Episode 41: Roll with the Punches!

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Show Notes

Wholesaling is an easy process but it can be very difficult.  As a wholesaler it is important to roll with the punches and remember your role is to solve problems for your sellers and your buyers.  Your Sellers Problems can be varied and your buyers are usually looking for a good deal on a property. Today Mike and Dave share some recent experiences where they had to roll with the punches.

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To learn more about Wholesaling visit: https://www.FreeWholesaleCourse.com

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David: Alright guys, welcome back to the Discount Property Investor podcast. This is your host David Dodge with co-host Mike Slane. Hey Mike!

Mike: Hey guys, thanks you for joining us. I am excited to be back recording, it has been too long. Sometimes we get some episodes recorded and then we go a little while before we actually get to come in and record. So how you doing, Dave?

David: I am doing pretty good, Mike. Closed a couple of deals this last week as you know, so feeling pretty good, man.

Mike: Still rocking and rolling, man. 100 miles per hour it feels like all day every day.

David: We did… we were just looking at the financials and we closed 17 deals in June.

Mike: Yeah.

David: Man, that was a busy month.

Mike: That’s awesome.

David: It was.

Mike: It was just absolutely awesome.

David: 17 deals. That includes purchases, assignments and double closes.

Mike: As we counting double closes as a single?

David: As a single deal. But we purchased a couple that we are wholetailing. Doing little minor rehabs, but total 17 different purchases.

Mike: So if you see the bags under the eyes, it is partially because we have been keeping ourselves busy.

David: That’s right.

Mike: Alright guys, if you are first time listener; what we like to talk about on this show is wholesaling real estate. That is our primary goal is to help other people learn…

David: It is what we do best.

Mike: It is what we do; it’s how we make our money. So we talk about wholesaling real estate, and we put together a pretty neat free course, we have had nothing but five star reviews every time people review it for us?

David: We have had almost 2000 people take it, knock on wood. Over 20 five star reviews. We haven’t had a single review that is not a five star review.

Mike: Knock on wood; we are not challenging anyone to do that. We are very happy with the course we have put together and we think a lot of people are getting some good value off of it. So if you are not familiar; please check out freewholesalecourse.com. Or you can go back and listen to our free episodes, first 10-20 episodes we hit on the what and how of wholesaling and quite a bit more… so you are able to learn all that from us for free. So very simple over what wholesaling is, Dave, we go out, we do some marketing for a property, we find a property that is a really good deal, we sell it for a pretty good deal to another investor.

David: I would like to say we but great and we sell good. So essentially… like that spread right in the middle. We are able to buy great because we can close fast, we pay cash and we make it easy. It is a very simple business guys, not a whole lot to it. We did 17 deals in June and there is no reason if you are new to this business that you cannot do your first deal within… what do you think, Mike? A couple of weeks?

Mike: Absolutely, again… so we recently had somebody ask us… hey if I start doing this can I expect to close a deal in my first 30 days? The answer is yes and no. You can absolutely expect to close a deal in 30 days. But, one of the things with real estate is building a pipeline and… once you get a property under contract; you are going to have an inspection period and several days before the title work is actually done. So even at the fastest, the absolute fastest you can buy cash on a property I’d say 3-5 days. That is literally the fastest…

David: The fastest because the title company is going to need that much time to process the paperwork…

Mike: That’s if it is a clean title all that stuff. Typically is going to be a minimum of 2 weeks and that is a pretty quick closing.

David: So true.

Mike: So we always plan on maybe 30 days out is what I would say. That is kind of how we know where our pipeline is at. Again, yes you can get one done that quickly, but it is not necessarily always going to be that fast.

David: Right and one thing I do want to add, Mike. Not trying to brag or boast about our business by any means. 17 deals was a ton but… we didn’t start a month ago; we also have a huge pipeline of following up with people and… the money is in the follow-ups. Maybe that will be our next podcast is the money is in the follow up. We will talk about that a little bit more. But back to what you were saying; it is absolutely possible to do your first deal in one month. But usually it may take somebody two months and the reasons is because… there is a lot of things that have to take place, inspections periods and so on and so forth. But also it is also hard to do one call closes, very difficult to go out and meet with individuals and… just say, hey I will pay you this for it, and they say okay and you sign, you got a buyer. Often times you have to negotiate with that individual and you follow up with them several times before you can get that… them to agree on the fact that you or offer isn’t unfair.

Mike: Absolutely. So just to be 100% transparent; I have said it in the past, It took me about 6 months from when I quit my full time job and dove into real estate full time and closed a deal.

David: At least 3 or 4 for me.

Mike: Again, yes you could do it in 30 days, you got to be a quick learner, you got to be a hard worker…

David: But once you did that first deal at say 6 months, month 7 your probably did 2 or 3 and in month 8 your probably got 2 or 3 or more because you have that pipeline. Let’s do a podcast on that, so it’s following up, but today we want to talk about…

Mike: Rolling with the punches.

David: Love it!

Mike: So…

David: Rolling with the punches, I actually like to box so it’s a good term for me.

Mike: It’s perfect. I guess I was helping one of our joint venture partners, our junior buyers with [00:05:57.09 – inaudible] around here. She came in and she was just so upset because… by St Louis standards a pretty big deal.

David: Yeah a very big deal.

Mike: It was… I am not going to go into the address at this point because it is still under contract and going to wait to see what is going to happen but… we are purchasing this property for a little over half a million dollars. $550,000 we are purchasing…

David: So it’s an apartment complex, multi unit apartment complex.

Mike: And we are selling it for 610 at the time. She came in and she is dealing with the buyer, their hard money lender. So the buyer is getting hard money on it because he figured it would be faster than getting his bank loan and everything. He has got plenty of cash to put into the deal… but she has been dealing with this hard money company that is giving her trouble and saying, hey listen we can’t close it on what we agreed to. She has been working this deal for months with the seller; she has got a great relationship with the seller. He knows… full transparency, he knows we are buying, selling and flipping it. So it is really no big deal. But… she was just super upset because this person was telling her they couldn’t close it on time. I said, listen it is not that big of a deal; what you have got to do is look at it as an opportunity. And opportunity to improve the sellers situation, and an opportunity to improve out situation as well. So what we did was we said, listen we are going to have to fund this deal; we are basically going to have to gap fund the buyer of this deal. So we will take down this apartment complex, the $550,000 deal. But what is going to happen is we are going to have money costs associated with that. So I said here is what we are going to do, we are going to go to the end buyer and we are going to tell him…

David: Don’t panic.

Mike: Don’t panic.

David: Let’s figure this out.

Mike: Exactly, we are coming up with a solution. The deal is not dead just because that buyer can’t close when we told the seller that we could close.

David: Two points, I want to interrupt for one sec, Mike.

Mike: Yeah.

David: One, we got the original deal with an option agreement. So we weren’t really obligated to buy it. The seller was just so motivated; again it comes down to motivation. The seller was so motivate he just wanted to sell it. So we told him, listen we are wholesalers, we know a lot of investors but we personally aren’t going to buy this, however we can help you buy it. We use an option agreement. Second point I wanted to make; so we had no obligation to purchase it. Second point I wanted to make is we had no money in this deal, zero. Because we were able to use the end buyers [00:08:31.29 – inaudible] money to put forward to our own earnest money. We made the end buyers earnest money, non refundable, then we even told the seller that our earnest money was also non refundable. So in the event the buyer walked away; the seller would at least get something.

Mike: Right.

David: Those are two points I really wanted to stress.

Mike: I appreciate that, Dave. That is a really good point, so that is part of the reason Lisa was so upset, because we told them it was an option then we committed, we said listen, we have got somebody, we are locked in and ready to buy this property. So again, that was another point of contention which is something she was upset about. I told her not to worry about it. So what we did; we called the end buyer and we said, this is a situation we are happy to work with you, we want to sell you the property. But, we are going to have to fund this, we are going to have to hold this for another week and that has some real cost to it.

David: It does, have to go to the bank, line up all the documents and everything, just a pain in the butt.

Mike: So… it is going to cost us about one point. It is going to cost us 1% of our purchase price, going to cost us about $55,000. If we extend the closing a little over a week, will you pay that money cost? He said, yeah I don’t really want to but I get it, I totally understand where you guys are coming from and I really want the property. Let me go back to my hard money lender and see if they can get this set up.  So we said, okay that’s fine. So he called his hard money lender back and he said, you know I really can’t… you know the 55000 you guys recommended, that’s fair, I totally understand where you are coming from, send me the contract… or send me the amendment to the contract…

David: Did we do 55000, or did we do 60…?

Mike: We did 55000.

David: So they know what we are buying it for essentially?

Mike: Yeah, they already know.

David: They already know.

Mike: It’s full transparency, this deal is full transparency.

David: Oh cool, very cool.

Mike: All parties involved know exactly what’s happening.

David: That’s great; those are the best type of deals.

Mike: So we…we are double closing.

David: Why they already know? Oh because it is a hard money lender, got it.

Mike: So we… sent the contract over then for what I think was 615 now… and we got that one signed, well actually we didn’t. We prepared the amendment and then we called the original seller and we said… this is the part… it’s actually kind of sad, and it’s one of those things where we really had to roll with the punches. This is the part where Lisa really got upset about. Breaking down a little bit she said, I am so sorry that we have to do this, but is there any way we can get this extended? That’s when I said… I kind of interrupted and I said, hey… I am on the phone with Lisa, I am the buyer of the property because Lisa was helping, I was going to be on the title.

David: Yeah, you are the owner of the company.

Mike: I said… you know I apologize, I hate to do this but can I pay you more money for your property? I said, yeah that is the part I wanted to open with because we do need a little bit more time on the closing. He said I really don’t want to, I thought we were… he said but I guess that’s fair. So we agreed we were gonna up the purchase price for him 2500 dollars. So we paid him $2500 to hold the property for another week. Then we sent the amendments, got them both signed and we basically increased our sale price by 55000 and increase our purchase price by 2500. So again we are creating another win:win situation. It was win for the original seller, he is making another 2500 even though we only asked him to hold it another…

David: We are making 3000 right? Because it is 55000?

Mike: So he is making 2500… we are making another 3000 on the spread and… the end buyer is still getting the property despite they were not able to fulfill their contractual obligation to us. It creates a win:win:win. I guess the other point to mention is that it was supposed to be a cash deal, and then they changed it to hard money. Again, we are not upset about it, we want them to get the properties if they are able to close on it, and that is exactly kind of what we did. So guys one of the things in wholesaling, just be able to… roll with the punches. Lie if something comes up, don’t look at it like always like this is the end of the deal, the deal is not going to close; it is just an opportunity to re-evaluate the deal. Just look at each component of the deal as it… relates to that component. The fact the seller is getting hard money; that is not our problem; the seller has the problem that he can’t get funded in time to close.

David: So true.

Mike: So you have to remind them, hey I am happy to work with you, I understand you are getting hard money; but our contract says that you are a cash buyer and we were supposed to close at this point. We would love to work with you, but can we just re-negotiate a little bit. That’s what we did, again it is all…

David: Rolling with the punches. It all comes down to… just being able to be… have the ability to pivot. Sometimes you have to pivot for the worst, other times you can pivot for the better. In this scenario we were able to pivot, and we were able to make more money, we were able to help the seller still sell this deal… and the buyer was willing to pay a little more because it was his fault the hard money lender wasn’t lined up and… he was willing to pay a little bit more for it. So in this business you really have to roll with the punches. What we mean by that is… there is so many things that can happen that can throw a curve ball on the deal… but you can’t let those little things blow up and ruin the deal for you.

Mike: That’s the thing; it is almost every deal.

David: Absolutely.

Mike: Not every, some of them are super clean and easy but they are few and far between. There is title issues; there are all sorts of things that come up during a transaction that just feel like they are going to de-rail the whole process. But don’t like that be your mantra, just look at it as… well this is one of the things I have to do to wholesale this property; this is one of the things, or one of the challenges to overcome. Your job as a wholesaler is basically to solve problems. So… it is just one of the problems you have to figure out, one of the obstacles, one of the hoops you have to jump through…

David: Absolutely.

Mike: … to get the deal done.

David: You are right though, almost every deal has some sort of… hoop we have to jump through, but it’s okay because it is worth it to us. Often times if you are transparent about what’s going on; you can solve the problem fairly easy because… just by being transparent, letting people know both sides of what’s going on and… yeah just roll with the punches, guys.

Mike: Look at that one, an almost $60,000 profit. We are not going to let that deal fall apart, we will figure a way to do it and… the reason I said we would fund it and lend to the guys was because we would do that; if we had to we would figure out a way to get gap funding for a week. That would really have significant cost to us, but we would absolutely figure out a way to get it done.

David: Right. Awesome, Mike. Is there any other deals you can think of off the top of your head that we have had recently that… have had major setbacks like that? I knew we bought one recently over in [00:15:26.27 – inaudible]… that… we had, it had a major foundation issue and we had estimated the total rehab with the foundation being around 30 grand, I think we ended up spending 45. That is another perfect example of just rolling with the punches. We didn’t know; when you start ripping down walls and doing rehabs, you find things you don’t know, we weren’t just going to throw in the towel, we had to finish it.

Mike: Right. Again it was just one of those things so we made a smaller profit on that deal. We still did okay on it. It is part of the real estate investing game; you are going to learn one way or the other.

David: So true.

Mike: You are going to learn through experience or from a coach who has done it before. Even then, no one can see everything. You are always going to have unknowns in real estate investing, because now two properties are alike… I mean there are just so many variables.

David: Right.

Mike: Other challenges… title issues are one of the ones…

David: Don’t get me started on title issues.

Mike: That’s one of the challenges that I think you have to… it is hardest one to roll with because it is so…

David: Out of your hands.

Mike: Exactly, so out of your control that it is extremely difficult to…

David: We are closing on one tomorrow and the seller is bringing 30 grand to the table.

Mike: Jeez.

David: He owes 38,000 on the property, we offered him 8.

Mike: Oh my gosh.

David: He is bringing $30,000 to the table and we are going to buy it for 8 and… we are going to be selling it on… what’s tomorrow? Friday? We are going to be selling it next Wednesday for 14, so a small deal, nothing crazy.

Mike: It’s just that area though, right?

David: Title issues, man. Just that area. He knows that the property is not worth more than 8, so we offered him 8. Rolling with the punches guys, its definitely something we want you to be aware of, and just know that if you have a hiccup on a deal it is not the end of the world, don’t let the deal blow up. Often times… like Mike just explained earlier in this deal; often times if there is a hiccup we try to find the positive in it, we try to make it… how can this be an advantage to us? In this scenario we were… in Mike’s scenario we made an extra $3000 by making one phone call…

Mike: Two phone calls.

David: Two phone calls, one to the buyer saying, hey we need more money. One of the sellers saying we are going to pay you more money, we just didn’t give them all of it.

Mike: Quite frankly we probably could have gotten by without actually even giving the seller more money.

David: Right.

Mike: But I just… again I feel like it is the nice thing to do.

David: It is the nice thing to do; he has another property we are trying to wholesale for him so we didn’t want to burn a bridge either. Not he is like, okay these guys they buy, they close, they pay me more money than I was even asking…

Mike: More money than we agreed to, we unconvinced him so… here is a couple of extra bucks.

David: Right.

Mike: It is not always about the money, it’s about… doing something that is good, it’s the right thing to do.

David: Right. Those people that are typically the most successful in business are the ones that can solve the most problems, guys. Look at it that way too. So in real estate, in life, in business; if you have an issue or a problem that arises, don’t panic, don’t let it get the best if you; just take a deep breath and figure out, hey, how can I solve this? And more importantly how can I make this an advantage? Because often times it is an opportunity.

Mike: Exactly, it is creating value or solving problems. That is one of the biggest things… we hear a lot about entrepreneurship, we have another podcast and we spoke exclusively about that. We are always talking about entrepreneurship in general. One of the key things is that you are creating value. That is exactly what you are doing a wholesaler too. If you think about it that way you have to create value for your seller, and for your buyer. If you think about it that way; you are solving their problem, that’s how you are creating value, that’s where your value comes from. You are not just a middle man, you really have to create value for people, and that is where you are really going to start seeing yourself make some money and cash some checks.

David: That’s true.

Mike: We kind of talked about roll with the punches.

David: Roll with the punches, guys. Pivot! If you have to pivot it’s not a bad thing, it’s great.

Mike: Exactly and you may wholesale a couple and say, hey this isn’t what I like, I want to rehab.

David: Pivot, find out what you want to do and run with that. But at the end of the day don’t give up, be persistent. “Persistently take action” that is my favorite quote, but that’s not our quote, Mike what’s the quote? Let’s hear it.

Mike: “Rolling with the punches, if plan A didn’t work, alphabet has 25 more letters, stay cool”.

David: I love that quote, that’s a cool quote, man. I really like that.

Mike: Alright guys thank you so much for listening. Like we said please check out free wholesale course if you are looking to get started investing in real estate. Or if you are looking for deals exclusively in the St Louis market right now; check out Discountpropertyinvestor.com.

David: Awesome, thanks guys.

Thanks for Listening

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To learn more about Wholesaling visit: https://www.FreeWholesaleCourse.com

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