Posted on: December 11, 2020
WI 578 | Wholesaling Blunders

 

This episode’s amazing guest is Stratton Brown. Stratton is a successful real estate investor based in Riverton, Utah. However, he also invests in Fresno, California. Prior to becoming a wholesaler and real estate investor, he pursued his dreams of becoming a football star.

Eventually, he chose a more practical path and opted to try his luck in real estate. Fortunately, real estate was an awesome fit for Stratton as he was able to run a massively successful wholesaling business.

In this episode, Stratton shared some of the techniques that has helped him build a thriving business—from his current business structure down to how he screens his deals, Stratton covered it all.

If you’re considering getting into the wholesaling space, consider listening to this episode a must!

The 2 Biggest Blunders that Will Destroy Your Wholesaling Business

Episode Transcription

I’m super excited because we are breaking it down with somebody who’s been through the wringer, knows the ins and outs of what it takes to make it as a wholesaler, and has found massive success through one of the best vehicles for wealth out there. Mr. Stratton Brown, I’m glad to have you. Welcome to the show.

Thanks for having me on.

How are you doing?

I’m doing good. I’m done playing with my son at the park and I’m ready to have a good time talking to you.

I’ve known you for a while and we’ve talked about a ton of deals before and gone over your business and all that stuff. You had a big, massive deal that I want to dive into. Before we get into the meat and potatoes of the conversation, what’s your background? How’d you get started in real estate?

For my background, I was a college football player. I thought I was going to make a ton of money. In my senior year, I was in all-conference and seventeenth in the country in tackles. I’m like, “You’re going to be so rich. You’ll live a wild lifestyle. You better learn how to invest your money, so you don’t end up on TV being that rich to broke.” I started listening to Wholesaling Inc., BiggerPockets, Dave Ramsey, Grant Cardone, and filling my mind with investing stuff because I’m already thinking, “You’re about to get a ton of money, you better invest it. You know yourself.” I need to put all these millions that I don’t have somewhere.

I make it to Seattle, I get to try out, I get a cup of coffee, and nothing happens. I’m at home and it’s like, “Do I want to try again for a chance to make it or do I want to start a career?” I decided to start a career. I came home and started a home inspection business. It’s awful. I’m going to meetups. I do one home inspection and I go through a crawl space. I’m like, “This is not for me.”

I don’t like the bottom, crawling through, getting spiders on my face, and I’m afraid a snake’s going to bite me. I was like, “This is not it.” At one of the meetups, I met a guy who I ended up working for who was like, “Three years ago, I was driving a tractor making $30,000 a year. Now I’m making several six figures a month.” I was like, “What? Cool.” He was like, “I want to buy a jet too.” I was like, “Okay. Cool.”

Was that guy wholesaling?

Yes.

Isn’t that crazy?

He owned close to 100 rentals at that point in time too, so his growth over those three years was crazy. I called him after that first mock inspection. I’m like, “What do you do again?” He was like, “Go download PropertyRadar and go knock on every single pre-foreclosure.” I downloaded it and I knocked on pre-foreclosures dusk until dawn so much that my pregnant girlfriend thinks I’m cheating on her because I’m waking up in the morning and knocking until the sun goes down. I’m doing it over and over again until I finally get a deal. I ended up working for the guy for 1.5 years and eventually, I broke off and started my own company.

You tapped into a business that was existing and you got to play in that before you went and ventured out into yourself. You mentioned pre-foreclosures. For those who do not know what pre-foreclosures are, those are the properties that are going to be foreclosed on. These are people that have gotten notices and they’re behind on payments. It’s one type of seller that’s out there. You got a job with this guy. What happened?

If you’re just getting started, cold calling is the number one way hands down.

I eventually ended up running a lot of his day-to-day. It feels like I’m a partner with him. We’re putting together all the marketing campaigns. We built out an in-house call center with eight people. Two are on all the marketing, run the office, and I’m charged with another acquisition agent and transaction coordinator. Eventually, it was time for me to part ways. It was the best thing I’d ever done. Anyone who’s skeptical about paying for coaching or going to and working for someone for free, don’t be. I got an MBA in real estate in 1.5 years. I learned so much.

How long ago was this?

About halfway through 2017 and then I started on my own at the beginning of 2018.

In 2.5 years, you didn’t know anything about wholesaling. Did you go into it by yourself?

Yeah, pretty much. I worked for him during that summer-ish, after I got back from Seattle, all the way until the end of the year through a little bit of the next year, then I broke off on my own.

This is a crazy thing and it’s something that I talk about regularly. It’s amazing how fast things move when you have this type of opportunity out there. The margins are big. The overhead is not. It’s minimal when you compare it to other types of businesses out there. If you do apples-to-apples with a brick and mortar business, the difference is astronomical. The opportunity out there, even in this type of market is insane. We did see a big change at the beginning of 2020. It was felt across the nation but even then, the opportunity was resilient. It’s still out there. How are you guys doing? What does your operation look like right now?

It’s me, we’re bringing on a new leads manager, and my call center handles all my cold calls. My entire business is cold calling. We do some texting but nothing too heavy with some of the new opt-out stuff and it’s a targeted list with our texting but it’s all cold calling and PPC as well.

As far as finding sellers, what’s working for you guys?

Cold calling is, without a doubt, number one. PPC is a lot more of a higher barrier to entry. We have it there and it’s nicer because people are coming to us. Cold calling, if you’re getting started out, is the number one way hands down to get going. I’d tell you to door knock but we’re in the middle of COVID, so it’s a little bit difficult.

It gets a little tricky. That’s one thing that I keep saying and keep pressing on. You’ve got to have one backbone form of marketing. Once you hit something, it’s a pillar type of marketing for your company and may be different depending on the area. You pick it, you test it, and you figure out what works. You have that and you always keep that going. You never stop. One mistake that I’m seeing right now is that we’re coming into the holidays and people are dialing it back. They’re slowing down their marketing. No, it’s not the time. People still have issues. People still have problems that need to be solved. We can still be out there and create solutions for those sellers.

You can’t slow it down. I made a mistake in slowing down in COVID.

WI 578 | Wholesaling Blunders

Wholesaling Blunders: Anyone who’s skeptical about paying for coaching or going to be working for someone for free? Don’t be.

 

If you slow it down right now, you’re not going to see anything in the first quarter. You’re not going to see profits in January and February. It’s the consistency at the end of the day. You have to stay on it. It’s okay, for example, to test out different methods of marketing but you’ve got to have that one. In your case, it’s cold calling. In my case, it’s cold calling. I have two that I don’t slow down from, which are cold calling and SMS. In this case, when you have something like this, you have to be consistent with it. It sounds like you have a pretty lean team. What are the highest revenue-generating activities in your business?

Talking to sellers.

Mind-blowing, I mean that in a good way. It’s easy to get around that because it’s one of those things that creates the fear of rejection. If you can’t talk to sellers, nothing’s going to work. The market, the system, the logo, the website, and all that stuff is not going to work or matter. If you look at it, you don’t need anything other than a phone and a list. How is your guys’ follow-up? Is that something that plays a big part in it?

Everything comes from follow-up. The biggest mistake people make is not marketing consistently and not following up. Most of our deals come from at least 3 to 6 months. A lot of our deals come from a year. You’re following up with them. Maybe they didn’t like the offer and the market goes up and they’re like, “This is a number I wanted.” You give them the number they wanted and it works out. You never know.

What also happens with long-term follow-up is a lot of leads are prematurely dropped. People stop calling because they didn’t sell on the 1st or 2nd try. A lot of these long leads, what happens is that properties start appreciating. Sellers are often stuck with that single number that didn’t make sense in 2019. From 2019 to 2020, in Maricopa County, we’ve seen 8% appreciation on stuff and that’s insane. When you see that stuff, the numbers are almost going to work themselves out. Now you have market inventory that also plays into it. You have the desired areas. What areas are being developed?

There are so many different factors that change within a quarter. Before, the landscape here was different from what it was. That’s going to impact the sellers’ price point or whatever their price point is if that’s an issue. You’re talking to sellers, your highest revenue-generating activity. How do you go about digging deeper into the conversations? We all know that as you start doing deals, we start finding out that it’s not always about the money.

It’s never about the money. If someone’s going to shop, you’re never going to win. That’s how I personally feel. Unless you’re someone who has an insane buyers list, you can lock them up and you can make some marginal money. Generally, the small deals where you’re putting in a ton of effort are the biggest headache and it’s not worth your time. You’ve got to follow up. That long follow-up builds rapport. If you can get that rapport, talk to them longer and it’s you and them generally. People fall off. People drop it and it’s you and them trying to put something together.

What’s your qualification process? I agree with you. You said something important. We’re not trying to convince anybody to sell. The worst thing that you can do is try to convince somebody to sell. If they don’t have a problem and you’re making them think they have a problem so you can get a property, one, that’s unethical. It’s not right. Two, you’re going to end up with a big problem in your hands as you go through a transaction. Often, the smaller deals give you the biggest headaches. How do you process that? How do you screen what’s a deal and what’s not a deal?

From the TTP master, from Wholesaling Inc., we go price, timeline, property condition, and motivation. For me, motivation is number one. Price is a big deal but some people throw out a price. That’s not as big of a deal. If they have a legitimate reason for selling, that counts as a lead for us. For property conditions, if anyone says anything besides excellent, that counts for us because sellers are always lying to you and saying, “This is excellent.” It’s always brand new, remodeled. Does anyone say it’s fair?

If someone says it’s fair, it’s at least in the condition you want a wholesale deal to be. For the timeline, I want something to sell within 90 days. If it’s outside of 90 days, we push it off.

Do you push it off or do you recycle it and put it on for follow-up down the road? What do you do?

Everything comes from follow-up.

For our callers, they’ll keep getting called. If it comes in through anything else, we’ll follow up month to month. As we’re qualifying there, we’re like, “It doesn’t even sound like you’re ready to sell right now.” They’re like, “I’m not, honestly.” If you’re real with them and go, “Are you even interested in selling right now? It doesn’t sound like it’s something you’re considering.” They’ll be like, “Honestly, I’d like to wait a few months.” “No problem. Do you care if I give you a quick 30-second phone call in about 30 days to see how you’re doing?” They’re always going to say yes or they’re going to tell you, “Give me a call in 6 to 8 weeks.” We still give them a call in 30 and you keep on pushing.

I know we have leads in our pipeline that have been on there since 2017. That’s money. People are always going to sell. The timing is going to be one of the things that play into it. Sometimes they feel they got this as a landlord and sometimes they’re fed up with their tenants and you’ve got to be there, top of mind, whenever that happens.

What I mean by it’s not about the money is that we’re solving problems. A lead we’re working on right now, an old man was there, he died, they inherited it and they have a squatter there, it’s the middle of COVID. They hate the squatter. I was like, “I’ll buy it with the squatter in place. I’ll give the squatter cash for keys and I’ll close in two weeks.” They’re like, “What about this and that? What about all the junk that’s in the house? We want to go through all of it to make sure we don’t leave anything.”

“No problem. As soon as we close, we get them out. We’ll leave you time to go through the whole house and pull everything out.” That’s what people care about. It’s solving those little problems or little things like that. If you can pull out that pain and pull out their concerns and objections, at least then, price doesn’t matter because you solved the problem no one else even thought about solving. Most of the time, the seller will go dark on other people.

I’ve had people grab a bag and walk out of the property like that. That was their problem. Now they don’t have to deal with all that stuff, all that stress, and headache. To us, it looks like a bunch of stuff. To them, it’s mental junk. We’ve had that particular scenario happen multiple times. You’re a football player and you started working in this company where you started to learn the ropes. How did you manage the transition into becoming a full-time wholesaler and getting over that fear, believing that you could do this, and trusting yourself to run an operation? How was that?

I had no other life skills. I spent over 23 years developing myself as a football player. I was like, “Your degree is in communication.” I don’t want to get a real job. “You’ve got to make this work.” Flat out. That’s how I did it.

You’re up against the wall, pretty much.

Also, believing yourself is a whole other thing. You don’t even know when I broke up on my own. It was still getting over that barrier of doing your first deal all over again. On your own, with your own money and cash. I had my butt against the wall and dead broke. I got to make something happen and you have none of the life skills.

Do you know what happens though, and I see it time and time again? Once you hit that first deal, the money matters. The fact that you get a settlement statement that says that you closed the deal makes everything real. It now becomes a reality. Now it’s like, “This is something that I can do. This is something that I can blow up.” I remember getting my first closing, the first one I did on my own, and getting into it. It was a total game-changer because it painted that picture of, “Cool. I can do this again and again.” After so many tries, you have a business. Was that similar for you? How did it change your life setting?

In both times, it was the proof of concept. Getting the check and saying, “This is possible. I can do this.” It’s one thing to see everyone on YouTube talk about it but to get the check in your hand and go cash it. I’d tell everyone, even though some people are like, “Do wires,” go get your first check. See it, hold it, feel it, smell it and embrace it, “I did this. This is possible.” That proof of concept was big for me.

It paints a whole different setting once you hit that benchmark. I want to talk about this deal. We’ll get into the numbers and all that stuff. First off, give me the rundown. What was the scenario, the situation with the seller, and how’d you find the seller?

This one was the most bizarre one I’ve ever experienced. The seller was like, “It needs so much work. It’s bad. I want to get it off my hands.” They live on the coast. They’re older, retired, and they had their grandson living there, who was a police officer in the area. We texted them. He came in and the wife responded to me.

I followed up with the wife for three months trying to get ahold of her and they went dark. For whatever reason, I was like, “This is a deal.” It was a lead that came in through text and like, “Yes, we do want to sell.” Anyone who says, “Yes, I want to sell,” it’s more than likely a deal because a lot of people try and come off guard, at least that’s how it’s been for me.

WI 578 | Wholesaling Blunders

Wholesaling Blunders: The biggest mistake people make is not marketing consistently and then not following up. Most of our deals come from at least three to six months. A lot of our deals come from a year.

 

I’m following up until one day she was like, “Let me get you on the phone with my husband.” I get on the phone with the husband and we negotiate for all of 30 minutes. He’s like, “It’s in bad shape. What can you do for me? I want to close in 60 days because of X, X, and X.” I was like, “Easy. I’ll make that happen for you. No problem.” I sent over the contract. It’s all virtual, I never saw him and the house.

What was the real problem? What was the problem behind the call and the reason for them selling?

They were older and they were like, “It’s time to move on. I’m tired of driving out to Hanford to go fix it up.” They lived two and a half hours away. They’re like, “I’m tired of going to this area to go fix it up or go check on it or go check in on my grandkids. I’m over it.” It wasn’t a massive motivation. That’s why it was bizarre for me.

It’s not massive motivation, yet motivation. How did you find the lead? How’d you find this deal?

It was an absentee owner. We texted him.

Was it in your county?

This is an hour away from our main area, in a different county.

It’s pretty local then. You’re practically doing virtual deals in your local market. That’s what happens, right?

Yeah. All my biggest deals have come virtually. Generally, the owner’s out of the area anyway, so you do it all over the phone.

Are you always hitting the absentee owner list? What do you do with it?

Always. I don’t know about you but that’s our staple. High equity absentee is, without a doubt, our staple. Once you get to a certain point of data, that’s what you have to pull to keep your business running. You can’t survive off of the niche.

Niche is good but you’ve got to have that volume play. Absentee owner high equities are always going to give you that big fat list in any county. The first thing that we look at whenever we’re tapping into a new market is, does it have over 200,000 people in it? If it does, more than likely, we can drop a good, healthy amount of campaigns on it and go to town with that. You found the seller via SMS. Did it take you three months to get ahold of these people and have that conversation with them? How long did it take you from the point that you first made contact to the point that you closed the deal? What was that timeline?

That was a day. That was one of the only times it’s been a day of talking to him. He gave me a price. I was like, “Let me run my numbers.” I called them back and I was like, “I want to move forward today. Is that okay with you?” He said, “No problem.” I said, “I need to be here.” He goes, “Let me talk to my wife.” I was like, “No problem. I’ll stay on the phone.”

The small deals where you’re putting in a ton of effort are the biggest headache, and it’s not really worth your time.

“I’m not letting go.”

I let him talk to me as soon as he has any questions. That was on the same day, but that whole process took a while. To me, it’s still follow-up. When people are ready, they’re ready, so you’ve got to stay in front of every single person because you never know.

How many follow-ups did you have to do during that three-month period?

I couldn’t even tell you. It’s countless. A lot of times, when a lead initially comes in, we call them every day, sometimes a couple of times a day, until they pick up the phone. Especially with cold call leads because cold calling is a lot of timing, you never know when you’re going to get ahold of them. Texting is the same way, they may engage with you, but you’ve got to get ahold of them. You’re paying money for these leads.

I remember back when we first started working on your systems and all that stuff. You mentioned the seven days of hell.

We call anyone three times a day. I didn’t want to throw it out there, but we bombard them with texts if they don’t answer because we’re like, “We called you. You said you’re interested. Let’s hop on the phone and talk about it.” If you don’t do that, there are other people who are calling them anyway, who are bombarding them, so you want to at least be there.

After that first call, you almost become the needy boyfriend or needy girlfriend. I remember you mentioning that when we were setting up your system. I was like, “That’s heavy.” You’re going to lose deals by not following up. I’d rather lose a deal because of too much up than because I didn’t follow up enough.

Especially in your market where it’s competitive, and I know some people do that. In my market, I have a dude who, without a doubt, does it. I’ve called his letters to see what happens and I get bombarded. I don’t want someone to come in and catch them, so we’ll send off texts. We want to at least get some engagement. As soon as we get the engagement, we’ll call it off. In the beginning, we’ve got to get a hold of them.

That’s crazy. I like it though. You have to be on it and tenacious about things. Once you had that conversation with the seller, he had this big headache, he didn’t want to take care of that property anymore. He was traveling two and a half hours to handle his stuff and he was done with that. How did you structure the deal? What did it look like?

One of his biggest concerns was, “I want to make sure my grandson has time to move out and find a new place.” He was like, “I want to do a 60-day escrow.” I was like, “No problem. We’ll do a 60-day escrow and we’ll still pay cash, no inspections contingencies.” That was his biggest thing and that’s the only way we structured it. It was cash and close of escrow and 60-day escrow.

How did you manage the dispo on it? How did you sell the contract on this? Did you close on it?

No, I signed it. I have a meetup here in California, Fresno Wholesalers. We have 700 members where it’s buyers and everything else. Generally, if I know it’s going to be a deal, we’ll send it out there and get bites right away.

The power of the network, it’s incredible what it does. I was in a mastermind. The stuff that you keep learning, even from the same guys on a regular basis, you can’t ignore. Everybody elevates at the same time. That’s what happens. You send it out to your internal network. At this point, you have the contract in place. You’ll sign that contract, they took it down and closed it from there.

WI 578 | Wholesaling Blunders

Wholesaling Blunders: If you can pull out that pain and pull out their concerns and objections, then price doesn’t matter because you solved the problem no one else even thought about solving.

 

We asked for proof of funds. We get a $2,500 to $5,000 EMD depending on our relationship with the person.

Tell me a little bit about the negotiation process when you were talking to the seller. It sounds like everything was relatively fast and the magic of this whole thing was in the follow-up. Were there any hiccups during the negotiation or anything that you would have done better or differently throughout the deal?

You can always price anchor lower, honestly. There’s something, by the way, at least find a way to throw out some random number.

You’re not clenching when you’re dropping that anchor.

You feel rude and you’re like, “They’re going to laugh me off the phone or they’re going to cuss me out.” You don’t want to lose the deal because you don’t want the price anchor too low. They’re like, “Quit wasting my time.” You always want to price anchor pretty low.

The fear behind the low anchor is that as the person presenting the offer, you’re thinking, “That’s what I need for the deal.” It’s a conversation piece. It’s an anchor. It’s what it is. If you see it like that, it’s like dropping the ball on the playground and seeing if somebody wants to play with it.

It’s an art to drop it the right way and laugh it off or something else or you say something, don’t say another word, and wait for them to say something.

It’s pretty interesting the way that works when you do it right and when you’re able to navigate the conversation and you’re able to drop that low anchor, which is important. You want to drop the anchor if they don’t give you a number first. The key thing is to try and get a number out of the seller. Figure out where their mindset is at in terms of pricing and where they’re at with it. You don’t have to sell. If that doesn’t happen, then you anchor low. All it is, it’s a starting point for that conversation.

It’s never killed my negotiation because you drop the anchor and if it doesn’t work, you come back really quick and you’re like, “Let’s figure something out of the works for the both of us. We can’t pay that much because it’s too high and that’s not what we do. You can’t take that low to where are we at? What is it going to take to get this deal done?” It’s finding that middle ground.

The better the conversation is, the more you’re going to dig into it, and you’re going to find out what the real problem is. A lot of times, it’s not about the price. It’s about some alternative solution that you can provide for them. We’ve had it where they don’t want to have difficult conversations with their tenants, they don’t want to do repairs on the property. They want to walk out and we would come in and solve that problem.

He wanted to sell it as is.

At the end of this whole deal, which took you three months to figure out and another 60 days to close, it was a five-month deal pretty much, right?

Yes.

When people are ready, they’re ready. So, you have to stay in front of every single person because you never know.

That is not uncommon. When we talk about wholesaling, it’s one of those things that you can be in and out of a deal in two weeks. A lead comes in, you get it, you lock it, you negotiate it, you can get it under contract and you sell the contract or you close on it. In and out. That’s a perfect scenario. Most of the time though, leads are going to come in, you’re going to have to do follow-up, work with that lead, they’re not ready yet, “I’ll be ready next month. Give me a call back.” You call them back in two weeks because we always split it in half but it takes some time. This five-month endeavor, if you don’t mind sharing a little bit of the numbers, what was the ARV on the property?

It didn’t need that much work when we ended up getting pictures. The ARV was $270,000 and we got it at $130,000.

You bought it for $130,000 and it didn’t need much work. California is a competitive market. I don’t know about that town where it was at but I know California overall is competitive. What was the sale price of it?

We signed it for $49,000.

It’s close to about $2,000 a month there. $49,000 profit for follow-up in three months, the follow-up was a key on that thing. That’s amazing.

Always.

I know you’re big into systems. For somebody who’s aspiring to be a wholesaler or new into wholesaling, what are the top three things that they should be focusing on?

Number one, you got to talk to sellers. I’m not giving legal advice, but your LLC, website, and logo don’t matter. If no one knows we want to buy their house at a discount, then you’re not doing anything right. People have got to know you at least want to buy their house at a discount.

You’ve got to have those conversations.

Number two is a CRM. Use Podio because eventually, you’re going to end up in Podio. It’s free. You can get a free real estate investor pack on Podio. That way, you can house the people you’re trying to buy houses from. You can have it in an organized way to know when to follow up with people. With me, I’m not super organized. My CRM saves my life.

I’m happy to hear that.

It’s amazing. Number three, get a dialer and start cold calling. I had to donate blood when I first began and go sell everything I had to afford a dialer.

You take blood out of your body to get your business. That’s hardcore. I did not know that about you. That’s newfound respect.

I won’t go into it but when I left the investor, I was dead broke. I was eating bananas and rice. I had to sell everything I had to pay rent because I know the amount of money goes into marketing and driving for dollars will only get you so far. Go donate plasma.

Do whatever you’ve got to do to get things rolling and focus on those three things. I love it. Thank you very much. I appreciate you sitting down with us sharing your journey so far. Thanks for reading. There has been no better time than now to kickstart your wholesaling career. If you’re ready to take advantage of the best opportunity out there to create wealth and you want to cut the learning curve and you want to do it fast, head over to WholesalingInc.com and schedule a call with our team. Have a conversation. If it works for you, you might get an invitation to become a tribe member and I look forward to working with you personally. Thanks for being on board. I appreciate you.

Thank you so much.

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About Rafael Cortez

Rafael is an Organizational Psychologist and real estate professional holding ownership in multiple companies in various verticals. He has profitably invested in wholesale real estate over the last decade, runs an active business doing an average of 15 deals per month and is now passionate about using his investment knowledge, entrepreneurial experience and training as an organizational psychologist to help others learn about real estate investing through the Wholesaling Business Blueprint Coaching program with Wholesaling Inc.

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