Lance made $96k in his first month wholesaling 4 real estate deals in 2016 and now he talks about why he still loves single family homes over multi family.
Key Talking Points:
00:00: Introduction to the podcast and guest's success in wholesaling.
00:20: Discussion on starting with a large volume of direct mail and host introductions.
01:06: Introduction of Lance Wakefield and his entry into wholesaling.
01:19: Lance discusses his initial strategy and details of his first four deals.
01:48: Explanation of the deals and Lance's decision to wholesale.
04:01: Transition from viewing wholesalers negatively to engaging in wholesaling.
05:02: Evolution of Lance's business and approach to wholesaling, seller financing, and holding properties.
06:25: Discussion on contracts used in wholesaling and benefits of tailored contracts.
08:20: Benefits of custom contracts and built-in 15-day extension.
10:31: Promotion for Deal Machine Unveiled event and the URL.
12:20: Lance's current business operations and comparison between rentals and seller financing.
14:02: Explanation of the difference between wholesaling and novation.
16:49: Breakdown of overhead expenses and business structure.
18:37: Strategy for focusing on bigger opportunities, including package deals and refinancing.
20:21: Reasons for targeting smaller multifamily units and packages of single-family homes.
22:10: Closing remarks and where to find Lance Wakefield on social media.
Links and Resources Mentioned:
Deal Machine Unveiled Event: dealmachine.com/unveiled
Instagram: https://www.instagram.com/lancewakefield_/
Facebook: https://www.facebook.com/lance.wakefield.9
TikTok: https://www.tiktok.com/@lancewakefield_
Podcast: https://podcasts.apple.com/us/podcast/pursuit-of-prosperity/id1498765055
This was for anyone looking for their first wholesale deal. Our guest made $96,000 in his very first month of wholesaling doing four separate deals. So a lot of the issues people have when they're first starting out, you're going to be able to avoid by listening to this episode. I'll give you a hint. It starts with doing a big amount of numbers. So for example, our guest today, he started with a thousand pieces of mail in his first month rather than starting with ten and seeing what happened. This is the podcast for 10Xing your income and replacing your W two through wholesaling real estate, which is a business model where you find a distressed property, you get it under contract for a discount, and then you sell it to an investor without using any of your money. And it all happens before the closing. My name is David Leko. I actually created a process that's helped people close 10,000 of these wholesale deals in all 50 states with the software platform called Deal Machine. And my name is Ryan Heywood. And back in 2019, I started a 30 day wholesaling challenge and got my first deal done in 14 days, and they've since gone on to do over 400 transactions in wholesale. All right, so Lance calling to us through his star link in his cyber truck in Dallas, Texas. How you doing, man? And tell us, how did you actually get your very first wholesale deal? I'm doing great, man. Yeah, my first wholesale deal, I send out marketers in January 2016, send out like probably a thousand pieces of direct mail into like a smaller, older city in the North East corner of the Dallas Metroplex. I specifically focused on like a downtown area. They had homes that were as much as like 150 years old, up to obviously new upstairs was just a really big mix of property. So I ended up contracting for properties in February. And then I sold those four properties and made one of the $8,000 in March. And I was like, this is what I'm going to do. Yeah. So yeah, I just kind of kept doing that. So you sent out a thousand mailers, which is, which is great. I wish everybody getting into this would just start with at least a thousand bring number there. And so you got a call back and this seller in particular had four properties that they owned. No, I was four separate sellers for individual properties for separate deals. And I was honestly, I had bought a couple flips from wholesalers late the previous year with with my parents. And and I paid like, I don't know, I want to say like 30 or 40. So it was like $90,000 for two properties. And I paid like 30 or $40,000 of assignment fees for those two properties. And I was like, I like it was pre goes fine from wholesalers. Yeah, I bought from two wholesalers. And when I saw the fees they are making like one of them, I think I bought the property for 42. And she made like, he bought it for 20. So he made like 22. The other one bought it for 35 sold to me for 50. And I was like, man, it's $37,000 that these jokeers are getting for doing nothing like I could do out. So I sent out some mailers and I was planning on flipping the properties I got under contract. But I got too many under contract and have the money, but bandwidth were like, infrastructure to flip do for pretty pretty substantial flips at once. And so from there, I just kind of was like, okay, well, I got I went to some meetups and like, people were offering me like, I need a deal, I need a deal, I need a deal. And I was like, I got some deals like about this one for 100, I'll sell it to you for 125. If you want it, okay. And then I had another one, I was like, Oh, I bought this one for I think 110. I sold it for 140. I bought another one for like 15. It was a couple of lots. And I sold it to someone for I want to I'm trying to I mean, this is I don't remember the exact number, but I remember it all added up to $8,800. That was like, I was chill and they all closed in March, and I had no freaking clue what I was doing. Like all I had done is I'd listen to this at this time, there's probably a hundred and maybe 120, 150 bigger pockets podcast episodes. So I just listened to all of them. And I was like, wholesalers suck, they're stupid. And then, and then I got those offers and I was like, okay, I guess I can get down with this. I guess I guess I can get it. So that's it's kind of how it started. Yeah. You became the Joker? I became the Joker. Well, he's more legit than that. Ryan, he's singing a Cybertruck. That's true. Well, like so, so what I kind of learned is wholesaling is a really good place to start because it teaches you to source deals. At the same time, in order to source them appropriately, you have to learn how to underwrite them, you have to learn how to underwrite the construction, you have to understand the whole process, as well as the rental process. We had buyers who were rentals, we were wholesale, we had buyers who were slippers. And so 2016 and 2017, I didn't buy and hold anything. I just whistled like crazy. 2016, I did just under a million in assignment fees. And 2017, I did almost three million in assignment fees. And so I did a lot of volume and learned how to structure things and how it works. And then 2018, 19, I like started dabbling in buying and holding and flips and everything. And then, and then it's time. I ended up selling some of those and like was kind of trying to figure it out. And then in the end, I ended up 2020. I started selling finance actually because that made a lot of sense for us. I'm just curving it in the market. And then in 2021, I started buying and holding 22, 23. So I wholesale, I narrow gate, we sell our finance, we buy and hold and we slurp just to come to the deal and what makes sense. So back in your first month, when you made $96,000, did you have a special contract that you use? Or did you use the regular state contract? I use the track. Yeah, I use the track at first. I probably wouldn't. What is that? It's like, that's the Texas real estate contract. It's the Texas propagated forms that realtors use. So I use that to start. And then, and then I had an attorney write my my own contract in 2016, like by month, probably once four or five, I got my own contract, just so that I could secure the property better. And then also not have like liability in the event I couldn't perform in my con. So got it. So those are some of the differences is if you could not close, you can back out and that was easier to do that. So my contract just reads that the only the only remedy the seller has in the event we don't perform on the contract is the earnest 20. And so that's just protective versus a track contract. It doesn't have that quite laid out as clearly. And so you'd have to do an addendum that would lay that out very clearly. But a track contracts also, in my opinion, hyper complex, a truck contract is 13 pages, and it's written in really deep like legal jargon. And then our contract is three pages, and it's written in pretty layman's terms. Like if you graduate high school, you should be able to understand everything. Yeah. Yeah. So there's somebody in distress, you know, they're not going to be hesitating to sign a contract that's easier to under the yeah. Yeah. And that does offer it does offer us a lot of protections too. And a few like little things that I'm a big that have helped us a lot like one of the things written more contract is we have a built in 15 day extension. And all we have to do is inform the seller that we're exercising that we don't have to get their consent. And so that can come in really clutch when like you fight a buyer and they can't quite close in time if you're wholesaling and you just need a few extra days and the sellers comply. Like obviously, we always try to get compliance, but sometimes sellers get really, you know, stuck in enclosing a certain day. And so like sitting in a handful of little things like that our contract that just protected us over the years. Okay, got it. Interesting. Did you feel like you were nervous at all that you wouldn't be able to perform with any four first property since they were your first four and you've never had something before? I mean, sort of I was really like looking to banks to help me fund those properties and and then looking to do the flips. And so I knew I could perform from that perspective. But I wasn't aware of like the risks I was taking by getting into the contracts with somebody. I didn't understand like how much I was just naive. I didn't know the risks I was taking. And so that was didn't feel like a big risk at the time. Looking back now, I do see that it's a little bit more risky. But you know, that's kind of why you get paid for it and taking some risks. And it's pretty rare to get sued through nonperformance on a contract. It does happen, but it's definitely rare. I've done well over a thousand deals now and I've only been sued once for nonperformance. And I've contracted way more than 1000 probably this year to like 13 or 1400 deals. And so you've got out of a lot of contracts and very rarely doesn't tell I want to let it get. Yeah, deal with she listeners. I'm wearing my turtle neck, not because it's Steve Jobs birthday, not because Apple just announced they're integrating AI into their phones. Nope, none of that. It's because we're coming up on deal machine unveiled, which is our special live presentation where we're unveiling the latest innovation in real estate technology. Last November, we had an unveiled event and we broke down the house with unlimited skip tracing, which also improved with our private investigator tool, the accuracy of your skip tracing results by 50 percent, meaning if you don't get data, you can actually see every person with that homeowner's name all in one spot in one place. There's no other place you can get that. So come July 1st, reserve your spot, get notified, be among the first to see what's coming next for the real estate industry. The URL, by the way, is deal machine dot com slash unveiled. So tell us you're breaking up like a little bit. We didn't hear most of that, but I think that it will upload, I think, with full quality. So I think it's still good, but I just was curious. Maybe we could switch over to you telling us, like, how is your operation involved since 2016? Because I know you're doing novations, you're doing some rentals and experimenting. But like, do you still like make $96,000 a month? Like, is that a realistic goal for a wholesaler in today's market? Yeah, for sure. Yeah, most months are at least that, I'd say. But I have overhead now. So back then, it'll be just me. And so there's a lot of overhead. So that's not like a lot more money. Now we'll have months where we'll do several hundred thousand dollars of revenue, and there'll be months where we just do like a hundred. But it just depends on what we're focusing on at the time. So now the operation has evolved into, we own about 200 rental properties, 200 doors. We are, we have about 50 seller finance notes that we've generated and that pay monthly as well. So those are kind of like our long term, like, reoccurring parent things that we have. So I like both of them for different reasons. Rentals, you get appreciation. You can use depreciation in taxes. You don't cash flow very much in taxes at least. But you get some of those other benefits. For seller financing, you don't get appreciation or depreciation, but you do get phenomenal cash flow. And you do get paid like there's three payment. Well, well, there's three methods of payment. You get a down payment at first, which is usually pretty equivalent to a whole selfie. Then you usually get monthly payments, which create cash flow. And typically, like on a rental, I see like $100 a month of cash flow on a seller finance. I see like 500 a month of cash flow. And then the last thing you get is there's an arbitrage at the end where if you've got a note with the bank or a mortgage with the bank, the mortgage that the buyer has with you, the gap between those two numbers grows each month along with the cash flow. So whenever they either sell default or re-signance, you get a really big payday at that time too. So there's like three points of payments. Those are kind of the, I do those two things, and then we wholesale and novate anything that doesn't fit well into those other those two boxes for us. Okay, got it. And how do you decide if you should novate it or wholesale it? And what is the difference in layman's terms with the novate? So a wholesale is where you sign a contract to buy the property and essentially pose to the seller as the buyer, the end buyer. And some whole seller is disclosing and not buying some don't. And for us, it just depends on the, it depends on the situation or whether we're disposing it or not. So we wholesale properties that are really rough. When condition is like poor to atrocious anywhere in that realm, we're typically going to wholesale that. When condition is better, so I would say like from fair to like excellent condition, we're typically going to lean towards innovation is the exit we want to take. But then we also have to get the compliance from the seller. So, novation works well when the seller wants more money, and they have a little bit more time to get that money, right? It's not as urgent. All selling works better when the seller needs money fast. No. And I usually am going to give them a much when they get a lower price from the equals. When we have to go wholesale versus innovation, because we get a lower price with the wholesale market versus the open real estate market. I'm going to use the same contract, whether you're innovating it or assigning it. So, a short answer is no. But the little bit longer answer is yes. It's a completely identical. There's just one paragraph at the bottom of the second page with the innovation language that allows us to novate. And then our option period goes from a 15-day to a 55-day option with the novation. So, those are the two changes in the contract, otherwise it's identical. There is additional paperwork with the novation that we do have to do. But that paperwork isn't, none of it gets signed at signing, other than potentially a listing agreement. We might sometimes bring a listing agreement with us to the signing where the seller will sign a listing agreement that enables us to take the property MLS at the same time that they signed the contract. Sometimes we do it in two pieces, where get the contract signed first and in that novation language, it requires them to sign a contract or excuse me, a listing agreement. And sometimes we just do them both together, just depends on the situation. So, what is your overhead now that you require to operate a wholesaling company that does one to two hundred thousand dollars in assignment fees per month? Right now, our business overheads are about 250,000 trouble. And then no, per month. You have two hundred fifty thousand dollars of expenses per month. We give you assignments, and then we also have the cash flow from the other businesses, and between those two assignments, negations, flaps between those two different, or all those different sources. That's where we reach profitability. Got it. And is that people who are talking with sellers, and are your acquisitions managers, for example, and getting those properties under contract? That's marketing, that's acquisitions, that's our construction team, that's our accounting team, our property management team, that's everybody. And what is your job look like day to day at this point? So, it's like, I'm looking for bigger opportunities typically. So, like, I'm looking for, like, we buy a lot of, like, package deals. So, like, from, actually, the first package that I ever did was driving for dollars, funny enough, back in 2016, but I kind of learned then that, you know, you can go to sellers who own one property and try and buy their home, or you can go to sellers that own 20 properties and try and buy all their homes. And you can just get a much larger fee, and have a lot more kind of buried profit, you know, in, you know, 20 homes than you will typically in a one. And so, that's kind of where I focus, my energy is there, and then financing, like with banks and stuff, we do a lot of, you know, we have portfolio of 50 million dollars of property that we own. And so, there's times where refinancing and doing different things, yeah, like right now, buying a package of 17 rentals in Dennis and Texas, so working on financing with the bank. It just, it just, it really depends, like, my philosophy is, I try and place myself in front of the biggest opportunities that we have. Right. So, wherever our biggest opportunities lies, that's where I want to focus. Yeah, so, for us right now, we're working, we had a bunch of real estate cash, so we're working to resolve once that to recapitize, and then we're also working to get financing for the new deals that we have come on. Oh, I wanted to ask you that, is like, why do you guys choose to do single family homes, when there's a lot of big multi-family deals out there that would maybe also fit what you're saying of like, yeah, that's a big opportunity. Because there's less people targeting packages of single family homes. I do buy multi-family, like I have a 38 unit apartment complex, a 24-year apartment complex, a 10-year apartment complex, like I do buy multi-family, but I like to target the smaller multi-family. So, this isn't like uniform across the whole country, but typically hedge fund, fund buyers, etc. The big, I'd say the bigger boys, the guys with the deeper pockets, all the way up through to like insurance companies and huge, huge rates and stuff. They just don't look at anything under 70 units, and the more money they have, the higher quality asset they're typically going to lean towards. So, the area that I'm playing is like the 5 units, I mean, 10 units, probably my preference, 10 units to 70 units, that's the area that I would want to buy in just because there's less competition. There's a lot less like mom and pop smaller shops that can go and compete for those assets. And so, that's why I like that space. Those sellers have less exits and less opportunity to sell, but I do focus on that in Dallas for worth because we want to manage them with our management company and rehab them with our rehab crews. We're typically looking for rest apartments, and we're taking room for more like a D-level apartment to like a B-minus. And so, we approve them, increase rent in general. So, I do do that. I just don't do as much of that. I can typically find better deals by buying groups of single-family hours because those sellers don't have a lot of exits and opportunity. When you own 25 SFRs and you're like 75 years old, you're like, "Girl, I just had to help something," or like, "Sighted retire," or whatever. If you want to sell to 25 SFRs, your timeline to do that is typically going to be like, I would guess at least 18, 24 months, and that's a lot of work, especially for someone who's aged. And then they've also typically owned these properties for quite some time, so they have a tremendous amount of equity. So, for them, it's easier to just say, "Hey, look, I'm going to take a haircut on equity." You know, usually make a couple million bucks and just walk away. And so, for them, that works well. And for me, that gives me an opportunity to capture that equity and make plenty of metal crew. That's awesome insight. Well, where can people find you that are listening to your social media? Yeah, I do have social media. I'm on, like, Instagram and Facebook and TikTok, live, old, Lance, point to build. Research Lance Wakefield, you'll probably find me. I'm on all of those. And then I also mess around with podcasts. I have a podcast called "Prestudent's Prosperity" podcast. Lance Wakefield's got, like, 25 episodes or something around there. And I just interview other real estate investors, mostly, real actors, people who are in space. Yeah, awesome. Well, thank you so much for your time. Thanks for listening to the Deal Machine Real Estate Investing podcast. Please leave us a review and follow along wherever you're listening to your podcast. [BLANK_AUDIO]
Lance made $96k in his first month wholesaling 4 real estate deals in 2016 and now he talks about why he still loves single family homes over multi family.
Key Talking Points:
00:00: Introduction to the podcast and guest's success in wholesaling.
00:20: Discussion on starting with a large volume of direct mail and host introductions.
01:06: Introduction of Lance Wakefield and his entry into wholesaling.
01:19: Lance discusses his initial strategy and details of his first four deals.
01:48: Explanation of the deals and Lance's decision to wholesale.
04:01: Transition from viewing wholesalers negatively to engaging in wholesaling.
05:02: Evolution of Lance's business and approach to wholesaling, seller financing, and holding properties.
06:25: Discussion on contracts used in wholesaling and benefits of tailored contracts.
08:20: Benefits of custom contracts and built-in 15-day extension.
10:31: Promotion for Deal Machine Unveiled event and the URL.
12:20: Lance's current business operations and comparison between rentals and seller financing.
14:02: Explanation of the difference between wholesaling and novation.
16:49: Breakdown of overhead expenses and business structure.
18:37: Strategy for focusing on bigger opportunities, including package deals and refinancing.
20:21: Reasons for targeting smaller multifamily units and packages of single-family homes.
22:10: Closing remarks and where to find Lance Wakefield on social media.
Links and Resources Mentioned:
Deal Machine Unveiled Event: dealmachine.com/unveiled
Instagram: https://www.instagram.com/lancewakefield/
Facebook: https://www.facebook.com/lancewakefield
TikTok: https://www.tiktok.com/@lancewakefield
Podcast: https://podcasts.apple.com/us/podcast/pursuit-of-prosperity/id1498765055
