Guide to Automatically Wholesaling Over 20 Real Estate Deals a Month
Wouldn’t it be extraordinary if you could create an automated wholesaling process that pumped out hundreds of leads and tens of thousands of dollars a month with minimal ongoing effort? David Dodge, who has over 8 years of real estate experience working with fix-and-flip and buy-and-hold investors, has implemented such a process. In our recent conversation, he explained how teaming up with local wholesalers and automating his marketing and leads process allows him to consistently wholesaler over 20 deals a month.
The Wholesaling Team
Initially, David was a solopreneur. Eventually, he teamed up with three other local wholesalers to start a larger wholesaling operation. “Our business is actually unique,” David explained. “I have three partners… One guy’s been [wholesaling] for 30 years, one guy’s been doing it for 10. I’ve been doing it for 8 and my other partner’s been doing it for about 4.”
Why did they team up? The main reason was economies for scale. David says, “We were all sending letters to the same people. We got together and said ‘hey guys, let’s build a business so we’re not really competing with each other, but also it will allow us to instead of each spending $3,000 a month on marketing, we could put it in a big pot and hit more avenues.’ That’s what we did.”
Combined, David says, “[currently] we’re spending $8,000 a month on marketing. 80% of that is direct mail – mostly letters and we do a little bit of postcards. The other 20% of our marketing budget goes towards online advertising.” All four were spending thousands of dollars a month mailing to the exact same investors, so teaming up saved them all a lot of both money (~$12,000 a month to ~$8,000 a month) and time.
With the four partners having different skill sets and experience levels, they broke the responsibilities up accordingly.
- “[Two partners] are really focused on listed, [on-market] properties,” David said. “Those guys are sending a ton of offers.”
- To aid in the on-market operation, they also hired a few interns. “We also have a couple of interns that work for us and they’re 100% commission. All they do all day is just scrap the MLS and scour it for the most part and send offers to properties that have been on the market for a long-time or just have certain keywords that we look for.”
- David and the fourth partner focus on the off-market deals operation, which are the people that call in from their direct mail and online campaigns.
They’ve been in business for about 7 months, and at the time of our conversation, they were on pace to complete over 20 deals in February 2017.
Wholesaling is All About the Follow Up
The advice is cliché, but David believes the follow up is key to success in wholesaling. David elaborated, saying “we are doing 15 to 20 deals a month and I can foresee us in 4-6 months doing a minimum of 20. Maybe even closer to 20 a month because every month we’re getting hundreds of leads that come in. Sometimes we’ll get 10 to 15 a day! They may not like our offer… 9 times out of 10, maybe 19 out of 20 really, they’re going to say ‘no you guys are crazy.’ So we have a follow up schedule where we’ll call, text, or email every week or two. Some people are on a 6-month follow up schedule… As you get more and more leads in your CRM, you just got to stay consistent and keep calling them. Eventually, people’s motivation changes for a million different reasons.”
In other words, those 9/10 or 19/20 “no’s” don’t mean, “no, I won’t ever sell.” It’s more like “no, we don’t want to sell right now.” But by continuing to follow up on a consistent basis, you’ll be top of mind so when they are motivated to sell, you’ve increased your chances of getting the deal.
The Automating the Wholesaling Process
Another important aspect of the wholesaling process is answering the phone and screening the leads. David has outsourced this process by training virtual assistants (VA). “We’ve hired some virtual assistants… [They] are great because they answer the phone on the seller side, they vet the deals for us, they provide us a MAO, and if it’s a deal, they’ll send us comps and set the appointment. If it’s not a deal, we put it into a follow up schedule [discussed above].”
What is MAO? MAO is the acronym for maximum allowable offer. “A MAO is a very simple formula,” David explained. “MAO equals your ARV, which is your after-repair value, and then you multiply that by a multiplier. Typically, you’re going to start at 0.7. If it’s a good area or a hot area, you can go higher – 0.8 to 0.85. If it’s a warzone, you go down to 0.3.” ARV and the multiplier are the first two parts of the formula. The next two pieces are repairs and assignment fee, which are subtracted from the ARV times the multiplier. Here is the formula in it’s entirety:
MAO = ARV*(multiplier) – repairs – assignment fee
“Our VA’s have been trained on how to run that report,” said David. “It’s very simple: somebody will call up with a property on 1012 Part St., for example, and they’ll be motivated to sell their house. The VA will run comps – they have access to the MLS – and they’ll determine what the property will be worth after it’s all fixed up (the ARV). Then they’ll do the multiplier and subtract out repairs, which you can do very easily based on square footage or maybe they’ll send one of us out to go do a repair estimate. Then [they] will subtract that out and subtract out our fee, which can be anywhere from $2,000 to $30,00, depending on the neighborhood, the house, all that type of stuff. Then we’ll make our offer.”
Automating the phone calls and MAO calculation enables David and his three partners to focus the majority of their time on finding deals!
Example Wholesaling Deal
David purchased a house for $160,000 a few weeks ago that was 4 days lead to close! The VA’s calculated a $300,000 after-repair value and $80,000 in repairs.
At first, the sellers were not too pleased with the $160,000 offer price. When hearing an offer, David explained, “People in the beginning always think ‘you guys are crazy. You’re trying to steal my house!’ or ‘you guys are trying to pay me 60 to 70 cents on the dollar for my house.’” But, David says that’s the name of the game. “We’re investors. We don’t pay retail, period. But, we pay as-is, we buy cash, and we close fast!”
Back to our example and how David handled the seller’s initial objections: “I went out and met with the seller,” David stated. “I said, ‘ listen. You can hire an agent and they may or may not sell this property for you. I hope they do, but there’s no guarantee. They aren’t the one buying it. They’re just trying to make a commission. Then you’re going to have seller concessions. You’re going to have appraisals. You’re going to have inspections. Good luck. However, if you just want to walk away, I’ll give you $160,000 and we can close by Friday.’” This conversation occurred on Monday of that same week.
The sellers were four kids that inherited the property and after they looked at their options, they decided to take the money and run. “It was a win-win,” David said. “We got the house at a great price. They got cashed out in a week and they didn’t have to deal with it anymore.”
Now it is David’s responsibility to wholesale the deal. He sent the deal out to his buyer’s list at $180,000 and will hopefully make $15,000 on that deal.
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