Wholesale Everything: The Intermediate How to Guide 201

Wholesale Everything: The Intermediate How to Guide 201 is an expansion to "Guide To Wholesaling Real Estate 101"

In Wholesale Everything: The Intermediate How to Guide 201 we will dig deeper into:

What is Wholesaling?

In Wholesale Everything: The Intermediate How to Guide 201, we expand on our previous guide. In Guide To Wholesaling Real Estate 101, we covered

THE DIFFICULTIES WITH WHOLESALING

In case you haven't noticed by now, trying to wholesale a deal is not as easy as you thought. If you want to do it right, make money, and really learn real estate, then you will have to put in a lot of work.

You can go full-time as a wholesaler. Understand that it’s very likely that you do NOT get a deal in your first 6 months.

So, you must have enough money put away to take care of your bills for at least a year.

Why a year?

Say you start working really hard by implementing the techniques we are sharing with you. But, it’s been a couple months and you finally get to wholesale a deal.

Say that deal makes you $5,000.

Now, what are you going to do with the money?

  1. Will you spend it on bills?
  2. Payoff bad debt?
  3. Go on vacation?
  4. Go shopping?
  5. Reinvest it so your next deal takes half the time to come to you?

While options 1-4 may seem very appealing. You want to look at this as a business. If you start pulling every dime your business generates from day one it will never grow.

The issue is, people make $3K when they wholesale a deal and immediately go on vacation! Only to come back and realize they’re broke again and have to start back from ZERO.

By reinvesting it you start to cut down the amount of legwork you put in to generate your deals. It won't be by a large amount at first but it will definitely start compounding more and more. Best yet, your business starts to grow.

Dealing with being overwhelmed

Because this business requires personal accountability and responsibility it can leave you feeling OVERWHELMED.

So, why would you feel overwhelmed?

Well, back when we started investing in real estate there really wasn’t too much competition for deals. So you didn’t need to get too creative with trying to generate a deal.

But now, there are so many new people coming and going that it has forced everyone to become a lot more creative and strategic with their marketing in order to stand out from everyone else.

In the MARKETING section, you will learn how to still wholesale a deal and NOT lose your mind.

The biggest way to overcome feelings of being overwhelmed is to stop overthinking and start doing. By doing, you will realize what works and what doesn’t and how to move forward. But, you can’t do this if you’re paralyzed.

HOW TO GET STARTED

In Guide To Wholesaling Real Estate 101, we covered overcoming the "what ifs", as well as being careful with gurus and "mentors". We also went over some of the languages you need to know.

In Wholesale Everything: The Intermediate How to Guide 201 we'll expand more on the networking side.

Step 2: Networking for success (expanded)

Unlock FULL Guide!

Also receive the PDF version in your mailbox!

envelope

First, let's review the tools you will need.

The ONLY thing you need to get started is business cards. All they need to say is your Name, Email, Phone Number, and the title of Real Estate Investor. The title helps the person that received your card to remember what you do. On this note, you also want to make sure that the back of the card is white and blank. We used this a lot when starting off. This allows for your (or them) to make a note of what you talked about on the back of the card so they can remember why they should reach out to you.

Keep it Simple. You don’t need a business domain so your email looks “cool”, you don’t need a website, or a mailing address.

How to hand out your business cards

We know. You read this and said, "Really?! What's so hard about handing out a business card?"

Let us explain.

When handing out your business card don’t just give them to anyone, that’s just throwing them away.

Instead, make it a point to build up some form of a connection with the person. If you did a good enough job THEY will ask you for your card.

Remember, the goal is not to get rid of your business cards, it’s to build your network.

You want a dependable network when it's time to wholesale a deal.

You do this by building relationships.

Stay away from new wholesalers

One mistake many new investors make is they hang out with other new investors.

This is so WRONG.

Now, we get it. It's easier to connect with someone like you that doesn't know anything and/or hasn't done anything. But this does not help you reach your goals.

You need to level up. So, to do this you must network with people that are where you want to be. When you do this enough you will see that eventually, you start reaching their level.

When you wholesale a deal you want it to take you closer to your goal. You don't want it to just keep you as a wholesaler.

Working the room

Many people go to a networking event, find a chair or corner and never move from there until they leave!

We get it, you’re nervous. GET OVER IT!

Everyone that goes to a networking event, guess what, they are there to network.

Everyone is there to talk to people they don’t know. So, if you don’t know everyone in the room then start talking to everyone.

If you know everyone in the room go to another room.

Stop being shy. This business revolves around networking. The sooner you get used to it the better you will get at it, the more success you will achieve.

Don't talk to people you know

Eventually, when you have attended enough of these events you will have people you know attending the same events. This is great but, don’t spend the whole time you’re there talking to them.

Even if they have something "REALLY" interesting to say simply tell them, "I would love to talk to you further about this, can we get together for coffee or a drink tomorrow?"

If they keep trying to hold you back to talk, which many do, we come out and just say "Hey, I don’t mean to be rude but I have a few people I need to meet tonight. So, is it cool if we catch up later?"

Most investors understand and will want to be doing the same thing.

Who to approach

Why are you in real estate?

Besides money, what is it about real estate that gets you excited?

Is it:

  1. Buying, renovating, and flipping houses?
  2. Buying rentals?
  3. Owning Notes?

The reason these questions are important is that they will help you in determining who to approach.

Say you want to flip a house. The best course of action is to find the most successful flippers in your market. We're talking about flippers that are regularly buying, renovating, and selling houses. This way when you wholesale a deal to them you'll also learn how to determine if it’s a good deal.

When you find the right people, you want to learn from them. But, it’s not that easy. You have to bring them value.

While we are all really nice people, you must understand our time is valuable. If you want it, what will you bring of value?

This is where being able to find great wholesale deals comes in to play. If you can bring a flipper a great deal, they will teach you A TON about flipping. The best part is all of these lessons will be learned while you're making money!

How do we approach possible buyers/partners/lenders?

The best way to start up a conversation with someone you're interested in learning from is by getting them to talk about themselves. This is a great way to get them to share a lot.

The truth is, everyone likes to brag about themselves at these events. Use that to your advantage.

By having people talk about themselves we can determine if they truly know what they’re talking about or they’re pretending. The more you do this the better you will get at asking them questions that will show their expertise.

You essentially become an interviewer. You’re interviewing them to see if they fit in your network of buyers/partners/lenders etc.

Questions to ask:

  • How long have you been investing in real estate? Here you want to see if they’re new 0-2 years, somewhat seasoned 2-5 years, or seasoned 5+years. Just know the keyword here is “investing”. Don’t ask how long they’ve been IN real estate. That’s too vague and they may have been a realtor for 15 years. The issue with this is that most realtors know nothing about investing. Therefore their lack of knowledge gives them no real experience in investing.
  • What’s your main focus? Here you want to see if they like flipping, rentals, owner finance, lending, or maybe wholesaling. This will determine the type of buyer they are. Even if they’re a wholesaler you might be able to co-wholesale one of your deals to their buyers.
  • Where are you focused? If they know what they're doing they will tell you specifically which areas they like and what price points. If they say anywhere, from our experience, they don’t know anything and they don’t buy anywhere. They are just saying that because they don’t know where to invest.
  • How do you fund your deals? This helps us determine if they have private lenders or hard money. Private lenders usually show trust and experience. This will also help you determine what the going rates are. So your follow up question should be, “What are the terms?” We use this information also to determine what they can afford when we wholesale them a house. The points and interest they pay help us determine what they can afford.

Now that you are equipped to eliminate the “What ifs” let's build our buyers list.

Which should you do first? Find a deal or build a buyers list? A lot of gurus out there that have a preference depending on what they're selling. But to us, it doesn’t matter. They are both equally important and should be done at the same time. So for the purpose of needing to put them in order, we will start with building a list.

BUYERS LIST

Now that you know how to network, the next thing is to build a list with all of the contacts that you get. After all, these are going to be the people you wholesale too.

Next, we qualify our buyers. The following is how we have built our list along with our belief system.

Pre-qualifying your buyers

We know that if you’re new you may not know how to do this. This will come with time. Many investors ask to be in our buyers' list but we don’t add just anyone.

We add only the people that we know can actually take on a deal.

This is how we qualify our buyers:

  • How do you plan to buy? Like the question above we need to know where their money is coming from. What are the terms? This way we make sure they can afford it and how much they can afford.
  • How many flips/rentals have you done? Here we like to know what is the scope of work that they can handle. We also want to know their level of experience. We have turned buyers away from wanting to buy houses we knew they couldn’t handle.
  • How quickly can you close? There are times we need buyers to close in less than a week.
  • What are your goals? We do this because we do want to build long lasting relationships with our buyers. We still have buyers from when we first started in real estate. It helps to make sure they are heading in the right direction.
  • How much are you pre-qualified for? We started wholesaling rentals. So, one of the most important questions is if they qualify for any type of traditional financing.
  • What are you looking for? Here we want to get as specific as possible. We want to know the area of town, price point, level of rehab, target rents, type of home. Really, anything that may be important to them. When you get more experience in your local market you will be able to expand on these questions further. With time we’ve gotten to know certain areas have very serious foundation issues and others are in a flood zone.

Selling the contract to your buyers

Once we gathered this info, we add them to our contacts list along with their information.

We tell each of our buyers the following, “We will never blast a property out to everyone. If it meets your criteria we will bring it directly to you. But, if you don’t buy because you lied to us and can’t actually afford it. We will move you to the bottom of the list for our future properties. If you do this again we will remove you!”

The reason we do this is that we are not like most wholesalers. All they’re looking for is the highest offer and they move on to the next one. Not that there’s anything wrong with that, but it’s just not us. We want to actually build relationships and help our investors grow.

We need our investors to be able to buy when we bring them deals that meet all of their criteria.

The investors we work with appreciate this so much that we have never lost a single investor!

Non-refundable deposits

If you don’t know or trust your buyers most wholesalers ask for a non-refundable deposit. This can be whatever amount makes you feel like they wouldn’t walk away. If they did, it would reimburse you for wasted time. Now, you may need to go find another buyer. You may even lose the deal because the seller is upset with you for not delivering.

But, if you qualify your buyers correctly you don’t need to ask for these fees. It makes it easier for buyers to work with you.

We don't like non-refundable deposits. We've never bought from a wholesaler that is asking for a non-refundable deposit. A non-refundable deposit forces us to put money down on a property that we haven’t done enough due diligence on. You should never be pressured into buying a house you haven't done proper due diligence on. Especially if you don’t have the experience. This is why we don’t rush any of our buyers and recommend you don't either.

Another thing we recommend doing is making sure the house is clean of any title issues. We will cover this later on in this guide.

You want to make sure your buyers are not buying a house that has liens or judgments on it.

We know many people claim ignorance but that really should not be your out.

Again, partnering with the right investor for your first couple of deals should make this process easier.

Now that we have covered the basics with language and building a Buyers List. Let's go over how to actually generate a lead.

Direct Mail (DM)

In the Guide To Wholesaling Real Estate 101, we covered some basic DM marketing. We also went over potential List you can mail too.

In Wholesale Everything: The Intermediate How to Guide 201 we'll expand on doing this regardless of your budget.

Working With A Budget

Having a budget that you can stick to for 12-18 months is the most important thing.

Many people spend it all in the first 2-3 months and then their real estate career is over!

So, first thing’s first. Is there a certain amount of money you can count on every month?

You can do this one of two ways.

  1. You know for a fact that every single month you will have $100,$200,$500+ to put into a marketing.
  2. You have $1000, $2000, $5000+ saved for marketing.

Option #1

Say you know you can set aside $100 every month for marketing. That’ll probably get somewhere between 250 postcards or close to 175 letters per month.

Obviously the more you can spend the more homes you can target.

Bulk buying.

You can get better pricing when you buy in bulk. We would suggest your first month’s marketing budget be spent on just buying material. This way one month of marketing capital can get you 3-4 months worth of marketing materials. Now you know that in 4 months you will need another month's budget to buy another 3-4 months worth of materials for the next 3-4 months. Make sure you always project ahead. You NEVER want to stop marketing.

Option #2

If you’re doing $1000 budget then do the same. But, in this case, you can afford to buy your years worth of marketing up front to save money.

Cost break down.

We buy roughly 2000 postcards from Vistaprint for about $0.05 each. They are in full-color front and back.

Then you add $0.35 for postcard stamps or $0.49 for letter stamps.

Now, we add $0.0083 for every 100 address labels which we buy a box of 3000 for roughly $25.

This equals roughly $0.40 per postcard mailed out.

Or

$0.57 for every letter. The extra pennies here are for a pen, paper, and envelopes.

The only thing we don’t buy in bulk are the stamps because it doesn’t really matter.

There's a reason for doing marketing for 12-18 months. This is so you make sure to at least get one deal that you can use to replenish your marketing. This will help to extend from 12 months to indefinite. Of course, this is IF you didn't use the money to vacation!

You should never, ever, ever, ever, ever, stop your marketing. The only time to stop is if you’re throwing in the towel and you’re done with real estate.

There are so many times we have received calls from a marketing campaign we ran over a year ago!

NOTE: Oh, before we move on you have to include the cost of the list you’re using also. This is usually a one time cost and doesn't amount to much.

EXERCISE: Before you keep reading, set your budget. Even if it’s zero go through the process to understand it better. Pick a number like $100/mo and go to different sites like Vistaprint and start seeing how much everything will cost. Stop reading now and set your budget! You better not have read this line until you set your budget!!

DOOR KNOCKING (DK)

There's not much more to add to DK other than what was mentioned in Guide To Wholesaling Real Estate 101

You can go over to our Podcast and listen to the episode on DK. We cover how we do it.

WORKING THE LEADS

In the Guide To Wholesaling Real Estate 101, we talked about getting an appointment.

First, you also want to make sure the homeowner is motivated to sell. Simply ask, "What's your reason for wanting to sell?"

The following reasons usually indicate they have a real need to sell:

  • Can't afford it
  • Downsizing
  • Behind on payments
  • Relocating
  • House is falling apart(very rare)
  • Foreclosure
  • Tired landlord

What you don't want to hear is, "I’m just looking to see what I could get for my home". Not that these can’t turn out to be deals, but there’s a small chance since they don’t really need to sell their home.

If they mentioned one of the top reasons, then set the appointment. Now you can now reach out to an investor to help you.

CONTRACT THE DEAL

In Texas, you should use the TREC One to Four Family Residential Contract (Resale).

This a very standard contract that is understood by any title company.

If you choose to do this on your own make sure you've reviewed it beforehand. Filling out a contract is easy. You read it and fill out the blanks. It's that simple. Now, the biggest fear people have is, "what if I screw it up?". It’s fine. There are addendums you can use to correct/change anything on a contract. Once you have the contract filled out, you send it to title. At title you will find out of there are any liens or judgments on the property.

But, in Guide To Wholesaling Real Estate 101, we recommended going with someone at first.

SELLING THE DEAL

In Guide To Wholesaling Real Estate 101, we went over tapping into your buyers' list.

When you reach out to a potential buyer make sure you have the deal ready.

You need the following info:

  • Pictures of the house- make sure you took A LOT of pictures 50+
  • Information on major components- in San Antonio we want to know how old the AC and Roof is. We also want to know if it has foundation issues.
  • Times available to go see the house
  • When is the closing?
  • Price- always include your wholesale fee in this
  • Any terms the investor needs to know about.
  • Clear title

Your wholesale fee

This fee is the difference between what the homeowner is getting and what makes sense for the buyer. If it's $20,000 or $200 then that's what it is.

Do NOT always add a minimum of $5K or $10K just because that's what you want. You will either screw someone over or lose the deal. Neither is a good business model.

Do you want to make more money? Get better deals!

CLOSING THE DEAL

The contract has been reviewed at the title company to make sure everything is fine. Once you have your buyer ready you proceed with closing. The title company will tell you when and where to get everyone will meet to close.

Now What?

This was the Intermediate Guide to Wholesaling. Next up, will be the Wholesaling Strategies: The Advance How-To Guide 301.

Guide To Wholesaling Real Estate 101

Start Wholesaling Real Estate Today!

Are you looking to start wholesaling real estate?

We will help you go from ZERO to a success by implementing what’s in this guide.Guide To Wholesaling Real Estate 101

What is Wholesaling?

Wholesaling is connecting a homeowner that NEEDS to sell their home at a discounted price to the right buyer. First, you will negotiate a price that is low enough but still gives the seller what they need. Then, you sell those TERMS to a buyer that is looking for that type of property. You are assigning your contract to the buyer. You get paid by selling the contract to that house.

We will cover seller needs, terms, contracts, and sales; everything to execute a deal correctly and profitably. Wholesaling is a great way to start learning real estate while making money.

Why do most people fail?

Wholesaling is a very low barrier to entry in the real estate investment space.

Many “GURUS” and “Facebook Investors” sell the concept of wholesaling as "you can do this with very little to no money and make $20,000 per month!". This makes it very attractive for A LOT of people.

But, is this true?

Allow us to answer this question with another question. If it were true don’t you think EVERYONE that started in real estate investing would be making $20K/mo?

The short answer to this being true is… HELL NO!

When people are telling you this BS always ask yourself what their interest is in you getting into real estate.

It’s usually one of the following:

  1. They’re trying to sell you coaching and/or training
  2. Get you to work for them for FREE (We’ll cover this later)
  3. They were sold on it. Although they have seen it’s not true if they can convince you it’s true then they feel it wasn’t a huge mistake.

So then, what is the purpose of wholesaling if it’s not to get rich quick with no money and little work?

Understanding the purpose of wholesaling

So, the biggest question is WHY wholesaling. Now, we're sure if you’re reading this, it’s because you probably have an idea of what it is and why you think you want to do it. But, allow us to really show you the TRUE purpose of wholesaling.

Wholesaling to us is like driving an Uber. Uber was created to put some extra cash in your pocket but not really for replacing a job or even as a career. Wholesaling to us is the same.

Wholesaling is a way to monetize on leads you come across from motivated sellers. While it does pay a lot better than Uber, it is very volatile and you can’t really depend or count on always making the same amount of money consistently.

We started our company PRYME Homes through wholesaling. If we would have stayed in that space two things would have happened. One, in order to grow or even sustain it, we would have had to take advantage of new investors by selling properties that were NOT deals and taken advantage of homeowners who perhaps really needed that extra $5,000 to move on. Which is what many large wholesaling companies do. Or two, we would have gone out of business. Wholesaling is a great way to get to start learning real estate. Please note that we say LEARN and not MAKE MONEY.

What you will learn by wholesaling

The best thing about wholesaling is that you don’t have to risk tens or hundreds of thousands of dollars trying to figure out the market and the right strategy for you to move forward with.

Wholesaling is like like shopping for a car. While you may test drive a few there’s going to be one car that will suit your needs the best.

In real estate, we always say don’t be a jack of all trades; master of none. Stick to one thing first and become the best at it. Then, you can start dabbling in other strategies.

This is why wholesaling is a great way to get you started in the world of real estate investing.

HOW TO GET STARTED

Unlock FULL Guide!

Also receive the PDF version in your mailbox!

envelope

Now that you’re hopefully clear on what wholesaling is and why people do it, let’s cover the HOW of wholesaling.

Getting started with wholesaling is very challenging for almost everyone so do NOT think it is just you.

Most people struggle because they focus too much on the “what ifs”.

These "what ifs" are the reason many people fall into the Guru traps and end up buying these ridiculous real estate courses for tens of thousands of dollars. These gurus know you’re insecure and scared. They’re offering you knowledge and security in a structured way. Now, we’re not saying there’s anything wrong with this but, we don’t feel it’s necessary if you truly want to learn.

But what about “mentorship/coaching”?

The majority of the gurus out there that offer any type of mentoring/coaching are doing so because they’re not making enough in real estate. Coaching, mentoring, and programs are a very scalable business.

So, it’s easier selling education than doing the work that it takes to become truly successful in real estate alone. The ones that have figured out how to scale their coaching usually have salesmen as their coaches. So, when you call in with an issue all they are doing is regurgitating the training. The worst part is most of the content these gurus are putting out are strategies and tips they may have used decades ago since it has been years since they've done any actual investing. This information won’t work in today's real estate market.

Either way, they can’t really help.

So, if coaching programs that rip you off aren’t the best option then what?

The best way to eliminate all of your “what ifs” is just by jumping in!

Now, if reading this is making you very nervous, relax. We promise you that what we’re going to share with you is going to be things that will always work no matter what economy you’re in or how little you know about real estate and your market.

There are two steps that you must take to eliminate your “What IFs”

Step 1: Learning The language of Wholesaling

The first “What IF” everyone has is "what if I sound like an idiot" or "what if I don't know what to say".

So, the first thing you need to do is learn to speak like a wholesaler, which will set you up for your transition into becoming a full-fledged investor.

How do you do this?

You start listening to every podcast on wholesaling/investing. You need to submerge yourself in real estate. We want you to only read, listen, and watch real estate. This is how you learn a new language. We have journals full of notes we took on everything we learned from reading, watching, and listening to real estate. The reason we say to "only read, listen, and watch real estate" because the goal of this IS NOT to determine now what’s good info or not. The goal is to learn the vocabulary and what everything means. Once you learn the vocabulary then you can start getting the experience to understand whether what you’re consuming is good or not. You do that by going to networking events in your area. Join your local REIA, meet other wholesalers/investors and ask a TON of questions.

That’s it!

We know, you're thinking “what the hell is this?” but the sooner you can get into your head that it is not as hard as you think the sooner you can start actually doing it.

When you go to these events the bulk of the people that you will meet are not doing anything in real estate, even if they say they are. There are usually a handful or real wholesalers that you will want to meet and pick their brains. But, this will take a lot of time on your part and going to as many events as possible(by as possible we mean ALL).

The more events you attend and the more people you meet you will see that your knowledge about real estate grows exponentially. The best part, FOR FREE!

After going to so many events for months you will start realizing who the actual doers are and who isn’t. You will see that from month to month the crowds change a lot. That’s because everyone comes in thinking it’s a get rich quick strategy and when they realize it’s not they stop. This is good for you, less competition.

Like we said before this is not for you to figure out who’s right or who’s full of crap. All you want to do is speak to people, learn the language, and start figuring out who the real players are.

Learning some of the Lingo

So let’s go over the most popular vocabulary you need to learn.

  • ARV(After Repair Value)- this is the most common term used in real estate. This is where all of your numbers and math start with. So, the ARV simply means what the house will be worth once it is in a fully updated state.
  • Comps(Comparables)- Comps are properties similar to your subject property that are fully repaired/updated. These properties give you your ARV. You run COMPs to determine what the house will sell for once it is all fixed up.
  • Repairs- This is self-explanatory except for the fact that this may not mean actual repairs. Here’s what we mean. Sometimes a house does not need “repairs” but it does need to be updated. So, when someone asks you what the repairs are, this doesn’t necessarily mean what’s broken but rather what does the house need to reach it’s ARV.
  • FMV(Fair Market Value)- unlike ARV, FMV is what the value is of the house right now as it sits. This is the value of the home in its current condition.
  • Assignment Fee- This is the money you make when wholesaling a property. Like we mentioned in the beginning when you sell your terms to someone else you are essentially “assigning” your rights to purchase that home to someone else for an Assignment Fee.

Step 2: Networking for success

We’re sure many have heard the saying Your Network = Your Net Worth if you haven’t, now you have. This is what we believe to be the most important thing you will ever learn.

Learning to network correctly is how you will go higher than you could ever believe. Networking, especially when learning to wholesale, is very important because this is hands down the best way to get rid of all of your What IFs. By growing a strong dependable network you will be able to reach out for help whenever you need it. The key to wholesaling is to find houses that other people actually want to buy. The depth of your network will give you this.

The ONLY thing you need to get started is business cards with your Name, Email, Phone Number, and the title of Real Estate Investor. That's it!

Marketing

Direct Mail (DM)

Direct Mail has to be by far the most popular form of lead generation. The reason for this is in the name DIRECT. This form is very popular because it is a way to reach your target directly by sending them a mail piece to their home.

When we first started doing DM marketing we were sending out yellow letters. We would get a yellow legal pad and a red pen and hand-write something along the lines of “My wife and I would love to buy your house at >>address<< for CASH in As-Is conditions”. You will need to test out different messages and mail pieces depending on the level of competition in your market.

Another thing you will need to also test is the lists you mail too.

What is a list?

If you’re going to send out a DM campaign you need a List of addresses to mail it out too. You can start looking for lists like, late mortgage(these are properties that could fall in to foreclosure soon), probates(these are properties where the owner has passed away and usually the family inherits the property and may want to sell it), code violations(these properties are being sent notifications from the city because they may have a few things wrong with them which could mean neglect), high equity(these are homes that show they have high equity so maybe the homeowner maybe thinking of cashing out) foreclosure(people that are about to lose their homes for lack of payments) and many others.

You can get these lists from different places online. One of the big ones is listsource.com.

Door Knocking (DK)

We know you may have gotten really nervous after reading this.

We completely understand!

It’s very scary to go door to door knocking and asking people if they want to sell their homes. But, this is a very successful strategy because not many people are willing to do it.

Now we know we said Direct Mail is great because the mail goes directly to the homeowner well, imagine how effective it is being, face to face with the homeowner!

The best part is that this strategy is 100% FREE!

Now, this may not be necessary depending on where you live and what the competition level is like.

But if it is, here’s how we do it.

Q: Who to door knock?

A: Everyone!

Seriously, if you bought a list or created a list you should be going and knocking on those doors.

3 Things to keep in mind:

1. Appearance- this is so important. People subconsciously decide whether they like you within 1/10th of a second! Dress casual. No flip-flops and no 3 piece suits.

"all it takes is a tenth of a second to form an impression of a stranger" - Janine Willis and Alexander Todorov

2. Stay positive- Always have a smile on your face. This gets very hard to do when you have been rejected for that last 50 houses. But you have to knock every house like it's your first.

3. Time of day- by far the biggest mistake people make when door knocking is, going when people ARE NOT HOME! Don't go door knocking before 5 pm on weekdays. We don't know if this is because they are scared so subconsciously they don't want anyone home. But, in order to get a deal, you need to speak to someone.

Working The Leads

Your phone finally rings! Now, what??

While your initial reaction is to just stare at the phone until it stops ringing, don't!

We know you're scared, nervous, doubting yourself, and think of a million reasons why you probably shouldn't answer the phone. Guess what? They're all wrong!

When you’re starting off you need experience FAST.

Instead of going through scripts and a bunch of questions. If the homeowner is motivated(really wants to sell their house) then set an appointment.

That’s it!

Don’t know what to do at the appointment?

Reach out to a local savvy investor and partner with them on your first deals until you feel comfortable moving further on your own. No need for guru training!

Contract The Lead

If you went to the house and it’s a deal, you now get it under contract using whatever is accepted by your state, attorney, and/or title office.

Again ask the local investor for assistance.

Selling The Deal

Now you reach into your buyers' list, and/or an investor that’s helping you, buyers list, to offer this great deal to them.

Many of your buyers will do their own due diligence but you still need to give them ballpark numbers for them to see if it’s worth it.

Once they agree to the price, you want to get it in writing using an assignment of contract agreement. (title, an investor, or an attorney can help you with this)

Closing The Deal

You still want to keep constant contact with the attorney/title company you’re using to close it and with your seller and buyer. Sometimes things go wrong and you want to make sure you can reach everyone quickly.

Now What?

This should be more than enough to help get you out there finding deals. If you feel like it's not, you're simply procrastinating.

We know that you want to be able to take a deal from start to finish all by yourself without splitting any profits with anyone else. If you truly feel this way then good luck!

Real estate is a team sport. The sooner you understand this the faster you will reach success.

Keep in mind that while we can't cover every possible scenario we will be releasing an Wholesale Everything: The Intermediate How to Guide 201 and Wholesaling Strategies: The Advance How-To Guide 301.

Becoming An Experienced Private Money Lender Guide

Private Money Lending to real estate investors can be a very profitably strategy.

In this guide you will get the tools to Becoming An Experienced Private Money Lender Guide!Becoming An Experienced Private Money Lender Guide

What is Private Money Lending?

Private money lending comes from an individual that lends their own money to a real estate investor. This loan will typically be secured by a mortgage on the property.

Pretty much a Private Money Lender is the bank to an investor. You are an investors alternative to a bank loan and hard money loans. Many investors will need a short-term loan to buy and/or renovate a property. A private money lender can help by lending with favorable terms.

Private money lending is as passive of an investment as you can make in real estate.

Honestly, we think it's the ONLY true passive form of investment.

Who is private money lending for?

Private money lending is for people that have the extra capital. This is not a cheap option. Lending money does come with risks (which we'll address later).

Private money lending is perfect for people who can relate to any of the statements below:

Now, you don't need to be ultra rich to be able to lend money. Sometimes there are opportunities where an investor needs $20K to do a cosmetic rehab.

Who is private money lending NOT for?

Private money lending is not for someone that is looking to lend the only $20,000 they have.

Like we said before, lending can be risky.

We see this a lot with people who feel like they're missing out with this rising real estate market. Because of this the lend to the WRONG investor.

Later in this guide we will cover the pitfalls with lending and how to avoid them.

Also, private money lending is not for someone that can't handle risk. If you see that it's hard to part with your money for an investment then don't do it. If you do you will put unnecessary stress on yourself as well as the investor.

You also don't want to lend if you think you will need access to that money in the next 6 months.

Fear Of Missing Out (FOMO)

We want to take a minute and cover this very real fear. We see over 90% of new investors get in to the market because of FOMO.

Please be honest with yourself and determine if this is the reason why you're getting into it.

If so, don't worry not all is lost.

We understand that you may be seeing on TV or Facebook, how many people are "crushing it" by investing real estate. So you don't want to miss this amazing, once in a lifetime opportunity.

The truth is, this isn't a once in a lifetime opportunity. People have been making money off real estate since the beginning of time. They will continue to do so until the end of time. As long as you have money to invest, you too can take advantage real estate. Regardless of the point in time.

The key is having money! But if you rush in because of your FOMO then chances are you will make a bad decision.

We know investors that made money right up until, during, and after the 2008 crisis.

So please, eliminate your FOMO. Don't feel like you need to jump into a bad deal now because they're all going to vanish! As long as people live in houses there will deals to be made.

THE RESEARCH

Unlock FULL Guide!

Also receive the PDF version in your mailbox!

envelope

You want to make sure you understand the market you're lending in. This will determine how much you lend and for what terms.

We recommend speaking to both Hard Money Lenders and Investors. They each have very valuable information to share with you.

Hard money lenders (HML)

Private lending is much better than Hard Money Lending to an investor. A hard money loan comes from an institution which charges investors extra fees and points for loans.

So, how this helps you is because you should interview the top hard money lenders most investors are currently using. Now figure out what are the terms and rates they charge. Once, you've done this all you have to do is beat their terms!

You also want to ask them questions about the market. Here are some questions that will help:

  • What types of deals do you see more of? Is it flips or buy and holds.
  • Are you seeing a slow down in those types? Here you want to see if there is a transition going on.
  • How long are their average loans for? Not how long can they be for. You want to know how long people typically borrow money for.

Investors

You want to start attending real estate groups to meet and network with investors you may possibly be willing to lend to.

 

NOTE: Don't start announcing that you have money to lend! The issue with this is that will not get the truth out of people now. All they will be interested in is selling you to lend to them.

 

You first want to find the savvy investors that are actually doing deals and borrowing money. After some time at these events those people will become clear.

Now, you start asking them the following questions:

  • What types of deals do you do? Here you want to figure out what type of market is it. Is it heavier on short-term flips or long-term holds.
  • How do you fund your deals? Here you want to get as much info as possible even if all they use is Hard Money Lenders.
  • How many properties do you currently own? You want to make sure they can handle volume and not just one deal every 6 months.
  • What's the projected population growth here? You want to know if this city is growing or if it hit its peak.

Introducing yourself as another investor helps keep peoples guards down as far as them trying to pitch you on lending. This way they tend to open up more and tell the truth.

 

Putting The Research Together

Now that you went to hopefully 4-5 different meetups, spoken to many different investors and HML, you start putting your research together.

By getting the answers to the questions above you should have a better picture of what the market is doing.

When a market is hot you find that investors can find money rather easy. This causes HML to also lend with much better terms and at times much higher risks.

This is useful information to know because you don't want to throw your money in when the market is too hot. At least not until you've found a great deal and investor to work with. Like we said earlier, don't be afraid of missing out.

In our market of San Antonio, TX, we have seen a big inflow of money for investments. The issue is that the majority is chasing short-term gains. So you have a lot of competitions as a lender for flips. But that means other avenues have opened up as well.

Long-term financing is going to be the next thing to pick up here. This means lending to investors that want to hold on to properties either for rental income or as an owner finance.

 

NOTE: The earlier you get into a trend the better the terms will be for you. Before investors were getting 2-4 points and 12%-14%+ interest (we'll explain this under the TERMS section). Now they're getting 8%-10% interest ONLY. This isn't bad but you can see it was better.

 

If the market is not as hot you will find investors having an abundance of deals but not enough money to take them down. This isn't necessarily great. This could be because it's a bad market and no one is buying. Or, it could mean that it's a growing market.

What you need to figure out is where in the cycle you are in.

Things to look up:

  • Populations Growth Projections. Why are people moving here? In San Antonio we are projected to double because of job growth and affordability.
  • Job Market. Is it a diverse job market or does it depend on one industry. This can be very crucial if the city is dependent on one provider for jobs.
  • Affordability. Is it a city people can afford to live in? Are the wages compared to living cost comparable? There are places like NYC where people work there but live an hour to two hours away.

All of this information will be very helpful in determining whether or not to invest there or maybe look elsewhere.

Who's the loan for?

As a lender you are investing in the investor not the deal!

What we mean by this is, that when you lend the money, you're doing so to a person. Even though it's protected by the house/investment you're still depending on that investor to make it work.

We have seen countless times where an investor takes a deal that was a great deal and completely killed it because they didn't know what they were doing.

You can do all of the due diligence on the property and the numbers and realize that it all looks amazing. But, if it's poorly managed then you run a real risk of maybe not getting your money back!

Experience

We know you're probably thinking, "Ok, I'll just look for someone with experience." You're right, but in today's world with social media and how quickly come in and out of this business, how do you know you're getting the right info?

Experience is very easy to fake if you're not asking the right questions. We have seen new lenders get fooled by fast talking wannabe investors. Understand that there are people out there that know A LOT about real estate investing... in theory! So, you talk to them and they can regurgitate everything they've heard, read, or saw someone else do. This makes them seem like they know their shit.

You have to dig deeper here.

 

Finding the RIGHT investor

You find the right investors by going to your local networking event. These people are either or people they've worked with are there.

You want to find someone that meets the following qualities:

  • Has multiple renovations going on. You never want to lend to someone that did a flip 6 months ago and hasn't done anything since. Markets change quick and 6 months is enough time to lose touch.
  • Works with private lenders. You want to lend to investors that work with private lenders and not just hard money lenders.
  • Verified lenders. Make sure that they have the same lenders that they've always worked with. We know of "investors" that cycle through lenders because they are always losing their money. We have lenders that have been lending to us for over 5 years!
  • 5+ past projects. It's easy in today's market to flip a couple houses and look like a genius because the market is always going up. But, someone that has flipped 5+ houses successfully in one year will know substantially more about investing.
  • They take an interest in you. Many investors that are quick to take money tend to raise some red flags for us. We get approached a lot for people to lend to us, but we don't always accept. We need to make sure you can lend and understand thoroughly the risks involved. If we feel that you don't we won't work with you yet.
  • Understands their market. It's astounding the lack of market knowledge so many "investors" have. They don't understand the neighborhoods, buyers, area of town, or level of finish the house should have. If you don't understand your market you can drastically over-improve or under-improve the house.

 

NOTE: We feel that the investor you choose to lend should have all 6 of these. Lending money is very serious and you should not take it lightly. Remember "CASH is king" but you must have the cash to be king. If you lost it all in bad deals then you won't have it available when the opportunities present themselves.

 

Attorneys

Ah, the people we love to hate. Attorney's are a crucial part of any business dealing whether you like them or not. But, it must be the RIGHT attorney!

What we mean by the right attorney is, if you're doing a real estate transaction get a real estate attorney. Many of you maybe think, duh! But some of you are thinking, "what's the difference?" Well there's a huge difference.

A family attorney may have a broad understanding of the law but may not completely understand real estate law. We have had trouble with people that have tried using divorce attorneys because it was their friend to look over a real estate contract. The advice they gave was terrible. So bad in fact that our attorney called theirs and advice that attorney that they can go to jail if their client proceeded with this advice!

Now, you're probably thinking, "that was just one bad attorney" and the answer is, NO. Not all doctors are the same not all attorneys are the same. There's a very good reason why they specialize in a certain area. Each area of law is very extensive and is subject to change at any time. So if this isn't their main focus they may miss new changes to the laws.

That being said, attorneys are here to look at every worst scenario possible. If you listen 100% to what the attorney wants you will NEVER get a deal done. In real estate like any other investment there's always a risk. But attorneys want to protect you against every possible risk. While this sounds great to you, this usually means the risk is now passed to someone else. Now, that someone else needs to be ok with all of that risk (which they won't) in order to proceed.

Here is where you need to weigh you risk reward. As investors we take risks all of the time. What makes those risks worth it is the possible reward.

 

The Risks

As a lender, your risks are losing the money you've lent. So how do you protect yourself?

We already covered Finding The Right Investor. This will help tremendously.

You want also verify that what you're lending makes sense. For example, if someone is asking for $100,000 make sure that house as it sits is worth more than that. The reason for this is many investors are overpaying for houses because they hope prices will be substantially higher when they sell.

By lending on a home that's potentially worth more will protect you if you have to foreclose on the borrower and sell the home.

Your loans should always be protected by a lien on the home (promissory note) and a Deed of Trust.

NEVER lend money to an individual without having any collateral. We have seen this happen too much. You should never trust someone that much. We don't care who they are and how long you've known them. Always protect yourself!

All of that being said, it's still 100% up to you how much risk you take.

 

Making The Loan

You can always lend money on a first lien position or second or third or no lien position. The further back your lien position the less of a chance there is that you will be paid if things go south.

In a loan 1st lien has priority and if the investor really messed up sometimes that's all of the money that's available.

Typically what happens is, the further your lien position is, the more you get paid. So, say the 1st lien is paying 10% interest only then the 2nd lien my get 1 point and 10% and the 3rd lien might get 2 points and 11% and so on. Remember as a lender points are better than straight interest.

But, everything is up for negotiation. We meet many lenders that want too much for their money and they either never find an investor that will pay that or they find the WRONG investor.

At PRYME Homes we wouldn't pay more for 2nd or 3rd lien just because it's not necessary. We have enough credibility and get our properties low enough that everyone has equal protection.

 

The Paperwork

Like we said before, there are 2 main documents that you want.

  1. Promissory Note: This is a note where it states what the payback terms are. This is how you secure the loan. Here is where you want to state interest rate, prepayment penalties, late payments, maturity date and much more.
  2. Deed Of Trust: This is your protection in case the borrower defaults. If they stop paying the Deed Of Trust allows you to take the property. This acts as a lien on the property which is great if the person tries to sell the property without letting you know. The Deed of Trust is held by a 3rd party, usually a Title Company, so if the borrower tries to sell your lien shows up. Because you hold 1st lien, you would need to get paid back first before any proceeds are disbursed.

Some of these documents and laws do vary by state so make sure you consult an attorney first.

 

Charging Too Much

Many new lenders what to charge too much because they've never done this before. Like we said above you will either not get someone to lend to or get the wrong investor!

Here's the other problem with charging too much that happened to one of our lenders.

Lender wants to lend at 12% interest. Borrowing $100K for 6 months that'll make them $6,000.

We have lender #2 that will lend at 10% interest. Now, lender #2 on the same loan only makes $4,999 in 6 months.

But this actually leaves us with an extra $1K in our pockets. So what happens is we make sure we bring our next deal to lender #2.

Now lender #2 has had their money out for the full 12 months which has generated $10,000. But because lender #1 wants 12% they have had to wait until someone that really needed the money brings them a deal. In this case it took lender #1 four months before they found the next deal to lend.

So in a 12 month period lender #1 made $8K and lender #2 made $10K.

Now guess who will get priority moving forward?

At the end of the day we're all in it to make money. Your money sitting there because you think you can make more at some point down the road sometimes doesn't make as much as you think.

In Conclusion

We hope that you have found value from this Becoming An Experienced Private Money Lender Guide. This isn't the answer to all of your lending questions but it should be more than enough to get you out there and doing the RIGHT research. Private money lending should not be taken lightly.

PRYME Homes is always here to help. We will be posting more articles, podcasts, and social media content in order to expand on many of the points expressed in this guide.

If you have any further questions always feel free to reach out.

We really appreciate the time you took to read this and feel free to share this with anyone.

NOTE: Nothing here should be taken as financial advice or legal advice. Always consult a real estate attorney before doing anything.


Know When To Walk Away From A Deal - AIJ021

In Episode 21 of An Investors Journey, we go over how to Know When To Walk Away From A Deal!

There are many reasons why you feel that you must not let this deal go by.

We were there before as well. Sometimes we're there now. It's hard to walk away from a deal especially when you really need it. But if it doesn't make sense then you MUST walk away.

In this episode we'll cover:

~FOMO- Fear Of Missing Out

~How to make the numbers make sense

~Seller Motivations and why it's important

~PITA Factor- This is very important!!!

~Not becoming a motivated buyer

Related Episodes

How We Do More Deals Through Partnering - AIJ007

From Phone Call To Contract, How WE Negotiate Our Deals - AIJ010

Being The Ultimate Investor Agent - AIJ017

How To Deal With Feeling Overwhelmed

The Struggle Of The Wholesaler

If you find this valuable please SHARE 🙏

Hope you guys enjoy this one!

Keep sending us your questions! @prymehomes

Any questions email [email protected]