Wholesaling isn’t flashy, but it’s attractive to investors who want to start in real estate without much cash up front. Detroit self-starter Emilio Basa went from gig worker to full-time real estate investor. Within four months of learning the wholesaling ropes, he did his first deal. In this podcast on the Joe Fairless Best Ever Show, he takes you through the building blocks of a successful wholesale strategy.
About Emilio Basa
Emilio is a versatile, creative investor who moved from working as a musician and web designer into wholesaling. He is now a full-time real estate investor with six years of experience and a diverse portfolio that includes over 30 wholesales, five rentals, and two flips. He averages three to five deals per month.
Unlike many wholesalers, Emilio embraces networking with his peers and doing joint ventures. This approach helps him grow his business and reach more sellers and buyers with win-win deals. In a nutshell, Emilio uses networking and social media to find deals and partners to help sell the deal most effectively.
Leverage Joint Ventures
If you’re new to wholesaling, you might assume that most deals have only one wholesaler involved. However, working with partners can help you close the deal quickly at a fair price.
Emilio estimates that joint ventures comprise up to 80 percent of his business. He partners with at least one other wholesaler in these deals, and they split the assignment fee. Each participant contributes, such as bringing a buyer or a contact who has a buyer.
Sometimes a deal has up to six partners, a potentially chaotic scenario Emilio prefers to avoid. In these cases, the fee each person nets may seem low. However, everyone works hard to close the deal. This cooperation leads to fast and successful transactions that add up over time. Additionally, everyone gains valuable business contacts.
Choose Trustworthy Partners
Like all investing, wholesaling attracts its share of shady operators. Emilio stresses the importance of vetting potential partners for trustworthiness. As you do more deals and get to know people in the business, you develop a quality contact list.
For his part, Emilio tells potential partners upfront what he brings to the table. One of his greatest professional assets is a straightforward style. He promises transparency, fairness, and no drama. He focuses on closing the deal and doesn’t get sidetracked. In an entrepreneurial business with its share of egos and greed, Emilio’s approach wins trust. Once people work with him once or twice, they bring him more deals and refer him to others.
Joint venture wholesaling has an organic quality in that you can’t always predict who will be needed to sell the deal. Emilio gives the example of a deal no one is buying. Someone comes forward with a buyer that another person found. In this case, the three wholesalers participate in the sale and split the fee. The key is to roll with the situation and keep your eye on the goal of a successful transaction.
Find Your Wholesalers
Emilio leverages social media to get the word out to potential partners. Whenever he gets a deal, he broadcasts it on all of his platforms. As people respond, he asks them whether they are wholesalers or cash buyers. Frequently, they are wholesalers with a client. They chat and often agree to a joint venture to mutual benefit.
You know those roadside bandit signs stating, “We sell houses”? Many people assume they’re scams or unwanted competition. Emilio, however, calls all of those phone numbers in search of wholesalers. Many of those contacts turn out to be, and he introduces himself as a buyer and wholesaler. He’s found some excellent partners by paying attention to sources others might dismiss.
Make the Money Work
Given multiple players and various deal scenarios, you may be wondering how to best handle payment. Again, trust is critical in establishing a fair split. Emilio asks the wholesaler in the first position how much the contract is worth. If this person wants to work with you, they should be willing to divulge the amount as a starting point for the split.
Emilio learned through trial and error to create a joint venture agreement. In the past, he did splits or drafted two contracts. A cleaner approach, especially with several partners, is to create an agreement with each person’s LLC name and split stated. Each participant signs it, and the final document should be acceptable to the title company.
You can disperse funds in one of two ways. In the first approach, one wholesaler receives the entire amount and then pays the others. This requires much trust and can be tough to enforce should things go wrong. The second method, which most people prefer, pays each partner directly from the settlement statement. Make sure to use a title company familiar with wholesaling to competently handle the transaction.
Market Hard but Smart
Emilio leverages email and text blasts to reach other wholesalers who may have deals. He can easily blast the same message to existing contacts and get responses. By the end of the day, he usually has at least one deal. This approach also loops in new contacts from other people’s bandit signs.
As with finding other wholesalers, Emilio started marketing to property sellers by leveraging simple tools such as bandit signs. He estimates a lead success rate of about 15 percent from signs and has gotten some quality deals that way. He pays about $6.50 or $7 per sign, a cost that includes a $3 delivery fee.
Recently, Emilio ventured into more structured mass texting as a cost-effective tool to reach sellers. He cites the low cost per lead, as he pays only 20 cents per text. If he sends 1,000 texts and nets one deal, he’s spent only $200 for that result.
Reach Motivated Sellers
What makes a motivated seller? These property owners are often facing pre-foreclosure, major family upheaval, or bankruptcy. They want to sell their home quickly while netting some cash, even if a more traditional selling process might yield a higher price.
How does Emilio find these motivated sellers out of thousands of property owners listed in public records? He began using PropStream, a software platform to help real estate professionals target their marketing.
PropStream software lets you filter lists by various criteria relevant to identifying a seller target pool. Emilio gives the example of selecting absentee owners and excluding LLCs to target individual owners who may be highly motivated to sell. You can also adjust filters for property types such as single-family homes with two or more bedrooms. Emilio exports the results list to a text blast application to reach his target audience quickly.
Build Seller Rapport
How quickly can you close a deal after contacting an interested seller? Each property owner has a unique and often challenging situation. Even if Emilio has a prospective buyer in hand, he finds that most sellers aren’t ready to close the same day.
Emilio has learned from various mentors’ selling styles, such as Flip to Freedom’s Sean Terry. He’s found success with backing off the hard sell and focusing on building rapport with each seller. Especially if they’re facing possible foreclosure, sellers often field multiple sales pitches. They get tired of figuring out which opportunities are genuine and which are shady. They also don’t appreciate being treated as a commodity when they and their families are in dire straits.
Instead of a hard sell, Emilio takes the time to build a sincere rapport with a seller. This approach often requires several conversations in which he gets to know the seller’s story. He finds out which tactics the homeowner has already tried and offers suggestions on new avenues.
Emilio is candid if he doesn’t think he’s the right buyer. For example, some owners might be better served by a traditional sale, even though the process will likely take longer. Sellers appreciate the honesty and are more likely to call Emilio when they’re ready to move in a wholesale direction.
Wholesaling Starts with Finding Your Edge
Perhaps you plan to explore wholesaling and could use some advice. Emilio’s top tip is to get out of your comfort zone. In other words, find your edge and operate there until you learn your footing. That is how you grow as a real estate professional and as a person.
Although he doesn’t formally mentor new wholesalers, Emilio enjoys freely sharing his knowledge with them. He’s seen many of them postpone success because they stayed comfortable, even in small ways. There’s the man who created bandit signs and then left them in his garage because it was too daunting to put his number out there. Some other aspiring wholesalers can’t bring themselves to make phone calls.
Wholesale is part of the basics of real estate investing, says Emilio. It’s not rocket science, and you need to get uncomfortable to master it. The reward is gaining the foundation to succeed at more complex investments.
Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.