In this video I am talking about a wholesale deal that was purchased off an email that I received from a wholesaler. He was asking $115,000 for a 3 bed 2 bath house. I offered $105,000. The reason that my offer was low is because the property appraiser website had this property listed as a 2/2 (not a 3/2). The wholesaler had other offers, but ultimately went with my offer because they knew me, and they knew that I would close.
To my surprise, when I went to the house it was indeed a 3 bedroom 2 bathroom house (with no illegal additions). Purchasing this house for $105,000 was definitely a great deal. I closed on the house a week later.
What was incredible about this house is that it needed zero work, which is very rare when you are buying properties at a discount. It had new carpets, new paint and new baseboards. The kitchen cabinets were original but were in great condition. As a rental, I could have just put a “for rent” sign out and rented it. But I decided to flip it “as is” instead to my investor list.
I sold this house for $135,000 without doing a single thing to it. I listed the house on the MLS, and I also advertised the house to my wholesale deals email list. I ultimately sold the house to a cash investor that receives my email list.
There are some lessons to be learned in this. Firstly, that a house that I can flip for $135,000 could be emailed to me and that I could buy it for $105,000 and make a $30,000 gross profit.
Secondly, anyone receiving that email could have purchased that house. I am sure that email went out to thousands of other investors. Why did no one else buy the house? The answer is deceptively simple. Most people receiving those emails DID NOT KNOW WHAT THE HOUSE IS WORTH.
If you pick ONE target market and you focus on it, then you will know exactly what you can sell a house for in that target market. If you know what you should be buying houses at, and the cost per square foot you should be paying, and what you can sell the house for then you will instinctively recognize a deal when you see one. Even if it arrives in your email inbox.
So if you are a cash investor looking to purchase properties make sure you are getting emails from every wholesaler in your town. And make sure you focus on one market well, so that when a real deal comes up in that market you will recognize it and jump on it immediately.
At the end of the day, as a real estate investor wholesalers are a source of leads and deals just like any other source of leads or deals. If I buy properties from wholesalers, my cost or acquisition fee may be $5,000 or $10,000 that I pay the wholesaler. This is a hidden cost since I am really only looking at what I buy the property for, but it is still a cost. If I had acquired that house myself, and had it under contract myself, then I would not need to pay that wholesaler but I WOULD HAVE A MARKETING COST.
Every deal you acquire will have a cost to acquire it. We call that an acquisition cost. It can be as much as $5,000 when you are buying houses yourself, using your own marketing methods to market to motivated sellers.
Direct Mail, Facebook Ads, Google Pay Per Click, Text Marketing and Cold Calling all have a cost per lead and a cost per deal associated with them.
Even if you bid on properties yourself there is an acquisition cost (your time). When you begin to realize this, you realize that it is better to substitute money with time than time with money. There are only so many hours in a day, and you cannot bid on every property. But you can hire people to bid on properties for you. And if you do then you have an acquisition cost too (their salary).
At the end of the day make sure you understand that you can buy good deals from wholesalers. But you need to know exactly what you are looking for. We buy almost 50% of our deals from wholesalers and they are a great source of leads for us. We also purchase deals from direct mail (postcards), letters, Facebook Ads, Google Pay Per Click, Text Marketing, Cold Calling, Bird Dogs, Referrals, SEO, and realtors.
Every deal has an acquisition cost. Make sure you understand this. It may cost us $10 to $20 to get a lead from text marketing. Leads from direct mail and PPC cost us between $100 to $300.
How many leads do you need to close a deal? That part is up to you, but you should be able to get at least 20% appointments booked per lead. And you should be able to close at least 20% of those appointments. So if you have 100 leads that should be at least 20 appointments booked. And if you can close just 20% of those appointments then that would be 4 deals closed.
If 100 leads cost you $100 per lead then you would be spending $10,000 to get 4 houses under contract. If you flipped each of those 4 houses for a $15,000 profit then you would be making $60,000 on a $10,000 investment. Deduct from that your time (or the salary you are paying someone). The rest is your profit.