Donald started investing in real estate while he was still active duty, with the purchase of a home that is now a rental. After serving he started wholesaling properties. It didn’t take him long to discover than he preferred to wholetail and make more money per deal. Donald will not only tell us the difference between the two, but we’ll also hear how to succeed as a wholetailer. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
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Donald Ross Background:
- Retired Marine & prior construction worker
- Got started in the real estate investing by purchasing a home while active duty which is now a rental
- Currently virtually wholesale/wholetail properties in the Milwaukee area
- Based in Orange County, California
- Say hi to him at REIAutomationSquad@gmail.com http://www.reiautomationsquad.com/
- Best Ever Book: Traction
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TRANSCRIPTION
Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t into any of that fluffy stuff. With us today, Donald Ross. How are you doing, my friend?
Donald Ross: I’m doing great. How about yourself, sir?
Joe Fairless: I am doing great as well. Donald is a retired marine, so first and foremost, thank you for your service to our country and helping us have conversations like this, where we’re not scared that someone’s gonna be knocking down our door with a gun and shooting us.
Donald Ross: I appreciate that, thank you.
Joe Fairless: My pleasure, thank you. A little bit more about Donald… He worked in construction prior to what he’s doing now, and now what he’s doing is he is wholetailing properties, and he’ll define that if you’re not familiar — I’m sure as a Best Ever listener you’re familiar with that, but if you’re not, he’ll define it. He’s wholetailing properties, and he used to wholesale properties. He used to do about three to four a month, and now he’s doing two wholetails, because he doesn’t have to do as many; he’s making more money. The margins are double, so he doesn’t have to do as many deals.
He is based in Milwaukee, Wisconsin, and he got the start in investing by purchasing a home while active duty, which is now a rental. With that being said, Donald, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?
Donald Ross: Yeah. A little bit of the background is I did, like you’ve said, the construction when I was in my younger years, after high school; new builds, large customs homes. Then from that I kind of left, went to the military. I wound up doing contracting at the very end, in the military, as an active duty member, Afghanistan, for the local type contracts, for our people, the marines on the ground.
I came back and wound up doing the real estate stuff. I sort of jumped into the lease options and figured out that for me just being remote here in Southern California was a little bit more difficult to do the lease options than it was the wholesale side. So I started doing some wholesales, reached out to different “We buy house” type people and brokers and realtors, trying to partner with them up in Wisconsin, and wound up getting to the point where we are at today, where I have a partner that’s on the ground. We have basically come together, and she goes on the appointments; we send out marketing, and once it comes in, I’ve got my girlfriend currently taking phone calls, as well as we’re about to have John Martinez and the Call Sniper guys take some of the calls. So we’ll set up our lady on the ground that’s partners with us to go on the appointments, she’ll get it under contract, and then we’ll go ahead and put it out to either our buyers, or list it on the MLS and sell it that route.
Joe Fairless: Did I hear Southern California in there?
Donald Ross: Yeah, I live out in the Orange County area. We’re dropping mail from out here into the Wisconsin market, and taking the calls, and then setting the appointments for the lady that lives in the Milwaukee area.
Joe Fairless: Oh, okay. Are you from Milwaukee?
Donald Ross: I grew up about 45 minutes away from there, so I was kind of familiar with the area. That definitely helps with the situation, when you can talk about the areas and different monuments and whatnot in the local area. And then I fly back usually every two, three months; I go out there and we go and look at some stuff together. We’re about to actually start our own brokerage here in August.
Joe Fairless: So how long have you been doing wholesaling? I know you’re doing wholetailing now, but how long did you do wholesaling first?
Donald Ross: I spent about two years. Not entirely long, but long enough to get the basics down.
Joe Fairless: So two years wholesaling, and you’re doing about 3-4/month, right?
Donald Ross: Correct.
Joe Fairless: Okay. And then you decided “This isn’t the way I wanna do it. I wanna do wholetail.” Will you define what wholetail is and give the pros and cons as you’ve experienced them, comparing to wholesaling?
Donald Ross: Sure. Like most, probably, for the wholesale side, I was working on the inner city type properties; for us, what that meant is 50k and below values, and that’s after repair. We’ve tried to get in there and get them at a good price, meaning probably 5k-10k, and we’d wholesale them off, and we were making in the neighborhood of 5k/piece on those properties.
When we’ve kind of figured out that on a lot of those properties you deal with tax liens and code violations and all these other things that pop up while you’re trying to close… There’s a lot of landmines to navigate with a lower-end type of neighborhood like that. So we really started to market to stuff that was 75k and above for an after repair value. Our average of where we kind of stayed (median value) I would say is in the 100k to 200k range. Every once in a while we’ll venture out of that to a higher price point if it makes sense, but the median for us is gonna be there.
We’ve figured out at this point 75k and above, if we wholesale, we can usually get 10k-15k, and if we go to the wholetail method, which is really where we’re pushing now, is we’ll go ahead and grab it and close on it, and then we’re usually putting it on the MLS before that. Wisconsin allows us to have equitable interest in the property and put it on the MLS, so we’re doing that. We’ve just closed one last week and it wound up being right around 26k after expense, everything… So the wholetail method has basically allowed us to double what we’re normally getting on a wholesale fee.
Joe Fairless: What challenges have you come across when transitioning from wholesaling to wholetailing?
Donald Ross: Well, I would say one of the easier methods, kind of a hybrid, rather than actually putting it on the MLS, if you can get a hold of a list of realtors that have cash buyers and sell it to those, they’ll pay a lot higher value. They’re used to going on the MLS and paying MLS prices, so if you can go that route and get a cash buyer, there’s a lot less headache. However, if you do go down the path that we’re going right now and putting it on the MLS and start dealing with your conventional type buyers that are getting conventional loans, and you’re having to figure out if there’s local banks or credit unions that don’t have mortgage seasoning – because that’s usually an issue you’ll run into, especially with FHA buyers… You’re gonna have to buy it, hold it for 90 days and then possibly sell it. Conventional buyers – we can figure out a way to get around that.
Joe Fairless: Have you found some lenders that would do that, maybe like portfolio lenders or something?
Donald Ross: Local banks and credit unions. Otherwise, you’re basically stuck telling them that they’re gonna have to get a hard money loan and they’ll have to refinance out of it.
Joe Fairless: Have you done any seller financing on those?
Donald Ross: Not on those specifically, but we did do a package deal seller finance. So we will pick them up with seller finance and then sell them off as well. The last one I know for what we did, we pick up a package of five, and the end buyer was an investor and he wound up actually breaking them up and he made some money by doing that.
Joe Fairless: Let’s talk about the last deal that you saw through the entire process. Can you give us the numbers on that?
Donald Ross: For the outlook [unintelligible [00:09:02].13] I’ll give you round numbers just off the top of my head; let me see if I can get in there real quick. We basically bought at the price point of 195k, and we wound up pushing it out to the realtors that had bought cash buyer type purchases, investors, and they wound up having a buyer that was interested. We brought him in, and at this point we closed last week at (I believe it was) 226k. So when he took out the realtor commission expenses and everything, we’re in the neighborhood of right around 24k, 25k, somewhere in there. So for a marketplace where we normally only see 10k-15k wholesale fees, it should make sense to go after that price point, and as well as going with those realtors and MLS that allows you to get that double.
For us, we can typically send out right around in the neighborhood of 2,400-2,500 pieces of mail, and usually get something from that. It makes it a lot easier both on the marketing, and taking phone calls and everything else, if you can capitalize on a property and double your profit, obviously.
Joe Fairless: So the realtors who have cash buyers – they’re key to this.
Donald Ross: Absolutely. For us, we can have the ability to go in and pool the last 12 months of cash purchases from the MLS, and it will show us who that realtor was that helped do that transaction, and we can either e-mail or phone call, reach out to them and find out if their client is interested in buying any additional properties. Then if they are, you build out a list from that, and then when you have something under contract, you blast it out to that list and see if they’ve got a client that’s interested in doing a walkthrough; especially if it’s vacant, it’s a lot easier to get them through the property.
That’s typically what we’re doing at this point. We’ve got basically two different segregated lists. You’ve got your typical wholesale type cash buyer list, and then now a realtor list.
Joe Fairless: You were a marine and you were overseas… What lessons learned over there have you applied towards what you’re doing now, if any?
Donald Ross: The first deployment I was applying logistics, so you can kind of compare that to all the moving parts in a logistic system that you would have with a contract, and negotiating and maneuvering landmines that show up on the title when you’re getting everything closed. So you kind of figure out how to roll with the punches… Especially over there, if people need things, they need them yesterday. So we had the overnight things over there we did, and obviously the same thing applies here. You’re trying to close something, and the seller thinks the date is gonna be a certain date; on the close date you wind up jumping through hoops, trying to make things happen at the last minute. Obviously, we try to avoid those, but it happens. So assume that it’s going to happen, not that it’s always just gonna float the best possible way.
Then as far as negotiating and contracts, my secondary job before I got out was contracts for the marine corps. I negotiated some multi-million dollar contracts overseas to have services and supplies and different things to show up for the guys on the ground. Obviously, that applies to negotiating with the seller and/or the contracts that we go through. It makes it a lot easier to understand these different contracts.
For instance, the state of Wisconsin, if you’re a realtor or a broker, they require that you use a state contract. Obviously, most of those are gonna be anywhere from 12 to 15 pages, and sometimes we’ve got sellers where even if we use a simple three-pager, the attorney gets involved and they want that 12 and 15-pager, so it’s nice to be able to understand exactly what we’re using and dissecting those different terms and conditions that are in there.
Joe Fairless: Based on your experience as someone who’s full-time in real estate investing, what is your best real estate investing advice ever?
Donald Ross: Well, the hard part is just getting out there and doing it and answering the phone. A lot of people have a scarcity of the phone ringing. I would say the easiest part is just get out there, send direct mail or pay-per-click or whatever marketing channel you’re gonna use, do that, and then jump in. Once they answer a few phone calls, it just gets a lot easier.
At this point I don’t answer a ton of phone calls on my end unless it’s getting super crazy over here. We try to get the call center to take it or my girlfriend is taking it… But the money is in that phone call, and the money is in the follow-up. So first of all, take the phone calls, and second of all, make sure that you have a follow-up process.
Joe Fairless: Let’s talk about the phone call… Congratulations, you just got a new employee, and now you’re training him or her on the phone call. What do you tell them?
Donald Ross: Well, for us, I have since delegated that to John Martinez. He’s got some training that you can get into for your leads managers. He’s got great call scripts, he’s got everything that you could want basically in negotiating and talking with a seller on the phone, and it’s strictly in regards to real estate and what we do.
So for me, I’m gonna hook him up with the Martinez training, and get them over there. It’s one of the best things I’ve seen out there, and that’s another reason why I’ve got his call center now taking our calls. It just makes sense.
The biggest thing for us is then going to be the Podio training; that’s what we use for CRM to track everything that’s coming in. Now what I’ve done is as you go through the process and you start to figure out what works and what doesn’t work, I use Screencast-O-Matic, create a video, save it, and then I save that inside for an internal video or process that I can show them, for anybody that starts.
Joe Fairless: You are scaling your business, so that you’re able to do this virtually. You’re bringing in team members, you’re automating the process… At what point do you need to be involved because you suffer the quality of what you could have had if you were involved?
Donald Ross: Well, I would say that is the point where really the tracking mechanism is. We use a spreadsheet based off of the [unintelligible [00:14:51].20] I’m not sure it was brought up, but I’m part of REI Vault. REI Vault actually has a system where they’ve built out the whole tracking mechanism [unintelligible [00:15:01].19] meetings so that everyone’s on the same. You’ve got your tracking metrics, meaning how many calls are being placed by your leads manager on a weekly basis, or how many are received, how many appointments, offers, contracts are happening each week.
Once you have that spreadsheet to track everything, it makes it super simple to know if there’s a quality issue or a people issue, that maybe the person is not the right fit and they’re not up to par, up to standard. After the first two weeks, you can really tell; if the numbers start suffering, it’s time to have a talk or potentially look at somebody else for the position.
Joe Fairless: How do you find the team members?
Donald Ross: For us, we’ve really started now to focus more so on a Facebook network, so local people that we would know or people that are friends with us. I’ve used places like ZipRecruiter and oDesk in the past for some of the VA’s, but right now we’re actually focusing on getting a leads manager into our new office that’s opening up in August, so we’re gonna have somebody locally actually come sit in the seat in our office… Which is new for us.
Normally, we’ve got obviously my girlfriend that takes the calls now, I’ve had VA’s in the past that are remote, but all those came from oDesk, the VA’s that were remote. Then obviously my partner – I just simply made phone calls to the “We buy houses” type of things that you find on Google when you search, found out what she was doing… She was doing a couple of deals by herself, and basically we wound up combining forces because I have the background automation in knowing how to track everything.
Joe Fairless: Are you ready for the Best Ever Lightning Round?
Donald Ross: Let’s go!
Joe Fairless: Alright. First, a quick word from our Best Ever partners.
Break: [00:16:41].19] to [00:17:29].23]
Joe Fairless: Best ever book you’ve read?
Donald Ross: Traction.
Joe Fairless: Best ever deal you’ve done?
Donald Ross: The last one, because it’s one of the easiest and biggest ones we’ve had.
Joe Fairless: What’s a mistake you’ve made on a transaction?
Donald Ross: Typically, we [unintelligible [00:17:43].17] I think that’s one of the biggest mistakes that we’ve made in the past… Because you have bomb shells that will hit you right at the last minute before you’re trying to close.
Joe Fairless: What’s the best ever way you like to give back?
Donald Ross: For me, it’s veterans. If I can give back to a veteran charity or go down to anything having to do with the veterans, I’ll do that. I did at one point work for the DA and I did[unintelligible [00:18:05].01] give back to my people that I’m brotherhood part of.
Joe Fairless: How can the Best Ever listeners get in touch with you?
Donald Ross: They can either get a hold of me by e-mail, which is Don@REIVault.com, or if you wanna find out more about me, track me down on Facebook. My name is Donald Ross.
Joe Fairless: Thank you so much for being on the show, talking about the pros and cons between wholesaling and wholetailing, the challenges. The main thing is getting that cash buyer, and you gave a specific way of finding the cash buyer, which is doing research on cash purchases in the MLS, see who the agent was or that person is, and then reaching out to them and seeing if they’d be interested in buying additional properties or if their client would be interested in buying additional properties in the area.
Then also how you’re automating the process and how you’ve applied the lessons learned from serving our country to now developing and building a virtual wholetailing company. Thanks for being on the show. I have you have a best ever day, and we’ll talk to you soon.
Donald Ross: Thank you.
