Wholetailing for Bigger Profits

Mike: What’s up, everybody. Hey, welcome back to the show. I’m super excited to have my buddy Greg Helbeck back on today. Young guy crushing it. Everybody always wishes they had started this business sooner. Today we’re going be talking about wholetailing and how you can make a lot more money wholetailing in some instances than wholesaling.
Professional real estate investors know that it’s not really about the real estate. In fact, real estate is just a vehicle to freedom. A group of over 100 of the nation’s leading real estate investors from across the country meet several times a year at the Investor Fuel Real Estate Mastermind to share ideas on how to strengthen each other’s businesses, but also to come together as friends and build more fulfilling lives for all of those around us. On today’s show, we’re going to continue our conversation of fueling our businesses and fueling our lives. I’m glad you’re here.
Hey, Greg, welcome to the show.
Greg: Hey, what’s going on, Mike. I really appreciate the ability to be on your show, man. This is a true honor. I’ve been a FlipNerd fan for a while and then obviously been in Investor Fuel for a while now. So it’s a pleasure to speak to you.
Mike: Absolutely. It’s good. I’m glad to have you on here, buddy, and you’re one of those guys, man. Your name comes up all the time we’re like, because how old are you now?
Greg: Twenty-four.
Mike: Twenty-four, and you’ve been investing for how many years?
Greg: Four years now. It’s my four year . . .
Mike: So you started when you were 20. It’s crazy. It’s just crazy the amount of success. It’s not even really the success. You’ve done great and I know you’ve done well. Obviously, most people see that. What I think, you know, for a guy like me or a lot of people that are in the business, like the biggest regret we often have is like, man, I wish I had started earlier. When they see you like, man, I wish I had started when I was 20. Like I didn’t start investing until I was like early 30s, right? Or kind of 32 or 33, something like that. And so, it’s like, if I could go have a do over, I’d want to be Greg Helbeck. Plus, you are a California dream and you invest in New York and you live in Southern California. It’s like, you know, it’ll change when you get married and start having kids, then your life will change.
Greg: Yeah. Yeah. It’s funny, you know, it’s like the whole California thing. I’m like, if I’m going to move to San Diego, I might as well do it now. And it’s a great place, I really enjoy it here and doing it remotely I think with technology and you know, relationships, boots on the ground, that’s definitely what makes it happen. But it’s definitely just as long as you’re willing to put the work in, no matter how old you are. I mean, there’s people who are younger than me who are kicking my butt, quite frankly. So if you’re willing to put the work in, I mean, age is just a number.
Mike: No doubt. No doubt. But the thing that I would say about you and anybody that’s listening right now is one of the things that I’m always impressed about with you, and my team and I, we were just talking about this the other day about you specifically, and you’re like, you’re just such a great student. You have the discipline to dive in and do whatever it takes to figure something out. And that is a lot of just humans don’t have that trait and especially younger folks because they’re just like, you know, you’re a little more carefree when you’re younger and then shit starts to get real. But like you got disciplined like early on and I appreciate that in you. That’s awesome.
Greg: Thank you. I really appreciate that. That motivates me to keep being disciplined because sometimes like, I’m [hoarse 00:03:26], I’m like, oh, no got up late today and I was freaking out.
Mike: Yeah. Yeah. So, for those that don’t know you yet, obviously this is the Investor Fuel podcast. So all of our Investor Fuel members know you because you’ve been a member for long, probably since the beginning or pretty close. So we had the mastermind for about two years now but maybe share your background and how you got started in real estate at the ripe old age of 20.
Greg: Yeah. So, Greg Helbeck, San Diego, California from New York originally. I still go there quite often. So basically, the skinny is that I graduated high school. I wasn’t a very good student. I didn’t go to college right away. I wanted to play in the NHL and I worked my butt off and played junior hockey up in Massachusetts and then in Canada for a little bit. And I made it about a year and a half after high school. I was playing competitive hockey, and I really was pushing to go to college to play hockey, to then go and play in the NHL. I had this whole master plan and basically it didn’t work out. So about a year and a half after high school, I had to kind of accept the fact that I wasn’t going to play pro hockey, which is my like option A no plan B.
And I had to go to community college and I was like, oh my goodness, what am I doing? Like all my friends are in school, they’re going to their fancy schools, taken out their crazy loans and I’m the loser at community college living in my parents’ basement. And I was like, I need to figure this out. And I’ve always hated having a job. I used to be a lifeguard, you know, I worked at a golf course and I always hated having someone tell me what to do. And I’ve always been like that. Ever since I was a little kid, I was a little stubborn, not afraid to tell people like, you know what’s good? And I was like, I need to figure this out.
And I learned about just the concept of reading books. I started reading like self-help books when I was like, yeah, like 20 years old. I remember I was kind of in a phase where I was lost. So I was reading these personal development books. Read “Rich Dad, Poor Dad.” Decided I wanted to be a stock market guy so I started day trading. No idea what I was doing. Basically, made a couple of day trades, made a couple bucks, nothing crazy, lost a little bit of money.
And then I realized like this is not really like for me, I don’t think. So then I ironically got a direct mail about a guru seminar in town, went to this seminar about real estate wholesaling and pretty much I think I spent $2,000, went to the intense bootcamp and I was 20, you know, and I went to this boot camp. They told me all about wholesaling and flipping houses and all this crazy stuff that to me was like the coolest thing since sliced bread.
Well, after the seminar basically started taking massive action, you know, and it took me nine months. I spun my wheels for a while, did a deal, made 1000 bucks, like helping another investor move a property basically. And then after that, I met some mentors, Larry and Frank actually who are in Investor Fuel, who really talked to [me 00:06:10]. They helped me. I started wholesaling them houses making like $5,000, $10,000, $15,000 fees.
And then from there it’s those still a couple of years where I really wasn’t doing great. I was making money every couple of months, but I didn’t have like a massive pipeline. I wasn’t consistently like, you know, making real money, you know what I mean? It was just like kind of like dribbles.
And then I started really kind of coming to the conclusion that if I wanted to really grow my business, I had to grow myself. So I started just immersing myself in like getting the skills that really allowed me to do these types of deals. So I started really basically jumping into other markets and learning how to virtually wholesale in your market in Dallas.
And then did really well there. And just fast forward to today, I’m buying like three to five houses a month, primarily in New York, mostly closing and wholetailing these properties, which we’ll get into today. And I’m also still doing some traditional wholesaling and now I’m disciplining myself to keep some of these properties as rentals. And yeah, that’s pretty much my business in a nutshell.
Not doing high, high volume, but I’m doing three to five a month but the profit margins or whatever they care about. Like how do I make the most profit per deal and how do I not have a ton of overhead to where if I want to change my model, if I want to change marketing channels, I don’t have to basically like fire people and like do all like this, just go through the big turnaround phase. I can kind of shift with the market and then also be in a situation where I can save a lot of my profits, put it in the bank for the next recession hits, I can jump in and buy properties at 50 cents on the dollar.
Mike: Dude, that’s so wise, right? I mean I know that you know this stuff because you’ve heard it from listening to other people too, right? I mean you weren’t here during the last downturn and so . . .
Greg:In middle school.
Mike: . . . that’s great stuff. I’m going to tell you right now the two biggest regrets people have is I wish I had started earlier and what you just said, I wish I’d kept more houses as rentals. Because I can tell you I’m going to have a rental portfolio.
We’re starting to do some multifamily stuff now or we actually have been doing it for about a year. And like when I look back, I mean I’ve bought and sold hundreds of houses and I kept like about 10% of what I bought. And when I look back now, even though the rentals are really a pain in the butt, but I look back, but the thing is, is there like it’s created like that’s where all my wealth is it my rental properties.
Now, a lot of it’s still on paper because we don’t sell a lot of it, but there’s a lot of equity trapped. I can refinance, I can pull money out. I choose not to because I’m kind of the mindset that I want to get them paid off and have them start cash flowing even better but that’s our retirement plan.
That’s a big regret and it’s a wise thing to do is keep the right ones, but make sure you’re keeping some along the way because otherwise you’re in this hamster wheel of I have to work this hard forever. And when you’re wholesaling or even if you’re rehabbing or wholesaling, we’re going to talk about today, like you’re only as good as your last deal. And so, it never ends. And I’m not saying that that’s a bad thing, but you’ll look back and be happy that you kept some and you built up some cash flowing assets for sure.
Greg: Exactly. And that’s something that I kind of started to realize, like, you know, money gets great when you start flipping a lot of properties. It doesn’t matter if you’re wholesaling or fix and flipping or wholetailing, but you feel like even, you know, let’s say you make a great deal, you know, you’re like, oh well now what? Like that’s $40,000, $50,000 but you know, you got to go out and do that again and it’s fun. I like it. It does get old and you’re like, hey, I think I’d probably even do better if I didn’t have to, you know, necessarily do these deals like, and have the rent coming in and then I can kind of cherry pick these deals or maybe get into bigger deals. So I totally agree with you. It’s so powerful.
Mike: So today we’re going to talk about wholetailing. And when somebody had been watching the show for a while, you know, you probably heard me say this before, like Greg and I jumped on and we started talking and catching up a little bit. And ultimately, we just say like, what are we going to talk about in the show today? And I’ve been wholetaling for years, and Greg has started to move in that direction too from wholesaling.
And so, it’s a perfect topic because I think it is the right move if you’re wholesaling to be doing more wholetailing sometimes, right? We’re going to talk about that. Not every time, but it’s, you know, I think, you know, from a wisdom standpoint, one of the things I want to share with people in that we’re going to share today is like, you can’t have one tool in your toolbox. Like you have to have different tools that you do with different houses depending on the situation. Maybe depending on your cashflow situation or your access to cash situation.
But the truth is you shouldn’t rehab every house and you shouldn’t assign wholesale every house. There is a middle ground here and it’s a cool little tool that we call wholetailing. So Greg, why don’t you talk about what wholetailing is for those that maybe have never heard that phrase before.
Greg: Absolutely. Yeah. And it’s funny, I discovered it like really this year and you’ve been doing it for years. It’s a lot of investments. It’s kind of was the thing in the back pocket that no one’s really talking about. So basically, if you’re not familiar with what wholetailing is, it’s kind of like, it’s essentially, it’s like a hybrid between wholesaling and rehabbing.
So what you’re doing with a wholetail essentially is you are number one, is you’re closing on the property. You’re not assigning the contract, you’re not doing a double close, you’re taking title. And usually you’re doing one or two things. You’re either going to clean the house out and then you’re going to stick it right back on the market without even doing a single thing except for cleaning it out. You always want to clean the house out.
It’s amazing, little rabbit hole, here how much different house looks just by cleaning it out. It’s like, oh my God, I didn’t know it was this big. So number one, you’re cleaning the house out. And then number two, if you, if you clean it out and list it, that’s option number A. Option number B is you clean it out and then the key here is you do the minimum changes to try to get the maximum value. So what are the minimum changes look like? Maybe getting the mechanicals working, you know, doing the landscaping, getting the deck fixed, you know, maybe taking the massive ugly antenna off of the roof and throwing that out. You know, just stuff like that. Painting it.
I would say a whole tail rehab, you know, would probably be anything up to like 20 to 25 grand. Anything over that usually you’re starting to get into renovation land. So you know, just make sure you’re doing the minimum changes. Assuming every time you spend money on the wholetail, you’re going to add that much more value to the property. So if you’re going to spend 20 grand and you know, cleaning and maybe even some minimum work, you want to make sure you’re at least getting 30,000, 40,000 extra of a value. You don’t want to spend money to clean it out.
Mike: Right. You’re taking more risk because you’re going to have some loan cost, right? You’re borrowing money. Even if you’re using your own money, you have an opportunity costs of your capital, right? So there’s a cost of money. You’ve got to turn on the insurance, you’re probably doing some yard maintenance. Like whatever has to happen when you own it, right? You’re paying taxes and you’re probably paying a realtor fees when you list it. So you have to make more but the beauty of it is if you do it right, you almost always will make more. In fact, the reason we’ve been doing it as our primary exit strategy over the last like four years now is I think we make more in some instances than if we rehab a house, which is insane, right?
Greg: The secret. That’s the truth. Yeah, that’s the truth. You do.
Mike: And it’s a mindset thing, because for me, and you probably felt this way for a while, you kind of think, well, there’s this ecosystem, like if I’m a wholesaler and I sell it to another investor, you kind of think like there’s a one size fits all investor, right? Like, well this is what investors will pay. But what you start to realize is like, well there’s a different breed of investor that’s often looking on the MLS. Like they might be like a buy and hold person, maybe an out of state person that’s buying in your market that can’t believe you can buy houses for that cheap or whatever.
And so, we’ll talk a little more about it, but what I found is even inside of wholetailing, there’s kind of two shades. There’s like, okay, this is still going to go to an investor but through the MLS or this is going to go to a homeowner that will almost always pay more. It kind of depends on how bad they are.
Now I will say what you just said of doing up to 20,000, 25,000 of work, like sometimes we’ve done nothing including not cleaning it. So it kind of depends. Like if I’m trying to attract a homeowner, I’m probably going to clean it, probably pump a bunch of air fresheners in there or whatever we have to do to make it feel like, well this isn’t too far from livable.
An investor is a little more tolerant of some of the repairs. So when we do like nothing including not cleaning it, that’s usually like an investor grade house that I think we’re going after and they probably don’t care if it smells in there, there’s still an antenna or cleaning because they can see past that anyway. But I don’t want to steal your thunder Greg, so go ahead.
Greg: I forgot to mention. Yeah, I glad you said it. So with the wholetailing too, there’s always two people that you can sell to. It’s can you sell to the consumer or do you have to sell it to the investor? And what Mike just said is if you know that this house is only going to be able to be sold to an investor, then you can get away with probably just turning around and sticking it back the way it is.
We just usually just like clean them out just because at least in New York, like we get some jerks up here. I mean it’s, people are a little more picky in the real estate up here. They try to ding you, their attorneys ding you, there’s trash in the house, so we just always clean them out. It’s like standard operating procedure. But I mean in Dallas, I’ve done a good amount of deals down there. I mean, people want property like that.
Mike: Yeah, this stuff will change a little bit based on your market. But you’re right, sometimes if you buy a house, it doesn’t have to be a hoarder house, but full of junk it’s like, okay, well, it’s going to cost me 2K to remove all that. And sometimes you might be able to add $8,000 or $10,000 in value just because some people, especially a homeowner, like they couldn’t see past that.
Greg: No, exactly. It all depends on the market and stuff. But yeah, it’s been a great strategy so I’m really excited to like deep dive deep on how and when to do this for sure.
Mike: So let’s talk a little bit about I guess kind of benefits or some of the criteria. So I know it kind of forces you to be a little more disciplined, right? Like some people that are just assigning houses and they’re like, I’m not closing no matter what. So there’s not a lot of risks. So therefore, you start to pick up bad habits. You’re like, wow, we didn’t really look at it that closely. If you’re going to take ownership, you’ve got to look a little more closely to talk about that.
Greg: I love that. I love how we’re kind of starting with that. We’re building it from the foundation. What you just said when you’re assigning, there’s nothing wrong with assigning. I don’t do that much more. We always use a double close when you wholesale now too, which is in New York, it’s easier that way.
But, you know, when you’re going to actually take title to that property, you have to underwrite that deal. Like you’re putting your money in or you’re putting your investors’ money in or you’re taking a hard money loan out and you’re putting that money in. So you have to be, it allows you and it really forces you to be much more disciplined with your underwriting, which is ultimately going to make you a better investor.
Because like you said, if you’re going to assign the contract, sure it’s got to make sense theoretically or else an investor is not going to buy it. But if the investor doesn’t buy it and you don’t have plans on buying it, then for you it’s like whatever, you know, the contract falls out. Maybe the seller’s mad at you, you get a call from an attorney if you’re in New York. I’m just kidding. But when you’re actually going to take title and close, it really it forces you to be much more disciplined on like, why would this be a good wholetail deal? What are the benefits to closing on this thing? I mean, what are the pitfalls? I mean, what do we have to look out for?
And then when you make your offer to the seller, this is another thing that is very, very, very powerful, especially in a competitive market and every market is competitive nowadays, is you’re literally buying the house off the seller. So, when you tell them you’re paying them X for the property, you can literally say, like, I guarantee you on buying this number, I’m not going to assign it. I’m not going to put an assignment in here. I’m going to put this much money down and it actually gives you a little bit of a competitive advantage over some other investors sometimes because most investors nowadays they want to go in and they want to assign, which is great.
But when you’re actually going and making the purchase, it’s going to give you an advantage on the acquisition side because most investors do not want to fold or want to assign. They want to try to flip it quick so you can actually have a little bit more of a competitive advantage with the seller because you’re going to be the actual end buyer closing on it, which also I have another case study on this, but it allows you to get the property most of the time at a better price.
I had to deal real quick where this other investor was offering them 42,000. My offer was 31,000 so there’s a pretty big delta there. They still went with me because I told them I’m closing and we’re closing on the house and like I got this $10,000 less because I was a real buyer.
Mike: Yeah. And you just honestly, you’re probably experiencing this now since you’re doing more of it is. Even if it’s subconscious, you’re more confident because you’re like, when you’re assigning a house, always in the back of your mind is like if somebody’s even going to buy this thing. And when you’ve done your homework and you’re a little more confident, you know, to the point to where like my strategy has been, we changed a few years ago when I started to get access to private money and I knew I could close. I knew I could close like as fast as the title company could move, is I would literally, instead of always negotiating on price, I’m using terms, like I’m saying, I can close as fast as a title company can be done and usually that’s three to four business days.
And they didn’t always want to close that fast but if it was vacant and they’re like, I want this to be done, like not many other investors, and I’m not saying that nobody, but are coming in and saying like, you’re done and you’re going to be done this week. And that gives you, that’s a lever, right? Some people are just like, the problem is so bad. Like speed is worth more than more money sometimes.
Greg: A hundred percent couldn’t agree with you more. When you have the ability to close, it just makes you and it makes your marketing better too. I mean, it makes my ad campaigns that I run, and I’m a big like advocate of mailings. It’s like, it makes those campaigns much more profitable because you have to be more disciplined, you’re going to be able to close, and a lot of times you’re going to make more money. But, so those are the pillar number one with the wholetailing is that it forces you to be much more disciplined with your underwriting, which is ultimately going to make you a better investor. You’re going to buy better deals. So it’s going to make you more money flat out.
Mike: Right, right. Yep. And so, would you say one of the things we talked about up front, which is true is you know, we’re talking about the wholetail model, but you can’t just wholetail everything. Like sometimes, you know, I’d like to get your thoughts on what makes a wholetailable house but not every house fits the bill, so just know that up front.
Greg: That’s super important. I’m glad we’re kind of coming on point and it’s really in terms of like what house is wholetailable, what’s assignable, it really comes down to the obviously your local market, right? Like what you’re in DFW. I’ve done stuff in DFW. I do a lot more stuff in New York now and like upstate New York. And really it comes down to like what is the demand for that type of product in your real sub-market actually.
So like you have to, in my opinion, if you have access to the MLS or you have a realtor on your team that’s going to make everything 10 times easier. But really you have to look and you got to see, you know, is there a scarcity of inventory in that sub-market? And if there’s a scarcity of inventory in that sub-market, in my market in the lower Hudson Valley, the scarcity of affordable housing is incredible. Like there is, people want starter homes like there’s no tomorrow.
So when you can understand that there’s a substantial demand for a specific property, your single family home, it’s not clunky house as I say. It’s like a regular, you know, raise ranch or in Texas, you know, three bed, two bath, whatever, one floor. If there’s a real demand for that type of a product, that always makes it a great wholetail deal especially in your like sub-markets.
So when you’re running comps to see if the deal’s wholetailable, I always like to look within a half mile. And I like to also really target properties that are in subdivisions that are not in the middle of the woods where there’s, you know, wells and oil tanks and all this crazy stuff. You want to have houses be really kind of in cookie cutter neighborhoods where it’s very easy to comp these properties.
Another trick is that you know, when in terms of seeing if it’s a great wholetail deal, you want to almost compare your competition is going to be a lot of the local REO properties. So you want to see what does the REO, what are the REO properties selling for because those properties will need a little bit of work. What are the REOs going for? What can you get this deal for and then how long did it take that REO to sell?
And the third real key on that is if the deal’s wholetailable is like, how much work does it really need? Because you know, if the house needs six figures worth of rehab, that is risky in terms of wholetailing it because you got to think about it. The buyer who is going to buy that house to put 100K rehab in, there’s very few of those types of people there. You’re almost selling that to a developer/builder there.
But if the house needs 30 grand and it’s mostly needs cosmetics. You could sell that to an investor, you can sell it to a consumer. There’s just so many more buyers for a house that doesn’t need a substantial amount of work. So if we come across a file that is a major renovation, you know, what we normally do is we either assign it or we decide to go in and take the project on. We usually assign those, but really has to do with you the type of work and really where that house is in terms of your local sub-market.
Mike: Yeah, I’m glad you said those things. It’s not necessarily the cost of the work, but it goes hand in hand. But it’s like, you know, for example, it’s easier to wholetail something if it needs more cosmetic work than like structural work. Because a homeowner that’s like . . . this is my general belief, like in our market in Dallas, and it depends on the kind of, if you think of wherever your market is, like the median price point of homes, this model tends to work better, like below the median price point because it’s people that are like, it’s a little bit of a stretch. Like they couldn’t get in that neighborhood otherwise unless they buy a deal. It’s kind of like, I kind of give the comparison of like a shopping at the . . . what do they call it, outlet malls, right?
Like the clothes, their sleeves are a little short and it’s like pink. I don’t wear pink, but I mean, that’s such a good deal. Like I’m willing to do it. So it’s like price is an objection that we all, sometimes we’re willing to pay for something even though it’s not perfect because it’s a good deal. In America, we’re suckers for deals, a lot of us. And it allows people to get into neighborhoods that maybe I couldn’t get in that neighborhood unless I bought a fixer upper. But it can’t be structural or big scary things. It’s got to be like, man, I hate this wallpaper, but we can fix that, you know?
Greg: We can deal with it, exactly. It’s manageable. And that’s the key what you said right there is that if it is a structural issue, you’re only going to be able to sell to an investor so you can wholetail the deal, but you’re going to have a limited pool of buyers, right? I will say though, there’s always better. Everyone always like reaches out, well, how do I build a buyer’s list? What’s the buy? The best buyers list in my opinion is the multiple listing service.
Mike: Put on the MLS.
Greg: You take away the whole disposition role in your company if you just put it on the MLS.
Mike: That’s what we did. And it just got, it made my life easier and we were able to make more money doing it. So that was part of the move was like, we make more money doing it and I have access to capital so I can do that now so that like capital wasn’t an issue and I don’t have to deal with the dispositions part of my model. And truthfully, even though there’s, I mean I’ve assigned the like lots of houses, you know, so I’m not saying it’s a bad thing to assign, but you get around the things like, well, how do I show the property if somebody is living in it, if I’m trying to assign it? It’s like you have to kind of eliminate a few of those issues that there’s a cost associated with doing it that way, but it just makes your life easier if you go that route.
Greg: Totally. Especially I kind of like how you just said that. I mean, you know, there’s a lot of investors out there looking to buy the same house as you. And if you can buy the house and close on it, then other wholesalers got to you know, take people through the house, which the sellers clearly don’t want. That’s another kind of goes back to pillar number one. It gives you an advantage in the marketplace. Make sure that the house is [inaudible 00:25:48].
Mike: Right, one of the thing that you mentioned is looking at the comps and you know, comping. So one thing that that I, because you know, I teach on our students and stuff on the same strategy that I want to throw out there, which I know you do the same thing is so one of the questions is what is a wholetailable house, which is kind of what we’re talking about here.
I think if you look at the comps, like we’ve been classically trained when you’re looking at comps to look at kind of the ones that are after repairs, right? Like, totally remodeled, right? So we’re looking at the top comps. What’s the best I could do if I rehab this house and how big of a rehab do I have to do to make it comparable to these top comps? So wholetailing is kind of like the other end, like look at the ceiling, look at the floor. What’s the lowest at anything as sold for on the MLS and how bad is that compared to how bad mine is? You just kind of looking at the other end, right? And saying what, like you said, you said REOs. Look at the distressed stuff that’s selling on the MLS and say, if I could get that price, would that be good for me or how bad is it compared to my house?
Greg: Exactly. That that is critical and it’s so important to understand that before you start doing this strategy. To add to that just so we give all these listeners like these real tactical steps, you know, you just call some realtors up who sold the properties. Like most of my deals, it’s like I call a realtor “Hey, you know, I saw you sold this REO down the street. I’ve got something similar coming up. I mean, what do you think about this? What do you think I can get for it? Can you drive by?” And then I’ll give them the listing.
So really you got to really use realtors to your advantage. I think a lot of investors get scared to use realtors especially if they’re wholesaling. They don’t like it. We’ve done great with realtors wholesaling, but if you’re wholetailing , just call realtors up. They’re your best friends. They’re the ones who are going to sell your properties. I mean, I think a lot of investors they kind of look down at realtors. I’m like, what is the matter with you, why would you do that? They’re incentivized to sell product and it should be your product, you know? And there’s a lot of great ones out there, you know, you just got to call them lead with value and that’d be a great way to sell your properties. They want leads.
Mike: No doubt. This is market specific. And, you know, when I started almost 12 years ago in the business and it’s, this is different in a lot of markets, but in my market, the DFW market and I think a lot of a lot of markets around the U.S. like it really wasn’t as acceptable to sell an imperfect property on the retail market as it is today. Now the MLS is just a clearinghouse for it could be distressed. A lot of that got driven by the REOs and all of the short sales and all that stuff. It’s like imperfect stuff started to be sold and that kind of opened the gates to I guess wholesalers and investors to liquidate their properties through the MLS market.
Greg: Absolutely. Yeah. It’s the best way to sell houses. I mean, we have so many examples where it’s like we put it on the MLS.
Mike: Well share one. I think you had a case study you wanted to share. It gives people some perspective on . . . I guess, do you have a rule of thumb? I mean you kind of need to have a rule of thumb. There’s this old rule of thumb, I won’t even say it’s mine, like I just kind of heard this along the years and I’ve perpetrated it by sharing it, but whether you should assign our wholesale versus rehab and it’s usually kind of gone something like, hey, all else equal, you need to be able to make at least double on it if you rehab it versus a wholesale. And so, you know there’s a bunch of shades of gray in there, but do you have kind of a general rule of thumb if it’s a wholetailable type property when you should be willing to take on that additional risk?
Greg: Absolutely. So that’s a great question because a lot of investors are probably thinking like, well if I do this every time I’m going to run out of money, which we can talk about the capital aspect. Basically, so number one it has to do with like what is the company liquidity looking like right now? Like how much money is on the street for me, like if I have a ton of my personal money or investor money or other properties that are under the wholetail process or even light rehab, I will maybe look to assign a couple of those deals just to get some cashflow coming in.
If that’s not the case in terms of the wholetailable deal, I look at the deal and I say, okay, number one, what could I get if I wholesale this? So I’ll say I could probably make 15 to 20 grand wholesale assigning this. If I could make it 15 to 20 again, wholetail assigning this and then I say, okay, that’s okay, I’ll take that. You can’t go broke . . .
Mike: Yeah. It’s better than a sharp stick in the eye.
Greg: Yeah, exactly. It’s certainly better than going to garage sales and buying and sell stuff, which would I used to do before I got into this business. But then I say, all right, well, if I can make 15 to 20 on the assignment basis, that’s not even how on the amounts. What can I make if I just stick this on the market, and then that’s where I call the realtors up. I look at the comps to see what the REOs are going for. I look at the demand and look at the inventory and I make a little hypothesis. I’m like, I can probably make 25, 30 if I just stick this on the market and essentially double my wholesale profit.
And then I’ll go into, okay, that’s great and I’ll kind of circle that. Go on the MLS, look and then I say, well, if I was going to be a crazy person and rehab this house and take all that risk, what could I make rehabbing this? And usually the secret is that it’s the same as the wholetail except I have another four months of hell. So then usually I say, okay, I try to put it out wholesale. I’ll put it out to my list, get some feedback on it. Usually get a couple of offers that are like pretty much right around what I projected.
And then I usually say, am I going to pass and then I go and turn around. I try to wholesale it for more than I really probably can just to high anchor that maybe I can get someone to overpay for the house, but usually I just circle the middle. I say this is a wholetailable deal. I can [inaudible 00:31:05], and yeah, 30,000 on this thing and hopefully that works out. But really it comes down to like if I can essentially double my wholesale profit on the same lead, the critical thing here is for everyone listening, you know you’re going to double your profit on the same lead, right? So you’re still the lead you got, the same profit.
Mike: Your advertising costs or your lead generation cost was the same.
Greg:Is the same.
Mike:The thing that would be different is you have some holding costs and you’re going to have, but you have to factor those in if you can still make about double, then you’re willing to take that risk. And the truth is, the wholetailing model, like you could always rehab it later if it didn’t work out and you’re like, it just has too many repairs so I’m just going to go ahead and rehab it.
Now there’s a general kind of rule of thumb that you don’t want to rehab by default. Like that’s not a good situation to be in as a real estate investor. Like my last opportunity is to double down on it. You don’t want to be in that situation.
Greg: No. I don’t want to do that.
Mike: But if it’s a house that you could rehab and it’s a burden for you, but the numbers are still going to work out really well, you could always do that if you need to, but . . .
Greg: Exactly, or rent it.
Mike:Or, rent it, yeah.
Greg:[inaudible 00:32:14] San Diego, because you can’t rent houses out here. I don’t touch anything. More than more than one exit strategy for sure.
Mike: That’s awesome. Yeah. And I just want to talk real fast about just kind of reiterate like why we’re able to make more money. And I would say, and maybe you have some others, I’ll kind of share like three quick, like reasons why. Because I think the MLS attracts a different type of investor.
Greg: Very true.
Mike: People that might be out of state and they’re like, in California, they’re like, how can you buy a house for $60,000 like in Texas or the Southeast or somewhere else? And I’m like, well, maybe, and I’m not saying you should never lie, you should never misrepresent anything but sometimes people just convince themselves that, well, the repairs are probably less than that, or I can get it done cheaper than that and maybe they can. Heck, I don’t know.
Or maybe their cost of capital is really low or, you know, I used to think like, well, if people are borrowing hard money and I kind of like create this avatar for a buyer, that’s like, if, if that’s the avatar, they would never do this. But then you start to realize, hey, who am I to define who the avatar is? Like all I need is one person and let them decide what they want.
Greg: Exactly. No, it’s so true. And like, you know, we’ve sold deals where we’re like, wasn’t best deal in the world but someone loved it.
Mike: And I’ve got people that, you know, I used to share when I used to assign and wholesale a lot more, I would tell people like here I think the repairs are 24 you know, and they would come back like, man, we got that done for 12 and I’m like, well, I’m leaving money on the table obviously. But so I think there’s that kind of investor that is willing to pay more for some reason.
And the second one is kind of along the same lines, somebody’s going to keep it as a rental. If you’re in a rental grade market, they might be willing to pay, you know, a lot more than what you would ever pay for it just because they or they’re going to seller finance it, right? They’re like, those guys will pay like maybe 90% of AVR.
And then for the owner that’s going to live there, this is my kind of hypothesis on that is for them, like when we look at repairs on a house or if you’re listening to this, if you’re rehabbing, probably roughly 60% of my rehab costs are labor and I have to pay those costs because I’m not rehabbing anything. And these hands are like super soft. They’re not going to get . . . I don’t want any blisters on these hands.
Greg: I got my baby lotion on these things.
Mike: Exactly.
Greg:Soft paws.
Mike:When somebody is going to do the work themselves and they’ll move into a fixer upper, they often don’t think of their labor, their opportunity costs of their time. They’re like, well, you know, for the next year we’re going to have a whole bunch of weekend projects and we’ll just buy like a case of beer and some pizzas for the cousins that come over and help us strip wallpaper and stuff but they don’t really think of . . . they’re not hiring contractors so they’re just thinking to the cost of the material. So in your mind if you’re like, hey, this was a $30,000 rehab, they might think it’s like eight because it’s like, well, we’re just going to do the work ourselves so they discount that.
Greg: Yeah. And that’s good for us and good for them. They’re going to eat their pizza and fix the house.
Mike: They earn sweat equity. They earn sweat equity, right?
Greg: I’m not like that though.
Mike: No, no. I don’t want to sweat.
Greg: I couldn’t even change my tire. I can barely put gas in my car.
Mike: I could put gas in, but you’re never going to see me changing oil or anything.
Greg: Yeah. [inaudible 00:35:19].
Mike: So hey, give a quick case study of a deal that you did that you kind of know what you probably could have got if you wholesaled it but decided to wholetail it and what and how it worked out.
Greg: Yeah, absolutely. I don’t want to like kind of give the listeners like a jaded perspective because this is a really good deal.
Mike: It’s a real deal.
Greg: But like they’re not all like this, but I’ll just share it. So there’s a house . . .
Mike: As real estate investors, we always share our best deals.
Greg: Yeah, I’ve got a couple of stinkers I can share. So I’ll preface with this. So two-year direct mail campaigns. So this is a two-year follow up. Lady calls in, wants to sell, not now. Follow up with her for two years. Finally sells me the house. I can barely assign this thing. I have one buyer who’s potentially interested for a $10,000 fee and I’m in California now and I’m like, “Oh my God, what am I going to do?” It was a sweet little old lady, she’s really, you know, relying on me and I’m like, I got to close on this thing and I’m like, I’m going to wholetail it.
So I could barely wholesale this thing. I got like basically like a one $10,000 assignment offer and I’m just like, man, I don’t know if I want to do that, you know. So I’m like, I’m going to close on this thing. Close on the house, clean out the house, get some of the mold fixed, stick it on the market, $80,000 profit. Sold in four days to a cash buyer and it was the cleanest deal I’ve ever done in New York. And most of them are like fighting tooth and nail.
Mike: So what scared investors away? You said it had like some mold in there? Was that the issue?
Greg: It had some little bit of mold. Didn’t have major mold. A little bit of mold, the foundation wasn’t jacked up, but there was like the whole foundation wasn’t jacked it. There was a few instances where like you could tell there was some, it’s sketchy settling. It was an old house that hasn’t been updated.
Mike: You fixed that.
Greg: No.
Mike: You didn’t fix it. Okay.
Greg: We didn’t fix it. No.
Mike: What did you do to kind of . . . what did you spend?
Greg: Cleaned it.
Mike: You cleaned it out.
Greg: Cleaned the house out. And the thing is, we put it on the market though. My only marketplace was my buyers and none of my buyers wanted it because it was like it wasn’t in the middle of nowhere. It was in a great, great town but it had a well. A lot of investors don’t like wells. They like the, you know, city water. But we put it on the market and they cleaned it out and I knew that there’d be demand for this thing because it overlooked this beautiful mountain range and really, really nice area Upstate New York up in the Ulster County.
And we put it on the market and we just, we got all the junk out of house because the house was filled with junk. And that’s what kind of the thing the investor was very like, “There’s some stuff in here, I don’t know.” And we put it on the market, cleaned it out. We changed the image of the property and you know, there was an investor on there who was basically seeing what the other investor wasn’t seeing and they made a full price cash offer. Actually, it was above asking and they closed with cash. They loved the house, they’re going to do great rehabbing it. And it was an $80,000 spread for us.
Mike: That’s amazing.
Greg: It was amazing. And that was private money funded that deal. So I mean, that was an example where I’m like, wow, I mean, why I should’ve been doing this for the last year. What I’m I doing? Silly Greg.
Mike: You never know. It took me a while to overcome that but I think I know the investor mindset, but I’m like, investor is such a loose word. Like, who am I to decide what somebody else is willing to pay for a house? And so that’s one of the beauties of the MLS is it’s supply and demand. The market kind of solves your problem or it’ll ding it.
So we had a house, a rehab recently that this is in like Plano, Texas. Everybody knows Plano. And put this thing out. We did a just an amazing rehab on this one. It turned out great. Like super proud of it. Put it out for like, I can’t remember the exact numbers, but put it off for like 245. We ended up selling for 265 and it was to an investor. It’s like that’s more expensive than a rental, but I think he was going to turn into an Airbnb or something, but they wanted to close in four days.
They got bid up like 20 grand over asking price from homeowners that wanted to live there because it was like a perfect family neighborhood and an investor said we can close, pay in cash, close in four days, no inspection. And we’re like, because we had done so much they apparently trusted . . .
Greg: They knew it was hard. Yeah.
Mike: And that was the lever they choose. And I was like, who the heck does this but sure, let’s do it.
Greg: As long as they got the money, I’m down to sell to them. As long as they got the money, I’m willing to do the deal. That’s amazing. Did they have an option period on that thing or they just were like, let’s rock and roll?
Mike: I think they wanted like a two-day option period.
Greg: They love doing that.
Mike: Because I was like, how are you going to close in four days? And they’re like, well, we want two days to the option for you. Of course, any retail buyer usually is putting in a 7 to 10 day option period. So like, hey, let’s give it a whirl.
Greg: That’s right. That’s all. That’s what’s funny. You never know. And like you couldn’t wholesaled that house to a cash buyer. They would have never bought it. But you put it on the MLS and all of a sudden, you know, it’s like, wow. I didn’t even have to rehab this. But no, that’s a great case study on like, you never know who’s going to want the product until you put it on the real market. People love to brag on like they have like 50,000 buyers in their list. I bet you 5% of those buyers are actually real buyers.
Mike:Real buyers, yeah.
Greg:You never say, yeah. Anyway, but I like that.
Mike: So good stuff. Wholetailing is a great model and hope you guys got some value out of that. Hey Greg, would you mind, I want to wrap things up here and ask how folks can get ahold of you here in just a second but would you mind just giving a quick testimonial on Investor Fuel? You’ve been a member for a while. We have an event coming up here, actually two events over the next couple of months here which you’re going to be a part of, but just maybe just share, you know, I don’t put any words in your mouth, just share your experience and what you think about Investor Fuel.
Greg: Absolutely. So I’ve been an Investor Fuel member for a while now and it’s going on I think almost two years now and I will see you next week. I’m really excited for that. So really at the end of the day, I mean before I joined Fuel, I was still kind of, well, first of all the relationships alone. I mean I’ve met people in that group that I’ve done tons of deals within Dallas actually. So that alone, I mean the relationships.
Mike: You literally probably done hundreds of thousands of dollars in deals you wouldn’t have done otherwise.
Greg:I wouldn’t have done otherwise.
Mike:Right? I never got my cut on that.
Greg: Yeah, no, but seriously, like serious, at the time last year, I was like three to five deals a month in DFW. Never seen the properties from someone I met in Investor Fuel. So the networking alone is first-class. Everyone in that group is an absolute giver, right? So everyone in there is a real good person that they’re there to give value and help the other members.
So the amount of value I’ve gotten just from like direct mail, like Todd how to do direct mail. Before I was in Investor Fuel, my direct mail strategy was embarrassing. Met Todd, connected with him and now I’ve just run my direct mail numbers right now, 1 out of every 21 leads is a thumbs up off of my mail. I have that literally written down right here and I was just doing that before our podcast tracking some of my numbers.
So you know, the Mike brings in the cutting edge, people in there who really know what they’re doing, they’re there to give, they’re there to help. And you know, at the time I wasn’t even doing the volume I’m doing now before I was in Fuel. And I think the big thing is like when you’re around people, this is what really changed for me, is that when you’re around people who are successful, assuming you do what they say to do, you can’t help but to be successful yourself. Like you’re the average of the five people you surround yourself with. In the Fuel’s case, much more than five people in there.
But it really gets you in an environment where you know, you’re set up to succeed, assuming you’re willing to put the work in and just a first-class group. So I really appreciate you for creating it and I’m happy to always contribute back to the group and share stuff that I’ve learned. And it’s a great place to learn, grow and evolve your business and more importantly, evolve life. Because you know, you don’t only just talk about business in there, you can talk about what are you struggling with in your family, how’s your work life balance, you know, how’s your fitness weight, things like that. There’s more to life than just business and in Fuel we talk about other things besides just our businesses and, you know, the P&L statements.
Mike: Absolutely. Thanks for sharing, Greg. That’s great. Cool, buddy. We appreciate that. So let’s talk a little bit about how folks get a hold of you if they want to learn more about you. You’ve got a podcast too, which actually, you know, dirty little secret. As soon as we finish here, we swap and I’m going to go record one of yours. It’s really exciting to be there. But how do folks get ahold of you and where do they learn more about you?
Greg: Absolutely. So if they were interested, yeah, so that I have a podcast out called Pave The Way podcast. You can go on iTunes or Spotify or whatever, Pave The Way podcast by Greg Helbeck. I put out two shows a week. Just started doing that back in April. It’s been a fun experience so far. So the podcast is a great way to get in touch with me.
If you want to get in touch with me personally, I would say social media is the best way to do it. So my favorite platform is Instagram, so you can follow me at G-R-E-G-O, _37 Grego_37. If you slide into my DMS, it might take me a few days to get back to you, but I will respond to you, trust me, and I’d be happy to connect with you. And if you’re local in San Diego, I’d be happy to meet up with you in person and have you come over to the office or we can go meet in La Jolla, have a nice dinner or whatnot. So if you’re local to San Diego, reach out to me. I’m out in La Jolla. There’s tons of good spots to eat. I love connecting with other investors and masterminding out here. So those are the best ways to get in touch with me.
Mike: Awesome. Awesome. Hey Greg, thanks again for sharing all this information today. This is powerful stuff. I mean, this is the type of stuff that if you’re just wholesaling and assigning deals that can move the needle for you, right? You don’t have to spend more on advertising. You really have no more upfront costs. A little bit more perceived risk, but if you do your homework, it’s really not that much risk, but it’s a way to take that kind of same piece of fruit and just squeeze more juice out of it.
Greg: Exactly. I love that analogy. Totally. It’s worth looking into if you’re an investor. I’m not saying do this tomorrow. I think it really, you got to be in a situation where you’re ready to do this and you have the capital, which is definitely something you can get, but you got to always look at like, how do I make the most money on my leads within reason? You don’t want to get greedy and sell stuff that’s overpriced, but how do I take this lead that is maybe a $10,000 lead in terms of profitability?
How do I make this a 15,000, 20,000, 25,000 $30,000 profit lead, which at the end of the day, it’s going to make you a more profitable business person? And instead of doing more deals and sending more money and hiring more people, you know, my strategy is like less deals, more profit, and everyone’s smiling.
Mike: Yeah. Yeah. Awesome. Awesome. Awesome, Greg. Well, hey, thanks. Thanks again for your time today and for all your knowledge. I appreciate it, buddy.
Greg:I appreciate it, man. Thanks for having me on the show.
Mike: Yeah, and everybody that’s listening to thanks for joining us today. If you haven’t yet subscribed to the Investor Fuel podcast, I’d love it if you do. You could basically just on iTunes, Stitcher Radio, Google Play, wherever you can find us at YouTube, we get a ton of traffic on YouTube. Of course, you can actually find all of our shows at investorfuel.com or on flipnerd.com so appreciate you guys a ton. We’ll see you on the next episode.
Are you an active real estate investor? If so, and you want to latch on to the power of surrounding yourself with over 100 of the nation’s leading real estate investors, all committed to building stronger businesses and living richer, fuller lives, you should jump on a call with us to learn more about Investor Fuel. Simply visit investorfuel.com to get started.