Partnering with other wholesalers...

Hollywood Dude1,

Do you have deal on contract yet? I can say from my experience I have never needed $1000 for earnest money, I've never even needed $100, let alone an escrow account.

Now let me follow that up with this question... What are you looking to do? Are you wholesaling? Are you buying? What type of sellers are you planning to work with? These are all questions that really need to be answered before we can give you a direct answer to yours.

Presently I deal directly with the seller on owned properties. There has never been an agent or a bank involved involved on my deals. I find most every investor I work with wants the property before it hits the MLS. I market heavily though and that comes at an expense. All of my properties come to me before they go to an agent or are even placed on a website. It's that much more money in my pocket. Plus an agent usally likes to use their contract and such. It just doesn't do well for my type of investing.

I wholesale typically. A buyer CALLS ME, not the other way around. I know right off the bat they are motivated because they called me and I take a minute on the phone to feel out their situation. I get some property info, do some research. If the deal has potential I do a walk through, take a video, put in an offer and get a contract in place.

Now, I use $20 to the seller for earnest money on that contract. You could easily get away without using that earnest money though. However, I believe for the contract to be binding some form of money has to switch hands (check with a lawyer if you're all that concerned).

Point is if the seller is motivated enough it won't matter. They'll sign and it's RARE a seller ever mentions earnest money. In my mind if they want a large deposit of earnest money in escrow they really aren't all that motivated of a seller. Personally I work only with motivated sellers because I have very little time to haggle around and I have so many deals coming in I could honestly care less if one got away, especially if it meant I was going to have to put up with a pain in the tail seller. Things just go so much smoother when the seller is motivated. I work full time as a business analyst and project manager for a fortune 500. I really don't have time to screw around with particulars.

That brings me to another point. Even if the seller wants more than I know is worth my time, I'll put it on contract IF the seller is EASY GOING and willing to work with me. The property never sells quickly, I'm ok with that. I usually go back to the seller and explain that it's not moving because the price is too high for investors, after all I am the expert with the list of investors. The more attractive the deal the quicker we'll be able to move the property. They usually understand this so long as you keep in contact and let them know what your investors response the property was. I moved a property this way back in spring. I had it for 4 months! Over the course of those 4 months the seller went from $25K to $8K!!! Other than a few phone calls and CL ads I had zero time and money in that property. I made $5K on it and probably could've made more if I felt like haggling with buyers. I was more interested in closing that week since the sellers had been so patient and decided to work with me.

So in your case I would first lock up a deal or find a deal. Don't put the cart in front of the horse. It's likely you won't need that $1000 in an escrow account for your first deal. After you lock up a deal or find a deal to lock up THEN decide what's needed. Dean calls it analysis paralysis or something to that tune. You're looking at particulars of a certain scenario that MAY happen down the road when you should be looking for deals. Find a deal then figure out the particulars. In real estate your ultimately just a solutions guy. People come to you with a problem and you come to them with a solution. The correct solution for most situations regarding sellers will not require $1000 in escrow and IF it does remember there's usually more than one way to skin a cat. Hope this helps!

Own Your Situation,
Ben

There's two things I've found in my market that work wonderfully and keep the calls coming in FOR MY NICHE (more on that). Web 2.0 or Free Classifieds (I wrote up a huge post on this already) and bandit signs. It depends on the area. A high class neighborhood will not respond to bandit signs and they'll most likely get pulled quickly by the code enforcer. I don't know too many people around StL that own $500K houses spending time on CL either. I move properties in the $30K-$100K dollar range. More people in STL have $10K-$50K to invest vs $200k. Most of the cash-flow properties in StL are in that range also (cheap rentals). It's just common sense in my market for what I do.

My mortgage will be $200 but my rent will be $650 for a typical property I move. That's great positive monthly cashflow and there's no real risk if I can't find a decent tenant for a couple months. It will not be a $1200 mortgage and $1400 rent (that's an avereage white collar neighborhood around here) which is higher risk if I can't find a tenant and doesn't have the cash-flow. See the difference? Investors who put up with less quality tenants in less quality neighborhoods make more profit per deal. It's a market within my market. There's tons of these micro markets around here. Often times these get Section 8 qualified and the state pays the rent. It's great!

It's about your market. StL isn't rich like the west coast. I make well over 6 figures in this town and I have a very comfortable lifestyle on that, most would consider me well to do. Move me just outside of NYC and with that same salary I wouldn't be able to afford a cardboard box. Marketing is about analyzing your market. It's not about plug an play techniques that "work anywhere". There's only so many techniques. You just have to find what works where.

Start with CL. You'll start to notice where all the calls are coming from. Those are areas you need to put bandit signs up. CL is free and quick. The ad stays up for 45 day. Read my other post on Web 2.0. Implement some of those ideas.

2 things you absolutely MUST do. Persistent and Consistent. Market always and market a lot. When you think you're done marketing look back at all the work you did then double it. It's not hard. I do all mine with an employee and my laptop. It keeps the phone ringing. Leads = cash in your pocket. No leads, no cash.

As for buyers I use this statement... If you build it they will come. Meaning find a good enough deal and buyers will find you. I use a hand written bandit sign. It turns up solid leads which I add to my buyers list. I also pull non-owner occupied addresses around my property and send them a postcard or letter letting them know I have property for wholesale next to their rental. I add everyone of them that call in off of those letters to my buyers list. I also know exactly what they look for now. I've never had to do anything more than this to find a buyer. I keep it off CL typically because a ton of wholesaler wannabe's will call you and waste your time. A true wholesaler rockstar will call you from your marketing targeted to sellers. Those are worth talking to.

Don't over complicate it. Just find a motivated seller and worry about the rest as it comes. It's that easy.

Own Your Situation,
Ben