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Posted on: May 18, 2020
WI 429 | Virtual Real Estate Deals

 

At the height of the COVID-19 pandemic, many people were asked to work from home. Undeniably, going virtual is considered the next best thing to working in the office. Can you apply the same principle to your wholesaling business? You’d be delighted to know the answer is a resounding YES! 

 

If truth be told, even before the pandemic hit, some people have been wholesaling virtually. And they’ve been very successful at it. In today’s episode, virtual wholesaling coach, Lauren Hardy, talked to one of the biggest (and most successful!) virtual wholesalers in the country—Tag Thompson!

 

Tag is an economist, real estate investor, and successful entrepreneur. Prior to pursuing real estate investing full-time, he has started and sold 13 successful businesses. Since 2017, Tag has been operating in 7 different cities and has made over a million dollars in assignment fees!

 

If you’re considering wholesaling virtually, you’ll get a clear insight about its basics in today’s episode. If anything, listening to today’s show is a huge step in the right direction!

 

How To Do Real Estate Deals In ANY Market In The Country!

Episode Transcription

If this is your first time reading, welcome. You are about to experience the number one best wholesaling show in the world. If you are already one of our loyal readers, one of our Rhino Tribe members, welcome back, and thank you for reading a very special episode. We have Tag Thompson in the house. He is one of the biggest virtual wholesalers in the nation. He is a mentor of mine and also a good friend. Tag, how are you?

I’m awesome, Lauren. I’m excited to be here.

Tag Thompson is a successful entrepreneur, economist, and real estate, investor. Over the last several years, he has started and sold thirteen successful businesses. In 2017, he left his position as the COO of a $6 billion wealth management firm to pursue real estate investing full-time. Starting a wholesaling business from scratch, he and his partners have made over $1 million in assignment fees and are operating in seven different cities. You are pretty big time, aren’t you?

No, pretty big deal.

Tag, thanks for coming. Why don’t you get started by telling everybody how you got started in wholesaling back in 2017?

I fell backwards into it. I was working for a wealth management firm and honestly, I’ve got a little burnt out of sitting in meetings where wealthy people would complain about how they’ve only got a lot more wealthy last year. It wasn’t my personality and necessarily who I am. I did not get excited about making wealthy people wealthier.

I always liked real estate wholesaling in general because it is something that people with nothing can start and make a lot of money in. You can start wholesaling with just the shoes on your feet and knocking on doors if you want to. There is no bottom to it. Anybody can get into wholesaling and a lot of wealth has been created from this industry.

I love seeing these stories of people who are like, “I’ve got out of prison and came from nothing. I didn’t graduate high school.” Watching these people become six-figure earners by wholesaling within a matter of years, I thought the stories were beautiful. One of my close friends is a real estate investor and he is my current business partner, David Olds.

The more offers you give, the more deals you get.

He taught me everything about wholesaling and real estate in general before I started. After I left the wealth management firm, I went to him and said, “Is there room for me to do this with you?” At the time, he was mainly doing flipping. He said, “Chattanooga is pretty small. We are tapped out here already but let’s give it a shot.” We tried to go for a little while and it did well but we tapped the market in Chattanooga. That is what led to getting into virtual.

You live in Chattanooga and do some deals there but you also are in several different cities. What is the percentage that you are in Chattanooga?

About 50% of our deals come from Chattanooga, sometimes a little bit more. We have expanded our Chattanooga market a little bit as well, so we are in the surrounding areas. We are also in Charlotte, Knoxville, Huntsville, Birmingham, and Atlanta. There is probably one more I forgot in there. We are mainly in the Southeast part of the US. We are commercially in all those markets and it is going great.

I do not think I have ever asked you this but do you flip houses or are you strictly wholesaling?

We do not flip. One of our goals was to not flip any houses in 2019. We accomplished that one and in 2020, we are not going to flip either. We have figured out that whatever package deals or multiple property deals come across our deck, getting those across the finish line is difficult. We are going to start purchasing those, putting a little bit of work into them, and selling those on the retail market after the fact but no traditional flips. That is not what we are into.

Explain to our readers why it is a little bit more complicated when you get a package deal. Are you saying that a seller has five houses that he wants to unload? The benefit to sellers is you are saying, “I will pay all cash and take down all five.” You are probably going to negotiate a sweet discount. My guess is it is hard to find on the disposition side, either a buyer takes all of them or you are working with five different buyers. That is my guess why you were going that way.

I hate this scenario because when I talked to newer wholesalers, they ran into that guy that has 25 rental properties. He says he is interested in selling. They get excited and this is going to be an awesome deal. If he gets to a point where they put it under contract, those deals are incredibly hard to sell because you are talking about 25 different sellers and 25 different properties that need to be appraised and comps. At a minimum, it is going to be a package deal of probably $1.5 million to $7 million.

I tell wholesalers this, “If you have got one million people in your area, there are probably 5,000 or 10,000 people that have $70,000 that they can spend on a real estate purchase but there might be two that have $1.5 million.” Your buyer pool gets incredibly small at that point. It has a lot of frustration and they are hard to sell.

WI 429 | Virtual Real Estate Deals

Virtual Real Estate Deals: Real estate wholesaling is something that people with nothing can start and actually make a lot of money in.

 

For that purpose, we buy them. That way, we control the deal. There are tenants and we do not have to try to work with somebody else’s tenants. We handle all the paperwork ourselves. It is our property. It is making it a lot easier to sell that way. That is our strategy but I hate telling new wholesalers that because they get excited about those deals. I feel like I’m popping their balloon every time.

On the disposition side, you are going to wholetail them, as we call it. You are not like HGTV going in there. You are going to get them where they can pass inspections and be livable.

If there are vacant ones, you are going to fill the vacant ones. It looks a little more attractive to a buyer. We can put the whole package together to be more attractive.

Where are you getting the money? You are a wholesaler that does not have any money. Maybe get money for something like this.

There is a whole industry of hard money lenders and private banks. We use one called longhorn to do most of ours. We have some private investors that lend us money for it.

It is a next-level thing. It is not a beginner strategy for beginning wholesalers but it is something to think about. It is a strategy I do not think we probably have been talked much about on this show. I’m glad we’ve got to talk about this but let’s move on a little bit and talk more about virtual wholesaling because that is what you and I have in common and how you and I met. For our readers, we met because we are both TTP students. We were crushing our cold calling game together.

I had noticed that Tag was a virtual wholesaler and I’m a virtual wholesaler. There were not a lot of us out there. I reached out and said, “Let’s be friends. We need to talk more.” Tag and I have had lots of long discussions about our strategies and how we run our wholesaling businesses virtually. With the knowledge that I have gotten and developed together over the few years, I came out with a virtual wholesaling course and a coaching program that we are launching and working under Wholesaling Inc.

That is why I’m hosting. It is super exciting but, Tag, a lot of it was started from conversations that you and I had. Let’s dive into virtual wholesaling. What would you say is the most difficult aspect of virtual wholesaling when somebody is getting into a new market? What would be the biggest hurdle you think they face first?

The good will outweigh the bad. You’ll get past the big losses, and the wins will overtake them.

It is great to see this come full circle because when you and I first started talking, there were no programs. You could not pay any money and have someone teach you how to do this. There were a few random books but you and I both got into virtual out of necessity like we had to. It is great to see you create this beautiful program that people can go through and you can teach them how to do this. That is such an awesome thing. I will encourage everybody to sign up for it. I’m a believer. It is good stuff.

For a newbie wholesaler that is getting into virtual, probably the hardest part is learning how to value a property in a city you are unfamiliar with. You do not know the layout, the neighborhoods, and how much houses cost. Most of us can guess how much the house costs on the street we live on but if I were to say, “I’ve got a seller who wants to sell a house at Wetumpka, Alabama,” the likelihood that anybody knows where that is or how much real estate is worth there is pretty low. That is the hardest part about getting into virtual wholesaling. We ran into that right away when we started going to these virtual markets.

We developed a thing called Go Offer. Lauren was one of the first people. She got to experience it in a super beta version. She had to test that out with us and help us develop that in the very beginning. We developed the software that looks at every property in and around the subject property area, everything in that neighborhood, and analyzes it based on every criterion that our artificial intelligence can find.

In some areas, it can’t find a ton of things, bedrooms, bathrooms, square footage and all of that is easy but it goes as far as saying, “Does this house have a gravel driveway? Does it have 2 stories or 1 story?” It dives in deep and extracts all of that data. It goes through an algorithm and tells you an offer range based on the condition of the property. It is very simple.

If you have an address and you know the basics of the condition of the property, you can know how much to offer the seller within one millisecond. As soon as you hit search, it will give you an offer range to offer the seller. We tested the product for a full year and it has worked in every market that we have tried.

The biggest problem going into a new market you face is understanding how to comp things. The other thing is analyzing the market itself. You did a great job in your program describing how to go into that market and analyze a market before you spend much time. That is a hard thing to do and it takes us some skill to figure that out.

I know what you mean with both of those things. I have experiences that I can share. My first virtual market was Nashville, Tennessee. I remember telling you, “I’m building houses in Nashville.” I was doing ground-up construction and Nashville was great for that. It was a developer’s market. I was like, “I will be a developer.” I was a house flipper in California. I thought, “I could do this.” I started wanting to wholesale as well and that was where I was having a difficult time. It seemed to be competitive.

It did seem to be that there were many wholesalers and developers everywhere chasing after the same houses in the same lots. Being that I was out of state, the whole neighborhood would be changed by the time I could even access comps. I would call a seller out. The seller would go, “I could walk outside and go talk to the developer across the street because they are building four units. I will get an offer from them.”

WI 429 | Virtual Real Estate Deals

Virtual Real Estate Deals: The hardest part in virtual real estate is probably learning how to value a property in a city you’re unfamiliar with.

 

9 times out of 10, who is going to win, the guy in front of her or the girl on the phone from California who does not have a Southern accent? I lost every time. I realized that was not a great market to get into as a virtual investor and had I had somebody giving me some basic parameters. It is not a whole lot but it is things that are important.

I probably would not have wasted my time, to be honest. I would have either stuck with developing homes there or wasted my time trying to wholesale. There are some basic things that you and I discussed over again about what makes a good virtual market. I do address it in my course but you are right about that.

The second half is once you pick a market, what is the offer pricing? How do you figure that out? That is difficult. When I first went to Oklahoma City, I could not figure out how to make offers for the life of me. I was always offering way too low. All the sellers were like, “No way.” I was like, “I do not understand. How could you make any money off of it if I go any higher?” I realized I was analyzing it incorrectly.

My opinion is that the traditional model for getting to a Maximum Allowable Offer or MAO is broken because it assumes that the wholesaler that is talking to this seller knows about construction and how much repairs costs. That is a big significant part of that formula, the traditional formula of 65% of ARV minus the repair costs minus your fee. That is a big chunk of money. If you underestimate or overestimate your repair costs, the deal is dead. Our program analytics takes repair costs out of the picture. We treat properties more like commodities.

I ask people all the time, “How much has a Big Mac?” “It is $3.99.” I say, “Why is it $3.99?” “That is what McDonald’s and their billions of dollars in research have figured out.” That is the most that somebody will spend on a Big Mac. If we are competing with Big Macs, we are going to sell it for roughly $3.99. We look at markets and say, “What are the similar houses to this one with every parameter that we can find? What did that sell for? If that one sold for that, this one should too.” We found that theory plays out in every market across the country. We do not need to talk about repairs, get estimates or any of that. We need to be able to isolate similar properties because that is what an investor already pays for a house like that.

What I always heard was 70% minus repairs. Being a flipper in California, I had to get even more competitive. I was getting up to 85% minus repairs. I made sure I listed myself and cut every cost I could but going into a market like Oklahoma City, which was my second virtual market, I could not figure out how to offer.

You were the one that told me, “You need to see what other buyers are buying at.” Minus the wholesale fee you want and make sure to support your narrative to the seller like, “Houses like yours are selling to other investors between $55,0000 to $65,000 in your neighborhood. Given the condition of your home, I’m going to offer you $55,000. What do you think?” I try to get the seller as low as I can. We will put it out to the end buyers, get a bidding war going, and hopefully, sell it for $65,000. Do not overthink it. If people are overthinking it with the whole 70% minus repairs thing, your Go Offer idea saves so much time for people.

Go Offer is a principle. It is just go offer. Do not waste time and analyze a deal. Get your number and go offer it to as many people as you can get in front of it. Some will say, “Yes.”

Don’t count your chickens before they hatch.

I did not realize that it was a principle. Some people are like, “Do you overanalyze? What should I offer?” It stops you from blurting out a number to the seller. I’ve got to say, “I do love the way you think and run your business.” One of the things I love about Tag is that in every process in his business, he thinks about, “How can I scale this process?” Everything that he does is scalable. I do love that.

With Go Offer, it probably came out of a necessity because you were training different acquisition managers. That is difficult when you are trying to build out a team, teach someone, and value investment property in a sophisticated way. That is days and weeks of training versus you have come up with a way of not less sophisticated but same results. You are able to hire and if somebody quits, you can hire someone in their place and retrain them quickly. I liked that about you. How did you come up with those principles or that way about you?

It was out of necessity. I love processes. I had to isolate the requirements of the process. There are only 3 or 4 key things that a good acquisition manager needs to do. I isolated those and created a system that made those four things as simple as possible. The technology to be able to call a lot of people and the ability to give offers quickly are very important.

If somebody can give offers quickly, they can deliver a lot of offers. As you know well, Lauren, the more offers you give, the more deals you get. The ability to deliver contracts effectively and get contracts back. These are some key things that position us. You isolate it and make that as simple as possible in a linear system and it works.

When we started TTP, everybody was opening call centers and hiring a bunch of people to call right in their office. It was a little bit different back then but we had to create a system for that. We had cold callers, which typically do not last long. I lost 7 in 1 week one time. That was a huge panic moment for me.

At that point, I realized I had to have a system in place where I could hire a cold caller and have them on the phone with sellers in four hours. We did that with cold callers and my acquisition managers. I can have them up and running in about a day and a half. It’s important to be able to have simple systems. Those can scale indefinitely.

Scalable systems, that is something everybody can remember from this episode. As you are building your wholesaling business and growing and when you are starting, you do not even think. You still think small and are trying to figure it out. One day, you might have a team underneath you. You always start from the beginning with scalable systems, so you do not have to undo things that you have already done. I love a lot of your philosophies. Let’s switch gears a little bit. What is something that you are super proud of? Do you have any big successes or wins? How many deals did you end up closing in 2019? What is something you want to brag about? Let’s talk about wins.

I’m proud of you, Lauren. The course you have created is impeccable and so well-designed. I’m proud of you but I’m proud of the business that I have created. I’m proud of the fact that I’m not sure how many teams of employees here we get to provide a good life for. I’m proud of Go Offer and the way it is going to be able to help wholesalers get to that offer number quickly and spend a lot of offers. I’m proud of all that stuff.

WI 429 | Virtual Real Estate Deals

Virtual Real Estate Deals: It’s important to have simple systems that can help you scale indefinitely.

 

I’m proud of you too. Go Offer is a great idea. I’m excited. When you launch that, we will talk more about it. The reason I like to ask about wins is that I like to segue into the next question, which is, tell us about a time that you lost or you ate it in this business. Everybody loves to talk about how great they are, how big deals they close, and how great they are doing. For a newbie wholesaler who is reading this blog post, they would all appreciate it if you could share a time when you were not as awesome as you are and you struggled with something in this business. It would be a bad deal you had or a crazy seller that blew up on you. Share a time when it was hard.

I have it somewhere around here. I have what I call my favorite learning hood or closing statement. We have a deal that we had a $60,000 assignment fee. In the South, that is a pretty big assignment fee. You do not get a lot of deals that big. It was a life-changing assignment fee. A lot of people in our office are commission-based. We had people lined up, ready to get these big commission checks.

Ten minutes before closing, we got a call from a buyer. He was in the car on his way to the title company but backed out at the last second. That was a bad day. Walking out of my office, I pulled my support staff off their desk and said, “I know you were expecting a $6,000 or $7,000 commission check but that is not happening.” That was a big loss. In the end, it was probably our fault. We made some mistakes that spooked the buyer at the last minute but we had a bad day, came in the next day, and got back to work. We have made well over $1 million in assignments since then.

Even though that was a big loss, I use that to tell people out there, especially newer wholesalers who maybe have not gotten their first contract yet, that throughout your wholesaling career, you will loss deals. Hills will fall through but you have to get back, keep making phone calls, and keep giving offers because the goodwill outweighs the bad. You will get past the big losses and the wins will overtake them.

We laugh about that loss but it was powerful. That was one of those deals, whereafter it fell through, we were like, “How are we going to make payroll this time?” It taught us a lot about the value of perseverance and getting back up. That was probably the biggest loss learning moment that we have ever had.

I always say, “Do not count your chickens before they hatch.” Another saying is, “It was never yours.” With a deal, I always say, “It is not yours until you are holding that check in your hand.” I don’t get overly involved in the micro of my business. I’m not looking at my contracts and saying, “How much is it proposed that we will make out of that?” Forget it. I more look at like, “What do we have scheduled that is closing?”

I do not even count the dollar signs. I’m more like, “How many do we have scheduled and what days? Put them on the calendar so I can see my calendar has closing scheduled.” That is a good feeling but I do not know how much those even. I do not even pay attention to what is coming in until I get a FedEx package with the check in the mail. That is when I’m like, “That was a good one. Good job, guys.” I let everyone know, “This came in. Collect your commissions.” We do not count our chickens before they hatch anymore because we have had that same experience. It is a brighter past. It is going to happen to me again.

We will have a deal fall through. I do not know which one but we will have one.

Tag, we talked about a lot of things. I want to thank you so much for dropping all this good information for everybody. If anyone wanted to get ahold of you, how could people get ahold of you?

Facebook or Instagram is great. If you search for Tag Thompson, I’m the only one. That is the best way.

If you want to visit my website and you are interested in my coaching program, please go to www.WholesalingInc.com/virtual. There’s a lot more detail in there. I have a cool video you can watch. Thank you for reading. Tag, thank you so much.

 

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About Lauren Hardy

WI 479 | Wholesaling TipLauren Hardy is a Virtual Investing expert and Real Estate influencer who owns multiple companies in the real estate industry including real estate investment, coaching, and software companies. She is also a Wholesaling Inc coach and co-host of the Wholesaling Inc Podcast.

Her experience in the last decade has been focused on real estate investing and creating products and services to serve the real estate investing community. If you are interested in investing in real estate virtually, house flipping, or virtual landlording, Lauren’s your girl.

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