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Do’s and Don’ts of Wholesaling a Wholesale

Posted on August 1, 2015 by Michael Vazquez

Wholesalers send me deals daily but I have started to notice that many of these wholesalers are wholesaling another wholesaler’s property. Before proceeding, I want to be clear that I have no issue with this but there is a right way and a wrong way to go about it. Also, understand that if a buyer/investor receives the same property from multiple sellers he/she will contact the seller with the best price. Wouldn’t you? Keep in mind that you did nothing to acquire this property. You merely sent it out to a buyers list you put together, which with today’s technology takes only a few minutes. So what should you avoid and what should you do when wholesaling a wholesale?

Let’s list a few of the major DON’TS:

Don’t wholesale another wholesaler’s property without permission. It is best to ask and establish a long working relationship with that wholesaler/seller. Just imagine if you end up having a buyer for the property but the wholesaler/seller has sold it or maybe he/she is not interested in working with you. It is best to get all this out of the way first.
Don’t add on a ridiculous fee to the price if it is not justified. The last thing you want to do is be known as the wholesaler who markets deals with very little to no potential profit. What’s worse is if the property is being shopped by multiple wholesalers in the market area and your price is the highest.
Don’t waste time marketing another wholesaler’s “deal” until you have seen a contract. Many times a wholesaler will claim to have a deal under contract but in reality he/she is still just waiting for it to be executed. Pre-marking is fine but don’t spend too much time on it until you see a contract.
Don’t contact the original seller of the property. If you run across the seller at the property and want to know more about the condition of the property or the neighborhood that is fine. However, do not discuss price, closing dates, mention wholesaling, etc. These are items you discuss with the wholesaler/seller you are working with. The last thing you want to do is jeopardize another person’s contract or be accused of trying to go around the other wholesaler to contract the property yourself.

Following Up!

Posted on July 2, 2015 by Michael Vazquez

Anytime real estate investors get together the question immediately asked is, “How is your buying/contracting going?” What they are asking is do you have a good amount of leads coming in, where are those leads coming from and are those leads any good. Of course, mostly everyone says they are doing great. Personally, I like to “keep it real.” If leads are low I admit it because I know that they will eventually come in. Meanwhile, I continue working and following up with all the leads in the pipeline. The follow up is what keeps a real estate business, or any business, consistently profitable.

In real estate, you are not going to crush it week after week, month after month. Real estate fluctuates and what works one day may not work the next. The key is consistency. If zero seller leads are generated one month from mailers, it does not mean I stop sending letters, it just means mailers did not generate leads this month. The same can be said for internet marketing, bandit signs, networking, flyers, etc. As a real estate investor you must always market through as many avenues that provide the greatest returns. In some markets bandit signs may generate lead after lead while in other markets you get zero calls. I usually test out new marketing strategies for about six months. During those six months I keep records of the cost, leads coming in, appointments set, contracts signed, number of closings, and of course profit. This lets me know if the marketing is working or not. It also lets me know if the lack of closings is due to the marketing or the people receiving the leads. If people are clogging the deal pipeline it may mean they need more training. In other words, make the adjustments where they are needed to convert more leads. Marketing will always require tweaking and more tweaking just when you think it is “perfect.” While all this is helpful and profitable the number one cause of profit is in the FOLLOW UP. Read More→

Thick Skin in Real Estate

Posted on May 29, 2015 by Michael Vazquez

Many people get into real estate, a few succeed, and others decide real estate is not for them. There are many roles a person can take on in real estate but being an investor requires the thickest skin. An investor faces rejection daily, is essentially profiting from other’s misfortune, and depending on the level of the investor, can be risking thousands of dollars.

As an investor, rejection sometimes comes as a simple NO and other times it comes with plenty of four letter words. Why does this happen? Well, you are or should be attempting to negotiate a purchase price low enough to make a profit. At the same time you must make sure you can validate the offer and can explain it to the seller. When you just give a seller an offer that investors give, the seller is usually quick to say NO. Many sellers do not look at their properties from an investment stand point but are emotionally tied to the property. This causes them to take an investor’s offer as an insult. When the seller takes an offer as a huge insult, the seller may do a number of things from hanging up to lecturing you about how the offer was so insulting, to yelling. This is where negotiation skills come in to play. You must have thick enough skin to let all this go and, if given the opportunity, explain the reasoning behind the offer. I have seen newbies and veteran investors both lose it, get into an argument, and as a result lose the deal. I have always said, “Lose your composure, lose the deal.” Read More→

Wholetailing

Posted on April 30, 2015 by Michael Vazquez

In many markets, properties are receiving multiple offers within days of being listed. This includes retail listings, foreclosures, short sales, etc. As long as the list price is remotely reasonable the properties are going into highest and best. This is not an ideal situation for investors because it means they may need to pay a higher price to be competitive. This can also be true for unlisted properties because all buyers, including retail buyers, are looking everywhere for their next purchase.

A solution to this problem can be solved by using wholetailing. What is wholetailing? It is selling a home for a price above the wholesale price but below the market retail price, maybe even at the market retail price in some cases. Typically these properties need mostly cosmetic or smaller, less serious repairs and/or updating. For this reason the seller is not willing to sell it at a wholesale price. As an investor you can close on the property at a discount, but not as low as a wholesale, and rehab it relatively fast. Once the property is ready you can advertise it at a profitable price below market retail value and get it sold fast if priced right. Some properties may need nothing more than just a deep cleaning. The targeted buyers are investors that may be looking for a rental property with minimal to no repairs and/or owner occupant buyers that are looking for a deal and not afraid of doing some sweat equity. This allows the investors to rent the property immediately to begin cash flowing ASAP. Owner occupant buyers already save thousands buying a wholetail property but they can also increase their equity if they decide to update or remodel the home to the property’s full potential. All these situations create a win-win all around. Read More→

Subject-To?

Posted on April 3, 2015 by Michael Vazquez

Like most investors, I too send out yellow letters to distressed homeowners. Obviously, the intention is to find a property that can be acquired below market in order to make a profit. In most cases the properties that are contracted are either sold as a wholesale deal or are purchased to be renovated and sold. In a few instances the opportunity to contract a property subject-to presents itself but this situation is not usually what you expect it to be. Let me describe my most recent experience with a potential subject-to situation.

Most investors already know what a subject-to is but for those that do not let me give you a simple explanation. A subject-to is when a homeowner deeds the property to the buyer but the mortgage that the homeowner has remains in place. When the buyer is deeded the property he/she now owns the home “subject-to” the existing mortgage. In other words, the buyer will begin to make the mortgage payment or find a renter or new homeowner to do so in order for the buyer to one day own the home free and clear. Read More→

Problem Solvers

Posted on February 27, 2015 by Michael Vazquez

Over the years I have learned many sales techniques to get the deal done and closed. Although all those techniques have assisted in closing numerous transactions, they are not the reason I close so many deals. The number one contributing factor for my success and many other investors’ success is being the go to problem solver. Whether you are trying to get a property under contract or sell an investment property to an investor you must identify their problem and solve it.

Many investors and wholesalers approach a potential seller of a property and assume that the only thing that is going to matter in their conversation/negotiation is the price. This is a factor but it is usually not the defining factor. For instance, recently a property was under contract for nearly $20,000 below list price. Yes, this was a property on MLS. What was it that separated my offer from all the others? Experience! After having an extensive conversation with the listing agent, I discovered that the previous buyer backed out of the contract because the title was clouded. I asked about the issue and it turned out that it was an heirship issue with about 4-5 generations of siblings. After explaining how I have successfully closed many other transactions with this similar issue she decided it was in her client’s best interest to accept the offer. After I had an executed contract, I explained the process I had gone through in the past to get a similar situation closed. We used a title company that was accustomed to handling these types of transactions and we are now days from closing. While we have not yet closed on the property, I have now become this listing agent’s go to buyer for similar deals, as she has stated that she runs across this situation often. In addition, I explained to her from the beginning that as a buyer we are willing to wait as long as it takes to close. This was important because many buyers move on after only a month or two of waiting for a closing to happen. We are now at 3.5 months with 4 different extensions signed. As long as the value remains the same in the area we are sticking it out until it closes. Read More→

New Year… New Plan?

Posted on January 30, 2015 by Michael Vazquez

The great thing about being in real estate is that it always changes, keeps you interested and forces you to adapt to the ever changing market. At the same time, these exact things are what keeps many people from becoming real estate investors. Each year you should look back at the previous year’s performance and take note of what made you the most profit. Once the most profitable part of your business is identified, it is time to figure out if the market is going to permit that part of the business to perform the same for one more year.

Last year, 2014, was an amazing year for anyone in real estate. Agents, wholesaler, investors, bird dogs, etc. were all making a killing. Agents listed a home and it was immediately in “highest and best.” Wholesalers were selling properties as high as 90% LTV. Investors were able to sell any renovation project they listed even if the workmanship was not the best. Our workmanship surpassed most competitors and caused our homes to sell in single digit days on market. I refused to get involved in all the hype and stuck to my criteria. In the end, there were many very successful investors. My partners and I bought, fixed, and sold more properties this year than previous years. In 2015 we will continue to buy, fix and sell. Not because it worked in 2014 but because in December 2014 our housing inventory reached a record low 2.5 month supply. As long as our market housing inventory stays low, buying, fixing and selling should be a revenue stream in your real estate business. According to the National Association of Realtors, “the national inventory of single-family homes is 5.1 months of supply.” This inventory level still justifies flipping homes in most markets. Once the market you are in reaches a constant 6 month supply or higher you may want to start looking into holding/renting in the near future. Read More→

Should Investors Have a Real Estate License?

Posted on January 1, 2015 by Michael Vazquez

I have been asked by new and veteran investors if they should consider getting a real estate license. My response is usually, “Sure, why not?” I do not want to push them into it nor do I want to convince them not to do it. I simply want them to consider for themselves their own pros and cons of having a license. Personally, I like having my license and could not imagine being an investor without one.

Are there cons to having a license? Yes, but the cons are insignificant or temporary. The one con that most investors and real estate agents alike share is the cost of having a license. Just getting licensed is an investment. You need to take some classes and make a minimum score before given permission to take the actual exam to get licensed, which cost a few hundred dollars. Once you are licensed and depending in what state you are in you must pay a National Realtor Association fee, local Realtor fee, MLS fee and brokerage fees. In order to keep the license you must also pay to take continuing education courses. However, if you close enough properties they will more than pay for these fees. Another con you may have as an investor is having to work for a brokerage. Read More→

Appreciation?

Posted on November 28, 2014 by Michael Vazquez

As the real estate market shifts in different areas investors must adapt to the changes in both their buying and selling strategies. Many people, including myself, strongly believe that you make your money when you buy a property at the right price. Recently, due to lack of inventory and/or more competition, investors have begun to buy outside my personal comfort level. I see them beginning to buy/invest based on future appreciation. If the appreciation comes the profits will be great but if not then they remodeled a house for a new owner for pennies or nothing.

Just two years ago I was acquiring single family residential properties for 65% LTV, last year I was still picking up a good amount of investments at 70% LTV and today I am having to go as high as 75% LTV. I understand that some areas are hot and demand is high but going above that seems ridiculous for a flip. Buying at a high LTV to rent I can understand but that is a whole other topic. There are investors who have given criteria that they will buy at 90% LTV. These are seasoned investors that buy, fix, and sell homes regularly. I ran into one of these investors the other day and had the opportunity to ask how he is making a profit buying at 90% LTV. He turned to me and said, “Appreciation!” As soon as he said this I already knew his business model. I myself benefited from the recent appreciation he was referring to on a few deals I joint ventured on this year. Essentially, he is figuring out the average appreciation in the area the property is located in and estimating what this property will be worth when it is renovated. He then runs his numbers based on those future appreciated values. Thus, while I am using current values and purchasing at 75% LTV he is buying based on estimated appreciated values at 75% LTV. This makes his true LTV greater than 75% based on current values and he would out bid my offer. When I benefited from appreciated values I still bought based on the current value. When I listed the property and ran a new CMA I adjusted the list price up to the new values. This increase in value was a bonus and nice to have but I did not base my entire investment on this appreciation. In fact, I could have still listed the property at the original ARV, undersold all the other listings on the market, had a better product, and sold even faster. Read More→

Real Estate Agents and Investing

Posted on October 31, 2014 by Michael Vazquez

When I began looking into investing I assumed that I needed to be a real estate agent so I can learn how to buy and sell real estate. Thus I began taking real estate courses in 2005 and became a real estate agent. I learned that those classes only taught me the law but nothing about how to contract, buy and/or sell real estate. All this came from on the job experience and each transaction taught me something new because no two transactions are the same. For this reason you should be cautious when selecting a real estate agent.

Today, as a broker, I make it my goal to properly train my agents thoroughly. Too often my agents and I work with other real estate agents that have not been properly trained. In fact, many times, those agents have called us to ask how to do/handle certain parts of the transactions. It has happened so often recently that we had to figure out what we would and would not assist with due to liability. We determined if the answer to the question is a fact we would answer. If the response is an opinion or company based we request that they ask their broker. I believe that this has happened more and more as a result of 100% commission brokerages. Agents receive their license and start at a 100% commission brokerage where there is minimal to no training because they are paying 100% commissions. What you end up with is an inexperienced agent that will learn at the client’s expense. When investing in real estate this can be a blessing or a nightmare. Read More→

Leveraging Investor

Posted on October 1, 2014 by Michael Vazquez

As mentioned before, real estate investors wear numerous hats and play plenty of roles in their business. If you know me, I am a very hard worker and take my business very seriously. However, any time you see/meet me I am usually in a great mood and in good spirits. People ask me what I do and when I mention being a real estate investor and agent they ask how come I’m not all wound up. My reply is I have a great team behind me that assists in leveraging everything in my business. The more you leverage the better off you will be.

The biggest questions are: How can you risk all that money on a home? What if after you close there are more problems than you expected? What if you cannot sell it? As investors we learn to evaluate a potential real estate investment but you do not want to spend time evaluating deals you may not have a good chance of acquiring. To prevent wasting time I have a team of agents, wholesalers, and bird dogs that I invested time in training to evaluate a deal the same way I do. Therefore, they are out submitting offers on my behalf and only contact me when a seller agrees to consider a price I would like. At this point, I schedule a time to meet the seller at the home and make sure my contractor meets us there as well. I let the contractor who already knows what I expect to look at the home while I get to know the seller. Once the contractor has finished putting his numbers together I ask the seller to give up a minute to discuss what the contractor just evaluated. Before coming to the property, I run a CMA and know what the property can be worth fully renovated, the contractor just told me the cost of renovation, and know I can calculate my offer. I present the cost of renovations to the seller to justify my offer. If the seller agrees I am ready with a contract at that moment. At this time, I now have a property under contract and a bid and the time I personally invested was about 2-3 hours. Of course, the contractor may have over looked a small item or two and there may be a hidden issue discovered during demo but there is always a miscellaneous number built into the budget for these items. Although this is an investment and there are risks, investing in real estate is a very calculated risk and the investment is tied to something tangible. If it does not sell fast I can always drop the price. I may not make as much as expected but you can’t hit a home run on every project. Read More→

To Guru or Not to Guru

Posted on September 2, 2014 by Michael Vazquez

Even before investing in real estate or considering it, you may have heard radio advertisements announcing a national “guru’s” meeting coming to town, seen the latest no money no credit infomercial, been pitched on $25,000 real estate investment programs, and the list goes on. I have been invited to many meetings, courses, classes, groups, etc. and have learned plenty but I didn’t spend thousands to do so. I have learned that not all “gurus” are created equal. Here are a few tips to consider before attending another course or pitch meeting.

Does this “guru” still invest in real estate TODAY? If they do not invest in today’s market I more than likely will not spend any money on this person. It is OK to make an exception if the meeting is free to attend to see for yourself if the info is still relevant. I personally have been in the real estate investment business for nearly a decade and the market has constantly changed. What did work years ago does not work as well as it once did.
If the person does invest, do they invest in your market? It may be an informative meeting but may not be overly useful in your market. I would strongly suggest that you find a person at your local REIA that invests in your local market. Read More→