The Titanium Vault hosted by RJ Bates III

Case Study with RJ Bates III: How to Appropriately Co-Wholesale a Property

May 31, 2019 Episode 83
The Titanium Vault hosted by RJ Bates III
Case Study with RJ Bates III: How to Appropriately Co-Wholesale a Property
Chapters
The Titanium Vault hosted by RJ Bates III
Case Study with RJ Bates III: How to Appropriately Co-Wholesale a Property
May 31, 2019 Episode 83
RJ Bates III
Show Notes Transcript

In today's real estate investing case study with RJ Bates III, we break down how to co-wholesale a property the correct way. RJ goes into detail how, why and the importance of how you handle a co-wholesale could impact your future business. Reputation and your ability to close on contracts is vital to growing you wholesale business and sometimes co-wholesaling is necessary.






Speaker 1:
0:01
Well, it's not real estate investors, entrepreneurs and agents doing long length place, unlocking the secrets to real estate investing and entrepreneurship. Welcome there, that titanium vault hosted by RJ banks. But third, here's RJ.
Speaker 2:
0:26
Hey guys, welcome to the titanium vault. I'm your host RJ Bates. Today I wanted to do a little bit of a different type of case study than we previously done on the first four and today I wanted to talk about the appropriate way in my opinion on how to co wholesale a property. What I mean by co wholesale is that this can be, you can be in one of two positions. You could either be the person that owns the equitable rights to the property, so you have located the motivated seller and you have contracted the property. You could be in that position and more often than not, when you need to go wholesale somebody, it's because you don't have the cash buyer or the end buyer to purchase the contract from you or who you're trying to assign the contract to. You don't know that person.
Speaker 2:
1:28
So you're reaching out to someone that's either more well connected, you know, further along in their career, has a larger buyers list, has a specific type of buyer, maybe it's a land deal and you don't have land buyers or whatever the different scenarios are. There is a time and place to call wholesale a property. And so you could be, or you could be reaching out to the person who's going to bring that cash buyer and the buyer in this transaction. So regardless of what role you're partaking in this scenario, I think there's inappropriate way to call wholesale and then there's an inappropriate way to do it. And I kind of want to go through those different scenarios. And I want to use a scenario in which we are closing on a deal today. We're Cole wholesaling and the role that we, um, performed was we brought the cash buyer.
Speaker 2:
2:27
So someone had a property under contract, they didn't have the cash buyer and they reached out to us and we brought the cash buyer. We're closing on that deal today. So in my opinion, and I want to keep saying that because obviously there's a, I'm opening myself up for criticism here where someone can step in and say, you know, no, there's other ways that you can do this. Yeah, there are, um, I like to be conservative when it comes to this and I, I think that wholesalers, um, as a whole can't get a bad reputation or bad name in this industry by Co wholesaling, right? There's a difference between coal wholesaling and daisy chaining. Okay. So I want to go ahead and clear that up. I am not talking about daisy chaining, I'm not talking about someone coming along seeing a wholesaler send out a property for 100,000 taking their marketing, sending out to their cash buyers list for 110,000 and acting as if they have the property under contract that I think is inappropriate.
Speaker 2:
3:38
That is not what I am talking about. So what I think is the appropriate way to do this is if you're in a scenario where you have a property under contract, unless you just use $90,000 as the price that you have the property under contract, okay? Cause that's easy for everybody to remember, right? $90,000 and you want to sell this for $100,000 okay? You then make all of your marketing material and you market this to your buyers for $100,000 you have a assignment contract or a wholesale property for sale for $100,000 and you market this out to your buyers and nobody, you know it's crickets, right? No texts, no calls, no emails you posted in the Facebook groups, nobody's responding and you're hitting a brick wall, right? So then you reach out to a more experienced wholesaler, someone that you know moves volume in your market and you say, Hey, I need help selling this property.
Speaker 2:
4:43
Okay. At that point in time, I think it is the person who is going to be bringing the cash buyer to the table. It's their responsibility to sit there and gather all of the information and really identify whether or not they have the capability to be able to move this property. First and foremost. The reason why I feel this way is because we have a motivated seller that is relying on all of us to get this property closed, okay? It is. That is the utmost priority here. Okay? Making money. Money is important, right? That's what we're in business to do, but our reputation and the ability to perform on contracts allows us to continue down the path of making money. We have to be able to perform our contracts and as the person who is stepping in and saying, I am experienced enough and I have the capability to sell this property, you need to be very confident in that ability because of the next thing that needs to happen. There needs to be a joint venture agreement put in place between yourself and the person who has the property under contract and I, I guess I shouldn't say yourself, whoever, whichever role you're playing, there needs to be a joint venture agreement. Put employees, identifying how the profit of this is going to be split. In my opinion, I think it should be a 50 50 split.
Speaker 3:
6:23
Okay.
Speaker 2:
6:23
The person who went out and found the motivated seller,
Speaker 3:
6:26
they did. Yeah.
Speaker 2:
6:29
A large chunk of the work here and when you really get down, and I know there's a lot of like idiosyncrasies that get into wholesaling, but in the, in the, just on a 30,000 foot level, when you look at this, it's identifying a motivated seller, identifying a cash buyer. Those are the two main things, so that's 50% of the work and then finding the cash buyers. The other 50% that's why they get should be 50 50 k.
Speaker 3:
6:56
Okay.
Speaker 2:
6:57
At that point in time, I they, it should be agreed upon that you are going to market this property for sale for the same price that it was originally marketed at. And the reason why is because,
Speaker 3:
7:15
okay,
Speaker 2:
7:16
it is an epidemic in the wholesaling industry that properties are marketed out at three, four, five different prices because we're going out and giving access to this wholesale or saying, okay, yeah, you can go send it to your buyers and you can go send it to your buyers and you can send it to your buyers. Just seeing if everybody will go out and actually get a buyer. Again, we're not concerning ourselves with what we really should be concerned about, which is selling the property, moving inventory, and taking care of the motivated sellers. Right? There were some kind of motivation there. More often than not, it's a financial motivation. There's a need for the sell of this property. We have to keep that in mind, right? Right. We're here to make money, but we're also here to take killers, take care of our sellers, so we need to market it at the same price.
Speaker 2:
8:11
And if you're going to call wholesale, it really needs to be with one person. You need to make that agreement where you're saying, okay, I have a property under contract. RJ, can you bring me a buyer? Yes, I can. We sign a joint venture agreement saying we're going to do a 50, 50 split. I am going to market that property at the same price that you are marketing it and I'm going to bring you a buyer. So let's talk about the specific example of how this happened. A someone that I met, um, at Max Maxwell's event here in Dallas. We live 19. Um, had a great conversation at the yellow letter HQ booth that we were working for. Todd swagger [inaudible]. Um, had a great time at that booth and at Max's event and I met a buyer here that's local to fort worth, Texas. He's a newer wholesaler.
Speaker 2:
9:06
I think he had done a couple of properties. Uh, but he went out and he got a burnout property here in Fort Worth. And selling your burnout property is a little bit different than just selling a typical rental or flip or just a regular rehab project. Like you have to have a specific type of rehabber that is going to be okay with taking a burnout property. Okay. So he brought it to us and initially he wanted us to add our fee on top. Right? Why, why did he want to do that? Because as a newer wholesaler, if you lock up a property for 90,000 and you're going to sell it for 100,000, it's just human nature to be like, I'm going to make $10,000 on this and it's a lot harder to swallow and come to grips with in order to move this property, I'm only going to make $5,000.
Speaker 2:
10:03
I'm only gonna make half of what I'd done I was going to make. Now, in this particular example, those are not the exact numbers. They're a little bit different. I don't remember them off the top of my head. Um, to be quite frank, I wasn't very involved in this deal at all. Um, Cassie handled most, most of it. Um, with this gentlemen. Um, but I thought it was a good example because that initially was his idea, right? His idea was, well, add your fee on top. I'll still make mine and, and we could move this property. Well, we explained it to him just like I'm doing on this podcast right now, that that wasn't going to work. We needed to sell it to that number, that made it a good deal for everybody. And obviously I would love to be able to add money on top of me, more money, but that's not right.
Speaker 2:
10:56
We need to make sure time is of this essence. We need to move this property for the seller and we need to make sure it's a good deal for our buyer. And so we need to keep it at the price that he was originally marketing in it. So we did that. We put together a joint venture agreement, 50, 50 split. We then located our cash buyer. We assigned the contract. Uh, the worst, some issues with the title work. Uh, the seller showed up at title and um, her ID was expired. So we had to do an extension and we had to get that resolved. Added a couple of weeks to the closing. Uh, what we did close today, um, we are funded and so every, it all worked out right? The seller, um, got the property sold, their motivation is now satisfied. A, the new wholesaler was able to move this property and make some money. Yes, it was half of what he was anticipating, but at the end of the day, he performed on a contract. This is a victory for him. This is an experience for him. This is an experience when you're going and you're negotiating with a seller, really understanding where you're coming from as a wholesaler on what it takes to move a fire, burn a burnout property.
Speaker 3:
12:23
Okay.
Speaker 2:
12:24
This also gives them motivation to go out and work on his cash buyers list. If this is something that you're going to market to and try to acquire, then you also need to work on the other side of the business and getting cash buyers for those types of properties. Okay. It worked out for us because we were given a property and we were able to satisfy and help him and we were also able to satisfy a cash buyer of ours that otherwise we, we probably wouldn't do business was very often because we don't actually get burnouts very often. So it was a very beneficial transaction across the board. Maybe not so much financially, but as far as satisfying different aspects of our business. It was, and that is how I think Cole wholesaley should be done, um, across the board. This would eliminate daisy chains. This would eliminate poor reputation that wholesalers have for sending out properties at, at different price points. This would also eliminate a, just so you know what I'm about to say, might be a little bit taboo in the investing industry, but there are rehabbers that market direct to seller
Speaker 2:
13:43
that taught poorly of wholesalers because of these actions don't end up becoming one of those wholesalers that gives truth to what those rehabbers and landlords are saying to the same sellers.
Speaker 3:
14:01
Yeah.
Speaker 2:
14:01
What I mean by that is they can go and they say can they actually perform on the contract cause I'm an end buyer. I can actually close. You could say the same thing as a wholesaler. You can say, hey we, I actually will close on this cause here's my proven track record. But you have to make sure that you actually create that track record by doing things the right way. Get a good reputation in your marketplace for being a wholesaler. That market is properties at the same price regardless of the scenario. Regardless if there is a partner, regardless if you are co co Wholesaley for example, I could have given my company titanium investments a poor reputation in the market place by taking this property and saying, okay, I'm going to add, cause I think I could sell it for more, which we probably could have, but there could have been one to five different investors in our marketplace that would've seen that email or that post in a Facebook group and said, I just saw this a couple of days ago for a hundred thousand and now RJ sell it for 110,000 what's going on here?
Speaker 2:
15:17
Hmm. I don't want to do business with RJ. No, we didn't do that. Reputation is more important than a few dollars today because later on, one of those investors, rehabbers, landlords, whatever it is, if he sees a property that I have a twenty thousand twenty five thousand fifty thousand dollars assignment fee, if it hits his criteria, and all he knows is, is that I'm selling good deals and he wants to do business with me, it's a worth a lot more than the additional 10 that I could have gotten on this one deal by coal wholesale in it. All right guys, that's our episode for today. I'll stop ranting about coal wholesaling, but I'm very passionate about this cause I think it's a viable tool for newer wholesalers. I think it's a viable tool when you're an experienced wholesaler. You should put yourself out there and say, I'm willing to work with you.
Speaker 2:
16:13
I'm willing to sell your properties as long as we do it the right way. I hope you enjoyed today's episode. Um, I hope you're getting something out of these case studies. We do have one more case study that we're going to do. It's going to be about a property that we sold in Hawaii. I've talked about it a couple of times, but, uh, we're, we're just trying to like nail down some final details before I jump in. And then we're going to get back to interviewing some pretty special guests. Um, they, we have quite a few, uh, very large influential investors lined up that are kind of come on the show and uh, you know, we're, we're marching toward, uh, episode number 100 guys, so make sure you're subscribed to the titanium vault. Make sure you leave us a review and we will talk to you guys soon. Thank you.
Speaker 1:
16:58
Thanks so much for listening to the titanium vault with your host RJ [inaudible], the third for more MPO and to stay up to date, visit www.podcast.thetitaniumvault.comandonfacebook.com/the titanium vault. If you enjoyed the episode, please rate and review and we'll catch you next time on a titanium ball.
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