The Science of Flipping - Episode 33: ATTN Wholesalers!!!! Don't pass on $50k | Real Estate Investing Podcast

Episode Date: April 25, 2014

document.addEventListener("DOMContentLoaded", function () { podlovePlayer("#player-5eb5ab3217354", "https://thescienceofflipping.com/wp-json/podlove-web-player/shortcode/post/505", "https://thescienceofflipping.com/wp-json/podlove-web-player/shortcode/config/default/theme/default"); }); <p> document.addEventListener("DOMContentLoaded", function () { podlovePlayer("#player-5eb5ab32173ab", {"title":"Real Estate Investing Podcast u2013 Episode 33: ATTN Wholesalers!!!! Don't pass on $50k","subtitle":null,"summary":null,"duration":"","poster":null,"chapters":"","transcripts":"","audio":[{"url":"http://thescienceofflipping.com/wp-content/uploads/2014/04/Podcast-Episode-33-Wholesalers.mp3","mimeType":"audio/mpeg","title":"AUDIO/MPEG","size":0}]}, "https://thescienceofflipping.com/wp-json/podlove-web-player/shortcode/config/default/theme/default"); }); <img alt="itunes-justin-colby" src="https://thescienceofflipping.com/wp-content/uploads/2013/09/itunes-justin-colby-150x150.png" width="150" height="150" /></p> Justin gets the attention of wholesalers and new investors looking to start out by wholesaling. You can make $50k four times a year and Justin reviews how to do that.  Take your wholesaling business to the next level and increase you income by $200k a year.

Welcome to the Science of Flipping Podcast. I'm your host, Justin Colby. Welcome, welcome, welcome everybody back to the Science of Flipping Podcast. I am your host, Justin Colby. We are on episode 33. It is a beautiful day here in Scottsdale, Arizona. I'm happy to be back doing a podcast. I love giving you all of the content and information that you can handle. Again, I'm your host, Justin Colby. If this is the first time visiting the podcast, I highly urge you to get over to our website, thescienceofflipping.com to download your free ebook. This is the ebook that, in my opinion, and a lot of other investors' opinions, is the ebook that we all wish we had when we first started. It is the 15 most costly mistakes a

real estate investor can make in today's market. Get over to the website. It is free. It's free content just like this podcast and download your free e-book, the 15 most costly mistakes a real estate investor can make in this market. I've had a lot of emails come to me and my staff about possibly consulting with me or me coaching individuals. If that is something you are interested in, you can send us an email at info at the science of flipping.com or even better yet, get over to the website and there is a coaching tab that you can click and fill out some information for us. That's the easiest way for us to help the individuals looking for a little bit more

coaching in their business. Today, guys, let's get straight to it. It is a podcast that I want to reach out to all the wholesalers out there who are either currently wholesaling or are about to start their business in wholesaling. And I love wholesaling myself because it brings in a consistent stream of income. But as a fix and flipper, our main focus in business is fix and flipping. And I just want to draw attention to all you wholesalers out there on how to become a fix and flipper and make more money without the headache of being a wholesaler. Now, understand guys, we run a very successful wholesale division of our company however our main business model is fix

and flipping so I want to spend this time speaking to you about the benefits and why people usually choose going into wholesale again this is for the people who are currently wholesaling or looking to get started wholesaling and why I feel that you can be a fix and flipper and make the same amount if not more income with no money and no credit. Now, that is usually why people become wholesalers, right? The appeal of wholesaling is you don't have much money at all, or you don't have credit to go get a loan to get your money, so you're unable to buy a home, rehab a home, and put it back on the market. Well, that's fine. And I love wholesaling. I

think there is a tremendous value in it. And like I said, we have a entire wholesale department of our business that only focuses on the leads that we bring in through direct mail marketing and other sources of lead generation. And the entire intent there is to fund our fix and flip business full of deals that we can buy ourselves and rehab and put to market. Now, why do we like focusing on fix and flipping is because the profit margins are larger than your wholesale deals. I have a lot of good friends, two very specifically here, that are also here in Phoenix, Arizona. And their main business models is wholesaling. And they're kind of reversed than us, right?

They do 80% to 90% of their business wholesaling, and they'll fix and flip a very small portion of their business. We're vice versa. We do 80% to 90% fix and flipping, and we have a department, you know, 10% to 20% is wholesaling. So I understand the appeal of wholesaling, and I understand it so well. We have a division of our business that does 10 10 to 20% of our entire net profit, net profit, not gross, is within wholesaling. And the beautiful part about wholesaling is you

don't need money or credit. So that's great. But wholesaling, you know, and as my friends would argue, you know, you can make three,10,000, $15,000 per wholesale. Sometimes even $20,000 or more if you get a great, incredible deal. And that's great. This is why we also wholesale. However, $3,000 or $5,000 or maybe even $10,000 is only sometimes not even half of the amount of money we can make on a traditional fix and flip. And I'm not talking big old 5,000 square foot homes in Arcadia, which is a very nice

neighborhood here in Phoenix, but your traditional $150,000 home to flip, we oftentimes can net $25,000, $30,000 on that. Now, what I want to do is review some numbers with you. I know I started off on a bang already this podcast, and it's just because I'm excited. It's been an incredible day. We're closing a couple wholesale deals, actually. Things are just booming here in Phoenix, right? So the real estate market is moving. Now, let's just run some quick numbers for you because it is very possible to start flipping $300,000 homes here in Phoenix and make profits north of $50,000 per flip. Now, if you're going to start focusing on some of the bigger flips, you can very easily make bigger returns. So why would I want to go out and create a wholesale

business, which again, I'm telling you is,000 a year. That's four homes netting $50,000 in profit. And I can do that four times a year and make $200,000 a year. Now, for some of you out there, you're listening and you're saying, yeah, it's exactly what I do. I make a quarter million dollars a year flipping four or five homes a year, and it's great. And others of you out there are thinking, okay, I'm listening and I'm just trying to get my business down. I want to hear the systems that you implement and why you do certain things and the organization you have for it and all of that. So what I want to do today is review flipping versus wholesaling and why, in my opinion,

though wholesaling is a beautiful business model, if I can go have four or five flips a year rather than working on 10, 20 to 50 wholesale deals a year and make the same amount of money, I'd rather do that. I would rather flip four or five homes. Now, so let's break down some of the numbers here. Let's say you are netting $5,000 per wholesale deal, which there are many wholesalers who net more than $5,000. They will net $10,000. They will net $15,000. I know wholesalers that net $20,000 on wholesale deals. But let's say your probably average wholesale deals a year do you have to do to net $200,000 in net income? A lot. A lot. I'm actually looking at my calculator right now and I'm saying 200,000 divided by 5,000, you have to do 40 wholesale deals a year.

God, I wish my math was better. It's just not that good. Sorry, that was probably really easy math, but 40 wholesale deals a year to make $200,000. Now, what I'm trying to say here is why do 40 deals a year babysit those deals, deal with title companies, deals with sellers, deal with buyers, put it all together, deal with the paperwork, when I can show you a way to do four or five flips a year and make the same money without

the same headache? Why wouldn't you want to do only four or five deals? I have a mentor of mine. He's a friend as well, but he has a lot of experience in business. He's already retired three times from the corporate world. Why he keeps going back, I don't know, but money's not an issue for him. He's set up for life. But he keeps telling me, Justin, why do you do so many deals every year? Why don't you pick the bigger, better deals and make the same amount of money? Less brain damage, he tells me, Justin. Why are you doing so many? Why are you flipping 50 homes a year? That's crazy. Go after the bigger, better deals and not have to have so much brain damage in it. So when someone has as much success as he has, I listen. I don't say a whole lot. I sit

there and I want to hear what he has to say. And that's what I'm providing back to you guys here. For those of you that are currently wholesaling and crushing it, you know what I'm talking about. You know the brain damage that goes into dealing with 20, 30, 40, 50, 60 wholesale deals in a year. Or more. You know what it's like dealing with the sellers and the buyers and the contracts and the title companies and putting all that together on each and every deal.

There's a lot of minutia. So one of the main arguments that some students or even listeners have brought to my attention is yeah, but Justin, I don't have any money to buy those homes. I don't have any money to rehab those homes. I don't have any money to rehab those homes. I don't have any credit to get a loan. I'm here to tell you that's not a problem. That's not a problem. You're going to do one of two things in life. You're going to spend time or you're going to spend money. So if you don't have the money, put in the time. Spend the time. And the suggestions I'm going to give you right now,

the same way we get deals in our business, is using time, especially at the beginning. So if you're new to this, and this is, again, the first time into this podcast or the first time you're hearing some education within real estate investing, there are ways for you to find deals that you don't need to go out there and spend a ton of money on marketing. I, myself, we send out 20,000 direct mail pieces a month. We spend a lot of money in marketing, but it's because we've gotten our business to where we can do that. I don't suggest you do that, especially if you're just starting. If you are just starting or you are a wholesaler and you don't have a huge marketing budget, here are some three ways that you can get deals for free. That's the key. For free. Hudhomestore.com.

Online, you can go bid on Hud Homes and you don't have to pay a cent. The MLS. Every single day, you can have realtors make offers for you on their own listings or represent you on someone else's listing and you can get deals or other wholesalers that have spent the money the same way I spend the money. They're doing 20, 30, 40, 50,000 mailers a month and they're getting the deals and they're marking them up 3, 5, 10, 15 grand and delivering you the deals. And if they make sense, that's how you get them. Or you have the courthouse steps, the auctions that you can go get a deal for free.

And so those are four ways you can go today, right this very moment and go get deals for free. You do not need to spend money marketing and you can find a deal. Now, the question, Justin, Justin, I don't have money to buy the home once I get the home. What if I get a great deal off the MLS or off a HUD home store or at the auction? I have no money. Okay, well, let me tell you how to get some money. And if you listen to past podcasts, I even have a podcast with one of our top lenders that I interview our top lender, Josh, who's been funding millions of dollars worth of deals for us for years. And I interview him and

I teach you through different podcasts how to raise money, and so I'm not going to go through all of that today. That's for other podcasts. That's, you know, go through all of the podcasts. We're on, like I said, episode 33, so I can tell you how to raise money and how to structure it. But listen, the easy thing here is find someone who has money, friend, family, or in a network, and say, I have a great deal here. Are you willing to partner with me on this? I'll give you a percentage of the profit if you put up the money. Now, I wouldn't suggest starting at 50-50. That is not what I am suggesting.

Maybe start at, it looks like this is going to make us $60,000. So I'll give you 10 or 15% of the profit. Well, on 10% of a $60,000 day is six grand. 15 would be nine grand. Depending upon your purchase price, that's a heck of a return on your money. If you're buying a home at $200,000, that's a heck of a return on your money. If you're buying a home at $200,000, that's a heck of a return on your money. And they brought all the money and you're running the deal.

You found the deal, you run the deal, and they bring all the money. Now, wouldn't you love to give someone 15, one five, percent of the profit, which is nine grand on a $60,000 profit, you walk away with $51,000 in your pocket? Wouldn't you love to do that four times a year rather than do five wholesale deals a month and deal with the sellers and the buyers and the contracts and the title companies? Wouldn't you rather do four or five of those a year and just go find the person that has money

and say, I'm gonna do an equity deal with you. I'll give you a percentage of profit. No interest rates, no points. Now, I want you to start at 10% or 15%. And if someone laughs at you or says, there's no way I would ever do this for less than 50%, well, everything's a negotiation, isn't it? And if someone thinks you're really ridiculous,

then just move on to the next. There's someone out there that will fund your deal for a percentage of the profit. So start at 10% or 15% if they say, oh, I need 50%. Well, say, listen, I understand you want 50%, but I'm going to run the whole deal. What are you going to do besides bring the money? Are you going to do anything? No, no, no. I'm just going to bring the money. I don't want to do anything else. I don't have time. Okay, well, listen. So with that said, you would probably understand it's probably not fair for you to get half of the profit if I'm doing all the work, right? So let's start negotiating here.

What do you think about 20%? Oh, you know, listen, I want 50%. Okay, listen, how about 25%? 25%, I'm showing you the numbers here. We're supposed to make $60,000. How about 25%? Well, they may or may not take it, but the point being is,

you know, 25% of $60,000 is 15 grand. If they invested $200,000 and they make 15 grand, their rate of return on their money is ridiculous. That's a great return on their money. And you can do that in four months, three or four months. So listen, at the end of the day, someone is going to be out there that funds this deal.

Now, also, I'm telling you, I don't want you to go to 50-50, but if someone just, that's the only way for you to get the deal done, guys, take the deal. Don't walk away from the deal. It drives me bananas when people say, oh, I'm so mad. I'm giving away half the profits and, this is horrible. And then I ask, okay, well, did you have any other options? No, he's the only money lender I have. Well, you're at least getting $30,000 from a $60,000 deal. Why would you ever be upset at that? You invested none of your own money. It's all someone else's money. And you made $30,000. You do that four or five times a year, you're making $120,000 to $150,000 a year. That is nothing to shake a stick at, especially

for you that are out there that are just getting your business going or maybe even have a quarter million dollar a year wholesale business. I know you're out there, I know you're listening to me. Well, why not go do four or five of these bigger flips and double your income? Now you have a half a million dollar a year real estate investing business. Why wouldn't you go do that? Listen to me, guys. Go get someone else's money, give them an equity split of the profits, and go make $30,000, $40,000, $50,000, $60,000, $70,000 profits on these flips. Why deal with the brain damage of three, four, five, six, seven wholesale deals a month to net your $250,000 a year, $300,000 a year? I'll take four or five deals all day long over doing that many deals. Bigger, better deals is the way to go, guys. I'm telling you now. I have all the respect in the world for wholesalers.

Some of my closest friends in real estate and in life are incredible wholesalers that make strong six figures, if not seven figures in wholesaling. But man, I'm telling you the stress and the minutia and the contracts and, oh, guys, listen to me here. Listen to me. Pull away four or five deals a year that have good fat in them and fix and flip them. You will love that you did that. All right, guys, that's all I got today. This is for all the wholesalers out there, potential wholesalers, people who say they have no money. You can do this. I promise you that. If you want to learn more, the Science of Flipping Academy will be launching soon. I'm very excited. TheScienceOfFlippingAcademy.com. Also, you can go over to TheScienceOfFlipping.com and hit the

coaching tab or email me at info at The Science of Flipping if you want to learn more. I'm happy to answer any of your questions. I've been your host, Justin Colby, for The Science of Flipping Podcast, guys. I'm out. Peace.