Have you at one point or another wondered if you were able to maximise profit on each deal and not leave any money on the table? Undoubtedly, this is a tough thing to figure out especially if you’re a new wholesaler who’s still trying to find your way around.
The good news? America’s number 1 wholesaling coach Tom Krohl addressed this concern once and for all in today’s special episode!
Not only that, Tom also generously shared his thoughts, wisdom, and expertise on other key concerns many wholesalers come face-to-face with. Surely, this is one episode you’ll listen to over and over again!
- Tom’s thoughts on buyer’s remorse and not leaving money on the table
- Why multiple mailings is considered ideal
- Why it pays to know your end goals
- How to create a business that runs without you
- The undeniable power of tithing
- Why you shouldn’t worry about the property’s after repair value (ARV)
- Why ARV is an unattainable number
- The only thing that can kill a motivated seller deal
- The commodities that are more important than money
- Why it pays to be brutally honest with the sellers
- Why doing creative financing is not recommended
- Download your Free Audio Book
- The Four Spiritual Laws of Prosperity by Edwene Gaines
- Mike Michalowicz
If you are Ready to Explode Your Wholesaling Business, Click here to Book a Free Strategy Session with me right now!
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Tom : Hey, this is Tom. Good to hear you.
Cody Hofhein: Awesome. Good deal. Good deal. Hey, yeah, I’m going to jump right into it. So, yesterday… Last night I actually got a property under contract. I’m expecting to make a-
Tom : Awesome.
Cody Hofhein: really good amount of money on this. We’re talking like 40 To 60 however-
Tom : Great.
Cody Hofhein: Don’t mean to sound greedy here, but I’m kind of getting some buyer’s remorse. I felt like I left some money on the table and just kind of wanted to get your thoughts on ways that you kind of talk to sellers in order to not leave as much money on the table.
Tom : When you say that, it sounds like you’ve done multiple wholesale deals before?
Cody Hofhein: No, no. I’ve only really gotten one under my belt. This is going to be my second one, but I have a few coming down the pipe.
Tom : Okay, How much did you make on your first one?
Cody Hofhein: It’s actually closing in a week. I’m only going to make about $3,500.
Tom : Gotcha. I will tell you this, I have been running coaching calls now for five years. I’ve heard just about everything that I could imagine. I’ve never heard somebody who on their first deal is going to make 40 to 60,000 talking about leaving too much money on the table. But I love it. You’ve got a great attitude. Hey, move a mountain. Right? That’s what we’re supposed to do.
Cody Hofhein: That’s right.
Tom : So I love it. Let me say this to you. When you say that you are leaving or you feel like you’re leaving money on the table, can you explain that a little bit? Why do you feel that way? What is the reasoning behind that?
Yeah. I was just talking to the seller. When I first talked to her, she said, “Hey, my bottom is 350”. ARV is 660 it’s crazy and it only needs about a hundred grand in repairs. And I ran the comps through a realtor, through a trusted realtor, top-notch guy. So, it’s looking pretty solid. She said 350 was her bottom. I did the walk through and she’s out of state. So I talk to her about the walkthrough. I didn’t want to come in and say yes I can meet your 150 so she didn’t get any like seller’s remorse. But I also was cautious to come in a little bit… To come in low because I didn’t want her to distrust me and say, you know what, I’m just going to try another one of these postcards that I got.
Because I was the only one she called because of a… Because I repeated marketing and then I asked her after going through everything that was wrong with the house, I was like after, after hearing all this, I guess, what are you guys willing to… I know we had talked about 350 but what are you guys willing to take for the house? And they came back at me and they said… they thought about it and they came back at me, perfect negotiation strategy. They said, “well what are you willing to offer”? So I… like I said, I didn’t want to go too low. I said “337,500 and something”. I threw out an odd number and they’re were like, well, okay, yeah, sounds good. And they just kind of took it. So now I’m getting kind of buyer’s remorse, but you know, I’m just kind of curious what strategy you would have used.
Yeah. So first of all, I want everyone on the phone because I’ve heard there’s a lot of new people on the phone this week. And I just want everyone to hear what you said, which was really interesting. Which was you said the reason that they called you back was because of multiple mailings. This is why guys, we don’t just do one mail and then if we don’t get a deal, we throw out the list. Because there are, depending on which coach you listen to, it goes anywhere from like three all the way to eight touches in order to generate a phone call. So I love the fact that you mentioned that because that is so true that repetitive marketing to the same list can be overdone, but certainly would not be [inaudible 00:04:55] to just do once and then dump it. So great point there.
Honestly, as far as what I hear, you did everything correctly. There’s a lot of times when people will call in and they’ll say, “you know Tom tell I feel like I left money on the table”. What they’re really referring to is… What happens typically is they’ll do a deal and then after everything is all signed and set and ready to go. They will have multiple offers come in afterwards at a much higher price. Did you experience that at all or not really?
Cody Hofhein: I’m sorry, you said multiple offers coming in at a higher price, like the sellers are going to get more offers?
Tom : From the buyers, no from the buyers.
Cody Hofhein: Oh, Oh, from the buyers. I actually haven’t… So I got this on their contract last night. I haven’t marketed it to my buyers yet.
Tom : Yeah, I would say that. This is an odd question because I’ve never gotten that. I would say absolutely, do not be stressing out about this at all. I wouldn’t even be asking yourself the question.
Cody Hofhein: Okay, got it.
Tom : You know, sometimes we have like a fear of missing out, so we want… But you’re making a very, very healthy profit. I would definitely… If you were my acquisition manager and you came back with this deal describing it the way you described it, if I peppered you with 50 questions, why you didn’t get the price at a lower number, would not be one of my questions.
Cody Hofhein: No, I…
Tom : I Will say this. Go ahead.
Cody Hofhein: Oh yeah, no, I totally get it. And I’m, I’m obviously very, very happy with the price I got. It’s just one of those things like, well, what if I could have made, you know, five 10 $50,000 more, and I just left it on the table. That’s kind of where… I just don’t want to become complacent with it. You know what I mean?
Tom : Well, I look at that a little bit differently. What is the end goal here, right. There are multiple end goals. But what I would suggest is this, if your end goal is to have a healthy, wholesome, happy business that is a servant to you rather than creating a job that you serve, don’t make the cash per deal the end all be all. And the reason I say that is… What I mean by that is its good and excellent and healthy and wholesome and biblical to make money, right? I have no problem with that at all and I make a tremendous amount of money and I’m happy that I’m blessed in that way. But I think what’s more important is that you really want to have a heart. If I sound like I’m hesitating, it’s because I just want to be careful that this is not like a religious phone call, right?
But I will say this, there is a great book by… I’m Christian, but there’s a great book by a rabbi who’s into Daniel Lapin. It’s called On Business Secrets From The Bible. And when they asked Jesus what was the two most important commandments of the tent, he said, “love me and love others”, right. Love your neighbor as you love yourself, right, god’s other children. So in order to have a business that is a servant to you, where you can legitimately go hiking through the rain forest of Brazil for three months and not worry about your business, it’ll run without you. The best thing to do is to put pieces in place that are repetitive based on the seller’s needs and… Rather than the actual cash amount per deal. Now some people have deals that are too small that are not sustainable, but at 40 to 60 K per deal, even though this sounds a little counterintuitive to entrepreneurship, even if you are leaving a few thousand dollars more on the table, I wouldn’t be too worried about it.
Cody Hofhein: Okay, got it. No, that definitely makes sense. And I wasn’t really going to… I wasn’t planning on telling you this or anything, but yesterday I actually not even thinking about this deal. Being completely honest here, I made my first tithing and a few hours later I got this under contract. So it was like from that book that you, that you gave us the four spiritual laws-
Tom : The Four Spiritual laws, Edwene Gaines, yes. Good.
Cody Hofhein: Yeah, yeah. I mean I was… Yeah. Anyways.
Tom : Yeah, it’s… well I will tell you if it’s just you and I on the phone, no one else can hear me. I love that book. I recommend it all the time. But if I really was sincere about it, I would be recommending that you read Malakai, which is a chapter [crosstalk 00:09:07] –
Cody Hofhein: Malakai, really, okay.
Tom : Yeah, there you go. Last chapter in the old testiment.
Cody Hofhein: Okay ill check it out. [crosstalk 00:09:11].
Tom : But that’s just you and I, cause this isn’t a religious call.
Cody Hofhein: Got it. Got it. Okay.
Tom : But yeah it absolutely works, it absolutely works. And I attribute the majority of my success to tithing, so yeah. Good job and awesome.
Cody Hofhein: Awesome.
Tom : And yeah, go get that deal. Also, just really quick before I let you go, I just want to say one other thing. When we were talking, you brought up when you were coming up with a price, a whole bunch of complicated stuff with ARV and $100,000 worth of repairs. Let me make this suggestion. Unless you have been rehabbing for the last 20 years and you’ve done a ton of deals. And I’m only being blunt here because I want to get across to you. Do not worry about ARV, do not worry… Remember in this tribe, ARV stands for assumptions reduce victory.
Don’t worry about ARV. ARV is complicated. Literally it is an unobtainable number. There is no way to determine ARV. It’s impossible. I can prove that to you because if you get 25 rehabbers to give you a good price of a home, the current price ,the ARV price and the amount it’s going to cost to fix it up, you literally have like 150 different numbers, so it just doesn’t work. So instead, always try to figure out the current market value just based on the recently sold. The other reason that you do this, which is very important for [inaudible 00:10:25] is because… Just remember this, like wake up tomorrow morning and sit quietly someplace wherever you go to pray or meditate or whatever.
But I want you to sit quietly, like wake up at like 4:30 tomorrow morning. And I want you to remember this. Just meditate on this. Every single thing that you do, every single thing that you do, the people who work for you are going to do. So just imagine the difference of who you’re going to have to hire. If you start trying to figure out ARV and repair costs, imagine who you’re going to have to hire to replace you, right? While I’m running a McDonald’s and I’m hiring a 16 year old kid. You’re going to be running a five star restaurant and you’re going to have to hire some expert to replace you. So the more you make this business about real estate and you complicate these procedures, the more difficult it’s going to be to scale. So you’ll make two, three, $400,000 a year, right?
But you’ll be working all the time and you will find it’s impossible to replace yourself. So I would really encourage you, don’t make this simple business complicated by making it about real estate ARV repair costs, the cost of a countertop and whether it’s granted or Corian, I will tell you right now, I know nothing about real estate. I legitimately mean that. I go to… I’m part of masterminds that are all about real estate. I go and talk to these guys 90% of the time, I have no idea what the heck they’re talking about cause talking about real estate stuff. So, don’t make it about real estate because you’ll be working hard and you’ll never be able to replace yourself. You know what I’m saying?
Cody Hofhein: Yeah, no that, that totally makes sense. I guess here is my approach. I kind of handed it, handed the property or the address to a trusted top-notch realtor in the area and he does this for another wholesaler as well. And he basically sent me the CMA back and I didn’t even look at the entire CMA. I just look at his personal like, Hey, I suggest if I was listing this property fully rehab, here’s what I would list it at. Is that, are you recommending against that then?
Tom : Absolutely. Because I will tell you why, because the reason I absolutely 1000% think that’s a bad idea is because it is very hard to repeat on a consistent basis and it also will delay the deal. Meaning that if that person’s not avail… The only thing… If you work for me in your my acquisition manager, as soon as that lead comes in, the only thing I care about is when did you call them back? When did you set up the meeting, when did you put it up under contract and for what price? I don’t want any delays. The only thing that can kill a motivated seller deal is time and the more you take of it to put it under contract, the worst it’s going to be, right? Because we’re not in the real estate business. We are a pawn shop. We sell speed and we sell convenience.
We sell that in exchange for a low price. So the seller brings us a Rolex. It’s worth 35,000 we say, “Hey listen, you can put it on eBay. You can wait 10 days. You can answer all the questions people have about it. But if you want cash today, right, I’ll give you 3,500 and I’ll make it happen right this second”. I might check the price on, you know, another resource for 60 seconds. But that’s it. I’m not going to bring in a Rolex expert. And that’s the key. So just be very, very cautious about making anything… Because remember again, remember what I told you. Everything that you do, the people who work for you are going to do. And the funny thing about this is if you do it the wrong way, you’ll make some money.
And that’s actually the problem, right? Because at the end of the day, what you’re really find out is it’s not about the money. Like money, if you’re struggling, and I respect everybody on this phone call, if they’re struggling and they haven’t gotten their first check, I understand that. But after you start to make money, you will very quickly find out that it’s not about the money. There’s something much more important, you know, health, relationship with God, time, right? These are your important commodities. Money is meaningless. It’s the lowest commodity. So be careful about constantly exchanging time for anything-
Cody Hofhein: Got it.
Tom : And that would be doing that. So, just be careful about that.
Cody Hofhein: Okay. No, I appreciate it.
Tom : But you’re doing great.
Cody Hofhein: Copy that.
Tom : You’re doing great. Three deals under contract. Yeah, that’s awesome. Great job.
Cody Hofhein: Appreciate it. Hey, I do have two quick questions or am I able to answer that or I don’t want to-
Tom : Okay, go ahead, yeah go ahead.
Cody Hofhein: So, when I’m talking to sellers, here’s my approach. I kind of tell them, yep, me and my investor partners. That’s kind of how I phrase it when I’m talking about the cash buyers. Like, Hey, they’re my investor partners. We’re going to come walk in, we’re going to do an inspection. And I always refer to them as my investor partners. Kind of two questions on that. Number one is that immoral? And number two, if it is immoral, how should I be phrasing that? I just don’t want to-
Tom : Yeah.
Cody Hofhein: Confuse the sellers and I’m not trying to like hide anything, but if they’re not asking.
Tom : Yes you are.
Cody Hofhein: A specific questions-
Tom : Yes you are. Wait hold on.
Cody Hofhein: Okay.
Tom : So hold on. Yes, you are, right? You are. That’s exactly what we’re talking about. So let’s just hit this right between the eyes.
Cody Hofhein: Yep.
Tom : Because it’s exactly what you’re doing is you’re trying to hide something. So let’s talk about that, right? This is your new attitude. Okay? Your new attitude is when you meet a seller, whatever you’re afraid to say because you’re being anticipatory or you’re assuming. Meaning if I say this, I anticipate that the seller would be disappointed. I anticipate or assume that seller would be upset. I assume that the seller is going to change their mind. What your new attitude is, I want you to stand up straight, put your shoulders back wear big smile. And I want you to literally be brutally honest with the seller. So, whatever you feel like you want to say, but can’t I want you to say it.
Cody Hofhein: Okay.
Tom : That’s, that’s where we live, right? Because I’m telling you right now for a fact that sellers are rooting for you, that you’re… I was going to say young, I don’t know if you’re young, young, old, but they… you’re, this kid comes in and this guy comes in, old guy comes in, whatever, and they’re there to help. They’re rooting for you. They’re there… They want you to make money. They understand you run a business, they understand you’re not going to live in this home. They understand that this is what you do to feed your family. So this whole idea of misleading or hiding or not being 100% truthful or honest, get it out of your head because I’m telling you, they are rooting for you to make money. So, this is your new approach, brutal honesty. Anything that you feel like you don’t want to say, I would encourage you to slap them in the face with honesty.
I mean that metaphor, you know metaphorically, what is the word? Yeah, so actually hit a seller, right? But what I’m saying is I want you to like literally shock people with honesty.
Cody Hofhein: Got it.
Tom : Just like you’re going on a date, you have something you don’t want to talk about. Right. Talk about it. Because I want to get… I want you to get it off your chest because when the person you’re on a date with says, “Oh, that’s not a big deal I know my uncle went through the same thing and it’s fine. We can, we can do that”. That’s so much better. And they’re rooting for you. They don’t… They’re not fighting you on that, so it’s not a big deal.
Cody Hofhein: Okay. Copy of that. I’ll… Noted and I’ll start doing that. And the last question, do you do any sort of creative financing on your deals? Like, “Hey seller, I’ll pay you the full amount in six months after we sell the house” or something like that?
Tom : Yeah, absolutely. Never because-
Cody Hofhein: Oh, okay.
Tom : Creative financing is very difficult. The reason we don’t do it is because there’s a lot of things I don’t do. So for instance, I don’t try to make money on any of the byproducts that my business is produced. For instance, there are a lot of people who are motivated but have no equity. So a lot of people learn how to do other types of transactions, right? Like there’s this offer out there called a three offer letter where you can do a sandwich lease purchase.
I don’t do any of that. I don’t sell my leads to agents who can put them as listings for the people who are not really that motivated, but calling my office, I am laser focused on Gary Keller. I’m laser focused on Mike McCallawits and Scott Alexander. Scott Alexander teaches us that a rhino charges at one bank. Mike McCallowits is the pumpkin plant, right? One pumpkin on the vine. Gary Keller, the one thing, as soon as you start chasing money by selling like all of the saw dust that your lumberyard produces, then your number one worker cuts his hand on the saw. So if you want to have a nice easy life where your business runs without you and it’s simple. Always remember this, keep it simple, keep it stupid, right?
Cody Hofhein: Yep.
Tom : If you start… I mean, could you imagine the skill level of a person who has to work for you, have to know how to do, not just wholesaling deals, but also at least purchase options and sandwich leases and rent to owns and this and that And owner’s financing, it’s no way. No good.
Cody Hofhein: Okay, yep. That makes total sense. All right. That’s all I got. Sorry… Again, I really, really appreciate your insight. Noted everything and going to start taking action on everything you said. I appreciate it.
Tom : Good luck on the deal. Talk to you soon.
Cody Hofhein: Yep, appreciate it.