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Deadly Myths of “Wholesaling”
Why are so many real estate “gurus” focused on wholesaling?
Maybe it’s because it’s the most obvious zero down structure. It’s easy to understand and it’s pretty simple to set up.
I teach it as part of my “Hierarchy of Zero Down Financing Structures.” There are only five zero down structures you will ever need. Wholesaling is number five on my list and is perhaps my least used structure of the five.
That doesn’t mean it’s not valuable.
Here are the five structures:
Land Contract/Contract for Deed
Assignable Cash Deals (Wholesaling)
I call them “Assignable Cash Deals” rather than wholesaling because I think it’s a more accurate description.
Here are the basics of wholesaling…
Find a property for sale that is dramatically under market value and tie it up with a purchase agreement that is assignable. Then raise the price by a few thousand dollars and go out and find a cash buyer.
Your profit is the difference between your purchase price and your sale price.
It’s quick, easy and there are lots of potential buyers for great deals.
It’s a simple zero down contract that anybody can learn in 10 minutes.
So why would I disparage wholesale deals?
I don’t. I think they’re great.
But they are a lot fewer and farther between than the other zero down deals we do. Fewer deals, less money.
If you’re advertising for sellers, it’s going to be much easier to find a seller that accepts full price for their property rather than a dramatic discount.
We find about 20 times as many deals when we don’t have to ask for dramatic discounts.
I still love it when we find great deals under market value – and we find them pretty regularly – but there are two ways to make money as a real estate investor.
1. Buy properties dramatically below market value for cash.
2. Buy properties at or below market value on terms.
These are the ONLY two ways to make money as a real estate investor. When analyzing a potential deal, these are the first two questions you should ask. If it doesn’t fit into one of these categories, you are wasting your time.
So my question to all the wholesalers out there is:
Why focus on a lead source that has so few leads?
Why not go after a group of sellers that is much larger?
Remember, it’s easier to sell water in the desert than it is to sell ice in the Arctic.
When you use the zero down structures I teach (like the for rent method or land contracts or subject to), you can give your seller a lot more options.
If the only zero down structure you know is wholesaling, it’s like having nothing but a hammer in your toolbox. And when all you have is a hammer, everything looks like a nail.
But if you have more tools – a saw and a screwdriver and a wrench, suddenly the things you can accomplish expand dramatically.
Learn your tools and use the right tool for the job.
So – with all that said – expand your business by going after deals that are more plentiful.
When you do this, everyone who has a home for sale is a potential deal for you.
Not very many people want to give their property away and give away their equity. It’s wonderful for you when it happens but you can spend an awful lot of time and money finding those folks.
We’re able to go after for sale by owners instead. They are the largest lead source of unencumbered, ready-to-go sellers in the world.
These are people who want to sell their property today. They are actually advertising their homes for sale and looking for buyers. They want to talk to you.
We contact these sellers and offer to buy their property with a lease option.
If they say yes, we have them sign a simple one page agreement. We then raise the price by about 10% and go out and find a new lease option buyer.
This new buyer doesn’t have to pay cash for the property. They don’t have to qualify for a loan. That means there’s a LOT more buyers.
Did you know that 75% of the country can NOT qualify for a mortgage? How many of them would like to have a home for their family?
All they need is enough money for a down payment. That down payment is your profit and is the difference between the price the seller wants for their property and the amount that you sell it for… typically 10% higher.
You don’t even have to negotiate the price with the seller – just give them what they ask as long as it’s reasonably close to market value.
We also know that 85% to 95% of for sale by owners (FSBOs) do not succeed in selling their properties. They must either take it off the market or list it with a real estate agent to get it sold.
The very fact they’re doing it FSBO proves to us they don’t really know what they’re doing and they need our help.
We can sell their property and get them full price – in a fraction of the time it would take a realtor to sell. Usually less than 30 days.
We will also get them regular monthly income, tax depreciation, value appreciation (if the buyer doesn’t exercise their option), and principle buy-down monthly on their mortgage. It is a much more profitable way for them to sell than using a real estate agent.
When you sell with a real estate agent, it’s going to cost between 6% and 15% of the sale price of the property after you figure closing costs, negotiation, repairs, etc.
So… that means we’re not just looking for people who are desperate to sell their property. We’re not just looking for “highly motivated” sellers.
We are looking for people who want to make more money and sell faster.
You can use the automarketer to find these leads. It’s an automated system that searches Zillow for FSBOs, scrapes the phone numbers and information about the property (automagically), and sends a series of text messages or voice messages over time to each seller with an offer.
On average, about 20% of the seller’s respond to our offer. (I’ve had response rates as low as 4% and as high as 85%).
You can find out more about the automarketer for your business at: http://www.PushButtonAutomarketer.com
The automarketer is part of my mentor program. Everyone who comes into my program gets access to the automarketer for 6 months.
If you would like to work with me and allow me to show you how to find deals like this. If you’d like to use my systems and have me walk you through the process step-by-step, I’d love to work with you.
If you want to work with me personally (not a hired hand), you can find out all about my Six Month Mentor program here:
This website will show you how my program works, what is included, what it costs, what you can expect from me and what I expect from you if you sign up.
There are 3 training videos on the site that go into great detail about what you need to do to build a profitable real estate investing business.
They add up to about 2 hours of education. I call them my “Advanced Training” because that is exactly what they are. If you know nothing about real estate, they may be a bit over your head.
The techniques I teach in these videos come from my personal experience and you won’t find this information anywhere else.
If you aren’t interested in working with me personally or can’t afford to join my mentor program, these 3 videos will still be worth your while.
They will give you an overview of my entire business and show you how to model YOUR business after the step-by-step systems I’ve created.
Even if you ultimately decide not to join my mentor program, I can safely say this Advanced Training Program can completely transform your thinking about building a real estate investing business.
I think these ‘Advanced Training’ videos are one of the best training programs I’ve ever created – and they won’t cost you a dime.
They distill my 35 years as an investor and 20+ years as a coach and give you a complete outline of how we build a powerful, profitable, consistent, reliable, ethical, PEACEFUL business.
They give you the milestones, benchmarks, and SOPs (standard operating procedures) you need to succeed.
That’s it for today!
I hope you will join me.
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