TBT: Real Estate Wholesaling 101: How to Get Started

Hello my friends. Welcome back to Passive Real Estate Investing where we dive into the world of real estate investing among other related topics. To help you with your real estate investing journey, today we’re doing something a little different. We’re going to take a trip down memory lane and showcase an important episode from the past on what we call our throwback Thursday episode. Now, whether you’ve been with us since the beginning, which goes back to 2015, or you’re tuning in for the first time, this episode is a must listen, we are revisiting one of our more popular episodes from the past, and believe me, what we discussed back then, whether it’s six months ago or six years ago, is just as relevant today. So sit back, relax, and let’s rewind the clock for this great episode. Enjoy.

So today I wanted to bring on someone else who was one of my mentors many years ago. I had Robert Allen on recently. And for those of you who listened to that episode, you know, that I will be bringing Robert back on again, here in the near future. But while I was learning from Robert, I was actually brought into a long bootcamp series back in 2003, where I met someone else who became one of my original mentors. And his name is Todd Dotson. He is one of the original wholesaling mentors well known throughout the industry in the country and really a true pioneer in the real estate education and training arena. He is the developer of the first onsite, literally onsite mentoring program. And he has the unique advantage of having mentored.

I don’t know how many students, but hundreds, if not thousands of students in virtually every market around the country, he’s known as the seminar, industry’s secret weapon for student success and the media personalities. He has provided fulfillment training for around the country, including Robert Allen reads like a who’s who of real estate education. And, you know, on that list of quote unquote successful students, you know, there are many of them and they have come from many different real estate investment education companies. I happen to be one of those students of Todd’s from many, many years ago, and I think he’s got one of the best wholesaling programs out there. So with that, Todd, welcome to the show.

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Throwback Thursday Episode (The episode originally took place in the year 2022)

This episode is part of our Throwback Series and may include references to older content such as web classes, events, promotions, or links that are no longer active or available. While the conversation and insights still hold value, please note that some information may be outdated.

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Hey, thank you so much for having me. And I’m really excited to be here, grateful to be here. Thanks for that introduction. And, and man, I’m, I’m so proud of you and all that you’ve accomplished and I’m ready to get into this and let’s help people create cash so they can build wealth.

Yeah. Sounds great. Lo <laugh> I love the sound of that. That sounds great. So I kind of introduced you, tell us a little bit more about yourself, fill in the gaps that I’ve missed. Cuz I know that you’ve been around the real estate investing block for a very long time.

It is a long time. It, it seems like a long time ago in a land far, far away. Now that you mention it, I live in Arlington, Texas. I’ve been in Texas since January of 1993, but I grew up in California, Marco, as you know, I was born in Oakland raised in the San Jose bay area. My dad was a pastor, a preacher in California for 30 years. Mom was a school teacher, always had a strong desire to get involved in real estate and begin that journey in May of 1988 by purchasing a late night TV program off of in commercial Dave Del auto back in the going way, way back in the day, the cash flow system and began implementing that, making that work in the Bay Area at that point in time, you know, three bedroom, two bath home was about three 50. So we’re talking 1988 and was renting for maybe 1500 bucks a month. So there was no no price to rent ratio that was favorable. And so I began looking at some different areas and I popped over into the Central Valley while still living in San Jose and began investing there initially buying, renting and, and holding so passively investing. And that was, was really kind of the start for me.

Interesting. When did you move to Texas?

Moved to Texas in January of 1993 and it’s, you know, it, it’s interesting because I, I began buying properties in the Central Valley. We’ll say Modesto area. Just cuz the price to rent ratio didn’t work in the bay area. And, and back then the focus was really either buy, fix and sell for a lump sum of cash or buy rent and hold for passive income and long term wealth building. And so I chose the, the passive income approach, but the numbers didn’t work in the bay area. So that’s why I popped over to Modesto. I began buying there. And then when I graduated from San Jose State University, I was enrolled in a teaching credential program, but had a chance to actually go work for the seminar company that I got my first set up books and tapes from. And it was while working there and a sister company, Dante Pero’s that I learned about out-of-state investing and investing in markets outside of where you live and Marco you’re the king at that.

And in teaching that and doing that and with your audience, but man, back in 1989, 1990, all the rules of thumb were don’t buy rental properties, you know, more than a, you know, a few miles from your house or certainly in your town. And there was only a handful of people that were really even talking about investing in out-of-state markets. But I learned about out-of-state markets, particularly Texas and the timing that I had there was on the heel of the collapse of the markets, 1986 tax reform, just deregulation of a lot of different things, energy issues. And so a lot of states just collapsed pricewise. Texas was one of those Arizona was one of those and it was a failed saving and loan fiasco in the RTC that became a clearing house for, for properties. And I began investing in out-of-state markets in Texas was my primary choice.

And I really went to Texas having learned about it from the seminar company I was now working for, but my total purchase price in Texas was my down payment in many cases in California. And I got a degree in English, not math. I went to a state school, but I could figure that out pretty quickly that if I could pick the right properties and the right markets, I could have not only great cash flow and appreciation, but I could get involved with more properties cuz the barrier to entry was a lot lower because the cash required was a lot lower.

Yeah. Very true. Well, up until recently the down payment here in California, would’ve still bought property in many places in Texas. So that dynamic hasn’t changed much until recently.

Yeah, it’s, it’s funny how that is how those correlate and the cycles that goes back and forth with.

So you mentioned my audience, you know, as you know, the majority of the audience that listens to this show are predominantly what I’ll call passive real estate investors there of the mentality of investing for passive income and growth over time, wealth creation over time, but I don’t have statistics, but I’m sure there’s a percentage of my audience that are actively involved in real estate actively, meaning, you know, they’re buying, fixing and flipping or they’re renovating or they might be wholesaling. And that’s the topic of today is wholesaling. So, you know, my audience is predominantly a passive investment audience, but for those that are curious or interested in wholesaling, let’s break that down. Let’s talk about what is real estate wholesaling. And before you kind of dive into that for those OGs and old timers and for those who are not all that familiar back in the early 1990s, somewhere around there, what is referred to as wholesaling today, back then was simply referred to as flipping the contract. So I’ll let you dive into all that. Todd, tell us what is real estate wholesaling, and then we’re gonna just deep dive into it.

Perfect, great question. You know, I think at an entry level, you know, wholesaling is just a strategy and, and the strategy of wholeselling has been around forever in a host of different industries. It’s been adopted heavily to the, the real estate industry and really become popularized, you know, since the mid two thousands and beyond. But I would say the strategy of whole selling really is, you know, buying a property really it’s, it’s controlling a property, not even buying it, but controlling a property with a contract and offer to purchase as we call it. And you’re usually controlling that property at a discounted price. And then you are either assigning that contract, flipping the, the contract that you would say or doing a double closing an assignment of contract you’re basically you’re in, you’re out. You’re you’re paid, you never own the property, a double closing’s a little bit more elaborate cause you’re actually gonna buy it first and then go ahead and resell it simultaneously. That’s kind of how I would, would describe whole selling for those that are listening that are just getting started thinking about getting started in wholes selling, or maybe you’re starting over with the right tactics, as we would say. So controlling a property, usually at a discounted price and then assigning that or reselling it via double closing would be a great working definition I think to start with.

Yeah. I just want to clarify that point because it’s such an important point and I think maybe some people didn’t catch it. There’s a difference between owning a property and controlling a property. And here’s the subtle difference when you own a property, you have title to it. You, you own it. You could do whatever you want with it, but when you control a property, you don’t own it and you probably never will or well, you, I, I shouldn’t say you probably, you don’t ever own it when you’re wholesaling it. You simply have it under contract and you have the ability to close on it or to sell or assign that contract to someone else for a fee. That’s your profit. And that’s really the core of wholesaling is you find a good deal. You put it under contract, therefore you control it, but you don’t own it. And now you sell that contract to someone else for a profit and you never took title to that property. Is that true?

Absolutely. And especially in the case of the assignment, the double closing, you will own it for a moment in time, but there’s, there’s lots of different ways to to move around in it. And I’m sure we’ll get in those. But one of the things that I, I love that you said, and I think it’s perfect for your augment to your audience, that, you know, you have it under contract, you’re controlling it. It’s no different than you and I going out and electing to buy a, a great single family home in one of your, your markets that you’re advocating for the great research you do. And we go and we have that property under contract. Our intention is that we’re gonna close on it, keep it, rent it and hold onto it. But it’s the same principle. And so with whole selling, our intent is to, to get in, get out and get paid as I like to say.

But one of the things that you mentioned that, that I really liked is that you can close on it. And so that’s why whole selling as we get into it is really something that everybody should be familiar with. I’m not gonna say everybody should be doing it. That’s gonna PIP on your, you know, your current life cycle and situation and what you’re currently doing for a living, but everybody should understand it. And we’ll elaborate on more of that. And I’m sure that by the time we’re done, everybody will say, yeah, I, I need to understand that and they’ll know why they need to understand that.

Yeah. So this is kind of begging the question. I mean, if you are not closing and taking title to it with basic wholesaling, the question, you know, that comes up is, does wholesaling, you know, as a strategy require either capital or credit?

Great question. And the answer is no, although I’ve trained lots of people as they got into it, they had plenty of money when they started and they had good credit. And I always tell people, if you have capital and credit, you don’t have to use it. There are times that maybe you will, it opens up the possibilities in some regard, but to wholesale properties you don’t have to have capital and you don’t have to have credit the skillset that you do have to have, that it really is more valuable than capital and more valuable than credit. Certainly in, in what we’re talking about is the ability to find deals, the ability to get the pulse of a market and locate opportunities, what we’ll call deals or targets on a regular repeated basis. That’s the key.

So one of my big questions, and I think one of the biggest questions is why would anyone want to wholesale property? Now, I obviously I’ve talked about it on and off a little bit over the years with the podcast as to, you know, why someone should be wholesaling. I don’t talk about it much because I’m not trying to advocate that someone should be wholesaling as a form of real estate investing. And actually as a side note, and we can disagree on this and we can, you know, kick it around if you want. I actually don’t consider wholesaling as a form of real estate investing because you don’t ultimately own anything. So I find it more as a form of business or side hustle to create cash and capital. And I may be answering the question here for you now, and I don’t want to do that because I, I want to ask you, why would someone want to wholesale property, but I’ve never really called wholesaling, truly investing.

Yeah. And I think there’s an umbrella that whole selling is an umbrella that a lot of things fit under. And it’s used really in a, is a generic term in, in many cases. And, and I, I agree with much of what you’re saying as far as it not so much being an, an investment in the sense that you’re staying with the property, you’ staying in the stream, but the capital requirement, the credit requirement is not there. And I think really no matter where somebody is at financially, that’s listening in, in my neighbors. I have two surgeons on my street. I have ironically I have a lawyer, that’s a neighbor that sues surgeons or doctors. I actually have three doctors on our street now and then, and one other entrepreneur, and I’m kind of the, kind of the oddball, but people that make a lot of money in their craft are then electing to take that money and invest it, which I think is why especially, or specifically in, in real estate and because they’re making great money at their craft, what they do, what they’re expert level at.

But I would say that they keep working because they keep wanting and needing to make money. And so when I’m dealing with a passive investor, that’s like, well, I don’t really want a wholesale. What I would ask particularly their, where they’re at in the situation is you get X amount of money that you’re making through your job. And you’re taking that and you’re using that as a down payment to buy property, but would you like the ability to buy more property? And almost everybody would say what I’d like to be able to buy more properties? Well, then I would say, well, what’s keeping you from that. And it typically is almost always the capital to do so. With that in mind, then it, it begs the question, well, how can you get more capital? You either have plenty of capital if you have a high paid job as a, as a, a litigator attorney, a doctor, or other professional.

But most people, you know, the, you don’t have a, an endless supply of money. And that’s why they’re working. We have people that are listening now that are excited and ready to go and buy their first property with you. They’re learning, they’re engaged in the process, which I applaud them for in my job is if they don’t have the capital I wanna show ’em how they can get it and they can get it more quickly and do it in a repeatable basis. That’s really scalable without having to be entangled. And that’s a real good word entangled in the process of creating another wing of real estate investing, like buying, fixing, and selling or something along those lines. And I like to call it, you know, for my passive investors. It’s, it’s what I’m teaching is really your down payment replacement.

You know, you took your money down, you bought a property. How can we get that back? And so I know for some people that are making good money, they’re like, well, I don’t want to chase around properties and try to get ’em under contract and build those systems. But the reality is if you do it right, and you can move from the strategy to the right tactics, which is what we’re talking about, you can do it in, in little to no time at all. And I always tell people on your way to work, almost everybody that I know is driven by a property and it maybe is run down, it’s vacant. It could be boarded up overgrown, and those that are listening. Now, I want you to ask yourself the question I know Marco is, and, and I know what his answer is gonna be like.

Mine is that everybody’s driven by a property before and looked at it and said, I wonder, what’s going on with that property. I wonder if they’re, they’re gonna sell it. I, I wonder if they’re gonna fix it up. Are they gonna list it? Did somebody die and, and leave it, is it inheritance? You know, is the city gonna take it for back taxes? What’s going on with that property? And so adding whole selling to your regimen is as simple as those properties that you’ve driven by. And many, many people, not for months but years asking about the same property. It’s as simple as let’s just identify 2, 3, 4, 5 of those. And let’s teach you a system to go out and get the properties that you’ve already been questioning yourself in your mind. And I wanna show you a convenient way to get it under contract and show you once you get it under contract, who to sell it to, cuz we’re gonna have all the properties pre-sold with the system that we have. And that we’ll talk about.

So to summarize basically what you just said, wholesaling is in my mind, a business or a side business, or a small business, or a side hustle that you create for yourself to generate more income chunks of cash that you can use for buying more property. So it’s, it’s whether you start an Amazon store or you sell lemonade or you wholesale property, the goal is really just to generate more income faster. So you can use that to buy more real estate or go on vacation or whatever you wanna do with it.

That’s right. And what I would say is, since our, our listeners are in the real estate business, investing in the real estate yeah. Markets for long term wealth and appreciation and, and cash flow, since you’re already in the real estate business, rather than start a business, Amazon store, whatever, and nothing, nothing wrong with any other businesses, but why not link some of those things together and stay inside the real estate business, but only do it with the properties that you’re already coming across. Because everybody that’s listening could say, yeah, I know what Todd’s talking about. I, I know that property, or I’ve looked at those properties and they haven’t acted on them and you know what somebody else eventually came along, bought it and fixed it up depending upon the market. I was in I was in Modesto, California last week doing a one-on-one mentoring with a great couple Alberta and his wife Christina.

And it was so fun to go back there in 2022. And my first investment property that I ever bought was December of 1988 in that area, I’ve been back a number of times trained a number of students there, but to see how much stays the same, but also how much changes. And they’re very successful with real estate agents and, and brokers with Remax. And I’m fortunate to, to train and go in and train a lot of brokerage houses on, on how to add this lever, if you will, to their existing listing business for the added income, cuz it all integrates so, so nicely.

That’s my thoughts.

So let’s just quickly take that one little step further. You know, I asked you the question a few minutes ago, why would anyone want to wholesale property? And I mean, the, the reason is obvious here it’s to generate extra capital more income, but you also refer to wholesaling as the gateway quote unquote to buying, right? Explain that.

That’s right. Most people that are buying, renting and holding are being supplied with that deal, that, that inventory, if you will, by a third party facilitator, it could be a real estate agent. It could be the RTC as when I got started it, it could be Norada and it should be Norada if you haven’t, it, it needs to be. And that’s how I started, you know, so 1990 I formed my first company in California that specifically was helping investors in California buy and out of state market. So it’s always fun for me, Marco, when we have these dialogues to kind of retrace my roots because I started in the passive investor space and then realized that the best one tooth punch ever is being able to create cash buying and selling without entanglement so that you can effectively buy and build wealth and hold because a lot of investors go out and they, they begin buying properties, but if there’s any kind of upturn or downturns or added expenses and they’re on a fixed income from their job now, they don’t have the resources to sometimes weather that storm.

And so by being in this wholesaling space, you know, it really allows that now, as far as the gateway, it’s really the gateway to good deals. And it’s, it’s really understanding buying, right? Because in order for you to be able to wholesale a property, you’ve gotta get it at the right price, almost always on a cash basis, or you’ve gotta get it on the right terms some kind of owner financing or subject to, and, and I teach whole selling the umbrella, incorporating all of those things on a financing subject too. But for most people they’re gonna see it as buying for cash and selling for cash. But in order to understand those things and to get properties at a good enough price, that if you want, you can assign it or double close, it means that you have some knowledge, some ability to source deals on your own and, and know what makes it a good deal so that somebody else would wanna buy it. And then so doing, you have the ability to buy your own properties at better, you know, at better prices. And that doesn’t mean necessarily that you’re, you’re gonna go out and source all your own deals, but the more information you have, the better equipped you are to go out and buy the properties that you want to keep and be able to afford to keep those for the long haul by understanding buying right.

Got it. Okay. So obviously you do, multi-day intensives boots on the ground. There’s a lot to get into, and obviously in a podcast episode, we can’t get into everything, but let’s keep going down this road. Let’s talk about finding motivated sellers. And then let’s talk about buyers to sell those properties or wholesale those properties too, for the remainder of this episode. So let’s start off with motivated sellers, general question. How do you find motivated sellers? I’m gonna let you answer this. I have a few comments about it.

Great. A great question and glad that you asked if we’re talking about the classical definition of whole selling or what people perceive as whole selling it typically is going to be what someone would call an ugly house or a rundown house or a fixer, something along those lines. I, I know, and, and I, when I got started and I wasn’t the first to do it, you know, you hear the term a lot driving for dollars, but driving for dollars was something that I did, you know, back in California when I got started, something that I did in Texas. Now, there were people that were driving for dollars before me and will be long after me in developing the first onsite mentoring program. I had the unique advantage of, of really being the first driving for dollars mentor because we were shoulder to shoulder with students in every market, out in the streets, driving, looking for potential targets that would be boarded, vacant, abandoned rundown, or just plain ugly.

And so when it comes to finding the motivated sellers, one of the simplest ways is to simply drive the streets in a targeted area. We’ll talk more about how to target some of those areas, the, the best ones to, to drive, to do that. And really just keeping your eyes open, you know mark, I shared with you a few weeks ago that I was doing a, a three day whole selling mentoring in Jacksonville Florida. And the following weekend, I was doing the one in Santa Monica, California, and I had one student that was able to attend both, which was really interesting. And he lived and lives in orange county. And so he was able to kind of see what I call the levels of, of, of ugliness, you know, a boarded up, run down house in Jacksonville’s different than one in Santa Monica.

The price point that we were buying him for in Jacksonville was 50 grand. The price point that I had my group looking at Santa Monica was about 1,000,005, you know, boarded up, just trashed. But it was even though I, I shared with him in Jacksonville, it’s gonna be different. The levels of ugliness, for lack of a better word, the price points different, the neighborhood’s different, the principles are the same. And so it, it really clicked it, it clicked for him then, but driving the streets is, is one of the best ways to find the motivated sellers. Because when you have a house that’s clearly vacant and, and run down abandoned, maybe boarded up it stacks the level of motivation, because if it’s physically distressed like that, then there’s gonna be other triggers. Maybe there’s a delinquent property taxes, a host of other little things that we could look at.

Maybe they live outta state. Maybe they inherited it, other stacking motivations. And in today’s market, we through just the proliferation of data, we have the ability to go in and locate vacant properties by zip code, in any market in the country. So that helps us it’s kind of a cheat sheet, if you will, nowadays, we’re not having to do it as, as remotely as we once did. I know I can pull the, the list of vacants and then target those areas and know which ones are gonna be vacant. And that’s a great way for motivated sellers. There’s a host of ways that, that obviously we find those, but for most people, I would say you’ve been driving by your first wholesale deal for days, months, if not years, it’s that property, that’s always kind of singing to you. Oh, what’s going on with that? Clearly it doesn’t belong. Mm-Hmm, <affirmative> something happening there. And I would encourage everybody to go up and, and get it. It’ll take you three hours to get in, get out and get paid.

So that’s, what’s one type of motivated. Seller is the distressed property, which is simply, you know, has visible signs of issues, call it distress. But there’s also another kind, you’ve got distressed properties, but you also have distressed sellers and that’s sometimes, or often less noticeable or less visible. How difficult is it to find distressed sellers? The people who don’t want the property, but there are no signs on the outside that they don’t want the property.

Yeah, man, it’s a great question. We go off of a problem, property problem, owner matrix. And just as you said, it perfectly the problem property physically distressed boarded, vacant, abandoned, run down, just plain ugly. The problem owner side, the house looks great from the inside. And a lot of times the owners living on the inside, not always, but in many cases. And so it’s not the outside of the house physically. That’s the problem. It’s, it’s the owner on the inside. That’s having some challenges. We typically will source those types of deals by what we call an unfiled foreclosure. And that’s gonna be owners that are about 90 or 120 days behind on their mortgage. It’s not been filed as a matter of public records. So it’s not a pre foreclosure property. It’s really a ghosted lead. Nobody knows about it, cuz it’s not a matter of public record.

The husband and wife know or whoever the owners are know, cuz they’re getting contacted by the bank and called by the bank, but there’s been no filing of them being behind. And so that’s one of the ways that we go after what we would call the problem owners. And then we sort those by no equity or equity, the ones that have equity, we go in and make a cash offer to buy it a relative to the, the price of the property in the market. For those that have no equity, we’ve got a great system that we’ve been using since 2000, although we’ve, we’ve continually modify and enhance it we’ll go in and take those no equity houses, subject to the existing financing. And then we will, depending on the market, if the numbers are are right you can keep it as a rental.

And so a lot of my passive income investments, including oceanfront properties in Galveston and condos in Hawaii have been bought subject to existing mortgage as a Hilton head is another example using this kind of a trigger. But the neat thing about it is if it’s a market like say Southern California, where you could take it subject to, and it’s not gonna rent for enough to cover the payments. We have a neat system for finding what we call non qualified buyers, buyers that have a down payment, substantial down payment who can make the payments. They just couldn’t qualify. And so we marry what I call the opportunity challenge seller, who has a mortgage that they qualified for and no longer can afford. We marry them with a opportunity challenge buyer who has a down payment can make the payments. They just can’t get financing. And we flip the financing or what I call OPM other people’s mortgages. It’s our high end, whole selling for nice homes and nice areas. So it’s definitely the gateway to, to buying, right, because there’s a whole lot more than just buying the ugly house in the whole selling system that we have.

So can you find distress sellers and distressed properties in all markets, most markets, how widespread are these distressed opportunities?

Yes, we having been on the ground in every major market in the country for the mentoring program, which was just a huge blessing of the Lord learned so much continue to we have every market broken down into a wholesale market or retail market. Wholesale markets are characterized by what we would call an amount of inventory. There’s large forces of those cities that have lower priced homes, boarded, vacant, abandoned rundown. And then we have retail markets that have the lack or the absence of a high amount of boarded vacant rundown properties. And then how we insert into the market wholesale retail is a little bit different, but the result is still the same. So going into say Modesto and Sacramento last week, California is a, is a retail market. You’re not gonna find as many boarded up houses driving the streets of of Los Angeles or Santa Ana or San Francisco.

You, you name it as you are in a, you know, a city like Jacksonville or Philadelphia or Chicago, anywhere USA. You, you’re not gonna have the same amounts of inventory, but the principles work exactly the same. And the ability to harvest those is exactly the same. When you get into a retail market, you’re gonna have higher price points, less physically distressed inventory, but a great buyer pool that wants those is evidenced as when we were in Santa Monica, California, the group was blown away that I located a pocket of, you know, properties within, you know, four blocks. It had, you know, 6, 7, 8 forwarded clearly, you know, run down abandoned properties that was, you know, a mile from the beach should not have been there, but they are. And so regardless of where somebody’s at, you can do this business, you can practice these strategies and tactics. And we have it all broke down now into the zip code. So literally every market, we have broken down based upon the zip code and we will do our research and we will sort our leads wholesale or retail based upon that zip code. So we’ve really got it targeted in like you know, like snipers just for the years that we’ve been doing it.

Right? So with so many different markets and every market having different price points and of course, different amounts of inventory and they could be a retail market or wholesale market. What does the income or profit potential look like when you’re wholesaling? Because I think I’m sure that’s a question that everybody’s wondering right now is like how much money can you make wholesaling?

Yeah, it’s gonna come down to the price point of the market. So in Modesto last week we’re looking at assign either assignments of contract or doing double closings, buying and selling at the same time between 15 and 40 grand per transaction. And that’s in Modesto, that’s gonna be substantially larger on the low end, in, you know, Los Angeles or San Francisco. If you’re getting middle of the country and you’re in Kansas or Oklahoma, wherever that’s gonna be anywhere from maybe seven to, you know, 12,000 especially as prices have gone up across the country. But for most people in today’s market with very few exceptions, if you are the one that has gone out and located the property using what market we’re gonna teach them, you and I about the minimum profit that you’re gonna have is about seven grand for a few hours of work.

Cause remember we already have the buyers for these on up to, it can be six figures depending upon the type of property that that you’re looking at. We start people, whole selling single family homes. My son who played college basketball and is, is back now jumped into wholesaling with op with lots infill, lots and also land, and is niche into that, which is perfect understanding how to buy that rights, led us into development and building, helping him do some of that. We also do it with apartments. You know, I wholesale departs when I was getting started. Yeah. I was buying them to keep, but so that I could buy more, I wholesale some of the ones that I didn’t want to keep or I couldn’t keep. And that’s how eventually I got to to this point. So it’s significant money, you know I would say the average wholesale profit, if we were talking east coast west coast, I’d say, you know, a minimum of 25 grand and I would say middle of the country, you know, probably 10 to 15, and then I can adjust that based upon the price.

It can be anywhere between five and 10% or more the property, which is kind of an easy way for people to calculate that.

So for somebody willing to learn the wholesaling method, you know, strategy and tactics, there’s some pretty significant profit potential. And I’ve known that from early on. Of course, I’ve done a little bit of wholesaling in my early days before I decided to go down the road, I went down, but someone who’s looking for a real estate based business or a side hustle or a means of creating some extra income. If you’ve got a little bit of time on your hands to apply, you can make some significant income from this.

Absolutely. I mean, I have stay-at-home moms doing it. I have people that are busy professionals doing it. And what I would say is if you’re one that you’re active buying properties passively, and, and maybe you’ve got a great paying job and you’re stretched already working 50, 60 hours a week, you’ve got kids, you’ve got grandkids, you’ve got family members that could really, really benefit from this. It seems like with all the proliferation of TV shows that are out there now on flipping houses, everybody’s fascinated by flipping houses, and granted they take the rundown house and they fix it up. And the before and after is an ooh and as an awe. So people have already got bit by that bug. What we’re talking about is just dropping in at a different level. You see, in a lot of these shows.

Now, if you go behind the scenes and I, I know the principles and a lot of them that they’re getting these properties from wholesalers to queue, ’em up from the shows. We’ve been a, a source of those. For many of those, it’s just a neat twist on the business. And I think the perfect way of explaining it is everybody listening to this is already driven by one, if not more properties that they easily could have wholesale and made 10, 15, 20, 25, 40, 50, $70,000 on or more had they known what we’re talking about and why not? Mm-Hmm <affirmative> the only reason is that they don’t know how right. If they were asking themselves the questions what’s going on with that. So I think you can easily connect the dots and it makes sense for people yeah. To the very least hand it and know it.

Well, I think most people don’t think about the fact that there are always people out there that are don’t wanters meaning that they don’t want the property because they can’t afford it. It’s too much hassle it’s distressed. They’ve got, you know, personal situations, family issues, whatever it may be. These are the distressed sellers. There’s distressed ties. And that’s one reason not to want the property more than you’ve got people who have situations and they’re distressed sellers. And, you know, they’re also, don’t wanters, and there’s a lot of ’em out there, but they don’t walk around with sign on their chest, advertising the fact, you know, if, you know, with the tactics that you teach, you can zero in and target these people and find them, and then get the opportunity to negotiate a deal, or put a contract in front of them where you can pick up that property, make a small profit for yourself. And then flip that contract. In other words, sell that contract to someone else who wants that property so they can keep it for themselves or fix it up and flip it themselves, or do whatever they plan to do with it. So that leads me to the buyer side of, of this whole equation. We talked about what is wholesaling? We’ve talked about motivated sellers and the profit potential. Now what about the buy side of this equation? How do you find buyers to sell the properties to?

Yeah, another great question and always has been a host of people that have money that are looking for deals to fix and flip or fix and ramp, and particularly in the cash buyer space. Back in the day we had we had to harvest a lot of that manually by signs by doing some title research by networking. And we still do some of those things, but we also now just, as we can go by the zip code and grab a list of vacant properties or a list of unfiled foreclosures, I can also go to that same zip code and pull up cash buyers, buyers that have bought in the last 30, 60, 90 days. And I’ve got a feel to see if, if they’re buying on a regular basis. In other words, they didn’t spend all the money that they had. They’re no longer buying. So it’s gotten a lot easier with technology.

And one of the things that has radically changed is with technology is we have a handful of apps that we use inside of our business. And some that we didn’t develop the apps. We’ve had, some of them add custom features that fit our tactical system. And so literally it’s a matter of me, you know, being on my iPhone while I’m on my way to work. As we were talking about seeing that house, that we’ve been driving by wondering what’s going on with it, opening up the app. It has literally the layout of the street and each lot and address clicking on that. It shows us who owns it and it shows if they’re getting their mail somewhere else, an absentee owner, how I can reach them. But I also can skip trace somebody right inside the app and get a mobile number that I can call from, or I can text from as well as an email address.

And so that’s changed the game remarkably inside that app, I can do a quick value run to see what it’s worth and what I should offer. And then there’s another button I can click on that are all the cash buyers who have bought in that radius in the last you know, 30 to 90 days. So, I mean, you know, imagine had, we had that Marco back in 2003, we were already dangerous cuz we were out at the street level, doing things that most people didn’t know to do or know how to do. And now technology is, is made it all the easier. As long as you have the right tactics to do it. I always tell people that there’s a reason why the army or the Navy sends people the special forces go in after the air force bombs, because you have to assess things on the ground in real time. And we’ve always been street intensive and, and out in the middle of it where the action happens. So finding the buyers is actually the easy part. It’s what worse. Most people worry about the most.

Yeah, that’s what I was thinking.

That’s human nature, but we’ve got it. You know, so wired now. And as you know, macro, I have cataloged through my checks, don’t lie brand students since I was training. And so every week I’ve got checks coming in from students where we can do all things that I’m saying, we can document that people are doing that now in real time, I’ve got students that, that are still doing it, that I trained when I trained you. And before that, and then new ones all the way, all the way along. So it works and just think about that house, everybody that you’re driving by. And if you would’ve got that in a matter of a few hours, controlled it and sold it. I I’ve yet to see anybody who wouldn’t cash a $25,000 check. Right. You know, <laugh> so that’s, that’s kind of food for thought.

One other thing I, a rabbit I wanna chase on the buyer side is years ago, I developed a sweat equity buyer, a methodology and a sweat equity buyer is we term them is gonna be an immigrant buyer in Texas or California could be Spanish in Cleveland and Ohio in SL village. It’s white, it’s Polish. You can have Russian in Dayton, Ohio. So it doesn’t matter the color of the skin, it just identifying immigrant pockets. So when I grew up in San Jose, we had the Vietnamese pocket. And so we sell a lot of our wholesale fixer upper properties to sweat equity buyers that are buying the home on a cash basis to move into. So they buy it, they fix it up, do the work themselves and move into it, not just to investors and the sweat equity buyer is buying the home for a return on emotion.

It’s a home for their family, the investor return on investment. And by tapping into our sweat equity buyer network. And we have that now built in every market in the country. We have the advantage of selling properties at higher prices, which means we can pay more than say other wholesale competition, cuz they’re all based on very tight numbers. And I like to tell people and give them the example you’re in Southern California. And I’m I’m from Northern California. If you look at a city like Compton, California, which is notorious, and I always think of ice cube and you know, the rappers and, and all that come out of that. And I’ve been there many times in the going way, way back into the nineties. If you look at Compton today, it’s predominantly Spanish. And so what happened is the markets collapsed back in late 08, 09,10.

And then you have pockets that are moving into the most affordable properties in a given community, fixing the homes up and moving in. We saw it last week in Modesto, see it a ton here in obviously Dallas and Fort worth. But it’s happening all over the country. And that’s this crystal clear example of how sweat equity buyers have come in growing up in San Jose, east San Jose, we saw the big influx of the Vietnamese population go into east San Jose and where those areas became predominantly of Vietnamese. And so us knowing that is investors gives us an additional buyer exit strategy that most people don’t have.

Interesting. So before we wrap up talking about your upcoming wholesale buying and intensives, there’s one other benefit I think to wholesaling that we should touch on one of your other unique tactics is what you call creating inventory. A reason to be wholesaling, especially today where inventory is a bit tighter than it has been in years past. So talk about this tactic of creating inventory through wholesaling.

Yes. You know, when I was in Jacksonville, I touched on it a little bit. And then the following weekend in, in Santa Monica, those were the groups that I was working with. You know, you have the traditional, what we would call on market inventory that you can chart. There’s a number of places that chart that obviously Marco, your listeners chart that directly through you. You’re keeping them up to speed on where the markets are at in inventory last year and early this year, there was inventory was really, really tight. We’re seeing that slip now. And so there’s more on market traditional inventory available, but creating inventory is, is about the ability to drop in and tap into the nontraditional inventory. The off market inventory that maybe is not being scooped up by your traditional buyers who are getting a, a loan from a bank or a mortgage company to buy the home, to move into or buy it to, to rent out.

And we’ve seen as a lot of the hedge funds have come in and stuff pit in the market, they’re gobbling up a lot of the stuff, you know, 200 to 500,000, which leaves then that above 500 and really below 200,000 and a lot of your traditional inventory doesn’t sit between two. And you know, it sits between two and 500,000 and the hedge funds have grabbed that because it’s a stable inventory base to rent and to hold onto. But there’s a whole what I would call underbelly. And it’s those, those properties that are under 200,000. And so when we go into a market, we directly plot the cheapest homes, single family homes. We, we start with that detach single family homes. And we plot those all the way from a zero price point. You know, all the way up to increments of 50,000, 75, a 100, you know, 150, 200.

And what unfolds usually is three to five zip codes that are chalk full of non-traditional inventory. And these are gonna be working class areas. They can be some lower middle class areas depending upon the market, but mainly they’re gonna be moderate income areas and even some low income areas. But it’s these areas that are so hot with the buying cycle for your cash buyers and your sweat equity buyers. And it’s amazing that that market is untouched. And so we literally drop into these segments of the market, creating inventory based upon our price point buyer matrix showing us then where that inventory is. And then those are the areas that we focus on. And then we’re looking at all the properties there that are boarded, vacant, abandoned rundown, or an unfiled foreclosure with, or without equity that aren’t listed with realtors. And a lot of those price points aren’t listed with realtors because a lot of the homes are unfinanceable.

You know, if the property condition is such a gets to a certain point, a bank’s not gonna lend on that. They’re also uninsurable in some cases, state, farm’s not gonna loan. So there’s this whole underbelly of inventory that most people don’t have any understanding while some of those areas might be a low and moderate income and not what Marco you and I would advocate as a long distance or remote buy rent and hold for a lot of the economic socioeconomic reasons, right? And I, you and I are a hundred percent on the same page with that. I wouldn’t advocate that, but there are these little transitional pockets. When you understand this, of course, we’ll go in there and flip those properties wholesale, but then you get into these little transitional blocks where things are bleeding between that 200, 250 to 275. And then you’re, you’re unpacking some inventory that begins to fall in that traditional space, but it’s not advertised or available as such. And that’s one of the ways to really hone in on properties that you could keep. Because it’s transitioning and many of you know, and Marco, certainly you, that that can be blocked to block. I mean, just getting Los Angeles by USC, you know, it can be blocked to block. And so by knowing those things, it makes a huge difference.

Right? Yeah. It’s nice to know that you have the option to look at those and hand pick them as properties for your own portfolio. So you can flip or wholesale many of those for profit, and then just pick the occasional one that is kind of that sweet deal that you were able to lock up for yourself. That’s right. Yeah. So that’s just one of the benefits.

Yeah. That wouldn’t be available without knowing that. And I would just, I would encourage people to start thinking about those homes they’ve been driving on by that they could, in a few hours, you know, wholesale, effectively, I would encourage people, you know, this weekend go to Zillow. Most of you aren’t realtors and just look at the 10 cheapest houses for your city or your county, just for fun. Go to Zillow, start with zero, and then run that meter up to what you think is the lowest price point. So if I’m in Los Angeles and I go zero and I put my lowest price point at 75,000, I’m not gonna find any single family homes. But I am in Kansas city. Each market’s different. But if I ratchet that up in Los Angeles to 200, 250, 300, you’ll start to see some inventory that now is below that 300 threshold and some below the 250 threshold.

And I’m talking about properties of just listed for sale on the market with realtors. When you go into Zillow, you can see the listed ones and then you can see the non listed ones. It’s not the best way to search. The MLS is updated. In real time. You can go to Zillow, Redfin realtor.com, whatever you want, but it just gives you a little bit of an idea and people always are, are, are pleasantly surprised. And, you know, I begin to teach people that formula, as you know. And so if say I’m in Los Angeles, I’ll begin to teach that. And all of a sudden we start seeing that, okay, there’s a few pockets in Los Angeles, proper that are, that that make some sense, but I’ve got stuff that’s in striking distance that I can work. You know, whether it’s out in Palmdale or Lancaster or, you know, Valencia or it’s getting into Riverside, or, you know, I, I mean, I can go down and down and down the list of the pockets having been there so many times. It’s neat that that price point run what comes from that.

Yep. So you and I talked about making available your wholesale buying intensive that you put on from time to time to our audience. Let’s wrap this episode up with talking about what that is. What is the wholesale buying intensive? How often do you do it? And then we can provide a link for people who are interested in more information or to actually sign up for it.

Perfect. Yes, it’s basically it’s a three day training event. I say intensive because we’re taking people outside of their environment where you’re folks forced in a good way to, to focus on this. And this is whether you’re just getting started in real estate and have never bought a property to hold, to build wealth, cuz you don’t have the capital or maybe you own a hundred properties or more. And you wanna build to unlock some inventory that maybe you didn’t know was there before, or you wanna learn how to create cash on demand with properties right there in your own market that you probably been driving a buy this three day intensive is basically gonna show people step by step, how to determine the hotspots in your market and other markets. If you want to wholesale, remotely or virtually how to assess those hotspots, how to go in then and locate the inventory, how to find the sellers using technology, using the app, how to find the buyers that wanna buy these, whether they live in the city, outside of the city, all the paperwork that goes with it, getting it under contract, the contract that we use to buy it, the contract that we use to sell it, we’ve got everything simplified, the title companies that you’ll use funding, where to get funding.

So as part of this, we provide transactional funding, a short term funding. So there’s a host of things. And the landing page that we send them to will provide in kind of great detail, what you know, what all that we’re gonna be doing. But in essence, it’s you’re gonna learn to get in, get out, get paid. So it’s three days. So day one. How to get in how, how to find the deals, how to find the owners, how to fill out the paperwork contracts, they too, get out. How do we find our buyers? How do we fill out that paperwork? What about title companies? Day three, get paid, how to close with your own money without your own money. Maybe you don’t have any money, the dynamics of that, and then how to do it in your market and remotely. So it’s a, it’s an action packed training.

I always have alumni students that are there that are in your market that have been doing it for a while. So you get a chance to, to meet other people that are already doing this. So you get kind of a living, working, breathing person that you can relate to. It’s a great networking event and people do deals. That’s the exciting thing. When we were in Jacksonville, one of the preemptive things that we did before we went, there is one of my long term students. I like you, Marco was joining me there as one of my trainers and got a property there under contract for 35 grand and sold it for I think 46,000. So it surprised people that were coming from all over the country that in Jacksonville, you could buy properties at those prices. And then that was bought and sold without ever stepping inside the house until we got there on a bus.

And actually went out and looked at it and then people were able to see, okay, this is the low side, but if we go five blocks over six blocks over, okay. Now we’re starting to transition into something that maybe that I would keep or that I would fix and flip. So it it’s eye-opening for people. And then we do an individual breakout with each person helping them as they go back to their own market. I’ll share with them, here are your zip codes. Here’s where you want to go. Here’s your price point? So it’s kind of getting like a two for one, you’re going to a remote market to learn how to do this in that market and do it, and then the blueprint to go back to your own market and do it. So it it’s a one, two punch, and markable be choosing some of these markets.

And again, I’ve done it recently in Southern California. People say, well, you can’t do this in Southern California. You know, maybe we go banging out and show people. This can be done in easily in Los Angeles or in orange county, mm-hmm <affirmative> Los Angeles county or elsewhere in the country where you’re actively got clients and students that are buying for passive income. What a neat thing to go to one of those markets where they’re already own some homes or looking at buying homes and see both sides of that market, you know, the traditional buy and hold for wealth. And and then the undercurrent of that market, the learning experience is invaluable.

Yeah. Yeah, it is. It really is. Okay. So you don’t do these all the time, but you do do them throughout the year. What else do you want to add Todd, before we close it up here? 

I just, you know, I, I appreciate getting the chances to, you know, to be on this and do this with you. And we’ve been able to reconnect at some other mastermind events, Power Room and things like that. So that’s been awesome, but I’m grateful for those that are listening to this. And I just want you to, to think about the things that I’m sharing, think about those houses that you’ve driven on by that you could have cashed in on those. Had you known this and it be an easy thing because you’re already in the real estate space or you’re looking at it. It’s just a nice little add on.

Yeah, well, great Todd, thanks for taking the time for coming on today. This has been, an information-packed hour, and I know we could go on literally for hours about this, but there’s a point where it’s information overload. And so this is a good first step on how to get started with real estate wholesaling.

 So again Todd, thanks for coming on today, I really appreciate it.

Thank you for having me. I really enjoyed it.

I hope you enjoyed this week’s throwback Thursday episode. If you haven’t already, remember to subscribe so you don’t miss out on a single episode. If you have a question about real estate investing or finance, simply go to passiverealestateinvesting.com and click the Ask Marco button. . I read all of them, I reply to many of them, and sometimes I cover them on the show, and I’m gonna try and do more of that. So, I am going to encourage you to go to passiverealestateinvesting.com and submit your question for Ask Marco.  Lastly, help us share the show with other like-minded people that you know who can benefit from it as well. Just visit us on your platform. Most of you are on iTunes and leave us a rating and review. I would greatly appreciate it. I read them all and I will thank you in advance. And that is it for today. Thanks for listening. I will see you on our next episode.

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