Are you ready to grow your real estate wholesaling business? Do you need to improve the quality of your buyer’s list? Do you want to step up your game and maximize leads?
If so, then use this episode as a guide to learn how to keep your pipeline full of properties and increase your cash flow. Christa is here again to walk us through the ins and outs of building your very own wholesaling business. Learn how she cracked the code by clicking on that play button! You’ll be shocked at what you’ll discover.
Joint Venture Masterclass – How To Leverage Other Wholesalers To Build Your Wholesaling Business With Disposition Manager Christa
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I wanted to take a second to explore something that will come up as you get established on the radio that can be beneficial to your business but it may be a little bit more difficult initially to try and navigate. When you are on the radio and you are getting yourself established and people hear you a few times, believe me, they are going to start to think you can solve all of their real estate problems. Their ad will not mention their issue specifically, hit on their pain point, or talk about them specifically, but after a while, they are going to assume that you can solve or at least you have some connection to a solution that can help with their real estate problem.
That creates a great opportunity. As these leads are coming in, they are always highly motivated. Whatever their situation may be, they are highly motivated to make a move and get something going. That is a great thing, but it will test you as a business owner, wholesaler, and investor because maybe it is outside of the literal area of where you service or it is stretching your area of expertise. Either way, it is a great opportunity for your business and also for you to start expanding your knowledge and also network potentially. That comes up a lot.
Christa is dispositioning leads. We talked to Christa before about dispositions in general but we wanted Christa to hop back on to help us understand what to do, “Do I refer this lead out because it is not in my area of expertise? Do I set up some joint venture? How do I handle that process? Where do I pivot?” We wanted to have Christa back on. This comes up a lot as she is dispositioning leads. Christa, do you mind hopping in here and giving us any feedback on the basics of that?
Part of being the dispositions is making sure that in every contract we get, we receive maximum profit from. That also follows over to leads, but some leads we cannot service. Maybe they are in another state or it is a retail transaction. Those leads still have profit potential. We have to make an effort to find them the right home so we can get the maximum profit. Those leads fall into two different categories, JV and referrals. Referrals tend to be easy.
Joint Venture: Develop relationships with a local agent. They will bend over backward to make everything happen because you’re going to be feeding them retail leads.
We had a radio lead call us. He was a trucker. He was driving for dollars. He heard us on the radio. His mom’s house is in Oklahoma. They were ready to sell it. We did not have any interest in doing business in Oklahoma but it was retail sales. They were not working with an agent, so we reached out to another brokerage and created an introduction. They got the listing and sold the house. We got 25% of the agent’s commission. It took us 30 minutes. We made a couple of thousand dollars and did not waste the lead. That is a good example of how an out-of-area radio lead happens for us.
Sometimes they are looking for a retail transaction. If they are in our area, we are very lucky. We have a brokerage side. We make a connection between one of our agents and the lead and maximize the profit from that lead as well. We can service wholesale as well as retail leads. Whereas not everybody is able to do that and not every wholesaler is licensed or has access to a brokerage. In developing our relationship with a local agent, they will love you and bend over backward to make everything happen because you are going to be feeding them retail leads.
That is exactly what I was thinking if you are in a situation where you do not have a relationship with that. This may be a silly question for anyone that is starting this for the first time. How should you go about creating those relationships? Do you start on Facebook? Do you cold call them up? Is there something you should be saying specifically? Is there something you should be on the lookout for as you are developing that relationship with them?
As wholesalers, we run into agents all the time. Just like anybody we meet in business, some people we click with and some people we do not. You meet those people, have a good conversation, make a mental note, call them up, and say, “I got this lead. Are you interested in a referral?” They are going to bend over backward because you are bringing them a referral, especially if it is a listing referral in this market. There are plenty of buyers. There are not enough listings. You could meet them through Facebook, networking events or people.
We have a lot of buyers who are agents. They may have clients who are investors. We have a relationship with them and other wholesalers have relationships with agents. That is normal business. It is someone that you feel comfortable giving your lead to. Of course, there is paperwork to make sure you get paid. You want that lead to having the best customer experience possible. You are not going to hand them to somebody you do not like or have confidence in, but you will meet those people as you do business.
That is a good point. You may go, “I do not have the expertise or the ability to service this lead but I still want to make sure that they are taken care of and they are handed off to someone that can help with their situation.” Is there something specific though, as you are reaching out and building relationships with agents that you should be on the lookout for? How would you know? Maybe their personality seems great and your conversation seems perfectly fine, but is there anything that you can look for as a sign to be able to trust doing business with them?
Should you be looking for a certain type of agent? Should you be listening to certain questions? Is there a series of questions that you could throw in to ask them to feel out if they are truly an expert on that side? Is there a certain number of years that they should have underneath their belt as the investor or wholesaler who is trying to build out relationships with agents for the first time?
Part of being in dispositions is ensuring that we receive maximum profit from every contract we get.
We have MLS access. If you have MLS access, you can look at what agents have sold in your area. Do they only specialize in a certain neighborhood? They are not going to waste their time if it is in the wrong neighborhood. Maybe for that lead, it is not the right person. I also look at agents’ listings. Are they honest with the description of the house? Are their pictures professional? Are they professional?
We live in an environment. If someone had a bad experience with you, they would put it on the internet. Look for reviews if several people are saying, “I felt like they did not get me the best deal. They would not answer my phone calls. I had to get another agent because I felt like they were untrustworthy.” People are very vocal about bad experiences. That is why we always want to make sure our leads have the best customer experience.
Maybe the number of years is not as important as, at a minimum, making sure that you are not ignoring red flags that are already on the internet about that potential agent. I would wonder if it is better to work with an agent that is a little bit newer who is trying to get themselves established or is it best to work with someone a little bit more seasoned.
I am betting that even if you were able to start a relationship with someone that is a newer agent, you still want to make sure that you can trust handing that lead to them and they can take care of it. Whether it is a newer agent or someone that is seasoned, are they trustworthy to go, “If I hand this lead to this individual, is the lead going to be taken care of?” If the lead has a bad experience, it can still be a bad look for the wholesaler and investor as well.
A lot of people who become agents work in a real estate agency or have title experience or something. Unfortunately, years as an agent do not always truly reflect their skills. They may have insight that could help your lead. We run into situations all the time where maybe a client had a listing agreement but then came to us and did not mention they had a listing agreement. We had a situation like that. The agent called me and said, “Why are you trying to sell my house?” We got through that and became friends because she was honest and fair. She knew it was her client and we worked something out so we could both profit. That is what everybody wants.
I am curious. If I am the investor or the wholesaler who are like, “To be honest with you, I am trying to connect my lead with an agent. Is it inappropriate or slightly unethical if I am honestly throwing the same lead to a couple of agents at the same time because I do not know who has the ability to close?” How does that work? Should you be focused on developing relationships with a couple of agents but pitch a lead to only one at a time? Is it inappropriate to be like, “I am throwing this one lead out there to the three agents I have a relationship with?”
That depends on the relationship. In general, I try and give someone 48 hours to reach out to the lead, set up a listing appointment, and do what they need. If the lead did not hear from them, we need to move on. We still need to maximize our profit off that lead. I would never say, “Give it to five agents at once and let them battle it out,” because then, unfortunately, they are calling, the lead gets overwhelmed and backs away.
Joint Venture: There are plenty of buyers, not enough listings.
I can understand that. Thank you so much for clarifying that because I would imagine you are looking at it and going, “I need to make sure I move this lead,” but you still want to be delicate in the way that you are doing it. That could overwhelm the seller who reached out to you for help and is expecting a phone call or some form of communication from that agent to be able to take care of them.
It could feel very spammy if they are getting overwhelmed with phone calls or communications from too many people at once that they do not even know. As you are dispositioning a lead to, let’s say, the trucker who was out-of-area, what specifically should be included in a referral agreement? With the agent, you usually try and give them about 48 hours. Do you communicate certain timeframes? What should be included in that referral agreement?
The timeframe leads information and clearly upfront what you expect as compensation. Unfortunately, you cannot leave everything via verbal contract. We do have a referral contract. We fill it out. It is nothing major. It just says, “This is the lead. This is what you are going to owe me if you sell this house.” It is very basic. It depends on what state you are in. You may have to cover some other basis. In Texas, that is all we have to do.
To your point about the timeframe, if I am setting this up for the first time, how do I know that my expectations are a little too high and they are not realistic? Is 24 to 48 hours okay or 5 days for that agent or whoever I referred to touch base before I move? How do you set that expectation on what the timeframe should be for yourself so that you can communicate it to whoever you referred the lead to?
Our acquisition managers are calling leads within 24 hours. Hopefully, it is much less than that. Sometimes it takes a little couple of calls to get ahold of somebody. I expect the same from an agent. In 48 hours, if you have not reached them, you are not going to. When I talk to a lead, I say, “I am not able to help you myself, but I do know this person. They are wonderful.” They talk up the agent. Sometimes I do an introductory email between the agent and the lead. I am part of that email chain and I see what the progress is.
I will call the lead and say, “I was checking in. Did Samantha get ahold of you?” If they say no, I say, “Let me try and three-way them in. We have an appointment.” I will take it from there. I will touch base with the lead and call the agents, “Did you get ahold of them?” “No, they are not answering.” “Let me call and see if I can get them to pick up the phone.” It is in my best interest for them to get that listing so I can make sure our company gets paid.
I like that a lot, especially the fact that you will still step in to, at a minimum, connect them via email so that the seller is prepared for who’s about to reach out. I can understand that. I am sure that can make the seller feel like they are being taken care of and that they are not waiting for a random phone call. They know who to expect that communication from roughly. Is there anything around the referral program?
People are very vocal about bad experiences. That’s why we always want to make sure our leads have the best customer experience.
Is there anything that you have seen in your experience, if there are common mistakes or mistakes that you made early on that you are like, “Now I know better. They are common mistakes?” You have talked to a lot of other agents, investors, and wholesalers who are jumping into it for the first time. Are there any common mistakes that you are seeing that they are making initially on the referral before you pivot and talk a little bit more about JVs?
With referrals, we make sure that we have explored every option that we can’t make that property work because we make more money if we write a contract and sell it to one of our buyers. Sometimes, people automatically see something and think, “That is a retail transaction. I can’t do it.” You need to explore and talk to the lead. You can’t see it right away, but maybe there are some severe repairs, which we are able to do better for our cash price so our investor can buy it, make the repairs, and get that equity. You have to dig down and make sure that you are not turning that lead loose too soon.
One last thing on the referral side is you were thinking of how to set an expectation in terms of a timeframe. How would someone know where to price themselves to get paid out on referral? If I am sending this to an agent, is there any rough percentage or system they should be following to go, “Here is roughly where you should be pitching yourself to get paid?” Is it completely up to them if it is a percentage, some flat fee, or whatever amount that they are comfortable with as long as they communicate it?
We normally say 25% of the commission. That seems to be standard in the real estate industry for referrals. We have adapted that and kept that. Usually, on a referral, we do not do a flat fee. We do a percentage because if they make more money, we need to make more money.
I can imagine someone who is doing this for the first time may think, “Maybe I will come up with a flat fee, so it is something simple.”
You do not want to leave money on the table.
That is by setting up a flat fee when you could have played with a percentage to make sure you do walk away with a handsome profit. Where is the line, though, with developing a referral? What’s the difference? How would I know to refer to this versus a JV? Is there something that you look for or anything like a radio lead calls in and says, “It is out-of-area or outside of my expertise.” Where’s my line in going, “Do I refer to this or create some joint venture?”
Joint Venture: You cannot leave everything just by verbal contract.
For me, the question I ask myself is, “Can we fully service this lead? Do we have access to adequately price this? Do we have buyers in that area?” Sometimes, it is a small town with 400 people. If we cannot maximize the profit on that lead, it is time to look for a JV arrangement. We also do not want to flood our buyer’s list with properties they are not interested in because then they will quit opening them. We also do not want to disappoint the seller.
If we decide that we cannot fully maximize this lead, we look for a JV. In this case, we are looking for someone to JV with. We know other wholesalers. One time we had something in Florida. We were able to make connections with another friend who introduced us to another wholesaler in Florida. We said, “We will do a percentage split. You get the contract. Pay us out at the end.” We register our JV agreement with the title company and they pay us directly.
That is a perfect segue. What does that process look like? You said you are going to go through the title company. As a summary, I do not know if there is a 1 step through 5 or the 5 best steps to take to build this process out for someone who is doing it or has done it before, but maybe there is something that they are missing that they could be tightening on. You learn as you go. I am sure with all of your experience, you have pinned down a much better process for setting up JVs. Do you mind sharing if there is a checklist almost that you utilize?
We first get our JV agreement in place. Maybe we are going to do a 35/65 split. We get 35%. We get that in place before they ever get any information about the lead. Once we have that signed by both parties, and most wholesalers work with 1 or 2 title companies, they can tell us which title company it is going to be at. They get the contract. In this case, where it is out-of-area, we have them get the contract because we may not have the right information.
We do not maybe know the neighborhood. They are the best ones to get the contract because it is their area of expertise. They get the contract and give it to their title company. Our title person is speaking to their title person and calling their transaction coordinator. They need to do an affidavit and there needs to be a probate. We are keeping an eye on it and we are included in everything that comes from the title. When it is ready to close, the title writes the check.
Is there a common timeframe when all of this is done? Are there any red flags to be on the lookout for in setting the expectation on timeframe?
Usually, in a JV agreement, it happens within 24 to 48 hours. They are calling that lead, setting up, and getting them a price and a contract because we know if it is left too long, they go to somebody else. They want this lead. They know somebody is motivated, so they are going to jump on it, but everything can move in 24 hours. It doesn’t take long at all. Clearing the title and getting it closed may take a little bit longer but when we get everything under contract, it is pretty quick.
Every lead is cash.
People have some unique situations where they may take a little bit more handholding to close out but when you do, it is all worth it. There is someone out there who is new to this completely or either has been doing this a few times for themselves. I have always wondered if there is anything in terms of systems or processes that may be missing that they did not realize as they were doing it, “I have not been structuring my system that way.” I am a little bit curious. I do not know if someone is new out there who is curious about this as well. Is the 35% split that you were talking about the standard? Is that something that we are comfortable with as a company and what you are comfortable with as a disposition manager?
That is what we have arrived at. When we are handing it out, they are doing all the work. Their title team is clearing the title. They are getting the contract. It is more of a referral split. When someone brings us a JV agreement and maybe they’ve got a house under contract but they do not have the ability to sell it because they are not sure what they are doing yet, sometimes we do a 50/50 split because we have to clear the title, do the marketing and find the buyer.
It is not set like that 35%. That gives you some room depending on where you are at with that particular deal and what you are responsible for. If you were the one responsible still for getting the contract and doing all the marketing, 35% may sound a little bit low for all the work that you still have to do on your end. Where does this play at? I hear this a lot as calls are coming in. From time to time, you will get what we like to call are bird-doggers.
It is someone that is like, “I heard your ad on the radio. I usually am already driving around and looking at properties.” How do you typically handle that on the disposition side? We usually pass it over to you and go, “We’ve got someone calling in and wanting to be a bird dog and look for properties for us.” Do you mind touching on that a bit? I do not know if that is going to end up coming up for anyone but it may be something useful in terms of your process.
We do turn those over to the acquisition managers. Lisa is one of our acquisition managers. She has built several relationships with bird-doggers, which is great because they bring the deals first. We still have to assess every deal to make sure it is something that we can do. In those cases, sometimes the bird-dogger has the contract. Sometimes they are like, “I have this person that wants to sell.”
If they already have the contract, we do a JV agreement depending on what our past relationship is and where they are as a seller. It could be a 35% split or a 50/50. If we go get the contract ourselves and they give us all the information, we may only pay $2,000. We also write that into the contract and keep them informed of where the contract is and its clearing title. The title company pays them out at the close.
There is the referral side and the JV. You have some unique situation where a bird dog does bring you property. Depending on where they are at in the contract, if they bring you a contract, you might go JV. In the case that they do not, do you operate more with flat-fee payments to the bird dog? Do you also jump into determining a split or a percentage?
When we are getting the contract and they are bringing us a property address or an owner’s name, it is usually a flat fee because we are doing all the work. We are convincing the seller to sign the contract and take our price, clearing the title and marketing. He just brought us an address.
He or she gets the flat fee if you do close. It is not, “Call me anytime you want and tell me random addresses. Here is flat fee payment.”
If we do not make money, the bird dog doesn’t make money.
Joint Venture: Really dig down and make sure that you’re not turning that lead loose too soon.
That makes perfect sense because there is still work involved on your side. This was a great conversation. We started more or less with the basics of dispositions, what occurs if you were to get someone that is out of your area or your expertise and the ways that you can pivot on referrals or JVs. It just so happens that as you are on the radio and people are listening to you, you will attract a couple of bird-doggers here or there that are going to say, “I am already driving around in my car. I have heard your ad.”
If there is some potential for them to send you something, they are going to at least call you and try and see what they can get out of that particular conversation. Before we wrap up, is there anything that you feel like maybe we did not touch on? Are there any lasting notes or gems if someone was reading this that they should comprehend about this process or system that you would like to leave them with?
What I want to leave people with is every lead is cash. Whether it is getting the contract, a referral, or JV, you need to work those leads to the maximum potential. I sometimes feel that people dismiss things, “It is a retail lead. It is not in a good neighborhood.” People like bad neighborhoods sometimes. You never know.
You can end up with a buyer’s list or a section of your typical buyers that have no problem with “bad neighborhoods,” a neighborhood that is a little bit further out, sellers with certain specific situations, or even a buyer’s list where they are okay with even a sticky tenant situation.
I always get frustrated when people throw away leads. That is what I would like people to remember. Leads are cash.
You do not want to miss any actual opportunities. With the radio, anything that is coming in from it is going to be highly motivated. You do not want to find yourself in a situation where you might have trash deleted thinking, “I do not know what to do with this. It is not up in my alley.” Even if it is slightly outside of your area or your expertise, you want to make sure that you are taking advantage of everything that is possibly coming in off of your actual stations because those leads are going to be so motivated. You do not want to miss any opportunities there.
That may be playing with JV, reaching out to more agents, expanding your network there or whatever that may look like. You do not want to miss any opportunities. With the program itself, this comes up for students as they are hopping on stations for the first time. They run into a lot of situations where it is like, “I have never dealt with this. I’ve never thought that this type of person or scenario would come my way. I do not know what to do with it.” I like to make sure that I work with students one-on-one to make sure that they are not missing any opportunities and help them find the best way to get the max out of it.
It is still beneficial for them even if it is outside of what they usually do and they are limited that they do not miss out on that. If you have been reading and you found some great gems here, that is why we pulled Christa on. I am so grateful to have her. As usual, if you are going, “The REI Radio 2.0 program might be up in my alley,” or if you have some questions you want to shoot over, feel free to go over to the website. That is WholesalingInc.com/REIRadio. Thank you so much out there for reading, as always. We will catch you on the next episode.