Starting wholesaling may seem daunting, but Lance's incredible journey demonstrates that making significant income in your first month is definitely possible. Lance made a staggering $96,000 in his initial month of wholesaling by closing four separate deals. Let’s dive into Lance’s strategy and explore the steps that can guide any beginner towards achieving such success.
Understanding Wholesaling Real Estate
Before we dissect Lance's approach, it’s crucial to grasp the basic concept of wholesale real estate. Wholesaling is a business model where you identify a distressed property, secure it under contract at a discounted rate, and then assign the contract to an investor for a profit—all without using your own money. This process typically unfolds entirely before the closing.
Lance’s Path to Success
Lance's wholesaling journey began in January 2016. He started by sending out a substantial amount of direct mail—around a thousand pieces—in his first month. This was a pivotal move. Instead of testing the waters with just a few mailers, he opted for a high-volume approach to capture more leads and opportunities. Heavy marketing efforts at the outset can significantly amplify your chances of securing deals.
Identifying the Right Market
Lance focused his mailers on a smaller, older city in the northeast corner of the Dallas Metroplex, particularly targeting a downtown area with a diverse range of property ages—from 150-year-old homes to new constructions. This mix of properties increases the likelihood of finding distressed homes at lower prices.
Closing the Deals
By February, Lance contracted four properties and within the next month, he had sold all of them, netting $98,500. This substantial income confirmed his decision to pursue wholesaling full-time.
Securing multiple deals swiftly can not only boost your earnings but also build confidence in your wholesaling strategy.
The Importance of Volume in Marketing
Lance's story underscores the significance of starting with a large volume in marketing. He explains that sending out a thousand mailers initially helped him secure multiple deals right away. Compare that to starting with just ten mailers, which would severely limit your reach and potential leads.
"I wish everybody getting into this would just start with at least a thousand."
Learning from Experience
Lance was not new to real estate when he began wholesaling. He had previously bought a few properties from wholesalers and realized the significant assignment fees they were making.
Transition from Buyer to Wholesaler
Initially, Lance bought properties intending to flip them. However, after getting multiple properties under contract, he didn’t have sufficient funds or capacity to flip them all at once. This led him to consider wholesaling, bolstered by opportunities presented by eager investors at meetups.
You should be ready to adapt your strategy based on circumstances and available resources.
Choosing the Right Contract
For his first deals, Lance used the standard Texas Real Estate Commission (TREC) contract. Later, he had a custom contract drafted by an attorney. The custom wholesaling contract included specific clauses to better secure properties and reduce liability in case of non-performance.
Initially, existing state contracts are sufficient, but as your business grows, consider custom contracts to better protect your interests.
Protect Your Interests
Lance's custom contract had several advantages:
- Ease of Understanding: Written in layman's terms over three pages compared to the 13-page TREC contract.
- Built-in Extensions: Included a 15-day automatic extension which could be executed without seller consent, proving beneficial in tight closing schedules.
Scaling the Business
From 2016 to 2017, Lance’s business exploded. He transitioned from making nearly a million in assignment fees in 2016 to almost three million in 2017. This learning period allowed him to refine his processes and scale rapidly.
Diversifying Strategies
Over time, Lance incorporated various methods to manage and grow his investments:
- Seller Financing: Starting in 2020, he began using seller financing, allowing greater cash flow from properties.
- Rental and Flips: By 2021, he was heavily investing in buy-and-hold properties and flipping houses based on deal suitability.
Diversification in investment strategies can lead to sustainable income growth.
Current Operations
Today, Lance operates with a significant overhead and manages a portfolio of around 200 rental properties and 50 seller-financed notes. His business's monthly overhead is about $250,000, emphasizing the scale at which his operation now runs.
"We have overhead now, so back then it was just me, and so there's a lawless overhead."
Evolving Roles
Lance’s current role has evolved to focusing on larger-scale opportunities and financing. This includes negotiating package deals and managing significant rental portfolios, illustrating how seasoned investors can pivot to high-value activities.
Conclusion
Lance's journey from a beginner wholesaler to a sophisticated real estate investor offers invaluable insights for aspiring wholesalers. By starting with high-volume marketing, securing diverse property deals, and continuously evolving strategies, anyone can achieve substantial success in this space.
Remember, the key to wholesaling lies in your ability to adapt, learn swiftly, and leverage opportunities as they arise. Whether you’re just beginning your wholesaling journey or looking to scale, Lance’s methods provide a robust roadmap to follow.
