Ep 176 - Our Journey Episode 6 - Wholesaling

Hey, everybody. Flip and Danny here, founders of the Freedom Real Estate Group, family of companies. And welcome to another episode of our.

Podcast, which is called Freedom through Passive Income.

There we go. Welcome to another episode of our podcast. This is our journey.

We have to listen to that about six more times.

You're the one, you're the one that came up with the idea. You should know what you're dealing with. All right, this is again, this is our journey. And this is episode six of a 12 part series here that we're doing of the 365 day series that we're in the middle of. And this is number six. This is our journey. This is called Wholesaling.

Yes, wholesaling.

So again, our series again, in case you didn't catch the first five episodes, we started off, you know, being musicians on cruise ships, and then we went to art auctioning and then we moved to land and then I still did art auctioning. You went off into the insurance game and then the mortgage game. And then I got off of the art stuff and then we were like, we need to do something else. And meanwhile, somebody's going, you should do real estate. And so we, we jumped into real estate and of course we did what everyone does. We got our Realtor's license and that sucked after eight months. And so then we went into real estate investing.

Yep.

And let's see, we've done short sales, we've done mortgage assignments, we've done sub twos, we've done sub two wraps, and we've done seller financing. And then we moved to Phoenix because it wasn't hot enough in Texas.

And that's where we are.

Yeah.

Here in episode six.

So now we're here in Phoenix. We actually, we're right now we're in a small little town north of Phoenix that was created by Del Webb. The housing community. They decided to make a town and so they made Anthem, Arizona. It's a small little town north of Phoenix. It was kind of nice. It's kind of like the small town feel. But Phoenix is right there. So we moved there and we got there and real quickly we found out that subject to reps, not the thing to do in Phoenix. No, no. Because you need a good title company, you need a good attorney to do this. And we figured Phoenix is some bazillion amount of people in Phoenix. Right. We'd figure somebody would know how to do it. We ended up doing one deal and it was the most painful deal to do. And so we're like, okay, we can't do that here. And so we transitioned real quickly over to wholesaling, and that was a very. Actually was a pretty smooth transition because of our knowledge that we've already built up. Yes, Danny, what is wholesaling?

Wholesaling, Flip. Let me see. So it's really. We're going to go talk to a seller, and we're going to offer to essentially buy their house. We're going to put the property under contract, and we're going to sell that contract for a fee to an investor who wants to own the property, either to flip or to hold for themselves. So wholesaling is essentially just selling your contract, add a wholesale fee to somebody else, and therefore you get paid for brokering that transaction now.

And this was 2014 when we did this, and wholesaling was still big. Not as big as it is now, thanks to the Internet and technology, but it was still pretty big. And we were in Phoenix, and there was a lot of gurus in Phoenix. And so they're called bandit signs. And if you don't know what those are, those are the yellow signs that are on the corners of the road saying, we buy houses or whatever. And so every weekend there was a whole new batch of bandit signs up everywhere in Phoenix. But we, you know, we created a real simple process. We had two other people that were working with us, and so we drew straws, and the shorter straw got to drive in a car about six to seven hours a day, five days a week. And I.

He's pointing.

Yeah, pointing to myself.

He's pointing at himself.

I got the shortest job. But, you know, what do you do when life gives you lemons? You make lemonade. And so I just put in tapes, like tapes that.

I was about to say, you really aged yourself there.

I popped in the old eight track of Abba. No, just kidding. I was listening to. Actually on my ipod, I was listening to, you know, lots of. Not motivational speakers, but like Zig Ziglar. I was about to say Zig Ziglar because I used to come home, drove her crazy. Because I'd come home going, well, hello there, sweetheart. I start talking like Zig Ziglar. And so she would hate that, but. But at least, you know, so I'd actually make it educational. So as I was learning while I was doing it, and I drive up and down the streets and, you know, just write down addresses, and then I take the addresses and I'd give it to the other people that were working with us. And then they would skip trace them and call them and said, hey, we're interested in buying your property. So we're doing something different than everyone else was doing. Because everyone else was mailing letters.

Yes.

So we didn't mail letters. We did. We went and found. Found the houses and then we just called them directly, you know, or tried to find them directly.

And along with the bandit signs, which you put up on corners everywhere, we.

Did do banner signs a little bit, but we stopped doing band because. Because the driving around was getting more. More leads than anything. But the biggest thing, before we talk about anything was is that we learned a lesson very quickly, and that was to find the three biggest buyers in Phoenix.

Yes.

And so we found the three guys. They just happened to be three guys that. That were the three biggest buyers. And so. And the reason why this is key is because we didn't. After. After so many months, we didn't have to market anything anymore.

That's right.

So I, you know, I'd find a property, they'd call them, we'd whatever, they would negotiate, whatever. I'd show up to the house or show up to Dunkin Donuts or whatever, get the property signed, get the contract signed. And. And we'd say, you know, within 30 days, we'll buy the property before I would even get home. I've already talked to all three of those buyers, or if I had to, I would just call one and if he didn't want it, then I call the next one. If he didn't want, I called the third one. But I would always have the property sold from getting it signed before I got home.

That's right.

That's all you need to do with wholesaling. And I don't know how many times I said that. I shot it from the mountaintops, but it doesn't matter. No one listens. So anyway, so that's. And we got this down to a science.

Yes.

And so I don't want to jump ahead to the next. To the next stage. So we're going to talk about the pros.

Yes. So another one of the pros is this is early on in our investing career. I mean, we've done a lot to this point, but we still weren't at the stage that we are today. And so it was a no money required type strategy. We didn't have to spend a whole lot of money to do this.

Yeah, it wasn't a whole lot. I mean, I still. We still had to pay for gas. Yeah. I'm sorry. And for the other people. But we weren't buying in the properties.

Yes. We have to run the business. And we've talked about that in previous episodes.

Plus, it's a great way to learn a new market and the big players. So, I mean, Phoenix is a huge town. Yes, it's a huge town. And in fact, we didn't know the city so well that I remember talking to one of the buyers and said, oh, we've got this property over on X. And he goes, oh, wow, you have a property on that street? And I said, yeah. He goes, what's the address? And I told him the address. He's like, okay, have you been to that house? I said, yeah, actually, Danny and I were there yesterday morning. We were walking around on the property. He goes, that's like one of the most dangerous gang areas in the city of Phoenix. And I'm like, oh, we didn't know that. Probably a good thing we didn't know we wouldn't have stopped by and walked around the property looking through the boarded windows. Yeah, I'm sure. Sure there's a lot of people looking at us funny. But we did learn that market very quickly.

Yes. Another pro was when you're wholesaling, if it's a deal, it's going to sell very, very quickly. And we tell people that all the time. Because now we're in the position that we are. We say, hey, wholesalers, bring us deals, and if it's a deal, we'll buy it tomorrow. Just bring them to us.

Yep. And quick paydays. Again, this goes back to the mortgage assignment days. We go back to episode three.

One, no. One was Y Real estate.

Oh, yeah. Two was Realtor three.

Episode three.

Yeah. Quick paydays. There was times we would get them under contract and we were at the title company ten days to two weeks later.

Yeah.

And getting our. Our little. Our little checky chicky check, check.

Yep, that's right. Some of the cons was it's a saturated strategy by people who don't know what they're doing. So that is still the case today. We're not a big fan of wholesaling, not because it's not worthwhile or a good strategy, but there's just too many people out there doing it the wrong way. And that was certainly the case during this time. So it's a big struggle. And you don't even really like telling people that you wholesale properties because you get bashed into the bad name of all the people doing it wrong.

So many people giving it a bad name.

Yeah. So that was a con and still is, quite frankly.

Yep. And then daisy chains this is something that I didn't even know existed until we moved to Phoenix. And it was. I had gotten a property under contract and this was before we knew the three big buyers. And I got it under contract and so it was already prepped and ready to go on the Internet. And so boom, we put it on our website and we sent it out, emailed it out. And on my drive home, I got a text from another wholesaler selling the property that I just got under contract, but $30,000 more than what I got. So he was. He was daisy chaining my wholesale that I just got under contract. Without even asking me.

Yep.

Or even talking to me about it.

Yeah.

And I'm just like.

And he had no rights to the contract. That's part of what's wrong in wholesaling. You're not even allowed to. You technically can't even market the property. You have to market the contract. Right. That's the legal way to wholesale a property. So he was trying to sell a property. Wrong. He was trying to sell a property that he didn't have under contract. Wrong.

Illegally.

Y. So, yeah, that definitely, definitely con. All right, so we're go through our top five risk tolerance.

Yes, there is risk here.

Yes. You can get in trouble, especially with the board of realtors. They're really cracking down on wholesalers these days because in order to do something like this in terms of selling properties, they want you to have a real estate license. So wholesalers that are not selling the contract, they're trying to sell a property, trying to sometimes put it in the MLS in states that. Where that you're not supposed to be putting in them. There's so many rules around this. There is a high risk to this if you don't know what you're doing because you're probably going to get slammed on by the board and then there's lots of different consequences.

And recent. Recently there's been some wholesalers trying to wholesale properties that are on them.

Yeah, yeah. Lovely. Yeah, yeah. Time availability.

Yep. You need time especially to walk around those gang areas.

Knowledge.

Well, maybe that should have been risk knowledge. You need to have the knowledge. And with that, we didn't have that much knowledge of the city, but we got it very quickly. But you need to know how to do the deals and you need to know the. Have the right terminology and right paperwork.

Yes. Inner circle.

You need it again. Yeah. It's the attorneys, the title companies to be able to close them. And the buyers.

I was about to say the buyers. That's the biggie that's the biggie. And access to capital.

It's unpiquito. Yeah, but. And then this is the one that I told you earlier way back. Remember episode one when I said there's a sixth one?

Yeah.

That's location.

Yes.

So this one is because we had just spent the time doing mortgage assignments, short sales, which we didn't do too many of Sub two. Sub two Reps. Seller financing. And all of a sudden we moved to Phoenix and we can't do it, you know, so it was location.

It was a big pain in the butt.

Yeah, we could do it. It was a big pain, but we could do more doing wholesaling. So it was location.

That's right.

Location based. And that's when I said, wow, you really need to. Need to be a chameleon no matter what. What part of it's not only what location you're in, but also what market. What market we're in.

Yeah.

You know, because right now we're in a completely different market than we were four years ago. So.

Yeah, ex. All right, so that's gonna wrap up this episode. On episode seven, we're going to move into the next part of our journey. And while in Arizona, we actually started our turnkey real estate journey.

I love this story.

Slick is going to share this story on the next episode, episode seven.

Awesome. Well, make sure you're heading over to our website, freedomcapitalinvestments.com to join our investor club to see what we're doing in 2022. Make sure you had no one over there. Make sure you're hitting the like button and you're hitting the like.

This is a fun freaking series.

Yes.

And we hope we're sharing a lot of value because we don't talk about this type of stuff. We have so much knowledge about all of this stuff that we just don't talk a lot about because this is a past real estate life for us. Really.

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Sam.