David Dodge And Wholesaling
Episode 337: David Dodge And Wholesaling
The real estate wholesaling business may be simple, but is it easy? In this episode, author and real estate educator Mitch Stephen chats with David Dodge of House Sold Easy about all things wholesaling. David reveals the learning curve, the “analysis paralysis” he had to go through, and the amount he had spent on his re-education, and see if you would do the same. He also shares tried and tested techniques to capture motivated sellers and negotiate deals. Discover how you can take advantage of technology to simplify the processes and ensure your investing success in this episode.
I’m on with David Dodge. He comes to us from St. Louis, Missouri. This guy is a wholesaling fool, but the guy’s pretty smart, hence the reason why he’s on the show. Before we get started, go to TaxFreeFuture.com and look at the 37 videos. If you don’t have a self-directed IRA or a tax-deferred or tax-free way to grow your investments or your financial future, you have no idea of the size of the tool you are missing out of your tool belt. You will not believe what your financial advisors are not telling you. We’re going to tell you what they’re not telling you and we’re going to tell you why they’re not telling you. It’s all going to make perfect sense. You will go to the next rung on the ladder in speed and knowledge. How are you doing, David?
I’m doing good, Mitch. Thanks for having me.
I was looking at your bio and one of the things I want you to talk about is you said it took you four months to get started to do your first deal and it really shouldn’t have. Why did it take you four months to do your first deal?
I’ve been investing for fifteen years. The first ten, I was part-time. I bought one house a year and I would rent it out.
What was your job at the time?
I’ve always done sales and marketing over that ten-year period. I was in different jobs doing sales for companies or marketing for companies and did various jobs.
That helps because we’re all in the marketing business.
The reason I stepped back is to let you know that I discovered wholesaling several years ago and since then I’ve been full-time and I haven’t looked back. It’s no longer a part-time thing. It’s a full-time thing. Also since then, I have not bought a house for retail because I didn’t even know that you could buy houses off-market at discounted prices until about several years ago. To do my first deal, I had my job, I was part-time. I learned about this and I’m like, “This is cool.” I’ve been wanting to quit my job and go full-time into real estate. Let’s start learning more. I read a book or two and then I bought a course or two. I bought a couple of more courses. I bought a couple more books. After about a month, I knew everything I needed to know about wholesaling, but I hadn’t done a deal yet. For the next two months, Mitch, I bought more books and more courses. I even went to the extent of hiring a coach at the end of those additional two months.
It’s relative to people because I hear these stories all the time and it’s more normal than it’s not, how much you spend and so far. We’ll ask you how much you spend on your coach.
At that point, buying little courses, books, PDFs, little things, I’d probably spent somewhere around $2,000.
What did your coach cost you?
My coach cost $5,000.
That was a hard check to write, wasn’t it?
It was a hard check to write.
That’s a lot of money when you’re not sure of yourself. Were you married at the time?
I was not.
That makes it easier to write that check. Because if you’re married and you write that check, it’s a really hard time.
It makes it a little bit more tough. You’re absolutely right. I had spent $2,000 in the first three months buying books, buying courses but here’s the thing, Mitch, I knew everything I needed to know after three or four weeks.$5,000 to hire a business coach to tell you that you know everything is a hard check to write. Click To Tweet
It sounds like you’re over-analyzing a little bit.
I spent two more months thinking, “Maybe there’s one more thing I needed to know. Maybe there’s one more thing I don’t know. Maybe if I get this next tip or trick, it will all make sense and then I can jump in.” At the same time looking back in hindsight, I knew everything I needed to know after three or four weeks and I spent an additional two months in analysis paralysis. I was buying more books, more courses, and more stuff, which isn’t necessarily bad.
You were afraid. You were unsure of yourself. If you’ve got the right coach, they should’ve fixed that for you pretty quick. Did you get the right coach?
I got an awesome coach and he fixed it for me immediately.
What did he say to you?
He said, “David, quit playing around. You know what you need to do. You are in the marketing business. You are not a real estate investor until you buy some rental properties or you fix and flip. You can flip houses without being a real estate investor and what you need to become as a marketer.” I kept sending him all these questions. “What happens if you go on, you buy a house and you do this? What happens if you go and they say this? What happens and what happens?” He said, “David, these are all great questions but they’re all irrelevant. None of these things happened and you are worrying about them. Instead of worrying about all the possible things that could happen, why don’t you try to worry about the things that are happening? If you don’t know the answer at that point in time, come to me or go seek a solution but don’t sit around all day thinking that you need to know every scenario.”
He said, “How many times your phone has rung this week?” This is basically day one for a motivated seller. I’m like, “Maybe two or three people that are calling back from my cold calls.” He said, “It’s not bad.” That’s in a week, not a day. He said, “How many people are you calling out a week?” I was like, “Maybe 20 or 30.” He goes, “That’s your problem right there. You already know everything you needed to know. You have basically paid me to light a fire under your butt.” I said, “That’s exactly what I paid you to do. I want to start wholesaling properties, what do I need to do?” He said, “You need to put in 4 to 6 hours a day cold calling outbound or you need to put some money into a marketing budget. The two of us, we’ll figure out what we’re going to do with that. If you don’t have any money to invest, you need to invest time. You either have a monetary budget or you have a time allocated budget.” His name was Joe. I said, “Joe, I got both, I’ll do 4 to 5 hours a day, whatever it is that you want me to do because I had quit my job at this point. I’m going to put some money into some postcards.” That was the first marketing I did. The first marketing I did after I paid him the $5,000 to join the program. I spent another $1,500 or $1,800 on my very first round of postcards.
$5,000, $2,000 and $2,000, you’re at $9,000. I put in this perspective for people. They walk out there and people say, “Flip this. It makes it look so easy.” I didn’t start with $9,000 because I didn’t have $9,000. I couldn’t even afford plastic. I went and took down all the politicians signs, flipped them over and cut them in pieces and wrote on the back of them and nailed them up to telephone polls by 100. There’s no excuse. You can start from broker or you can start with a budget. We’re talking about a guy who started with a little bit of a budget.
This is all on credit cards.
That changes again.
I am not discounting the fact that I had spent $2,000, $5,000 and then another $1,500 or $1,800, but I didn’t have the money to spend. It was all on a credit card.
You’re betting on to come?
That’s right. What happened next is I sent the postcards out and I essentially started working 4 to 6 hours a day. That’s it. I wasn’t doing 10, 15 or 18-hour days, but 4 to 6 hours a day was equivalent to two weeks of the amount of work I had done in the previous two weeks. I was only making cold calls, 5 or 10 minutes a day on average prior to hiring my coach. I had no inbound people calling me unless they were calling me back because I had left him a voicemail about a property that they were either selling or had for rent that I was trying to buy. It was that simple.
We breeze over a couple of things here, but I’m going to stop and pull you back. You mailed out some postcards. They’re usually about $1 a piece. They’re 1,800 postcards maybe.
Postcards are about $0.40 apiece. Call it $0.50, that’s about 3,000 or 3,500.
Who are you mailing to? People do want to know that.
I was mailing to absentee-owned individuals with high equity as well as the vacants. I mailed the two different lists because the first list I pulled only had about 1,200 people on it for the zip codes I wanted. He said, “No problem. Find some vacants in that area. If you don’t, I have enough to meet your marketing budget.” which at that point was 1,500 to 1,800 then do more zip codes. He’s like, “Let’s not get into the weeds about what the list is.” People will be motivated or not and if they’re not they will be at some point.
I’m going to assume you’re going into medium price range houses?
Medium to low end. I was scared of the houses. I’m in the St. Louis market and the medium house range here is, $100,000 to $150,000. The nicer homes, $300,000, $400,000, $500,000 or $600,000. I was scared to touch those at the time.
That’s a phenomenon. Everyone goes to the cheap houses because they think they don’t have the money to do the big houses, but there are strategies to do the pretty houses as Ron LeGrand says. You don’t need any more money than you need to do the little ones. There’s hardly ever a true zero down. There’s always some little expense, but some of it’s so small, we call it zero. I don’t appreciate those people that want to split hairs. It wasn’t free. You spent $100. I said, “You spent $100, I made $20,000. If you want to debate about that not being free, then go waste your time.” You did absentee owners, which means someone owns a house but they don’t live in it or vacants. You did high equity, which means you tried to cipher whether the note was 5 years old, 10 years old, 15 years old or 20 years old. Is that what I’m getting from you?
No, it wasn’t so much in terms of the age of the note. I was buying my list at the time from ListSource. You can actually filter those leads out by the amount of equity that it’s presumed. I don’t know their exact algorithm or how they do that.
That’s how they’re doing it. I’m pretty sure. There’s no other way to do it that I know of. You can do it yourself or you can get ListSource. How ListSource does it is that these guys borrowed money 25 years ago and they’re still paying. The same lien is still on there. Obviously, they must have paid this note down a lot. There must be a lot of equity, not to mention the fact that the house should have gone up in value from that time.
My criteria was 30% to 100% equity.
Did you get a lot of return postcards?
I did get a lot of return postcards and at the time I throw them away because I didn’t know better.
We all did it. We all threw it away at one time. Somewhere in the back of your mind goes, “That house is still vacant. It’s still there.” Just because the card came back, it doesn’t mean the house vanish. The house is still there. Someone owns it. I bet you. It dawns on you like, “If I could find that guy, I bet you no one else’s postcard got there either. I’d be the only guy in the room.”
We skip trace them all and they come back. At the time I didn’t know any better.
What skip trace service do you use?
We use True People Search, which is free to start and then beyond that we use TLO.
We use TLO too. Is that when you’re starting out or as you say you try to use that resource?
We searched every single person through TruePeopleSearch.com first.
If you don’t get them then you go to another.
The reason is that 75% of the time, I can find it in their information for free. Why would I want to go pay $1?
I learned something. You’re mailing out these postcards. If someone calls you, they’re motivated seller. Do you have a script? Let’s talk about what that conversation sounds like. Where do you go with that conversation? I call you, I’m a motivated seller. What happens?
“Mitch, I’m Dave. I appreciate your time. Thank you for calling. What is the address of the property?”
1125 Alamo Street.A wholesaler does nothing more than provide liquidity to the marketplace. Click To Tweet
“1125 Alamo Street. I know the area well. I own a bunch of properties right around that place. Is this a 3-2 that’s about 1,200 square feet?”
Yes, with a two-car garage.
“I love it. Mitch, you got one of my postcards or you heard my ad on the radio or you saw my ad on the online. I want to thank you for calling. Is this the best number to reach you back at?”
Yes, it’s my cell phone.
“Mitch, why are you selling the property or why do you have interest in selling it?”
It’s a mess. It’s sitting there vacant and people are tearing it up. I owe some taxes on it. I’m ready to turn the page on this, but realtors don’t want to sell it.
“No problem at all, Mitch. I bought 98 houses. I would be happy to buy this house from you. I do want to say one thing, I’m an investor and I don’t typically pay retail. However, I buy houses cash as is, and I can typically close within 2 to 3 weeks. Does that sound like something that’s going to work out for you?”
Yes, what are you thinking I can sell the house for?
“I’m thinking that I’m going to need to see it first before I can make you an offer. However, I’m typically buying houses in this neighborhood between $80,000 and $100,000.”
What if I owe some back taxes?
“How much taxes you owe?”
It’s around, $4,000 maybe $4,500.
“How much do you owe on the property?”
It’s around $30,000.
“You owe $30,000. Let’s assume that I come to the closing table with $80,000. The title company is going to pay the $30,000 loan off and they’re going to pay off those taxes. You’re going to get difference so you don’t have to worry about those back taxes. We will handle that for you. We want to make it easy for you.”
What if there’s some stuff in there I want to get out?
“We make it easy. The name of my company is House Sold Easy. If you need more time, no problem. If you don’t want to leave that stuff behind you can leave it behind. Your problem becomes my problem. We want to make it easy for you. Is there a good time that I can meet you at the property?”
Yes, anytime. I’m retired.
“Let’s go down. Do you want to go right now? I’ve got two hours on my schedule.”
I want to go now.
“I’ll meet you there. I’ll see you in fifteen minutes. Let’s go.” That’s it. It’s simple. I don’t necessarily have a script. What I do is I seek motivation. I figured out why you want to sell it. If you don’t tell me why. No problem, I asked when. The When reveals the Why. Here’s a perfect example, 7 to 8 months ago I was buying a house. A guy calls me up, “Dave, I got a house for sale.” I’m like, “When can I come over and see the property?” He’s like, “I’m here now.” I’m like, “I’ll be over this afternoon. You’re going to be there in about 2 to 3 hours.” I get there. I said, “Mr. Seller, why are you selling the property?” He’s like, “Dave, it’s not really your business, but I need to sell it and I need to sell it by next Friday. I literally need to have cash in hand next Friday.”
I’m like, “Maybe we can make that work. I’m an investor. I don’t typically pay retail, but I would love to buy this house, assuming that I can get a good deal on it.” As a wholesaler, all I do is I trade convenience for a discount. That’s all I do. A wholesaler does nothing more than provide liquidity to the marketplace. I make this very clear whenever I talk to sellers. I’m very transparent and I tell them, “I don’t do this for free. I don’t buy houses to lose money. I don’t buy houses to break even. I have a family that I have to feed. This is my business. However, if you are willing to give me a discount on the property, I am more than happy to purchase it. Pay you cash close quickly and buy it as is. You don’t have to do anything to the property. You can leave everything behind.”
I liked that approach because a lot of people are out there advertising them. We pay a market price for houses and everything and then they get there and they want to change the story or run the house down. I don’t like the bait and switch. I’m more of a believer in how you do it. “I’ll be happy to solve your problem pretty fast with cash within 3, 4 or 5 days, but you’ve got to leave me enough room to make a little money. I’m not doing this for my health.”
I usually do this on the phone. I give them a range. Let’s assume that the ARV is in that neighborhood or $150,000. I’m going to take that and I’m going to times it by anywhere between 60% and 75%. I’m going to say, “This is where I’m buying homes in that neighborhood.” If they say, “You’re crazy, the home’s worth $150.” I’m like, “No problem. If you still want to sell it and you want me to help you connect you with a real estate agent that can maybe get you that, great, but there’s no guarantee they’re going to get you that there’s no guarantee that it’s going to happen quickly. It’s going to take a long time. It’s going to be a painful process. I’m happy to help you do that.” However, I don’t even typically ask people what they’re asking for a property. The reason is because one time out of 1,000 what they ask is lower than what I’m willing to pay. I typically just figure out what I’m willing to pay and then I make that offer. I set the bar really low and then what happens is they say, “That’s crazy.” They say, “We’re in the ballpark. Can you come up a little bit?” Maybe I can, most of the time I can but if they say, “Your offer is completely crazy.” It’s not that the offer is crazy, it’s that they aren’t motivated and I am way too busy doing deals, being successful with other things in my life than to waste time chasing an unmotivated person. We put that person into our CRM, we follow up with them every month or every quarter or sometimes even every year.
If they aren’t motivated to take an offer that’s discounted, then I have no motivation to buy their house cash as is quickly. This is a trade. All I’m trading in is a convenience for a discount. I will tell people that straight up. If they are in a bind, then that offer looks more and more. We talked about this guy that I had talked to and he wouldn’t tell me the why. What I did is I said, “Why don’t you want to sell?” He said, “It’s not your business, Dave. I would like you to give me an offer and I’d like to close by next Friday and I have cash in hand.” I said, “I don’t know if I can do next Friday, maybe I can but when do you need the funds? What’s the last day that you could do this?” He said, “I need these funds next Friday.” He stuttered and he’s like, “I’m going to be in jail on Monday.”
He told me his why by me asking when. If you ask a seller why and they say, “Dave, this isn’t your business or I’d rather not tell you why.” Ask when they need the funds. If it’s very short, give them some pushback and then they’re going to tell you why they need the funds when. If you want to understand somebody’s why ask when and it will reveal the why. He essentially said, “Dave, I’m going to be in jail next Monday or the following Monday, so I need to have my funds this Friday.” I say, “I don’t need to buy this house. I bought 98 houses. I didn’t need any of them. This is a business. If you want to sell it to me at a great price, I can close next Friday.”
That’s a really important point because there’s a lot of postcards going out.
I don’t need any of these houses guys. None of them, but I would love to buy them at a great price. I am very transparent. The reason is, is I want to disqualify myself as being a retail buyer. I want to disqualify them as being non-motivated. If either of those things crisscross, I don’t waste time talking to that person, drive into their house, trying to build rapport with somebody that isn’t going to take a discount. There’s no worse waste of time. You have to put that out there in the beginning. I’m not saying that if somebody says, “Your offer’s crazy,” that you hang up the phone or they hang up the phone on you and that’s it. You’re getting started. My average deal and I’m doing about 8 to 10 a month.
It takes 4 to 6 months. That doesn’t mean that you can’t go out and get a call and lock up the property and have it sold or even do all three of those in the same day. I do it all the time. The average deal takes 4 to 6 months because I’m averaging my deals over five years. What happens is I’ll send a postcard out or somebody will hear my radio ad or whatever the marketing that I’m doing and we’ll touch base, we’ll talk and we’ll have a great conversation. Some conversations are three minutes, some are 30 minutes. I don’t care about talking on the phone for a long period of time, but what I do care is getting in my car and driving somewhere, spending a lot of time there, and then not leave him with the contract. I want to qualify.
I also want to disqualify myself as paying retail right away, immediately because then it saves your time, and then what you have is a business, not a job. If you can be more efficient at it and you can outsource certain parts of it, you have a business, not a job. Ask when, when they don’t tell you why. The When reveals the Why. Disqualify yourself as a retail buyer. You don’t have to buy that house. In fact, you don’t even need or want the house. However, if you can get a great deal, everything changes. Qualify yourself as a retail buyer and then try to qualify them as motivated. If they are not motivated, then say, “The house is probably worth this and I’d be willing to pay you in this range,” which is going to typically be between half and 75%. If they are willing to play with you, if you are in the ballpark with them, then set the appointment, spend more time building rapport, but get it out immediately. There’s no reason to small talk somebody 25 minutes to then say, “I’m glad you called. I also liked the Cubs.” Whatever you’re talking about, it doesn’t matter. Get to the point.
If they want retail, you offered to send them to a realtor. What’s your relationship with this realtor?
I own a brokerage locally. I’m not an agent and I’m not a broker, but I have a partner who’s a broker and we own several companies together. We have agents that work for us. I will send them the lead or I will give the number of the agent to that particular seller. There are lots of ancillary benefits of wholesaling too. Wholesaling’s a means to an end for me. Wholesaling is a job, but I love it because I can make a lot of money very quickly. At the day, it’s a job. My motto is very simple it’s “Keep the best, sell the rest.” All the marketing that I do, I do it for me. I do it because I want more rental properties.
I want a nice fix and flips. What ends up happening is 90% to 95% of the deals that come in, I don’t keep, I sell because they’re not good flips or they need more money than I’m willing to spend. I can make a quick $8,000 or $10,000 on a wholesale versus waiting 3 to 5 months to make $15,000 or $20,000 or $30,000 or whatever it is. One in the hands is better than two in the bush. Wholesaling is a means to an end for me to find the best rental properties and the best deals on my fix and flips. I keep the best and I sell the rest. It just so happens that the rest is like 90% of the deals that come through, but that’s okay.
It’s a way to work your way out of a job. You buy enough of these and you get them cashflowing enough, you set yourself up to not have to do it anymore. Of course, if you’re like most of us, it gets in your blood. You become a deal junkie. Are you addicted?
Yes, you could say that.
Are you going to have to go to wholesaling anonymous one day so you can get unhooked from that?Data is only as good as the person putting it in. Click To Tweet
It’s quite possible.
What are you doing for CRM?
I actually have a couple of CRMs. I don’t recommend you do what I do. However, I have a couple of good systems. I’m not just a wholesaler and we do fix and flips. We have about 50 plus rental properties online. Our goal is to get to 150 in the next 24 months. Basically, buying one rental a week. We’re growing pretty quickly. We use Podio with the backend of GlobiFlow to automate and manage the day-to-day operations of all of our businesses. That is a place to take notes and to create tasks. Podio owns GlobiFlow and both of those companies are owned by Citrix. GlobiFlow, they need to merge these two into one. It’s stupid that they’re in two different URLs. All GlobiFlow does is connect to Podio and it automates tasks, contracts sending, PDF creation and all this stuff in the backend.
I’m using Podio myself too and it’s quite the deal. Of course, I have eight people in the organization, they all got to get notified at different stages. It’s about the same volume as yours, about 100 houses a year. Don’t try to do that, but are you doing it by yourself because you have to participate because only you know the structure of your office and who your players are. You have to draw the tree. After that, I suggest you get someone to help you or to actually program it and make do what you want. Are you doing this stuff yourself or are you paying some Podio expert to get done what you want?
I do both. In the beginning, I was paying somebody and then I had learned what they were doing and I was like, “I can do this myself.” I do my own automation and I changed them daily too because I can make them better in real-time.
We understand the basics of it, but I can tell you something else. The CRM that we have is going to take the place of two people. We would need two people to do this stuff and now we don’t. I went back and forth, I thought, “Maybe I would go on it within InvestorFuse.” My problem was I was already too far into building this.
That’s a common problem.
I was too far into it to stop and go with those guys. InvestorFuse has got a good program. It can get you jump-started really fast. I like those guys over there. I was too deep in and too committed to build on my own to stop. I sold a lot of people on the idea of InvestorFuse or got them to look at it.
I’m very familiar with InvestorFuse. I’m very familiar with a couple of different software that are built on top of Podio and all of them are great. I’m not going to sit here and bash anyone’s software. They’re all great, but the data is only as good as the person putting it in. It doesn’t matter if you got 100 bells and whistles or not if we’re not using the CRM.
Tell us some of the things your CRM does.
My CRM can automate a contract. Maybe eleven fields that I enter. I had entered those fields. I click one button, it generates a contract. I type in a name and an email address. It sends that contract to them via RightSignature. If they sign it, it comes back into the CRM. It creates tasks for everyone that’s involved to start marketing that property on our website. It also pushes that into a new app that we track our closings in. Our closing coordinator is aware that there’s a new property that needs to be added to the board. That’s one example. That’s contracts sending. We also generate notes in deeds of trusts with Podio with very simple inputs. We have two virtual assistants in the Philippines that have access. They have phones as well via RingCentral. They’re in there all day. They actually answer all of our inbound calls. They also do all of our outbound follow-ups.
You have VAs answering your inbound calls?
Are you training them yourself or are you having someone train them and you’re hiring from a company?
I’ve been working with my virtual assistants, one of them for four years, one of them for two-and-a-half years. I trained all of them myself. I try to spend very little time on my phone in a day. The more times my phone rings, the more distractions I will have in my life and the least focused I can be on the things that matter.
Delegation’s not the easiest thing for some of us to learn, but once you get the hang of it. I got the hang of it so good, I started to piss my wife off. She’s like, “Honey, can you go down and pick up the dry cleaning?” I’m like, “I make $800 an hour. Can we get someone else to go do the dry cleaning? I know some of the most expensive dry cleaner, picker you’ll ever hire. Why are you asking me to do that?” It doesn’t go over really well, but you’ve got to think like that. Don’t work below your pay grade in any area. You won’t ever catch me out mowing the lawn unless heaven forbid, I wanted to get a sun tan, sweat and burn some calories. You won’t see me out there. If I want to do that, I’ll go to the gym. I’m not mowing the yard.
Our CRM and Podio, it’s great. It manages my wholesale business. It manages my rental business. It manages our hard money lending, which is very small and it’s only for St. Louis people, I’m not promoting that, but we have a business that does some lending. We have several other businesses. We have a podcast. We use Podio to manage all of these different things because you can tag people, you can create notes and you can make follow-up tasks and appointments. It’s very basic, but I love it. Podio is great to keep everybody in the loop. However, we used another CRM called REI BlackBook. REI BlackBook is a marketing machine. They have a CRM built-in. I’m not going to bash it, but I don’t like it. I like Podio better. Let’s put it that way.
It’s a little more customizable. You can make it personal and change it easier?
Yes, REI BlackBook is fantastic. I’m a huge fan. I just never liked the way that the CRM inside of it was worked and talked to each other. Since then they’ve made some major improvements, but I got into Podio and trying to change it to something else after you’ve built something out for years, it’s not worth it. Even if it could be better, it’s like I already know everything. All my team knows everything. I don’t want to mess with it. What I use REI BlackBook for, is they can generate websites very quickly and you can also add your properties to those websites very quickly, which is awesome. You can also add flags like available, under contract, pending, or coming soon. That allows me to market all of my properties.
They also have lead pages. They have email blasting. The way I look at it as pre-contract, I use Podio. Post-contract, I use REI BlackBook and I’m still taking all my notes in Podio, but those property pictures get added to REI BlackBook. They get added to the website, it goes on my website. I send a text blast or an email blast or sometimes both to all the buyers that have opted in on my website. I’m not taking buyer calls being like, “What do you a look into buy?” That’s not efficient for me. My virtual assistants are doing that. If somebody asked me what I have available, I send them the link to my website. If they say, “I want to be notified.” I send them a link to my buyer’s list opt-in. It’s all automated through REI BlackBook.
The properties at the website, they get emailed out to the buyers via that website. They also have a phone system in there. They have a pretty cool system for following up with people and putting them on drips for text messages, ringless voicemails, even letters, even one-off letters. There where I do the majority of my marketing post-contract. It means that I follow up with my buyers in that system and all my sellers are in Podio. I don’t recommend you use two systems. It’d be much easier to use one, but that’s how I’ve always done it because I didn’t like the CRM and I wanted to run more businesses out of Podio than a real estate investor specific CRM would let me do. I had more freedom. I also started using a third CRM called REsimpli. I’m not using it full time by any means, but I’m dabbling with it. The reason it is the creator and owner of the system is one of my good friends and I’m helping him with feedback. I really like the system because it’s unlike any other I’ve seen. What I mean by that is KPIs. Let’s talk about KPIs for a couple of minutes, Mitch. With Podio, your KPIs are ugly.
Tell everyone what a KPI is.
KPI is a Key Performance Indicator. Basically, it’s a snapshot of how you’re doing in your business. It’s a way to measure how much you’ve spent and how much you’ve earned, where you’ve spent, when and why. It gives you the ability to track certain things. For instance, how much am I spending for an inbound lead? How many leads do I need to get to get an appointment? How many appointments do I need to get to get a contract? How many contracts do I need to get to get a wholesale deal done? Even beyond that, what’s the number of days on average between the times I talked to somebody at the time I can get a contract, or the number of days on an average between the time I get a contract and the time I sell it?
It’s very difficult to run these reports out of Podio. We’ve spent thousands of dollars having KPIs set up and we end up deleting them because they suck. Podio is very inefficient with that type of thing. They’re very great at other things. This software REsimpli that I’m hoping to pivot it too eventually. For Podio, I’ll probably still keep REI BlackBook because it’s a great marketing machine and I haven’t found anyone that can compete with them in that realm. REsimpli is created by a CPA. Everything that you enter in there, you can actually link in your bank account too, which is sweet. You can reconcile your bank, you can remove QuickBooks altogether with this software. The creator of the software is a CPA.
He built a CRM on top of the spreadsheet, whereas everybody else is trying to build a spreadsheet on top of a CRM and that’s impossible. His system is all about your KPIs and it records all the inbound and outbound calls, which I didn’t have. I can better manage my virtual assistance versus looking at a call rail sheet or an analytics sheet of how many numbers were dialed in or out. I can actually listen to these calls and if my virtual assistants are dropping the ball or don’t have high energy like me, then it’s time to have a talk with them or find a new virtual assistant. Managing virtual citizens can be difficult. I don’t want to get too far into the weeds on these different topics, but that definitely has solved multiple problems for me. I’m spending about $160 a month on QuickBooks for seven or eight different companies that I run. I can eliminate that completely with this software too. I’m using three. I don’t recommend you use three. I recommend you use one, but you ask what I use in and that’s it. I wanted it to be completely transparent.
That’s good. Telling the truth about it. I wanted to let you guys know you can get a free wholesaling course. Go to 1000houses.com/dodge. Go there and get his free wholesaling courses absolutely free. He doesn’t sell anything as a general rule that I know of except for houses to wholesale buyers. You can also get a copy of his book, Ultimate Guide to Wholesaling Real Estate. It’s actually the first 30 podcasts. If you rather shortcut that, you can go to his podcast, Discount Property Investor Podcast. It’s all about doing that first deal. If you haven’t done your first deal, get it under your belt. Don’t get stuck down in the minutiae. The last topic, how are you wholesaling your houses? What’s your average day on the market with a wholesale deal and what’s your average profit? How are you doing this?
In the Midwest, we don’t have the luxury of having the massive spreads like a lot of people do on the Coasts or in higher expensive markets. Our average wholesale deal is usually around $7,000 but $7,000 could change a lot of people’s lives.
Especially if you do it twice a month or three times or eight times like you’re doing it.
$7,000 is actually quite a lot of money. Our average deal is $7,000. We typically like to have our deals sold within about four days. If they aren’t sold within four days, then we’re pricing them too high or we need to go back to the seller and renegotiate our prices with them. We typically shoot for ten business day inspection periods. Let me give your audience another little gold nugget. I’ve done a couple of nuggets here. This is actually one of my favorite nuggets here, Mitch. When getting a property under contract you want to have CYA closes, that stands for Cover Your Ass. There are lots of different ways to do CYA closes. What I like to do is I like to give myself ten business days to inspect the property. Why business days?
I know why. It’s two weekends, so you’ve got fourteen days. Heaven forbid, there’s a holiday like Labor Day. That gives you fifteen days.
If you get twenty days versus twenty business days, you’re going to have even more. You’re going to have eight extra days. You basically by yourself 40% more time by adding one word to your contract. It’s one of my favorite tips. When we shoot for ten business day inspections, we try to have our deals sold within four of those days. If not, we use that extra time to renegotiate the deal down. We probably do as many assignments as double closes. We’re probably doing 8 to 10 deals a month, I’d say on the low side. Some months 12 to 15, but we’re usually doing at least 8 to 10.
If it’s a wholesale deal, it should be gone with the first person you call, at least the second or the third person you call. Sometimes you don’t want to take. The reason why you would shotgun out a wholesale deal is you’re trying to find a greater fool. You’ve got a high price, you’re shooting it out to 200 cash buyers hoping to find an idiot and get a high priced. If you have it at a wholesale price, you should be able to pick up the phone to one person who’s a major player in your town and it’s done. If it’s waiting around for over four days, prices are too high. I agree with that. What’s your opinion though?
There are a lot of wholesalers out there trying to find a greater fool. I ended up turning those guys off black and I’m out. I wouldn’t even take their calls at all. If I want to wholesale a deal, I leave enough money to be a true wholesale and I pick up the phone and call one guy. If he’s out of town, I’ll pick up another guy and call another guy. I sell two or three phone calls. If I send that same deal out to everybody, I’m going to make one guy happy and I’m going to piss off everybody else because, “Why don’t you sell it to me?” I don’t shotgun out my wholesale deals. I’d pick up the phone and call a couple of people to say, “You’ve got time to buy a house because I know you want it. Do you got time?”
That’s a great strategy. I love it. I think it’s awesome.
Do you use mass texting in your sales?
We’re getting away from doing it. We use mass texting to promote the website that has all of our properties on it. Essentially whenever a new property added to it, we will notify the buyer’s list. They opt-in. I’ve never added anybody to my texting list. I actually added it in the footer of my emails saying, “If you want to get notified in real-time.” A lot of people don’t check their email like 8:00 in the evening. If I send out a deal at 7:00 AM and they want to know about it. We decided to implement that. That list quickly grew to over 2,000 people that wanted to get the text. However, it’s very expensive. I probably spend anywhere from $25 to $30 sometimes per text to get that out to people. I’m trying to scale that back to maybe around 50 people or so, but yes, we do that.Wholesaling is not easy, but it is simple. Click To Tweet
I can’t thank you enough for taking the time to come on. Maybe I’ll show up on your show one day. I like to sell my houses with owner financing. I pick up about the same as you do in the down payment, $7,000 to $10,000, but they still owe me about $500 a month for 360 months. That’s $180,000.
Are they always $500 a month?
I averaged $535 a month positive cashflow, but I use $500 for an easy number. If I sell a house with a $100,000 house with a 10% down payment, I got $10,000 down. That’s equal to a wholesale deal, but if I seller finance it on a 30-year note at 10%, then they still owe me. I never borrow over 65%. I average 58%. I buy my houses at 58% average of what I can owner finance them for. At the end of the day, they owe me $850 payment. I owe my private lender $350 and I collect about $500 in the middle. If you take 360 months, they owe you that’s $180,000. I don’t have any surprises. My note’s not forever, it’s temporary. It’s going to get paid off one day. Your rent houses are forever.
I don’t get the appreciation of those houses because it’s not my house anymore. I lose appreciation and depreciation, but I also lose all those liabilities from the back fence to the front mailbox. I’m not responsible for any of it. I get the check and if it clears, it’s my money and I never have to give it back to any maintenance guy or anything unless I got to foreclose on somebody. That’s the two sides of the coin that I teach. Buy and holds have been around and more popular. Owner financing is a little bit different. The only problem with owner financing is you can owner finance 300, 400, 500 notes and be collecting the payments. You better take the money you make from that and buy something that rents.
I chose many storages and boat storages, self-storage because it was the easiest rental in my little brain. When you buy all your rent houses, you’re done. You’re buying forever assets. They’re yours until you decide you don’t want them. In the seller financing, I don’t have to deal with tenants and toilets, but I have to take an extra step and I have to take the money I make from that cashflow and I have to buy something forever. Be it strip centers, apartment complexes, rental houses or commercial buildings. I buy self-storage. I have 1600 doors and everybody owes me $100 on the first of the month on average. It’s been a great business. It started in 1991 with thirteen units, 30-something years later, it’s built into something. It’s funny how these things take time, don’t they?
You’ve got to be patient.
Let’s talk about all that stuff you talked about the CRMs and the systems. You didn’t learn this stuff overnight and no one goes in and hold your hands with this stuff. You have to jump in and start.
You’ve got to go in and be okay failing.
Any last words of advice?
Don’t do what I did in terms of thinking that you don’t know enough. You had mentioned that I have a free course. Go check it out. Check out the course. All that money that I had spent, it’s over $100,000. All the things that I’ve learned, I’ve added to this course. You don’t need to go hire a bunch of people or buy a bunch of books. Learn the basics. The wholesaling real estate, I don’t want to say that it’s easy because I would be lying to you. Sometimes it’s very difficult. However, it is simple. There’s a big difference between simple and easy. I do my best in the course to make it both simple and easy, but wholesaling, in general, is very simple. You want me to tell you what a wholesaling looks like in under 30 seconds? You market it to motivated sellers. You use a contract to lock up a property, find a cash buyer and you take it to a title company and get paid. I’ve done that 400 times for several years. It doesn’t mean that it’s necessarily easy to do that, but it’s super simple. Don’t think that you need to learn more that there’s more out there or that you need that one extra tip to be able to get out there and do it. You didn’t have one of two things or both.
You need to allocate time to outbound calling and texting sellers or landlords or you need to allocate money towards a marketing budget that will get your message in front of them so they call or email you. You either go hunting or you go fishing. You don’t understand those analogies? Whenever I send out 1,000 postcards, I’m basically standing at the edge of a lake with 1,000 fishing poles or I could pick up my phone and I can start calling people saying, “I own a couple in the neighborhood. I’m looking to buy more. You want to sell?” That’s hunting. You either hunt or you fish. You get a time allocation and you get the money that you allocate.
You’re fishing them or you’re stalking them.
That’s all there is to it, Mitch. The only thing I would like to end on is don’t overthink it. It is extremely simple. My company is doing 8 to 10 wholesale deals a month. You can do it too. I’m not special.
You’re not virtually, you’re not doing this all over the country. You’re doing this in your hometown.
I’m doing this in my backyard. I don’t typically like buying. I wholesale because I want the rentals and I want the rehabs. I’m marketing for houses I want. I keep the best, I sell the rest. I don’t like driving more than 20 or 25 minutes to a property. What does that mean? I don’t market to properties 45 minutes away. Sometimes it randomly happens that way.
Unless you want to wholesale them.
My office is strategically located where three highways come together. I can get to any house in town in 25 minutes or less. I live in St. Louis. I only buy properties in St. Louis. I suggest you start there in your own backyard because you can learn very quickly whenever you can set appointments, walkthrough properties and build rapport with people. You can learn very quickly how the process needs to happen. It’s not a hard process but it’s a process. Keep it simple.
Get your Ultimate Guide to Wholesaling Real Estate book. Be sure to check out his podcast. Thank you for taking the time to get you some David Dodge. Please check out TaxFreeFuture.com. You won’t believe what your financial advisors are not telling you. We’re going to tell you what they’re not telling you, why they’re not telling you. It’s all going to make sense. David, thanks a lot.
About David Dodge
400+ houses flipped to date. Author of “The Ultimate Guide to Wholesaling Real Estate” Also have a podcast myself, a free course on wholesaling as well as courses and a coaching program.