Posted on: June 17, 2019

Is it possible to spend very little on marketing and earn a huge revenue in return? When you’re in the wholesaling business, it is possible! Not convinced? Then you should hear the amazing wholesaling story of today’s special guest!

Mike Whitehead has been on the podcast before. Back then, he talked about his first wholesaling deal which earned him a whopping $20,000! Now Mike is back to talk about how his wholesaling adventure is going so far and how he’s been able to crush the wholesaling market since that fateful first deal.

Just like most people, Mike came from a totally different background (he was an MMA fighter!) before crushing the wholesaling market. However, he has learned so many techniques along the way that has helped take his wholesaling business to the next level. Luckily, in this episode, he candidly shared them.

If you need some help getting your wholesaling business to where you want it to be, today’s episode is for you. Have a pen and paper handy, prepare to take down notes, and of course be ready to take action. Rest assured, it would only be a matter of time until you experience the same level of success Mike is enjoying!

Key Takeaways

  • How he found his motivated seller
  • Total number of bandit signs he put out
  • Where the messages he gets goes through
  • Details of a lucrative deal he did
  • How much he earned each for the first 3 deals he did
  • What “subject to” means in real estate
  • Three ways he makes money
  • Gross and net monthly revenue of his 5 properties
  • The biggest lie ever told to real estate investors

RESOURCES:

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Episode Transcription

Tom Krol: Oh man. Guys, I am so excited to be here today and it is going to be with an amazing guest. I’m good friends with this guy. He’s a rhino who came into the tribe. He had immediate success. His first deal was $20,000, which is insane. That is much larger than the average first deal. My first deal was $2,000 so he beat me by 10 times. But guys, this is going to be a great episode.
This episode is all going to be about how one deal can totally alter the trajectory of your entire life. Not only is this one deal just amazing, I had to share it with you, but additionally, this one deal came in from an ad spend of about $3. It was a a $3 ad spend and it is a deal. When you guys hear this deal, you are going to just, you’re going to think it’s not true.
That’s how unbelievable this deal is. So I’m excited guys. My name is Tom Krol from America’s number one wholesaling real estate training program, Wholesaling Inc. I am super excited to be with you here today. If you don’t know what wholesaling is, wholesaling is the art of consistently finding discounted properties. If you can get good at consistently finding discounted properties, you will become a multimillionaire.
I can guarantee you that. So we’re going to get started today with Mike Whitehead. He’s a former MMA fighter, one of our rhinos who came in and crushed it and we are going to put him in the hot seat. We’re going to pick his brain. We’re not going to leave anything unsaid, so all the questions you’re going to have are going to get answered on exactly how you can repeat exactly what he did to find one deal that will change your life. So, Mike, can you hear me? Am I coming through okay?

Mike Whitehead: Yep. All good.

Tom Krol: Awesome. Well, it’s good to be with you here today, brother. Before we deep dive this deal that you did, and I know everyone is anticipating, everyone is anxious to hear about this, can you tell us a little bit about yourself and how you got started and all that good stuff?

Mike Whitehead: Okay. Yeah. I guess I was on the podcast before, but flipped my first house in 2013, played around with the mobile homes, played around with some notes over the years. Wholesale, my first deal last year, I believe in June, and from there just been going, focused only on wholesale. So.

Tom Krol: Was that that 20K deal?

Mike Whitehead: Exactly. Exactly.

Tom Krol: Yeah.

Mike Whitehead: Can you see my bell? Is it there?

Tom Krol: Oh, I love that victory bell. I hope we sent it to you.

Mike Whitehead: Oh yeah.

Tom Krol: [inaudible 00:03:26] I love it. I get to see our guests and students, on and the rhinos, right on video now. I love it so much better. Well good. No one cares about you. So let’s get right to the deal. So let’s not waste anyone’s time. So first of all, first question is if this deal is really, guys, a spectacular deal and Mike’s going to pour into here now and tell you all about it. But the first question that everyone is going to want to know is, how the heck did you find this motivated seller who was willing to sell their property at such a massive discount?

Mike Whitehead: So I got this one too through… I’ve only done one run of bandit signs. I haven’t gone back to it just because there’s a decent amount of people doing it already. And I’ve gone into some other marketing lanes that I enjoy better. So this was the one run of bandit signs I did. So this bandit sign literally cost me with the stake, a $1.25.

Tom Krol: That’s awesome. How many did you put out?

Mike Whitehead: I put out, I did six runs of 100, so 600 total.

Tom Krol: So that is very telling guys because if you hear what Mike just said, he did 600 so that’s a very telling number because-

Mike Whitehead: A 100 out a week for six weeks.

Tom Krol: And first of all, I guess I assume… First of all guys, I just want to say this for anyone who’s listening, if you are putting up bandit signs, make sure that they’re legal in your County, city, township or municipality. That’s very important. You don’t want to break the law.
So you put out these bandit signs, few questions on the bandit signs, number one, what did it say? Number two, did it go to voicemail or did it go directly to your cell phone? And number three, how big was it and what was the font? What was the color? Anything that we need to know and where did you put them? So that someone could go out and say, “I want to do exactly what Mike did.” So I want to know about basically-

Mike Whitehead: What it said?

Tom Krol: What it said and did it go to voicemail or [crosstalk 00:05:10]-

Mike Whitehead: So, easy, we buy houses for cash, yellow with black print, regular size 18 by 22 with a stake. Unless, there was a pole there. I went online and found the intersections that had the most traffic and I put them in those intersections along with Home Depot, Lowe’s, stuff like that that people go to on the weekends. I put them out on Friday and just left him out.

Tom Krol: I love it. And did it go to voicemail or did it go directly to your cell phone?

Mike Whitehead: So halfway through I switched it and it was going to voicemail, halfway through I switched it to go straight to my cell phone and picked them up live.

Tom Krol: Awesome. I love it. Easy peasy. Lemon squeezy. So that’s very repeatable. So there you go guys. There is everything you need to know about how to put out the bandit sign. Who is the vendor that you used? Do you remember to buy the bandit sign?

Mike Whitehead: Dirt cheap. Dirt cheap.

Tom Krol: Very popular. Very popular those guys.

Mike Whitehead: [crosstalk 00:06:02] Good guys over there and they got them out quick.

Tom Krol: Awesome. I love that. Okay, so now this lady calls you and tell us about the deal. How did it happen? What did she say? Did you visit her? I want to know the details. So the phone rings, what happens?

Mike Whitehead: I’ve got so much notes here, like so still been going on literally since last year. So notes and I’m just keep myself on point here. But a call came in. I didn’t pick up live, I believe I was on the other line. I listened to the voicemail. She said she has eight properties. She’s having a hard time getting rid of them. She seen my sign and that she’s already worked with a couple wholesalers and not had any success. And so I called her up, went over, met with her, got the addresses, got kind of the situation.
So she is a landlord who back in the day she was buying cheap properties from the city, fixing them up and then renting them to people from her church who were low income, who couldn’t afford nice houses and so she would rent to them until they got back on their feet. She had a… I don’t know exactly how many she had at one time. She had a decent amount.
She was down to these last eight, and her husband died about three years ago and I think she just kind of gave up. She just kind of lost the passion for it and just didn’t want to deal with it anymore. A couple of them went vacant, she let them go vacant. She didn’t try and get them going again, performing again. So she just left them vacant and she just was tired.
And so her thing to me is she said the first wholesaler that she signed with had her sign a six month deal. She didn’t know that she thought she was tied in, that she was locked in with this guy, that she couldn’t do anything with them, which I informed her that that wasn’t the case, you know?
So she thought she was locked in for six months. She couldn’t do anything with the properties for six months. The guy called her a couple times in that six months, gave her some stories about that he’s still trying, blah, blah, blah. Second guy comes in, she goes, well, I’m not going to do six months. I’ll do three months with this guy. Second guys didn’t even call her once in three months. She gave me 90 days. She gave me 90 days to get something started on these. I got the first one wholesaled. I believe in three weeks.

Tom Krol: Beautiful. And how about you speak on that first deal?

Mike Whitehead: So the first one I made 10 grand.

Tom Krol: 10 grand. Okay.

Mike Whitehead: [crosstalk 00:08:23] 10 grand. The second one was a couple of weeks after that I made 18 grand. The third one was a week after that I made 7,500.

Tom Krol: That’s amazing.

Mike Whitehead: So those are the first three gone. Now, the reason that the last five are not wholesale is that they were too close. There was not enough, really enough room to wholesale. So I went to her and I presented to her a deal where I could tell that she was tired. She didn’t want to deal with them anymore. Some of these were vacant, some of these were performing. And I just said, “Have you ever thought about subject to?” I explained to her what subject to was like, I would take over.
You wouldn’t be responsible for the mortgage payments or any phone calls. I’ll take all the phone calls, I’ll take all the responsibility, something breaks, I’m going to take care of it. All the responsibility is off your shoulders. You just keep them in your name. I will take care of them.

Tom Krol: So let’s just explain for everyone who’s listening exactly what a subject to is. It’s subject too the existing mortgage. So you’re buying the house but you’re keeping her mortgage in place and then you’re going to be responsible to pay those mortgage payments.

Mike Whitehead: Yeah, the mortgage payments basically I pay them straight to the mortgage companies. So, that’s a really key part in this whole deal. Don’t pay to the person pay to the actual mortgage company because if you pay to the person and then the person pockets it at the end, you can get in some issues there.
So I paid straight to her mortgage company, so I know the insurance is being paid, I know the tax money is being set aside and I know the mortgage is being paid. Okay?

Tom Krol: So right. Now, the way… I just want everyone, they’re saying, “Well how do you make money?” I assume what you’re making money on is the spread, the difference between what you pay the mortgage company and then what you either rent the house out for or sell it with owner financing or whatever. However your exit strategy, is that accurate?

Mike Whitehead: Yep. Yep.

Tom Krol: Okay.

Mike Whitehead: So two ways I make, well actually, truly there’s three ways on some of these I will make money in three ways, but the first two ways is number one, the spread. So let’s just go over the first one that I-

Tom Krol: And while you’re looking at those numbers, let me ask you, a lot of people are going to say, “Yeah, but Mike, why would a seller want to keep the mortgage in their name?” So my first question is, doesn’t the seller say, but “Yeah, Mike, I don’t want to carry that mortgage.” Or do they really not care?

Mike Whitehead: She obviously was reluctant, but she knew enough to understand that with the little bit of room there was between what she owed on them and what they were worth, she was either going to have to come out of pocket or it really wasn’t even going to be worth her time to sell it or she couldn’t even got what some of them needed some fixed up so that she wouldn’t even be able to get that from the MLS.
She would have to come out of pocket. So I let her know going with me, I’m going to take care of those things and you don’t have to worry about it.

Tom Krol: Now, one thing that’s important to point out guys that Mike is in such a strong position is, and we have not spoken any detail about this deal at all, but I can tell you that probably that these mortgage are already far into being paid. Is that right Mike? If it’s a 30 year mortgage, how many years has she already been paying on that mortgage?

Mike Whitehead: She had been paying on it, but she reapplied.

Tom Krol: Okay.

Mike Whitehead: That’s why they’re close.

Tom Krol: Got it. Okay.

Mike Whitehead: So she reapplied within, on some of these she reapplied within the last couple of years. One of them [crosstalk 00:11:46] Yeah, one of them, she reapplied like 10 years ago. So there was a little bit more room and there’s room on all these especially going lease option off the backside. But one of them she reapplied a couple of years ago and so it was very little room.

Tom Krol: So before we just go a little further because we’re going really fast and there’s a lot of jargon getting thrown around. So I just want to be clear.
So you had said that, so you put the properties under contract to buy, you took over… You wholesale three, you took over the other five, the mortgage payments, and you said that on the back end you did a lease purchase option. Can you explain what a lease purchase option is to exit the properties, what that looks like?

Mike Whitehead: So basically for that person they lease it and creative finance stuff. It can look like whatever you want guys. It doesn’t have to be in the box, it doesn’t have to be a certain amount and some upfront and some on the back. It can look like whatever you want. So the minute you try and put creative finance in a box, it’s going to jump out like it can look like whatever.
So the way that I have these is I’ve got a down payment, I have a monthly payment that is over the mortgage payment of each one of these. So the person coming into this, the reason why the person on the backside is doing this deal is they can’t buy a property off the MLS for whatever reason. They don’t have good credit. They don’t have the income, well they got to have the income because the payment, but a lot of times it’s credit.
A lot of times they just have issues getting credit worthy to buy something off the MLS, so they’re going to come to me. I’m going to take a down payment. Obviously I’m to do some background checks and make sure I’m not selling to someone horrible, but I’m going to look to make sure that they have the income to support the payment, that I’m not putting somebody into loose and they’re going to come in and they’re going to put a down payment.
So they’re already invested in the property and some of these they’re even going to be fixing them up. The very first one, it needed some foundation issues. The guy came in, I gave him a break on the down payment. He took the money from the down payment that I gave him a break. I still got a decent size down payment, but he fixed the foundation.

Tom Krol: So just to be clear, what you’re saying is on the exit of this property, you are essentially doing a rent to own, like they going to get to give you money down towards a purchase price, which is more than what you’re paying for the house. So they’re going to give you a percentage down. Then they’re going to make you a monthly payment and a portion of that payment is getting taken off of what the purchase price is. It can or maybe not. Okay.

Mike Whitehead: [crosstalk 00:14:09] doesn’t have to be. [crosstalk 00:14:10] Like when you try and put creative finance in the box it’s just this way.

Tom Krol: I love it.

Mike Whitehead: Like I know guys that don’t do that. Right. [crosstalk 00:14:18] do lease options and they don’t get a rent credit. So it can, I do. I do. So.

Tom Krol: Okay, so you have that. And then at a certain point they are obligated to go out and get a loan and pay you the remainder of what’s left. Right? And then you would pay off the note and or do… You tell me I just… There’s a lot of people listening. Right? And they don’t know what at least purchase is so I just want to make sure that we don’t confuse them.

Mike Whitehead: And my point is like don’t get caught up in that it has to look one way. So what you just said is very true. A lot of people do like a three year term so it’s at lease option that’s got what they call got teeth in it. Like within three years you got to pull this thing into your name.
What I did, and some people will frown on this, but I basically did a mortgage in lease option terms. There is no end term, there is no end date. They can basically take as long making their payments obviously over the amount of years that these are and most of them are eight year terms, but that pays the house off completely.
So I didn’t do a three year term or a five year term. I did, well, this is how long it’s going to take if you pay this amount all throughout the whole time is how long it’s going to take for you to pay this house off.

Tom Krol: I love it.

Mike Whitehead: In terms it’s a mortgage.

Tom Krol: Absolutely. And Mike is, yeah, he’s totally right. When it comes to creative financing, as long as it’s within the law, you can pretty much create anything that you want to create and yeah-

Mike Whitehead: Absolutely.

Tom Krol: So I love that. That’s very, very cool. Now let me get to some numbers here. What kind of monthly revenue? And guys, I don’t even know these deals, but I could tell you to do one deal with eight deals and knock it out like this. On those five properties, what are you anticipating that’s going to cashflow per month? Not even including the down payments.

Mike Whitehead: Okay, so my cash flow, my gross cash flow per month is 3650 right now. My net cash flow per month is 1545.

Tom Krol: Awesome.

Mike Whitehead: Okay?

Tom Krol: And is that with all five being rented?

Mike Whitehead: All five are performing right now. Now four of them are lease options. One had a renter in it that the owner asked me politely to let them stay because they’ve been with her for so long.

Tom Krol: Sure.

Mike Whitehead: I politely said okay. I would like for them to get out because I don’t like, I mean even this morning they called me about the AC. So we’re starting to get some warmer weather here.
My guy went out and said that there was a switch, not [inaudible 00:16:40] they charged me 50 bucks. I wouldn’t have been charged for that on all my other four. Those things I want to get away from. Anyway, so all five of them are performing right now so I’ll just start from the beginning.
First one I did was Quincy, the ARV on it was 44, I sold it. What was owed on it was 20 I sold it for I believe 47 and the mortgage payment on that per month is 325 and my monthly payment from him is 460 so I have cash flow 135 bucks. That was the first one. I did it wrong. I should have done at least 200 bucks.
That’s kind of where the sweet spot where I want it to be. I got a little hot and heavy getting it. So I also got a $4,000 down payment. It was going to be $8,000 down payment. I gave him a credit of 4,000 [crosstalk 00:17:30]-

Tom Krol: For the repairs.

Mike Whitehead: Because, it had a fairly major foundation issue. He had a guy that can do the foundation, and we put it in the contract. You take this four grand and you put it into that foundation. And he did.

Tom Krol: Okay, so we don’t have to get into the numbers of each property. But the bottom line is you made upfront between all of your down payments and all the assigning. Right. So, I mean that’s got to be a big number.

Mike Whitehead: So, out of all the assignments and it’s crazy if we go back and listen to my podcast with Cody, I told him that I’m probably going to make somewhere around 60 grand off this deal before I had it. And it was in the works. So with all the assignments and all the down payments for the lease options, I made $62,500.

Tom Krol: That’s awesome man. That’s great. And plus you have now cashflow pretty much for years and years and years, which is incredible because how much money did you actually put into this deal? Not a lot guys. Not a lot.

Mike Whitehead: I don’t think I did any. I don’t… Let me think.

Tom Krol: Wholesaling is the greatest business in the world. [crosstalk 00:18:39] Oh, man.

Mike Whitehead: [crosstalk 00:18:42] that question, but I didn’t put any money into the ones I wholesaled obviously. And then these ones that I had gotten lease options, I got them to take care of the repairs.

Tom Krol: So let me ask you a question. Are you using a servicing company to pay those mortgages? Or you’re just… I know you said direct but.

Mike Whitehead: I’m not right now. I want to get to that point.

Tom Krol: [crosstalk 00:19:01] Yeah, not a bad idea.

Mike Whitehead: I want to get this last one, these renters out, which it sounds like they’re going to be getting out soon and they keep saying that they hate the property. There’s nothing wrong with the property, but they hate that I’m now making them pay their rent on time.
They were paying their rent on like the 15th and the 18th for years and now because I’m making them pay on or before the fifth and they get late fees, they’re hating me. So I’m like, well, just move out.

Tom Krol: Hey listen, I just got out of a meeting with my bookkeeper and my personal assistant Tony. She’s a total rock star and we just went, we finally, finally, I could tell you for sure the biggest lie ever told to real estate investors is that you can make passive income through single family rentals.
You can make monthly income, but certainly not passive. As a matter of fact, I know that because a lot of the properties I buy come from landlords who thought that rental properties were going to be passive income. Those are my favorite motivated sellers. But-

Mike Whitehead: [crosstalk 00:19:56] So are you turning all yours into seller finance deals? Or are you moving into like condos or apartments?

Tom Krol: So my plan is a little bit different. So I want to have four years of cash in the bank. This is very controversial and [crosstalk 00:20:11] cause a lot of comments to come up, but I will tell you that my mentors are putting me in a little bit of a different category.
So I’m doing four years of liquid cash. I’m converting half of that, of those four years into 20% of physical gold. And then I have my rental portfolio and I have my owner financing portfolio. Obviously the ROI on the owner financing is absolutely through the roof. Those properties are free and clear. So it’s, I love it. I [crosstalk 00:20:35]-

Mike Whitehead: I know a guy down in Texas who he took like, I think he had like some over 800 rentals that he turned every one of them into seller finance deal. Got rid of all rentals and he’s moved completely into owner finance.

Tom Krol: You have to be careful because there are new laws about doing that so you have to make sure you’re following the letter of law. But yeah, I love that idea. And the ROI is, some people will say, well if you do 30 year mortgages, it’s going to end in 30 years with the kind of percentages that we’re making.
I could really care less. I love this. This is really awesome. And I just want to encourage everyone guys, this is how one deal can literally for a $1.25 or really closer to 600 or $700 because you had to put out a lot and you wouldn’t have been able to just pick that one. So, but for six or seven or $800 how you could have a deal that gives you over $60,000 up front plus monthly cashflow about maybe, what 1500 you said?

Mike Whitehead: Yeah, 1545 and as they get paid off obviously that’ll go up.

Tom Krol: And without putting any money in the deal and really no risk because the mortgages aren’t even in your name, so you’re not even taking on any debt. So it’s really, really powerful guys. I just want to encourage everyone, if you’re thinking about wholesaling, I don’t even know what else to say. I mean, that just speaks for itself.

Mike Whitehead: For me, it’s all about not being the first or the second wholesaler that went to this lady. Because I guarantee you they did the same thing. They looked at the numbers, they’re like, oh, there’s no deal here. Right? And they didn’t think outside the box and she gave the last guy three months.
I had 45 days. I had a month and a half to do something and show her that I could perform. And I had a great relationship with her now. I’ve taken her to the title company a couple of times on the wholesale deals. She’s rode with me, I know her family now and she’s loving me. So yeah.

Tom Krol: That’s awesome man.

Mike Whitehead: Yeah. So-

Tom Krol: And you were an MMA fighter. This is not even like in your wheelhouse. I mean it’s not like you were trained and you went to like you studied under an apprentice I mean this is… You guys, you have a long hair guy and an MMA fighter and we have, national news broadcasters and single moms with two kids and CPAs and attorneys and doctors and chefs and I mean it doesn’t matter. So brother, I’m ringing the victory bell for you again.
And I also just want to say as a side note Mike is a rock star. He is such a big Go-Giver as being a rhino. He helps so many rhinos in the tribe. So Mike, I just want to tell you, we shout out to you. It’s a shout out. We love you, we respect you. You’re good man. You have a good heart. So thank you for everything you do man.

Mike Whitehead: Appreciate it. Thanks mate.

Tom Krol: Awesome. So this is our first one, so I don’t know, how do I sign off on a video podcast?

Mike Whitehead: I just want to say thanks to you guys, you and Cody and Brett, you guys talk about me being a Go-Giver, you guys give so much material, so much content and it was great meeting you down in Asheville. You guys are awesome. Couldn’t have done this without you guys, so thank you.

Tom Krol: Absolutely. It’s an honor. Hey, next summit is 2020 in October [crosstalk 00:23:31] be there?

Mike Whitehead: Why so long away?

Tom Krol: We couldn’t do it this year, brother. It was too much. Those events are a bear. They are a bear.

Mike Whitehead: Yeah, yeah.

Tom Krol: I’ve got five kids.

Mike Whitehead: I’ll be there. I’ll be there.

Tom Krol: Orlando. All right guys. Well that was Mike Whitehead. He’s a rock star rhino out of Kansas City. He’s a total Go-Giver, a total sweetheart. So many of our rhinos rely on him. He even has like within our tribe, a small little mastermind that he put together and he is out there crushing a $20,000 on his first deal. One deal for like a few hundred six seven $800 to do 60K in his pocket plus monthly cashflow of $1,500 with nobody in the deal at all. Bam!
I love this business. Head on over to Wholesaling Inc, Wholesaling I-N-C.Com. Check us out, fill out an application if we like what you have to say, we might even invite you in to be a rhino. All right brother. Rhino salute man. Come on. I love it. Talk to you soon, Mike. Thanks buddy. All right, God bless. Bye bye.

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