Wholesaling Lease Options With Joe McCall
Episode 455: Wholesaling Lease Options With Joe McCall
Everybody thinks that their market is the hardest place to do deals. While it’s true that it’s more competitive and more challenging than it used to be, the deals are still out there, and Joe McCall is out to prove it. Joe helps people find simple ways to make money in real estate. Today, he joins Mitch Stephen to talk about lease options and why he thinks they’re the easiest and fastest way to make money in real estate! He also shares some valuable lessons on the best wholesaling lease options you can use to boost your sales. These options are so simple that anyone can do it. All you need is action, consistency, and your phone. Are you experiencing difficulty getting deals? Join Joe and Mitch Stephen in this conversation and discover how it’s done.
I’m here with Joe McCall, and we go back to the CG days. It was years ago. I first met him over at Collective Genius when we were in a mastermind together. He is brilliant. I’m glad he’s on. He’s always on the cutting edge. We’re going to be talking about marketing and probably throwing a little about wholesaling lease options, which he’s written the book about. We’re going to be able to get you a free copy of that. I need to pay homage to my sponsor, TaxFreeFuture.com. If you don’t have a tax-deferred or tax-free retirement plan, then you don’t have any idea of the size of the tool that you’re missing in your tool belt. Check out TaxFreeFuture.com and watch the 37 little video vignettes. I started a lot with Self-directed IRAs with tiny bits of money. They all have large bits of money in them now. It’s all because of what I learned from things, the seminars and stuff. I’m passing them along here because you will not believe what your financial advisors are not telling you. I got that out of the way. Joe, how have you been?
Mitch, I’m awesome. Thank you very much.
You go around the countryside in your RV with your family, and make money every time you pull over.
Yes, but I have not done that in a little while. As my kids get older, it’s harder to travel because they’ve got many more commitments now with volleyball, gymnastics, basketball, music lessons, and with school too. It’s been awesome. We’re planning a trip to Turks and Caicos. It’s going to be a lot of fun.
Did you go to every national park in the countryside or something?
Not every one. We went for three months on an RV trip through the western half of the US, Northwestern mainly. We spent a lot of time in the Glacier, Yosemite, Yellowstone, Olympic National Park and Mount Rainier. We went up to Alaska for three months and we were doing deals while traveling. We’re doing deals here in our backyard without even seeing the houses, why can’t I do deals while traveling in an RV or traveling around Europe? We’ve done that several times, three months at a time. We’ve been to Europe twice with my family, wife and four kids. We went on a three–month RV trip with my family and we brought our dog. She probably didn’t enjoy it as much as we did but we’ve done a lot of traveling. We homeschool our kids so we get to do that.
That’s a lot of territory to have to mark as a dog.
She didn’t like it because she wasn’t in her normal bed. She was always on a leash when we were in these national parks.
Was the internet connection a problem in Europe at all?The follow-up is always important; it works in every market. Click To Tweet
No. What I would do was I had an iPhone, and every new country we would go in, we would get a new chip. I’d get prepaid internet plans. It wasn’t cheap. I wanted to make sure I always had the fastest high-speed internet I could get. Whenever we’d go into Italy, for example, I’d have to go find what was the fastest internet provider there for cell phones. I would get their chip and pre-pay usually a month at a time for data. I would use that for my hotspot on my internet. When I was in an RV, I bought a Verizon hotspot plan and an AT&T hotspot plan. Especially when you’re in Montana, Wyoming, one might work better than the other. In a rare circumstance, I couldn’t get even data from a wireless plan. There would be a coffee shop where I could work for a couple of hours, and get internet from there.
Here’s the wonderful thing about that though. When we are traveling, it wasn’t like I was on vacation for three months. I was still working but I was forced to be so much more productive because I only had a small window of 2, 3 or 4 hours max a day where I could get any work done. I couldn’t work in Europe because of the time zone change. When we’re out in an RV, you can only sit on a picnic table in the park for a couple of hours and not get annoyed with the bugs or the weather or whatnot. When you’re in a coffee shop, you can’t work in there. I only had small windows of time and it forced me to be so much more productive and rely on my team to do more of the work for me. I would have to plan and say, “I only have this two-hour window. This is who I can talk to and this is what needs to be done and get accomplished.” I got more done forcing myself in this small little window than I would normally on an eight-hour workday.
You were probably plenty rested and rejuvenated up here too to do it with all this time off. Are you doing virtual deals all over the country or in certain states or just your own state?
When I was traveling in an RV, we were doing deals in four different states. I’ve done deals in maybe eight different states. When I was in Europe traveling around, we were mainly doing deals in Missouri.
Let’s talk about finding deals because that seems to be a challenge for people. I bought a house every 4 to 5 days for over two decades. I don’t know why or how, I have always been able to find deals. I met a partner, Mike Powell. I took this young whippersnapper at 25 who was full of piss and vinegar. He reminded me of when I was young, but he had a lot more brains. He’s a house magnet. He wakes up in the morning with houses stuck to the side of his face. He’s brilliant and gives a shit, and a lot of tenacity. He doesn’t get down about much. I have sat him down. He goes, “What are our goals for this year?” I said, “You want to know my goal? My goal is that you take some time off.” You plan about a three-day weekend every month, at least one. You take a couple of week-long vacations and show up to the gym every 3 or 4 times a week because if not, you’re going to relive my greatest regret, which is I didn’t slow down a little bit during the building of the whole thing.” I got so far that I’m lucky I’m alive. I quit drinking, quit smoking, and lost 55 pounds.
I’ve been watching your progress on Facebook. It’s been awesome and inspiring to see.
I’m about to put out my story called Enough. The subtitle is Enough: Drinking, Smoking, Kiss My Fat Ass Goodbye. Many people ask me about that and it was helping many people. I got people reporting to me from all over the nation and some parts of the world. They’re telling me how they quit smoking, how they quit drinking, how they’re losing weight. I thought, “This is going to help many people, and they will all want to know something different.” I write the whole 38 pages, everything I could think of, my thought process and whatever I did. I’m going to put it out by the end of the month for free. I don’t want to make any money off of it. If it’s helping people, I’ll put it out.
Let’s talk about finding homes because losing all that weight, taking care of yourself, getting blood tests, figuring out what you’re deficient in, and correcting with supplements, pills, vitamins, testosterone, and all kinds of shit that you need costs money. We got to sell some houses to get some of this done. How are people finding houses in COVID? I’m used to buying about 100 houses a year. I thought in the middle of 2020 I was going to be lucky to break 50. Somehow at the end of the year, we excelled. We got up to 83, but it was still a down year. A lot of people didn’t fare so well. MLS listings are down because they didn’t want strangers in the house. You can’t foreclose or evict anybody still so there’s no pressure point anywhere. What’s going on?
We’re finding most of our deals from the follow-up. There’s a saying, “You need to dig your well before you’re thirsty.” I see that over and over again. In our own business, when we’re looking back, it’s getting little a bear in here. We look at and start hammering our old leads. We start calling, sending letters to, and texting them. We’ve even coached students with, “If you need deals now the fastest way, go find another investor or another wholesaler who has old leads and offer to follow up with their old leads for them.” That is one of the fastest ways because when you talk to a seller, usually they are landlords. Most of the sellers that we’re marketing to are landlords.
They may not want to sell that house that we called them about six months ago. Six months later, that tenant they’ve put in there, maybe they’ve been late three months in a row. Maybe they’ve had some repairs that they’re sick and tired of. They don’t want to sell that house anymore, but they have another house that they want to sell, that they want to get rid of. The follow-up always is important. It works in every market, but it’s even more critical now in this market that people learn how to follow up with their old leads. If they don’t have old leads and find other investor’s old leads, offer to follow up with their old leads for them and then split the deals with them. That’s super important, especially if you’re a new investor and you don’t have any money for marketing. That’s where we’re finding most of our leads from.
The other thing I say is I pulled a bunch of properties that were on the MLS over 60 days. I see this all the time. The market is hot. You hear it, Mitch. Somebody in Denver will complain, “The market is so competitive.” I’ve been hearing that for years and years. Somebody in Des Moines will say, “This is the most competitive market in the country.” Everybody thinks that their market is the most competitive market and the hardest place to do deals. It’s maybe true that it’s more competitive and harder than it used to be, and it’s not as easy, but the deals are still out there. I can prove it.
If you picked any market now, we could go into that market and you hear this, “All you need to do is stick a sign in the yard and you get multiple offers, and it sells above the asking price within a day. Every deal is flying off the market.” Really? We could go right now to Redfin, which is free that anybody can get to, pick any market and look for houses that have been on the market for over 90 days. You’ll find hundreds of them. Maybe a few years ago, it used to be thousands. Now it’s hundreds, but there are still deals out there. I was doing it in Kentucky market for a student. I downloaded all of the properties that had been on the MLS for over 60 days that were under $150,000.
In Louisville, maybe the median home price is $200,000. I’m looking for the lower-end properties that landlords would buy. I found one under $150,000 and had been on the market for over 60 days. I downloaded all of the emails of the realtors, the listing agents. I split it in half. I sent about 65 emails to the realtors. I asked him a simple question. The subject line was, “Your listing at the address.” I said, “I saw your property that you’re listing. I’m a landlord. I’m looking for more deals in the area.” These were houses that have been on the market for over 60 days. They hadn’t sold yet. Why is that? Their price was too high. They were asking too much.
I sent this email, “Would your client consider an offer something in this price range? Before I send you a contract and proof of funds, I was wondering how negotiable your client was on their price. Would they accept something in this price range?” The price range I used was from a spreadsheet where I took 60% of the list price to 70% of the list price. I was making an email of soft pass offer for 60% to 70% of the list price. I used special software that I have. I had almost 75% of the realtors respond and the email does not look like spam. It does not have the unsubscribe information at the bottom of the email. It looks like a real email. It is a real email.
One realtor responded back. This was a house in a great hot market in Louisville, Kentucky. The realtor respondent. It was listed for $99,000. I sent her an email saying, “Would your client consider something from $59,000 to $69,000?” It was listed for sale for $99,000. It had been on the market for 93 days and hadn’t sold yet. I asked would they consider something between $59,000 and $69,000. She replied back, “I’ll talk to the seller and get back to you.” She talked to the seller and said, “The seller would accept something in the higher end of your range.” All I did was send an email and asked. Here’s the reason why you can still find deals. Motivation still happens in any market, whether it’s a hot market or down market or flat market. People die, people have tenant–landlord problems, people go through a divorce, people get sick, people get tired and frustrated of owning property.
They figure out that their house isn’t worth $1 million.
There are still motivated sellers out there in this market. You just need to make a lot of offers, talk to a lot of sellers, and don’t ignore the realtors. That was the whole point of what I was trying to say.
As a realtor, these are variables, “Dear Jeff, I noticed your listing at 123 Main Street. Do you think the owner might consider an offer at 60% to 70% of what the asking price is?”
That’s what I did. I sent her this email, “I’m just emailing to see how negotiable the seller is on their price. I’m a landlord. I’m looking to buy some more property in the area.” I didn’t want to use the word investor. I said, “Before I send you a contract and proof of funds, I wanted to see if they would maybe accept something in this price range.” The other thing you could do, and I’ve done this before with even better success, is send an email to the realtor saying, “I saw this property has been on the market for 85 days.” It’s a merge field. “I’m surprised because it looks like a nice house. If I could get that seller the price that they’re asking for, would they consider something creative, maybe seller financing or lease purchase or something like that?” That’s it.
You said that because you want to find out if they’re going to seller finance first.
This time that I was doing it, it was just a straight cash offer. My range that I was giving them, I call it a soft pass offer. Would they consider something in this price range? It’s just 60%, 70%, maybe it’s 70% to 80%, whatever you want to do, but I was looking for motivation. One out of 65 emails came back. We’re now working on the deal, looking into it, doing some due diligence and stuff. This will blow you away, especially when you know how to do creative deals like you do with seller financing or lease options or subject–tos. Send them an email saying, “If I can get you that price, would you consider something, maybe getting your price with payments over time?” However you want to phrase it. If you don’t want to use the word seller finance, you probably have great examples of this like, “If I could get them the price that they want, would they be willing to maybe do some seller carryback financing? What were some of the terms that you would use?”
“Would they be willing to take some of their money over time?”
You’ll be surprised how many realtors will come back with saying, “Maybe. Let me talk to them.” What do you do then? You pick up the phone and you call the realtor. You can tell the agent, “I’m still making sure you get your full commission” They may ask you, “Why don’t you just buy the house? Why don’t you just go and get a mortgage? It’s easy.” You can say, “I could. That’s not a problem. I’ll send you a pre-approval letter I have.” If you go to Better.com, you can sign up for a free account. It’s like Lending Tree or Quicken loans. What you can do with Better.com is you can get a pre-approval letter. It’s a soft hit on your credit. It doesn’t ding your credit, but it’ll give you a pre-approval letter. You can go there and I did this. I said, “I’m looking for an investment property.” It asked me which area I’m looking in and what was the price range and how much can I put down.Motivation still happens in any market, whether it's a hot market, a down market, or a flat market. Click To Tweet
I just put that I’m looking for a rental property in the St. Louis area, up to $500,000, and I can put 20% down. Not that I want to put 20% down. I’m just saying that I could. They gave me a two-page pre-approval letter for $392,000. It’s not a proof of funds, but it’s a pre–approval letter. You can use those to send with your offers. There’s no rule that says it has to be a certain type of document or whatever. It’s free. Try this. You’ll be shocked. I’m going to give you one other tip here in a second, but send these emails to the realtors. These are older listings. Remind them of the pain, “I saw this. It looks like a nice house. It’s been on the market 115 days, and this market’s supposed to be hot and everything, but it hasn’t sold yet. Why not?” It’s because they’re asking too much for it.
“What if I could get them that price? Would they consider maybe taking some payments over time? Could we do seller financing or lease purchase or something like that?” You’ll be surprised how many realtors will be open to the idea. They’ll say, “I’ll ask the owner and get back to you.” Let me say one other thing. This is something I’ve done that’s worked well. I have sent letters to the owners of these older listings asking them if they would consider. One of the ways is I sent a letter to the owners of these older listings, these are nicer homes in the median price range, not expensive, not cheap, but right in the good price range. I said, “I’d like to make an offer to buy your house, but I’d like to rent it for a year or so first. Let me know.” I send that letter out and I’ll get 1% to 2% response rates on that, which is huge in direct mail. There are a lot of opportunities there, looking for houses that haven’t sold yet. The reason why they haven’t sold yet is because they’re overpriced.
I want you to make note of one thing that’s the underlying theme of all this. You have to get off your ass and start doing something. You have to fire yourself, pull some lists, send some letters. I like to say, “You can’t get hit by the money truck if you’re not standing in the middle of the road.” When you don’t do anything, you’re like standing out in a pasture somewhere. No money truck can hit you. They’re on the pavement, somewhere around those dotted lines. To move yourself more into the middle of that road, you have to do something to put yourself in the path of that money truck. That’s mailing letters or knocking on doors. Anything is better than standing out in the pasture by yourself.
I know you’re in Texas. I’m picking Houston market here, Mitch. I’m looking right now at Houston and I’m looking for houses. I’m going to go right here on Redfin on the market over 90 days. I hear it all the time that Houston is a hot market. There are 4,800 homes on the MLS in the Houston area that have been on the market for over 90 days. Some of those are new construction. Some of them are expensive. Let’s remove the new construction. I’m going to say it had to been built before 2018. That’s going to bring that number down to 2,600. Let’s say max price is $750,000. There are exactly 2,000 homes that have been on the market over 90 days. Let’s do a price under $500,000 and these are houses only, no townhouse and condos.
I went to Redfin. I did a search for up to $500,000 and I clicked on more filters here. I said house only for sale for more than 90 days. I applied filters. Now there are 1,580 homes under $500,000, not new construction that have been on the market over 90 days. This hot market of Houston where it’s supposed to be, everything’s flying off the market. Everything is selling super fast. What if you went into this house that looks like a nice home, but it’s been on the market for 145 days. It looks like a nice house but it’s a little outdated. I’ll look at the wallpaper, the wood paneling on the walls, old carpet. It’s not the best property, but this house would still sell if it was priced right. The kitchen needs updating.
I will sell it for $165,000 and seller finance it with 10% down.
What if you sent an email to this realtor and say, “I saw your property there on English Oak Drive. It looks like a nice house. I’m surprised it hasn’t sold yet. If I could get them something close to $145,000, would they maybe consider some seller carryback financing? Could I make them with payments over time?” Make an offer. They’re getting motivated. The house is vacant too. That seller’s thinking, “We should have gone in and fixed it up and replaced the carpet.” That’s a big rehab right there. You can also go into PropStream or something like that. Find the address of the owner and send the owner a letter and say, “I’d like to make an offer. I’m looking for more houses in Spring, Texas. If I could get you your price, would you consider maybe renting it for a year or so first or do some seller carryback financing?”
I don’t care if there’s a mortgage on it or not. You can still send the offer, send a letter to the owner. You’re not going to go around the realtor and cut them out of their commissions. You still pay the realtor the commission, but you’re trying to deal directly with the seller. I would send an email to the realtor and the letter to the owner. If the realtor is mad, you apologize. This is a great solid house. You could sell this for $165,000. What if you gave the seller a contract to buy it for $145,000 and you sold or assigned that contract to an end buyer, and then you’re done and out of the deal. What were some of the things that you would do with this?
I try to get it for $130,000. It’s not that big a discount if it’s been on the market for some time. They have some spread there. It’s not a homerun.
What do you think their mortgage payment is on that house? I can look to see when they bought it in PropStream. Let’s say they did have a mortgage on it and you could rent that house out for $1,300, $1,400 a month. You could cashflow for $300 to $400 a month with that thing easy. What I’m saying is you could take over that mortgage and get some good cashflow.
Everyone knows I don’t like being a landlord for $300 or $400 a month. It’s too much responsibility for too little spread. Give me $10,000 or $15,000 down and give me a mortgage where I clear $300 a month where I don’t have any responsibilities for the hot water heaters. I’ll take that all day long. When you have thin margins, I try to get out of being the landlord and try to be the bank because I don’t have many responsibilities. When the check comes in from your buyer, whatever the spread is, it’s your money in the bank. When the air conditioner breaks, it’s not your air conditioner.
I felt sorry for the landlords. Every house on the planet froze to death for about 4 or 5 days down to 6 degrees here in town. Pipes were breaking everywhere and I’m worried for some of my friends who are big landlords because I’m sure they’re going to have some problems. When some of my friends have 300, 400, 500 rent houses, there’s got to be at least 3 or 4 or 5 in those big pools of houses that were in complete water.
What about this house here that I was looking at? I don’t know how long they’ve owned it, but they’ve owned it for a long time because there’s no record of prior sale. Usually if there’s no record of a prior sale, they’ve owned it before they started tracking those numbers, but it’s a free and clear property. The mailing address is the same as the property address. You remember that house was vacant. It’s a vacant property, free and clear, and it’s not an absentee owner. Whoever owns that house has not gotten any mail from anybody. Why not send them a letter, a handwritten yellow letter? Maybe it’s probate, it’ll go to the estate but there’s a lot of these deals even in a hot market. That vacant house, maybe the pipes froze and now there’s water damage all over in that house. You can still tell the seller and tell the realtor, “I’m sorry that happened. I’ll take care of it. Don’t worry about it.”
You pulled up one house randomly and it got me excited. I hope someone in Houston reads this and goes to his house.
The address is 23939 English Oak Drive, Spring, Texas. It’s been on the market for over 145 days. How many months is that? That’s like five months almost.
That’s too long in a hot market.
It needs updating. It needs new walls, new flooring, new appliances, probably new electric, new plumbing.
What it needs is for that seller’s circumstance to close in on him, whatever the circumstance is. You got to be there when that happens, that’s called a follow-up.
You send a letter to the owner. That listing maybe won’t sell. It expires in a couple of months, but you follow up with that owner and the family there every 30 days. I’ve had sellers say this to me all the time like, “You must want this house. You’re the only one that follows up with me all the time. When I call, you’re the only one who answers their phone.” I get a huge stack of postcards. A student told me this one time. The seller told her, “You must have a lot of cash and you must be serious about buying a house because this is the fourth postcard I’ve gotten from you.” She said, “I want your house.” These sellers see that. They see that you’ve been following up with them and calling them every 30 days, every 60 days, sending them a letter every 30 days, sending them an email and a text message, a voicemail like, “I’m just following up. Have you sold that nice house on English Oak Drive yet?”
It’s important to point out that you’re not always going to get a bunch of signs. With 1,500 houses that are over 90 days, you’re only looking for 1 or 2 houses out of that pile to make a big difference in your financial statement at the end of the year. If you get 3 or 4 of those houses, great, but if you only get one and make $30,000 or $50,000 off of it, that’s a good month. If you do that every month, you’re not far from being a multimillionaire pretty quick.
I’m looking at another house. It’s been on the market 110 days for $326,000. Four bedrooms, 2,500 square feet and it’s completely vacant. These are homes like, “Why isn’t this sold yet?” Somebody owns that house. Somebody is making a mortgage payment and I’ll tell you, the longer it sits there on the market, the more motivated they’re going to get. Make an offer. The cool thing about doing creative deals like we do is you can pay that seller a little bit more than they would get from a cash investor.
You can pay $1 million for a $200,000 house if you get your terms. I can always come up with a set of terms that will work. It doesn’t matter what the price is. One, there’s always the fail-safe. If I don’t have payments for the first 30 years and I’ll be dead by then. The term will always beat the price. The question is can you find a set of terms that will outrun whatever is acceptable to your seller? We have to feel around to find. Is this person just a price guy? Some people are so stuck on the price that you can say any amount of terms and they will say yes because they got their price.
A lot of these homes are free and clear. They don’t want to lower their price. That’s why this house has been on the market for four months. They don’t want to lower their price. Maybe they can’t. If you can give them an offer for a way that you can, give them that price that they want.
There are all kinds of offers. I offer 50% if you’ll subordinate the other 50% to the second position. We’ll divide that number by 180 months and whatever that is. I’ll send you fifteen years’ worth of that payment per month. That’s an interest-free loan. It doesn’t matter the price. I’ll give $70,000 to him, but he’s got a subordinate his lien into the second position. That means I get to go borrow the $70,000 from somebody else to put it in. It’s a classic nothing down deal. It’s an old nothing new to Joe, nothing new to a lot of serious investors out there, but it might be new to someone who read this. It’s a classic zero-down deal. It’s 50% down if you subordinate the other 50% that I owe you into the second position so that I can borrow $70,000 in the first position from someone. I have no money in this thing. I make a run at a low to no interest rate loan on the back end in that second lien position that’s being held by the owner financier to see. With 50% down, that’s starting to get someone’s attention. That’s $140,000. That’s $70,000 down. That’s nothing to laugh at.
I had a seller. It was a realtor and she had her house listed for rent. It was a nice neighborhood. This was a nice house. This is not the house that the landlord goes and buys and rents out for cashflow. This is like a $300,000 house. I called her and it was a realtor. I said, “This is a nice house.” She was playing hard to get or snooty and whatever. I was nice and talking to her about, I said, “I’d like to buy your house, but I can’t pay you that much for it with cash because I’m an investor, but I might be able to pay you something like that if you could lease it to me for a little while first.” I know she didn’t have any equity. She said, “I’ll be honest with you. I’m going through a divorce right now. I bought this house three months ago. I don’t care if you lease this house from me for the rest of your life. I just want out. I can’t handle it. I want to get out.” She wanted somebody to take over her mortgage payment.
That’s a motivated seller. There’s not enough cashflow in there, but she was willing to do a lease option. I could get that property under a lease option contract, and then sell that lease option contract for $5,000 or $10,000 to a tenant-buyer. I’d be done and out of the deal, and not have any commitments. That’s something I wanted to ask you, Mitch. If you do find a house, let’s say it’s worth $200,000. They owe $180,000, but there’s a good $300, $400 a month in cashflow on that deal. What would you do in that situation? Would you do a lease option or would you do a subject–to?
I don’t like to do subject–tos unless there’s a lot of spread. I’m being transparent here. It’s not usually the bank calling the note that’s the problem. It’s the seller after you save his ass and keep him from foreclosure and everything. Two years later, he has a new life and a new wife. They call screaming, wanting you to pay it off or they’re going to call their lawyer. That’s the problem. If there’s enough money in it or enough room, I’ll do it. I understand that you wholesale the contract because you’re not in the middle anymore. You’re not sandwiched. You gave up your piece of paper for some cash and you walk away.
I like that a lot better myself. This comes to tolerance for risk or being an expert because I find while it might make me uncomfortable. If you’re a person like Joe who’s been doing it for years and years, you’ve dealt with it so much. You know how to deal with these little things. You’ve got all the little nuances put together, which is why you ought to go over to 1000Houses.com/JMcCall and check out Joe’s book, Wholesaling Lease Options. He’s going to give you this book for free. Don’t split hairs with me here. This is a fantastic offer. He’s just asking to pay the shipping because that would come right out of his pocket.
He’s already going to send you a book that he’s paid good money for. You can get the book in your hand for free and that cost him something. He’s willing to send it for you for free if you pay for the shipping. That’s a great deal. Check out Wholesaling Lease Options. There are many different ways to make money in the creative real estate genre, that whole big industry, but every single way, you better get to know the minutiae down to the end. That’s the difference between losing your ass on a couple of deals and not losing your ass. It’s knowing the minutiae. Joe, how long have you been doing this?
Full–time, since 2009.
Lord only knows how many hundreds of deals this is. He has already made the mistakes. He’s going to tell you how to do your CYA right in the book. What is shipping $5, $3, $7?
$7 or something.
I have a book called My Life & 1,000 Houses: The Art Of Owner Financing. I sell it for $50. People call me and complain about it. I laugh at them and say, “Put the book down, step away from it because you’re not ready at all. That book’s worth $1 million. You don’t want to pay $50 for it? Stay the hell out of this business. You don’t know what you’re doing yet.”
Why would they complain? I don’t get it?
My book was $50, but I did it on purpose. I put my book at $50 because it has all to do with seller financing. If you go into it and you’re not serious about it, you can hurt a lot of people.
I have your book and it’s a fantastic book. You’re not selling it for enough. You’re undercharging, Mitch.
I say, “I don’t think you understand. There’s $1 million worth of ideas in that book. If you don’t want to pay $50 for it, I can’t help you. I’m sorry.” That other one is trying to do the same thing. Joe was trying to give you this book on how to wholesale lease options for $7, which is the cost of the shipping. I want to buy that book for myself. I’m going to hang up here. I’m going to order it because I want to add that to my library. Who knows? One day, I might find one of those deals and go, “I need to get with Joe really quick.”
I’m looking at your book right here. Are you kidding me? You’re talking about how to structure these deals. You’re talking about even how to raise private money. You’re talking about how to sell notes. There are five different ways to get paid on these deals, finding partners, case studies. How many case studies you have in here?
I try to cover completely different case studies so that they cover different problems. The point is I’ve been doing that for 25 years with over 2,000 deals in my hometown. I made a few mistakes. I know how to keep someone out of that trouble. $50 to stay out of trouble is nothing compared to what you can lose in a split second signing the wrong piece of paper. I digress. Tell us about the book. First of all, it didn’t look like a big-ass bulky book and I liked that. I like things that are thin, but they’re rich.Marketing is everything, and everything is marketing. Click To Tweet
The problem is I spent months writing this thing. Let me tell you, given the context. I worked so hard for this thing and I printed it, and it was only a quarter of an inch thick. I was like, “You’re kidding me.” I was frustrated that I worked so hard on this book and it’s a quarter of an inch thick.
By the time you finished writing a book, if you’ve ever tried, they’re all stupid by the time you get done. You hate them. You don’t want them anymore. Writing the books was probably one of the hardest things I ever did. It still is. It’s rewarding and it helps a lot of people. What I like about it is if you spent that much time on it and it’s that thin, it has to be rich. It has to be rich like Crème Brûlée at the fancy restaurant. You can only eat so much of it because you’re going to fill up. My Private Money Changes Everything Course is like that. It’s not bulky. It’s not heavy. It’s not thick. It’s just right on target. It’s what you need to know right there.
I talk about how to find the sellers, how to find the buyers, how to make the offers. I walked through the deals from beginning to end. There are a lot of deals out there that don’t have enough equity. You can’t throw those away. You could, but why not do a wholesaling lease option on them? Give the seller a lease option contract, and then sell that contract to a tenant-buyer, and you’re done and out of the deal. I don’t have any obligation to start making payments. It’s a legal and ethical way to sell your contracts to another tenant-buyer. You can do this in Texas. Maybe there are issues in Texas with doing sandwich lease options like long-term lease options, but you can flip and do lease option assignments all day long in Texas. There’s no state in the union where this is illegal. This is the strategy I used to quit my job in 2009.
I’m thinking off the top of my head with wholesaling lease options is the more expensive the house, the more you can make. You don’t even have to come up with the money for the house or anything. You’re getting paid to write a good contract, to write a solid contract, which I’m sure you’ll show them or tell them how to do. When you don’t have any money, this is probably one of the more outstanding strategies that you could pick. Am I wrong about that?
That’s what I did. I was doing a lot of marketing, direct mail. I was doing a lot of marketing for deals. I was doing some wholesaling deals where they had to have a lot of equity in them. I was throwing away many leads that didn’t have enough equity. I was getting frustrated with that. I thought, “Why can’t I find the seller that wants to sell their house but can’t because there’s not enough equity in them? Instead of low-balling them, why not I give them whatever price they want as a lease option and then sell the contract?” I wanted to make sure I wasn’t obligated to start making payments at a certain time.
I didn’t want to give them a contract that said, “I’m going to start making payments 60 days from now.” I made my contract contingent. I have a simple one-page contract. I made my contract contingent on a satisfactory inspection of the property and the subsequent completion of a more formal and signed lease option agreement. That says, “Here’s an initial contract,” and it’s not a binding contract either. I’m not taking the house off the market. There’s virtually no risk to the seller. If they sell it before I find a good tenant-buyer to assign it to, they can cancel my agreement, no big deal. If I can’t find a good tenant-buyer for that house in 3 to 4 weeks, then something is wrong. It’s overpriced. I go back to the seller and renegotiate new terms, but I know I can sell that contract to somebody else.
When I find another tenant-buyer, I always have a mortgage broker review that tenant-buyer to make sure they have a realistic chance of getting a mortgage in 1 or 2 years. I create a new contract with the seller, a separate lease, and a separate option. I assign those contracts to the tenant-buyer for an assignment fee that I keep, and I’m done and out of the deal. The seller approves the tenant-buyer because the seller signs the assignment agreement. I have the seller sign the assignment agreement, and the tenant buyers sign it and I sign it.
You’re nowhere on any piece of paper. You’re drawing up papers, finding someone who wants to take advantage of living in that home under the conditions and terms that you have to sell it for. You’re taking it over to the seller, getting those two people to make the deal behind you and you pick it up.
It becomes a new contract between the tenant-buyer and the seller and I’m out of it. I am in there because I’m doing the assignment, but the seller approves the assignment. I‘m done and out of the deal.
You’re putting down that light little one-page piece of paper that says you have to try to get this done. That is an interest in the property. You’re not practicing real estate without a license or anything because you do have an interest at that point when that piece of the paper is signed. That’s all that piece of paper is for and to maybe mentally take your seller off the market, even though it doesn’t. That’s all that matters is what they think. If they think they’re getting in the way, then they are.
I appreciate you taking the time to be on. I could talk to you all day long and we could probably cover a lot of ground. It’s fun to talk to you about this. The thing I’m hearing the most out there is people are struggling to find houses. You got to get off the beaten path and you got to up your numbers. I’ll give you one before we go. There’s not a lot of them. There are very few of them now, but there are still some. Go find your FE & D’s. They are usually not even at the courthouse. You can’t find them on the courthouse record. You’ve got to go down to the courthouse, knock on the door, get someone to talk to you and say, “I want to know where the FE & D’s are or the writ of possession. Forcible Entry and Detainer, that’s when the sheriff or the constable has to come to forcibly remove someone from a house because they won’t leave with the judge’s order. They got to drag them out.
There’s not a lot of those and they are hard to get. You are probably going to have to use your Freedom of Information Act, FOIA.gov because they’re not going to give them to you and you just walk in. My point is, the harder it is to get to a lead, the more it’s worth because less people went that way. Try to find some of these leads that are hard. If the water company is not giving out all the houses that have the water meters pool for the last 2 up to 7 years, if they’re not handing that or that list is not readily available, figure out how to get it. It’s going to take a little while. You may have to go threaten them with FOIA, Freedom of Information Act, or call your lawyer and get them to give you.
You may even have to pay. I had to pay because they didn’t have a way to pull it. They said didn’t. They do some programming so that they can give me what I wanted. They said it was going to cost $1,800. They gave me 18,000 houses that hadn’t had a water meter for 2 up to 7 years. I wrote a check the minute they said $1,800. I said, “Done deal. Here, give it to me.” I got the list of all the houses with no water meter. Do you think they got a problem? Do you think they are making any money off those houses or you think they’re sitting there rotting and deteriorating? They’re paying taxes on nothing? Try to find ways to find houses that are a little further up the hill where people are dropping off.
Last but not least, for those who are new to the game, we mail out 10,000 mailers sometimes to some highly filtered lists. We’re not interested in someone to call us off the mailer. I’m interested in the return mail because if my postcard didn’t get there, no one else did. Now it’s game on for these 400 pieces of returned mail. We’re in business now. We’re not waiting around for anything. We’re charging out into the frontier, trying to find these people and being very active. I don’t like sitting and waiting for my phone to ring. I like to get out there and make something happen. If the phone rings off a couple of those because we mailed them, good. That’s a bonus, but that’s not why I mailed 10,000 postcards. I mailed 10,000 postcards to get the 400 returns so I can go to work. My friend, anything you want to say to these people out there that are having a tough time finding houses before we wrap it up?
People get overwhelmed sometimes and they forget that this business is simple. It only comes down to a few things. Number one, marketing. It’s always got to be marketing. We’re not in the real estate business. We’re in the marketing business. If you can’t do it yourself every single day where you’re sending out some marketing, then get somebody else to do it. Marketing is everything and everything is marketing. That will solve all your money problems. If you can just do a little bit every day, every week, make sure you’re always marketing. Number two, it comes down to talking to sellers. You should make it a goal to talk to five sellers a day. Even if it’s a realtor or a property manager or just another landlord, pick up the phone and call five sellers a day.
Everybody that has listened to me that has done that and has followed that simple advice makes money in this business. Every day, call five sellers a day. If you don’t have any sellers to call and respond to your marketing, go to Zillow, go to Craigslist. Start calling landlords and property managers. Start calling realtors and say, “I’m looking for deals. Do you have anything?” The third thing I’ll say is make offers. Your speed to income is directly proportional to the number of offers that you make. If you want to make money in this business, you got to make an offer. Even if the seller says, “No, I don’t want to sell it,” send them an offer anyway. If the realtor says, “They will never take that,” send an offer anyway. If you can talk to five sellers a day and make at least three offers a day to those five people you talked to, there you go. It comes from the follow-up.
We used to do that but we got out of the habit a little bit. I’m about to put it back in since you remind me. We do things and then we forget, and then we go back to the things that work. We would buy houses six months after we mailed the contract. We would say, “Why us?” You’re the only person that ever presented a real contract. It’s been sitting on my dresser for the last four months. This is a constant reminder that was in writing. When I send the contract, I don’t sign the contracts. I got red markers and everything where they have to sign. Inside the envelope is an envelope addressed back to me that they can put it. I don’t put the postage on it because I figure you need to be at least serious enough to buy your own postage stamp to put on it if you want me to think about buying your house. We used to do that a lot. The overriding reason why they would sell the house to us was almost the same every time, you’re the only person who ever sent a real contract.
When I send an offer, I sent it in the physical mail. It’s a cover letter with a one-page contract. I have something behind that. That way, you have something to follow up with them on. You can call them every 30 days, “Jimmy, you probably don’t remember me. I’m calling about your house. I sent you an offer on it a few months ago. I’m following up, have you sold it yet? Do you have any other properties that you want to sell?” I know this guy who was one of those who always will be a bachelor type. He has a man cave. He is an introvert. He doesn’t like coming out into public. When he needs more money, he’ll come out of his cave and start making phone calls. This is what he does.
He has a list of a couple of hundred property managers, realtors, investors, wholesalers in the market. Every couple of months he gets on the phone and calls all 200 of them and he asks them two simple questions, “How’s it going? We haven’t talked in a while. Do you have any deals you’re looking to sell and looking to buy a deal?” He asks them, “Are you looking to buy some deals right now?” That’s all he does. He asks everybody on that list, “Do you have a deal you’re looking to sell? Do you have a deal you’re looking to buy?” Inevitably, every single time when he goes through that list, he’ll find somebody that’s got a house they want to sell. He’ll find somebody else that has a house they want to buy. He puts them together and he makes this assignment fee and he back and hides in his cave and he plays video games or whatever he does.
It’s going through getting on the phone. Many people think this thing is a cactus. It’s not. It’s a phone. This is a million-dollar device right here. If people could learn to get on the phone. The more you do it, the better you get. We’re only talking about 2 or 3 minutes. I could do it right now. If we have the time, I could go on Zillow, call a landlord and say, “This looks like a nice house. I’m looking to buy more property in this area. You don’t think your client might be interested in selling it? I’ll let you represent me. You can represent me and get both sides of the commission.” “No, they don’t want to sell it.” “Do you have any other properties that you might know of where somebody is looking to sell?” Every property manager, if you talk to them and you’ve got a little decent rapport with them, they will have at least one other client who’s got at least one other property they would like to sell. Every landlord who has a lot of properties always has that one property they don’t like that they would love to get rid of and sell. Everybody’s got those deals, then say, “Can I give you my name and number? If you ever find a deal, can you send it my way? I’ll let you represent me. I’ll pay you a commission on it.”
If you made five of those calls a day, do you think you might do a deal? Somebody might bring you something 2, 3 months down the road. You talk to a seller. “No, I don’t want to sell it,” but you call them again every month for six months. They’re like, “Yes.” I’ll say this one more thing. My business partner and I did 58 or 68 deals. Of those 68 deals, only four of them came from the first phone call. If we would have not done any follow-up, we would have only done four deals that year, but we did 64 more deals because we followed up. On average, it was 2 to 3 months, 5 to 7 touches. Over 2 to 3 months of follow–up on average. Some of them are over a year, 7 to 8 touches. That’s constantly calling them every 30 days. “Have you sold the house yet? Just calling to see.” That’s what it takes. If you want to stand out in this competitive environment, if you’re having a hard time finding deals, that’s what we started this call off with follow up with your old leads. If you don’t have old leads, somebody else does. Make five calls a day. I promise you, you will kill it.
I say this to people all the time. I had someone who was looking for something that was non–real estate-related. I said, “Get on Facebook and ask for what you want.” I wanted a ten-speed bicycle. I didn’t want to pay $2,500 for one. Bicycles have gotten out of this world. $10,000 for bicycles. I wanted a bicycle to ride through the park so I could get some exercise. I thought I’m going to put it on my Facebook, “Anybody got a bicycle they don’t want? I want one.” That gave me a ten-speed bicycle in about 24 hours. They said, “It’s been hanging in my garage for fifteen years. If you want it, come over here and get it. It probably needs a couple of new tires or something, but come get it.” I got it. I spent $200 on it and it is brand new. Ask the world for what you want, whether it’s a seller or a buyer or whatever. If you need a coat and you don’t have the money to buy one, ask the world for a coat. Someone will show up with it. If you don’t ask, you’re not going to get anything.
I want everyone to go to 1000Houses.com/McCall. I want you to get a free copy of the Wholesaling Lease Options book. All you’ve got to do is pay shipping. I want you to look at his lease option course that he has for sale. There will be a contact information over there, stuff on his podcast, whatever he’s probably going to have his whole life over there. Get over there and check it out. Joe, it’s been great. Thanks to TaxFreeFuture.com because you wouldn’t believe what your financial advisors are not telling you. We’re going to tell you what they’re not telling you. We’re going to tell you what you can do about it, and then it’s up to you. Check it out.
About Joe McCall
Hi, I’m Joe. I know what it’s like to feel stuck — like you can’t get any traction when it comes to your income or lifestyle. I was there, and I knew there was another way. My life changed when I discovered real estate investing and lease options. Within just three months of doing lease-option deals, I was making more than I was in my job.
So I quit my job and have been doing (and teaching) lead option deals ever since. Over the years I’ve flipped well over a hundred deals and helped my students flip thousands more. Doing deals has given me the margin and freedom to travel around the world, golf with my boys, or go jump in the pool with my girls at the drop of a hat.
Whether living in Prague for three months, the Czech Republic, or traveling across the US in an RV… lease options has allowed me to have the freedom to live life on my own terms. Though we still do many deals today, my greatest joy is helping others discover the power of lease options! That is why I have put together my free class on lease options, as well as a free book.