More Wholesaling

Ok, I know I started this blog thing last night about wholesaling, but here is the problem. I teach a mentoring class here in my market and one of the weeks that I do is on wholesaling. That class is 2 hours worth of information about the subject, so thinking that I hit everything last night is not very smart, but I hit on some things that were on my mind at the time, so I will try to keep it up if at all possible. I do get kinda' busy, I actually am not the busiest wholesaler in the world, but I do sell about 60 or so houses every year wholesale, plus adding about 10-15 rentals each year to my portfollio, and about 15-20 retails as well. All of that being said let's touch on a couple of other "wholesaler issues" that I think everyone should think about. The next item that I think we should all think about if we want to be wholesalers may get kinda' deep so this may be the only thing that I talk about in this blog tonight. I hate to bring this up, but let's talk about ethics. Yeah I know ti sucks, we are investors, and we can do whatever we like with no consequences right? Wrong. I think that a lot of investors do have that attitude, and you have to decide what role you want to have in this business, but I feel that if you can't do it right then why do it. I say this because there are some gurus out there that say you should just float a contract until you find a buyer. They also say that you should have a couple of outs in your contract so that you don't have to close on the property. That being said, I also believe that you should have an out or a "weasel clause" in your contract, just to protect yourself, however I do believe that if you write a contract you should be ready willing and able to exercise it. So needless to say I do not agree with a lot of those gurus that say write the contract and if you don't sell it just back out and go on down ther road. There are a lot of investors that have given real estate investors a persona much like a used car salesman. Now I don't know about everyone that visits this site, but even though I do know some nice guys that are care salesmen, they are not the ones that we are being compared with. If you write a contract be ready and prepared to close on it, or at least be upfront with the seller so that they know where it is that they stand. The true wholesalers out there usually have large portfollios of rentals........all of the houses they could not wholesale. So what's the point? Why am I rambling on about this issue? Well for one I think we have to add a modicome of dignity to our industry. With all of the sub prime loans going bad, our industry is not exactly the favorite for the peace prize this year. I for one do my best to operate the best that I can and to do a superb job in our business. We have a lot of people (130-150/month) that call us monthly to sell us their house. When they do that they are taking us into their confidence and leting us in on personal issues, money problems, and a lot of other issues that the general public does not get to hear about. I feel that if they put their trust in us and allow us in then we owe it to them to do our best to be honest and represent ourselves and our businesses in a true light. I said all of that to say disclose what it is that you want to do and let them make the decision with regard to doing business with you or not. The next thing to remember is that you are not the only option that they have, so if you are honest they will make their decision and you will have to live with that, but you cannot afford to no be honest in this business. Next is that they are not the only option for you out there as well. This is not a business for the feint at heart by no means, you must be on your stuff to keep up with everything. And yes you do sell contracts before you ever close on them, but that is not the INTENT. In many things in business you hear about "intent", and here it is the same. You write a contract with the intent to buy the house, but you find an investor that wants the house and you either sell it or assign the contract. There is nothing wrong with that, it is free enterprise and business. There are times where you will also tell a homeowner that you don't buy houses like his normally, but you may have an investor that would be interested and you would only be willing to close on it if you find one of your investors that would be interested in buying it. So there are a lot of ways to make it happen from a wholesale standpoint that do not entail "floating a contact" with no INTENT to close. I know after all of this the next question is "what is the bottom line". Or what is the damage, how much can I make? Is all of this worth it? Realize that I am bringing a lot of issues to the table in a short format, but this is a side of the business that I have been doing actively for about 7 years and have seen every part of, but down brass tacts. We average about 9k or so per house that we buy and wholesale. That is a pretty good average and amounts to about 500-600k in the net column for my business every year. One of the things I do like about the franchise relationship that I have in HomeVestors, is that I get a lot of info that is from around the country and lets me in on certain trends that other investors may not be aware of. For example we find that about 5% or so of all transactions that are sold in a market are sold at a discount that an investor would be willing to buy at. That being said in my little market in Mobile for example we have about 600k people and about 1000 or a few more houses per year are sold at a discount enough for us to be able to buy them. That means that there are plenty of deals to be had in the market for everyone. Next, I will talk about the mindset of having plenty of options in the market and the attitude of plenty that we all should have as investors.