 | Wholesaling
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(TRandle) Ok, we're going to get started as Steve has other commitments this evening. Steve, thanks very much for taking the time to be with us this evening. Ready to get started?
(SCook85) I'm ready
(TRandle) Can you please give us your definition of wholesaling?
(SCook85) Wholesaling is basically buying homes cheap and then selling them cheap to other investors.
(TRandle) What's the difference in your mind between bird dogging and wholesaling?
(SCook85) Bird dogging is basically where people who do not have the means to tie up a deal, in other words perform on the deal, should get started.
(SCook85) Bird Dogging is providing leads
(SCook85) Wholesaling is comitting to the deal and then reselling it to someone else
(SCook85) There is more money to be made as a wholesaler
(TRandle) How should I go about finding my end buyers? And should I do that first or after I have a contract signed up?
(SCook85) I don't know if there is a right order to do it in. I certainly would not advise anyone to turn down a good deal because they didn't already have the buyers lined up.
(SCook85) But Wholesaling sure is easy when you already have buyers in your back pocket
(SCook85) I find my buyers by running ads in the paper
(SCook85) By calling on ads in the paper
(SCook85) Not only the "I buy houses" but also the for sale ads
(SCook85) For sale ads are when you can find the "real" investors
(SCook85) Many "we buy" ads are beginners trying to get into the game
(SCook85) For sale ads are people already in the game. If someone has 3 homes for sale, you know they are a player
(TRandle) How do I determine which neighborhoods to target?
(SCook85) This is a matter of personal preference and the amount of volume that one wants to do.
(SCook85) If someone wants to do high volume flipping, they aren't going to get the numbers they want in really nice neighborhoods. They are going to have to get to the edge of the war zones
(SCook85) I have a neighborhood scale that I designed in my courses. 1 being the war zone 8 being mega wealthy
(SCook85) The most deals worth doing can be found in zone 3. If you want to work in middle class neighborhoods like zones 5 and 6
(SCook85) there are deals to be had, but they are much harder to come by.
(SCook85) That is if ugly homes are your specialty
(TRandle) How would I go about determining what to offer on a property?
(TRandle) (For those that came in late, we will open it up to Q&A in a while...)
(SCook85) This again is a matter of personal preference. It all comes down to how much money one wants to make on a property. Fortunately for us all, there is pretty much an industry standard, it1:09] (SCook85) After repair value X 70% less the cost of repairs = what a rehabber wants to pay. As a wholesaler you have to subtract your profit as well
(SCook85) This formula covers all of our costs and leaves a respectable profit for the rehabber
(TRandle) And that percentage formula works on the lower end houses you described as well as the middle or upper houses?
(SCook85) No it doesn't necessarily work on lower end homes. I usually won't use that formula on homes that retail for less then $75 - $80k. The profit margin becomes to small. On lower end homes I 1:11] (SCook85) After Repair Value less $25,000 less cost of repairs = rehabbers offer. An example would1:11] (SCook85) If a home retailed for $60,000 and needed $15k in work I would 1:12] (SCook85) $60,000 less $25,000 Less $15,000 = $20,000
(SCook85) My offer would be the $20k or less
(TRandle) What have you found are some of the best ways to locate deals as a wholesaler?
(SCook85) My favorite has always been the MLS folowed by HUD
(SCook85) When I first got started in investing, dealing with realtors was tabu
(SCook85) Now it seems everyone wants to deal with realtors
(SCook85) I'll be the first to admit that there are still many deals to get, but there is much more competition
(SCook85) For those who can't come in really strong with an offer, they are better of pursuing FSBO's
(SCook85) It's hard to compete with guys like me who can write my entire offer as my earnest money check
(SCook85) But there are still deals to be had. My students are buying deals all the time. I bought 5 last month when everyone says that the MLS has dried up. I don't see where.
(TRandle) How can a new investor get an accurate feel for comps and repairs?
(SCook85) It takes time for comps- you have to spend time in the neighborhoods, and look at the comps, drive the neighborhoods, check for trends, etc...
(SCook85) It really takes a lot of time. I see so many beginners who are not willing to put this time in. They want some magic formula or for someone else to do it for them. That is the kiss of death. No one is going to look out for your best interest the way you will. Everyone MUST do their own due diligence, or they are eventually going to get bit. I'm speaking from experience.
(SCook85) As far as repairs go, for some this is easy because they have experience in the field. I guessed when I first got started. It doesn't take long before you become comfortable with it, but havind done some rehabs certainly helps.
(SCook85) For those with no experience, I'd recommend having a contractor bid a BIG job for you, and have them itemize the bid so that you can use it as a guide in the future.
(TRandle) My last question would be who I need on my wholesaling team and how do I find them?
(SCook85) I'll give these one at a time
(SCook85) Not in any order of importance
(SCook85) My real estate agent is always very important for me. They notify me of deals and make all of my offers. My agent keeps me abreast when I'm to busy to do so myself.
(SCook85) My hard mone lenders allow me to make buyers of people who normally couldn't buy my properties. Many beginners want to get into the business but don't know how to do a deal. Of all the procrastinators out there, if someone would just show them how to do their first deal they would no longer be a procrastinator.
(SCook85) I've taken many procrastinators and walked them through their first deal. The money is the hang up for them. If I can lead them to the money, they will buy my houses
(SCook85) Hard money lenders are a big plus
(SCook85) And then your title company/attorney. This person needs to be a deal maker and not a deal breaker. They can help hold deals together that most people would let go. An experienced "investors" attorney is worth their weight in gold.
(TRandle) Ok, I'm going to open it up for Q & A. Please show Steve the courtesy of allowing him to answer a question before another one is asked. Thanks.
(Dee-Texas) Hey Everyone......
(SCook85) Hello Dee, good to see you here
(Dee-Texas) I just had to hear you in person it;s been too long
(SCook85) I'm still waiting for someone to book me in TX so I can come see all of my friends
(oya) I have your book, it is well written. When dealing with a realtor, what am asking them to look for.
(SCook85) Hint, hint, Tim
(SCook85) oya,
(Dee-Texas) Hey, that can be arranged.........Tim?
(TRandle) it's in the works, my friend, but I'm slow...
(oya) yes
(Dee-Texas) Has there been a question yet?
(SCook85) you want them to give you everything. You want to target fixer uppers, vacant homes, estate sales, etc... but you don't want the agent to do that.
(mikePA) Hi Steve, should a list of repairs be submitted with the offer....when buying junkers?
(SCook85) You go through all the listings and decide what is a deal or not
(SCook85) You will get educated by going through all the listings
(SCook85) Mike, I have never done it. Perhaps in an instance where the seller is being totally unreasonable you may want to try it
(Dee-Texas) do you like to work with just one realtor, or do you work with the listing broker?
(mikePA) i suppose they would already know it needs work....thanks
(SCook85) I work with one realtor. There are advantages to working with listing brokers like they get both sides of the commission if you end up buying so they work harder for you.
(judy) In your opinion, is it an advantage to have your RE license?
(SCook85) Mike, often the seller is not aware of how much work the home really needs
(SCook85) Judy, it can be an advantage. Access to the MLS and ability to use your commission toward your deal are big pluses. The reasons people have against having your license have more to do with ethics. If you operate a clean business, like everyone should, you have nothing to worry about.
(shappee) What HML's do you recomend to new investors?
(oya) So, would I ask them to give me a list of properties in a price range? date?
(jaba) It was said earlier that MLS has not dried up. What would I look for myself if I had access to MLS?
(SCook85) Shappee, HML's are typically wealthy individuals. They are not institutional people who lend nationwide. You need to find local lenders in your area, people you can call up and talk to them, call them by their first name.
(SCook85) oya, price range, area, then you take it from there
(SCook85) Jaba, first look at everything. Don't try to narrow things down. But look for signs of motivation like "bank owned", "vacant", needs work, a low list price, days on market, estate sale, etc...
(JDave) Steve do you ever run ads to find deals in your area?
(judy) what do you think is an effective way to check for "trends" in an area?
(Dee-Texas) after you offer on a property and it's accepted........using your formula.......my formula here in Graham has to be changed a little because we don't have the price range you do. Do you always want to filp or do you still do rehab? I think I read that you don't like selling on L/O's anymore. So quick cash is better?
(SCook85) JDave, I don't run ads any more. I have used them, and they have worked. But you don't need to use the MLS, run ads, use signs, send postcards, buy billbaords, etc... when you are trying to slow down. You only need to use all of them if it is your goal to dominate. Any of them used right can produce enough deals.
(JDave) thaks steve
(SCook85) judy, you learn trends by staying on top of the area. Studying it over time. you can't see trends right away unless you study years or at least many months of comps. You can also check for changes in the neighborhood.
(SCook85) Dee, quick cash is always good
(rpgoerlich) you mentioned there's more money to be made in wholesaling, Was this due to more deals, less money tied up for longer periods ?
(SCook85) I like rehabbing, but Wholesaling is always where my heart is. I did two wholesale deals in the last ten days that netted me around $40k between the two. That just isn't so bad when you consider I can make that with rehabs that take months
(shappee) How do you recomend locating and "pitching" to private individuals to be an HML for you?
(judy) Which was the most effective method you ever used yourself to find sellers and bring in deals?
(SCook85) There is a good bit of money to be made in wholesaling if you do volume. You certainly can't do the volume of rehabs that you can do of wholesale deals. With rehabbing we are limited by our resources. With wholesaling, our only limit is our time. When you get on a roll you can crank out some wholesale deals
(Dee-Texas) steve are you wholesaleing to contractors mostly or who?
(SCook85) Shappee, I don't believe in that unless the opportunity just presents itself. I've never been one to reinvent the wheel. Why try to talk someone into it, when there are others who are ready, willing and able.
(SCook85) Judy, the MLS has been my most successful.
(oya) Steve, I am having problems locating the owners of vacant properties. How do you locate the owner?
(SCook85) Dee, some contractors, but not most
(SCook85) oya, again I don't go out of my way. If it isn't easy I don't bother. The MLS is easy. If I really want to know, I go into the tax records, get the last mailing address, send something and hope it gets to them. Otherwise I go after those who are making it known that they have a home for sale.
(SCook85) Did I mention that I'm lazy?
(judy) What precentage of your offers would you say produced a deal, offers you made based on MLS?
(oya) What is a good price range to ask the realtor? I am in Chicago
(SCook85) judy, a very low percent. That increased to a higer percent, something like 15-20%. But that is back down now to about 5%.
(Fletcher) Steve, at what point did you decide to branch off into being a teacher, and not just an investor?
(judy) How many offers on average would you say you make or made a week?
(SCook85) oya, I don't know your market, but you should probably pursue homes that are below what the local average is. For instance. The average home price in the Baltimore area is about $180-190k, I buy homes that retail in the $100-160k areas
(oya) thanks
(SCook85) When the emails and the phone calls started flooding my time. I decided that I would put everyones questions into one place figuring that it would save me time. When I wrote Wholesaling for Quick Cash, it didn't save me time. It created more calls and emails.
(SCook85) Judy, I used to average about 20 or so a week
(Tim_Cleveland) Steve, how has the recent FHA rule changes affected your business, the availability of deals, profit requirements and availability of willing rehabbers, holding time of your rehabs etc? Is it much ado about nothing? Is it to early to tell?
(jaba) 01Shappees trying to ask so I'll just ask about HML's can you help in that area for south Texas with a name or is tht not cool?
(SCook85) Tim, those rules are now written. We've been playing by them for years now, with the exception of the fact that there are actual guidelines as to the amount of time between puchase and sale that have to be met. The 90 day requirements shouldn't be a problem for anyone really doing rehabs
(judy) Do you usually make your offers site unseen or do you usually view the properties first.
(SCook85) I'm in Baltimore, with the exception of a national lender name Ready Mortgage in your area, I don't stay on top of HML's outside of my area. Bob Beckman of Rehab Funding may lend in TX but I don't know.
(TRandle) Jaba, there's a list of HML's on the site and a few specifically for Texas
(jaba) ok thanks Randle I'll look for it!
(SCook85) Judy, it depends. When rehabbing and dealing with areas where homes are not all alike, I'll look at them. And the better a home is priced, the more inclined I am to get in my car and go look at it. If a home is priced to high, or in an area where all the homes are the same and I know the typical rehab costs, I may make them site unseen.
(rpgoerlich) with wholesale realestate acquired, whats been the relationship between your holding time and profit margin ?
(judy) Do you use a trust or a company with limited liablity on your contracts to buy?
(SCook85) I don't quite understand your question
(SCook85) Judy it depends upon what I'm doing with my homes.
(SCook85) If I'm rehabbing I use my C corp
(SCook85) If I'm wholesaling and my contract is assignable, I'll use my C
(rpgoerlich) Sorry , have you found that not being able to sell it wholesale dips into the profit margin
(jaba) 01why not a S Corp?
(SCook85) If I'm wholesaling and my contract is not assignable, I'll create and LLC so that I can assign the LLC, and if I'm holding I'll acquire with my LLC
(judy) How quickly do you look at the property, do you make it a rule to see them and tie the deal the same day?
(jaba) 01Got it!
(judy) for wholesaling, you use LLC? i am not sure what C is, sorry
(SCook85) Usually if I can't sell wholesale I may have paid a little more for the home then I should have. However if I rehab it, there is still room left for a profit. I'm never that far off.
(rpgoerlich) thx
(SCook85) Judy, if it's worth going after, I'll stop most everything to see the home and wrap it up
(SCook85) Judy C corp. Read the article on my web site about getting around the "non-assignability" clause and you'll see why I use an LLC
(judy) I meant if it is assignable.. you said above if it is assignable you use your "C".. i am not sure what that is..
(SCook85) My C corp
(TRandle) Speaking of which, Steve, I know you need to leave soon. Can you please give these good folks your web site and email so they can contact you after this?
(SCook85) My web site is www.flippinghomes.com and my email address is scook85@flippinghomes.com
(Dee-Texas) Thanks Steve.......
(SCook85) I wanted to offer a discount on my products to all who are here and have authorized Tim to pass it along. Tim how do you want to notify everyone of the discounts?
(Dee-Texas) Steve.........when is your bootcamp?
(judy) Thanks very much!!!
(SCook85) Dee, you are very welcome
(RGC) Thanks for your talk Steve
(shappee) Can we contact you with questions about deals in the future?
(TRandle) Steve, I can post the links separately. Do you want to describe the specials or do you want me to?
(SCook85) Dee, it is coming up in 2 weeks. I'm really excited about it. It is going to be awesome. Many of my students from around the country have signed up this time
(jaba) 01look forward to talking to you in the future , Thanks Steve
(mattc) 01Thanks Steve. I will be getting your video seminar in the mail soon - and look forward to it. Nice chat tonite.
(SCook85) Shappee, my newsgroup is always available. I do my best to answer all questions if possible
(rpgoerlich) appreciate your time Steve
(shappee) Thanks for your time, Steve.
(Strongwills) Thanks Steve for your time!
(bwaters) Steve I will be at your Boot Camp and am sooooooo Excited to be coming
(SCook85) Tim you can describe the specials, I'll try to answer a couple more questions. I have 7 more minutes
(JDave) thanks Steve and Tim for all this great info!
(SCook85) I'm excited about seeing everyone. It's going be great to see those who I chat with all the time but never see
(Fletcher) And get to TX soon ;-)
(SCook85) The specials are only available through Tim, not through me so don't ask. It's not that I don't want to, but this is Tim who was kind enough to host this tonight. Thanks Tim!
(TRandle) And Steve's new workshop videos are available here....
(shappee) Do you use "official" state forms or do you use your own?
(jaba) 01this is my first time and i enjoyed it!
(Tim_Cleveland) Steve, how did your first pre-quallify trully qualified investors/rehabbers with cash toclose, seems like mostly bottom dwellers here in Cleve unless I am looking in the wrong places
(SCook85) Shappe, most of the time the state contracts. When using FSBO's I just print one off of my computer
(TRandle) Steve, I just wanted to say thanks again for taking the time out of your schedule to be with us. And thanks to everyone who showed up to make it a great event.
(SCook85) Tim, the first guy who I brought my first 7 deals to was a cash buyer. He was advertising 7-10 homes for sale at any given time. He actually borrowed hard money or had lines of credit, but he was real, no doubt about it.
(Tim_Cleveland) so you pre-quallified him essentially bythe number of places he was selling at the time?
(TRandle) I'll also be bowing out soon as well, but you're welcome to hang out as long as you like.
(rejobber) Thanks Tim and Steve!
(Tim_Cleveland) okay thanks
(judy) Thank you !
(JDave) Thanks again Tim and Steve!
(martin1g) Tim and Steve, thanks a ton.
(SCook85) He was undoubtedly real, nothing more to do when you see he currently has 10 houses for sale. Today I'll ask for HUGE deposits, or to see proof that they have the money if I'm not comfortable
(porta7667) Thanks Steve
(jaba) Good Night All!
(RGC) anyone here in the DFW area?
(SCook85) Thanks all, good night and Blessed Investing
(martin1g) Tim, do you know when the archive for this chat will be available?
(TRandle) Take care, Steve
(TRandle) Take care, folks, and thanks again for joining in. I appreciate it. Night....
(RGC) night Tim
(martin1g) Tim, thank you. appreciate you doing this very much. |
 | Steve Cook |  |
Since 1998 Steve Cook has flipped many hundreds of houses as an active Baltimore-area real estate investor. Steve's unique specialty is the "flipping homes 1-2 punch", a proven system of real estate investing that powerfully combines wholesaling and rehabbing houses. Steve Cook is dedicated to helping others succeed through understanding and aggressively applying his time-tested, step-by-step approach to flipping real estate.
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