Is Wholesaling Real Estate Profitable?
On this episode we are going to talk about is wholesaling profitable. It continues to be a question that people are asking, and I want to make sure you understand why it is profitable.
𝐉𝐨𝐢𝐧 𝐎𝐮𝐫 𝐏𝐫𝐢𝐯𝐚𝐭𝐞 𝐅𝐚𝐜𝐞𝐛𝐨𝐨𝐤 𝐆𝐫𝐨𝐮𝐩
With that being said, if you are not watching this podcast, you need to be go over to youtube.com forward slash Justin Colby. And make sure you start subscribing because I take the podcasts that are usually on iTunes and I actually bring them right over to YouTube. So then at least you can see me in fact, funny story. If you watch my last episode, I actually match with the wall like identically. The only reason you can see me is because my bald head anyways, funny story, good reason to go over to youtube.com forward slash Justin Colby. So let’s dive in here as this podcast is always about making sure your real estate investing business has the right tools, systems processes to implement to be profitable. That’s really what we’re here for. Right? Because otherwise, we’d all just get a job and so be it. So let’s talk about it in my ultimate answer is 100%. emphatically wholesaling is massively profitable. If you do it right. So I paused for a second because that is the key, there’s like a little ash strict there that you actually have to do it right. And yes, I talk a lot about KPIs and knowing your numbers. And that is a big component of this, like a big component of this. But the other part is what I’m going to talk about is being unaware of your like p&l. What are you spending money on? And is it giving you a return? So for example, I actually had a great coaching call this morning with some of my top students, and they were talking about this marketing budget that they want to put together so they can bring in more leads, etc, etc, bring in more acquisition people, and actually stopped them. I slowed them down. I said, Let’s hold on, hold on. What are we trying to achieve? Are we trying to achieve more deals? Are we trying to achieve more dollars? Right? So it’s deals or dollars, sometimes it’s both. But the reason why this episode is so important is because most people especially when starting, they don’t actually know the difference in profit and loss, right? And then they again, watch someone’s YouTube, listen to someone’s podcast, you know, maybe they have incorrect coaching. But they go into this world into the space of real estate investing, specifically wholesaling. And they start spending money before they’re making money, and they’re spending a decent amount. But then they get discouraged, because in 30 days, or 45 days or 60 days, they actually don’t make any money. So they get discouraged. They say whoever on youtube I watch is wrong. Whoever I listened to on podcast is wrong. Whatever coach I have is wrong. They’re terrible. It’s awful, right? But they actually aren’t looking at it as a business. And that’s what I want to talk about on this episode is looking at this business as a business. It doesn’t matter how much you spend, it doesn’t matter how much you make. It matters that you combine the two and you make more. Right. So I would say most people get into the space and they start marketing. They start cold calling texting, direct mail, pay per click advertising, you name it. And they don’t really know sales and conversion. And they’re trying to make it up because whoever they listen to is all about leads, leads, Leads Leads, which by the way, I myself will tell you is all about leads. But getting leads and being able to convert those leads are two separate things. So it’s really about how are you going to make it profitable. Let me give most of you newbies, and even some of you guys that are experienced a couple tips to make it more profitable.
First, start doing deals that cost no money. Are you actively doing deals with other investors and agents alike? To make money whether you call wholesale, maybe you buy and flip a property from a wholesaler, maybe you wholesale in a property from an agent, maybe you buy and flip a property from an agent maybe you buy in hold properties from either but ultimately this costs $0 for you to do business with a wholesaler or a realtor. So that’s free. You got to focus on free first. The other way to go free is to Calling for sale by owners or start calling, you know, failed listings expired listings, cancelled listings, figure out why they didn’t work. What happened there? They had motivation to sell. But they didn’t sell. So why? How can you provide value to that homeowner that maybe they weren’t getting when they put it on the market for the MLS? So those are free. All of this is free. Right now, in terms of calling expired listings, cancelled listings? Yeah, you might have to do some skip tracing, I get it. If you’re going to call for sale by owners on Zillow for sale by owner calm, yes, you’re going to have to do some skip tracing, but the fee is going to be very, very nominal. So maybe it’s not 100%. Free. But the point is, you’re not spending 510 $1,000 a month to do it. So that is the first thing.
The second thing is focusing on conversion. Let’s say you are out there spending money, you’re doing cold calling, you’re doing texting, you’re doing pay per click advertising, you’re doing direct, you’re doing any of it and you’re spending money, like real money, are you actually converting the leads that you’re bringing in. So most people, most people to get into the space, they focus only on bringing in leads, I need more leads, I need more leads, I need more leads, I totally get it. And by the way, I need more leads, I’m saying the same thing you guys are saying? The difference being is I also focus on conversion? How do we convert more the leads we already have, versus forcing our hands to drive in more leads. And that’s a big component of whether you’re going to be profitable or not. So for example, I bring in, you know, 100, leads a week cold calling, and it cost me roughly $17, maybe $18 per lead. But it also cost me anywhere from three to $5,000 to convert that deal. So I know based around my conversion ratio, if I’m bringing in the amount of leads I need, I’ll be able to three, four or 5x my marketing spend, because I know where I need to be converting those leads. So it comes down to understanding your numbers. As I said, it’s not always about that. But at least that can highlight where the breakdown is in your business. So I really spend a lot of time making sure that we’re converting the right amount to be at minimum 3x profitable if I spend it all I want to make three back. And so that is the the lagging indicator, which is I brought in enough leads, why am I not actually converting them? So are you actually studying sales? Did you hire a sales coach? Are you working with a coach on how to convert more leads? Do you even understand how to underwrite the property? Do you actually know those things? Do you know what ARV is versus as is value? Do you know what your buyers are actually willing to pay? versus what you’re going to contract out? Do you know some of these things? And lastly, I just brought it up as buyers as a wholesaler. If you don’t have real buyers, I mean, buyers that buy and flip in buying hold not more wholesalers, real buyers that can execute on their contract. If you don’t have them, and you don’t know what they will pay for a property, then yeah, you might be leaving money on the table. I can’t tell you how many times over the years I’ve done this for 14 years. I can’t tell you how many times I’ve had another wholesaler within my deal. So what does that mean to me? That means we didn’t price it right. That means that wholesaler had a buyer I didn’t have it was able to remarket it above my price and make money. By the way, I’m actually okay with that. Because I made the money I wanted to make they made a little extra. But ultimately, your key is finding the buyer who will be willing to pay top dollar. And if you don’t have that, and you’re not constantly working at that, then sure, maybe wholesaling is not going to be profitable for you. But if you focus on these three things that I’m talking about right now, on this episode of the science of flipping, and by the way, make sure you get over and watch this last video. I mean, I am quite honestly matching the wall. Anyways, go to youtube.com forward slash Justin Colby. If you are not doing these things, then yes, it might not be profitable. If you focus on these things. You absolutely can be profitable, but it’s about being consistent. It’s about understanding these three metrics. And ultimately, it’s about doing the work. Are you trying to outsource it and bring up a bunch of costs and hire people and put in operational costs. That’s a recipe for failure. If you’re not putting $250,000 in your pocket every single year. Don’t go out and hire a bunch of people. Don’t go get office space. Don’t go spend a bunch of money. put the money in your pocket, do the work. That’s my biggest advice. If you are interested in me, maybe holding your hand teaching you actually walking you through this blueprint. I would tell you to go to the science flipping.com forward slash, no just as that just the science of flipping.com then there’s an application fill out the application. Some of my top advisors will talk to you and we will feel out whether you and I are a good fit for coaching. Otherwise besides that, I will see you on the next episode. Peace