Wholesaling? Try Wholetaling!
When I started out as a real estate investor I was a total one-trick pony. My only possible exit strategy was to wholesale the property to a cash buyer. I wasn’t set up to flip, buy/hold, or wholetale because, well… I was broke. I didn’t have any of my own cash.
Finding My First Private Lender
My first private lender reached out to me after a post on Biggerpockets 3 or 4 years ago. The post went something like this: I’m a successful wholesaler who has done X amount of deals for a net profit of Y in the past Z months. I am looking to try wholetaling some houses to increase my profit margins. I’m looking for someone interested in funding my deals in exchange for an equity cut or interest rate on their cash.
Debt Vs. Equity Funding
Initially, I took on an equity funding partner. An equity lender shares in both the profits and losses based upon a predetermined split. The perk for a new investor is that you don’t have monthly payments and if the deal goes sideways you’re only on the hook for your %. The problem is that it ends up being WAY more expensive than just paying an interest rate.
Debt funding is exclusively what I do now. We offer an 8-9% return to our private lenders with a 1% point on short term deals to make it worth their while.
Turning $5,000 into $41,583
I don’t have a golden goose but thanks to my wonderful private lenders I now have multiple exit strategies (and LOTS of rentals lol). I got this property under contract and shot it out to my buyer’s list and the best offer I got would have me just $5,000. This was an A-Class SFR in Carmel Indiana (one of the best suburbs and often voted one of the best places in the US to live) and I knew I would kick myself if I took the “easy” five grand. I reached out to one of my lenders and asked if he had an interest in funding the deal. A week or so later we closed on the house, had it cleaned, and installed a new furnace. We had professional photos done and listed it on the MLS.
Initially, we listed the home at $279,999. This was pretty bold on our end because we were only into the house for 205k and it wasn’t updated at all. A few weeks in we got a cash offer for 269k. We accepted. They retraded to 265k and we accepted.
Our real net take-home profit for the company after paying realtors, my private lender back, and my staff was $41,583 in just 30 days. Y’all that’s more than double what I made a year at my day job before becoming an investor!
The Nitty Gritty
I’m not here to just share my success with you. I’m also here to help you replicate deals like this in your own market! Reading about my success and patting yourself on the back does nothing. Here are the exact steps, notes from my staff, and HOW we did this deal.
Lead Source: Direct Mail From Ballpoint Marketing (whom I own) I use the custom pieces. You can see them here: Click me!
The List: The seller was on a list of seniors with equity we pulled from List Source. My typical filter on a senior list is SFR, 60 years old+, and 35-100% equity. You can see a how-to on this list here:
Live Answering: The call was answered by Call Porter (whom I own) who has taken every seller call I’ve had for the past 3 years! Check em out!
Here are the initial notes from Call Porter pulled right out of my CRM (also a Call Porter product):
The roof was put on in 2011.
No updates have been done to the kitchen or baths.
2 car attached garage
She is wanting to relocate.
Wanting to sell asap
Thinking around 270k as asking price
appt booked June 14th @ 5pm
APPOINTMENT CHANGED to June 20th at 5pm because of illness.
Call Porter booked an appointment with my staff on the initial call based on my acquisition managers’ availability with a motivated seller on the initial call. I do want to highlight something here though. This seller was ASKING RETAIL when she called in. A lot of investors wouldn’t have even given this lead the time of day. We work our leads which is the ONLY reason we got this deal. If you’re expecting to show up to appointments with sellers where they have a pre-drafted contract at 50% of ARV and a warm glass of milk… This is not the industry for you. Shoot… Sales is not for you.
The seller initially wanted $275,000. After our appointment, we told her that she could probably get it on the MLS and to just list her house. She declined and insisted on getting a cash offer. We came in at $195,000. After a few back/forth conversations she dropped to 240, then to 210, and we ultimately ended up settling at $205,000.
If your only exit is wholesaling… you are leaving some serious cash on the table.
If you don’t have private money yet I get it! I recently had an Instagram follower hit me up to tell me that he used my methods to secure $1,000,000 in private money. You can find my Instagram here: https://www.instagram.com/ryancdossey/
Raising Private Money
You can find my training on what we do to raise private money embedded below:
*Note: This is how I have personally funded $8.8MM worth of Brrrr deals! I could easily put this content behind a paywall but I wanted to add some serious value to your business. It’s up to you to take the action. If you haven’t already be sure to snag a copy of my Free E-book Creating Consistent Cash Flow