you some sort of kick back, in terms of finder’s fee... a gift card, buying you dinner.

Mike: The key difference is when you are bird dogging, you are not necessarily going up and speaking to the owner of the property, you might not have that information, you are just providing that lead to the investor. So again, I think that is the key difference. You are not out there trying to get their number.

David: Yeah, you don’t have to be knocking on the doors necessarily, you could... we have done a previous episode called 'driving for dollars' essentially just driving around the neighbourhoods looking for houses that... have tall grass or in distress, maybe they have gutters hanging off the front, paint is peeling. Something that looks like it would be easy to add value you to, and the sellers can’t afford to keep up the property.

Mike: I just thought of an idea. So you know we had Tucker [00:08:42.02] on not long ago.

David: We did.

Mike: And he has the driving for dollars app. So think of a great way to bird dog using that app. You could partner with the wholesaler and say hey, I will go drive around and I will take pictures of these for you.

David: Right.

Mike: And it is going to go ahead and plug into your mail system and get the letter out the door for you. All you have to do is work the leads and pay me on those leads if you close them. Again, wow! You are creating value for another wholesaler. I think... we would pay someone to do that.

David: We would absolutely.  We would either pay you to do it... or really what I recommend for all the viewers and listeners is; if you are going to have that app for example, put your name and number on there, and just talk with the seller, and if you are not interested in working that lead; then just say you are going to have your partner call you. But that way it is going to be a little bit easier for you to track. If you are just getting paid hourly to go out and drive and do this that’s one thing; but if you are going to be paid on a deal by deal basis, you could make a lot more money.

Mike: Absolutely. So the reason I say it that way is because your topic was if you are not really succeeding in wholesaling, what else can you do? But Dave's mind is in the right spot because I am the same way; I would want to say, hey can I partner with you? Can I get 10 or 20%?

David: Versus saying, hey can I make 20 bucks an hour driving around doing this? Yeah that's great they will probably pay you to do it, we would. But at the same time, it is finite.

Mike: Honestly, I think I would prefer to pay someone on a percentage basis anyways. You are not guaranteed to get...

David: You are not guaranteed to get any deals but it gives them incentive... because once they do land a deal and we just wrote a check for one of our junior buyers two weeks ago for $5000 off a deal he brought us. If you add up all the time he has spent... he wouldn't have even made a 5th of that.

Mike: Oh my gosh, not even close. I don't want to put words in his mouth but probably not more than five or six hours on the deal. Just... anyway bird dogging is a great option. I think we kind of transitioned into co-wholesaling.

David: Yeah we spoke about this quite a few times, but let’s talk about it again.

Mike: What you were saying was... maybe you don’t necessarily offer to do it, you offer to partner or split with them. So that is kind of what co-wholesaling is essentially; you are partnering with another wholesaler, one of you finds the lead, one of you finds the buy. You guys split the profits, that is kind of what co-wholesaling is.

David: Absolutely. Co-wholesaling is great; I would say on any given week or month... a third of our deals are co-wholesale deals. Either somebody us brings us a property that they need help marketing, or another co-wholesaler will come to us and say, hey I see you are making this particuler property for sale, I have a buyer that has been looking in this zip code for this type of house for two months. If I bring in the buyer will you split the deal with me? Of course we are going to say yes. We are in the business of selling deals and we don’t really care how it gets sold. If we have to pay somebody a percentage of our profits or even half of our profits just to bring the buyer to the table to close, sign and fund... then why wouldn’t we?

Mike: We are happy to do it.

David: Right, we are happy to do it because... absolutely. So co-wholesaling is a huge part of our business, but again, if co-wholesaling isn't working for you; it is an option to open some more doors for you.

Mike: So co-wholesaling is a big part of our business. So if you are in St Louis; we love wholesaling with other people. Again if you see some of our deals online we are happy to work with you.

David: Find us a buyer and we will pay you.

Mike: Or if you have a deal, you have something tied up, we have a whole product, let'scowholesale.com, and that's where people can go out, enter properties that they have under contract. They come to us, we vet the deal, if it looks like something our buyers are interested in, we are going to send it out and get it sold for ya.

David: Absolutely!

Mike: So again it's...

David: You guys, feel free to copy that model. Go check it, let'scowholesale.com. Essentially it is nothing more than a Podio platform just imbedded into a URL we purchased. I think we spent maybe 30 minutes building it?

Mike: We could totally build it out more, we actually talked about.

David: It's kind of crazy because... we have listeners in 30 different countries at this point which is awesome. I love that people are listening and learning. Hopefully we are teaching a lot about our business and how you can make money in real estate investing. We are getting people entering those properties into that forum from Michigan, Alabama, New Jersey and places. We always respond back, hey thanks but we are not wholesaling in those markets...

Mike: We will be, but we just don't have a buyers list built up, it doesn't make sense for us to accept those at this time.

David: Right, I am always happy to reach out to those people via e-mail or phone and say, hey... go to Google and type in sellhousefast. The top five people that are paying... add words or have websites built or ranked, those are going to be your top wholesalers in that market. So if you have a deal you are willing to sell; contact those people in your market versus us. Because again, we do not have that buyers list. But again, you can do it in your own market. So if you are a wholesaler, or a new wholesaler, or even looking to become a wholesaler... do a simple form like that. You can use Google forms; there are tons of products out there.

Mike: There is another one, you could literally build your whole business on co-wholesaling and not even really be the wholesaler or... literally you can build a site to bring to aggregate, to bring together, co wholesaling, get a profit from both sides of it. Again, there are tons of ways to make money even if you can't invest in front of the sellers. You are not succeeding there or you can’t find the buyers, whatever it is, whatever your hang up is, there are plenty of ways to make money.

David: Mike, let's talk about rental properties, man. My favourite part of real estate. I love to wholesale obviously, that is the bread and butter for this. For me in this business... I have to get my words straight this morning. Rental properties are my favourite part of real estate investing because you make money while you sleep, essentially mail box money, I love it.

Mike: You and me both. We both read Rich dad Poor dad, part of our story is just... we like the idea of passive income and not having to work every day but still have money coming in.

David: It's awesome.

Mike: I don't care about my network as much as I care coming in...

David: Cash flow is king.

Mike: ... so I can spend it. So rentals. The easiest way... what is the easiest way getting started in doing rentals? I don't even know.

David: The way I have always done it... I shouldn't say always, but most recently... like a wholesaler, send out letters to motivated sellers and... if you come across a property that has a decent amount of equity. It depends on... your ability to get bank financing if you have some cash, and how much work you are interested in doing.

Mike: That is why I said I don't know where to recommend to start because... let's say you are somebody without any money and you can't get financed.

David: You can still get into rentals though.  Owner carry back financing.

Mike: So let's talk about those real quick and I got another one I want to interject too. So we put together that savvy [00:16:21.20]

David: We did.

Mike: And that's available as well. So using private money essentially. So if you can't get bank loans there are other ways. So let’s talk about a couple of those to get into rentals without having...

David: There are probably 10 or 15 different ways, but the 3 or 4 major ones that I am aware of would be, buying a property subject to the existing financing sub two. Essentially what that means is you go talk to Mr and Mrs seller, they can’t afford to live in the home anymore. Maybe they owe that the home is worth, okay? Or... there could have been several reasons but they can’t afford to live there anymore. You go in and say, I will take over your payments. So essentially we are going to go to a title company and close on this property, title is going to transfer from your name into my name or my LLC. However, the mortgage is going to stay in your name. So essentially you take over control of the property, but they... remain, the mortgage remains in their name, you just take over the payments and you can get a renter in there and 9 times out 10, you are going to be collecting more rent than the mortgage is, you are also going to get the advantages of real estate as far as being able to appreciate that real estate on your taxes. You are not going to have the interest expense because you are going to be paying somebody else’s mortgage. But essentially you are going to be able to control the property, rent it out and collect cash flow.

Mike: We talked to Jeff Coffman episode 19, if you want to learn more about subject to. He is a wealth of knowledge and shares that with us on that.

David: Jeff’s the man.

Mike: That is a great way to get started.

David: The next one would be lease option. So essentially you go to a seller, could be a motivated seller, could be... a person that is just looking to lease out a property, and you say I want to buy this property, however would you be open to me leasing it for a year or two, or five before I buy it? You essentially try and arbitrage that. So you sign a lease with them with the option to buy. Then you turn around and sign a lease with somebody else. Maybe you give them the option to buy, you just mark it up. So you are essentially controlling the real estate, becoming a landlord and you are kind of in the middle. So lease option... on the purchase is probably not as good of a strategy as using the lease option on your exit. But again, it is something you can do to get into a property with little to no money down.
The next thing I would like to mention would be seller carry back or owner financing; it is essentially the same thing. It just means you go to property; this is really how most big commercial deals are bought and sold. If you go and try and buy a building for ten million dollars; most people don’t have two million dollars to give to the bank and... in terms of their 20%, so essentially the seller will say they will do a second mortgage... for 20% so the bank will give you that 80% loan. That same principle, that same philosophy can be used on a single family home for 50-100k, or any price point. But you just go to them and tell them you would love to buy the house, but can't get a loan from the bank as you don’t have that kind of money. Will they be the bank? Will they finance this home to me over five, ten or fifteen years? They may say yes they may say no. If they so no just get creative with them. Say well, what can you do if I put a little bit of money down, can we work out some terms on it? Essentially all you have to do is ask. What is the worst thing that can happen? They tell you no? If you don’t ask you are not even going to know. I usually always ask if there is any creative thing we can do to help me get into this property little to no money down? Even though I am a cash buyer at this point and I could buy with cash. So seller carry back owner financing is a great strategy. I have done a couple of those deals. They are awesome because essentially you don’t have to go to the bank. The seller becomes the bank. So you pay them a little bit of an interest rate. You say, if you finance this home to me over ten years, I will give you a 4/5% interest on this loan, and I am going to pay you what you are asking. So you are maybe not getting a steal on that home, you are not getting a ton of equity capture on day on; but you just acquired an asset... that you can then rent out, hopefully brings in more rent than what you are paying out, get cash flowing.

Mike: That is a hugely powerful thing that you just said. So you are acquiring an asset that you would not have been able to acquire if you didn’t ask. Again, that is awesome, a great way to do it.
So another option then, rentals are a great option. Obviously we are passionate about building our portfolio.

David: Passionate about making money while we sleep.

Mike: We love rentals. So the next one is rehabs. This one... I think we are both kind of getting our feet wet; we talked about some of our wholetailing, we are still having some ups and downs in that department. Some of the minor rehabs, we are learning. But we got... a lot of experience on our team, which is helpful.

David: It is.

Mike: So we are not making the big major mistakes which... that you want to avoid rather.

David: Right.

Mike: Rehabs; let's talk about that and how you get started with no money. This one is where I really think that savvy course will help out the most, and using private money.

David: Tim Gibbons (?) course too.

Mike: Right, so to actually get into the rehabbing you got to have some knowledge or experience. Taking that course with Tim will... on and upcoming episode.

David: We got to.

Mike: Tim is a great guy; you are going to love Tim. But yeah we will have him coming up, teach you how to do the rehabs themselves... and Dan can show you how to get the money for it if you can’t get those bank loans.

David: Yeah.

Mike: That is kind of the way to get the money without being financeable to creditable.

David: So yeah to kind of touch on rehabbing; there is also ways to do rehabbing to guys. Like... some people will purchase a home and they will just clean it up. Essentially you are flipping the home and... make ready. Let's say you buy a house that is a hoarder house.

Mike: That's because you think like a landlord. Call it a make ready.

David: Call it a make ready, right. So maybe you just clean it out and you hire some maids to come in to scrub the place down. That is not so much for rehabbing but it is a way to flip the property because you kind of emptied it out. Another way to do it would be like what me and Mike like to call wholetailing. Where essentially you go in and do a paint and carpet and maybe some landscaping. You just kind of fluff it up a little bit, make it look pretty; take the ugly off of it.

Mike: And this is a house that is not distressed really that bad.

David: Gutters can’t be hanging off because...

Mike: There can't be a hole in the roof.

David: Right.

Mike: Carpet and paint isn’t going to fix the hole.

David: Not going to fix the hole, right. But sometimes it can as far as fix the house though, make it pretty. Then you can get into full blown rehabs, you are gutting out kitchens, gutting out bathrooms, putting in new flooring, moving walls. That is definitely a way to go to. Rehabbing can become very expensive, but typically what I have found... is... a lot of the investors; at least in our market place that are making the most money are doing the bigger rehabs. Also they are not having to do as many of them. The profit margins on each individual rehab are much higher. Mike and I might need to wholesale 15-20 or even 30 deals to make the amount of money that some of these rehabbers will make on one or two of their deals. I am not saying they are working any harder or any less hard really. There is a lot of money to be made in rehabbing.

Mike: It is more expensive but it can be more profitable.

David: It can be but I have heard horror stories too, where people will buy a house, and maybe they didn’t get it at a deal. Maybe they thought they got a deal but didn’t, then they put 100-150 grand into it... then they have to sell it for a $50-60,000 loss. So it is definitely risky, risk versus reward, you know? If you are getting into rehabs start small, work your way up, get some experience. Try to find that off market deal so you can get that equity and get a good deal on it.

Mike: I think we covered a couple of options. I mean for things if you are not... if wholesaling isn’t clicking.

David: Right.

Mike: The other one obviously is get a mentor or a coach. I think we kind of skimmed over that, but get someone to help you to do deals. So it is kind of similar to [00:25:32.06] but find someone... that can help you do a deal.

David: Absolutely!

Mike: If someone if your market is tearing it up; that means there are ways to make money in your market.

David Absolutely.

Mike: I have always said... I just cringe when people say, the market is too competitive, there is too many people. Well how do you know? Just because you see bandit signs on the side of the road everywhere, it doesn’t mean a bandit sign isn’t working; probably means they are working, that is why people are putting them out. I don’t know, that's just my two cents.

David: Definitely hire a coach or find a mentor. People always say there is no magic sauce, well there kind of is. There is a system and a process that you follow to do a wholesale deal. A system and a process that you follow to acquire a rental or do a rehab. If you find somebody who is doing these already, that can coach you or mentor you; they are going to essentially teach you everything that they know. All you have to do is copy their model; they are not going to be upset that you are copying their model, that is why you are paying them to learn it. So essentially there is a magic sauce or magic formula to doing a wholesale deal or rehabbing a house or acquiring a rental. It is not rocket science, there is probably several ways to do everything we just talked about. But all in all the process is the same.

Mike: It is the same, what I want to say is... every deal it surprises me how many things are different.

David: How curve balls can hit you.

Mike: How many little things like... that is an issue, okay we just have to figure out a way around that, or...

David: We are essentially professional problem solvers.

Mike: Exactly, we solve problems for people. Again, it is fun we enjoy it.

David: Right guys thanks for listening. There is obviously other ways to make money as a real estate investor. If wholesaling isn’t working for you... Mike and I have a great coaching program to teach people how to do wholesaling. We have also put together a free course, freewholesalecourse.com to get you started; show you essentially what wholesaling is and how it works. So if you are looking to learn more about that, check out that website, freewholesalecourse.com. Thanks for listening; we do have an ending quote here for you guys. Let's go ahead and read it out.

Mike: "The best investment on earth is earth"

David: Love it.

Mike: Thanks for listening guys.