Onset Part 1 | How I worked with my wholesaler

Ryan: So I am back here with Mike and we're talking about the Onset, Massachusetts property. Now, Mike, I know you worked with a wholesaler for this property. I am interested in the money. How did he get paid? How did you go about that? I want to know the specifics.

Mike: That's a great question, Ryan. I get asked that question a lot, and what I find with people who don't quite understand this business, who are getting into it for the first time, they always want to try to negotiate with the wholesaler. There are times when you do want to negotiate with the wholesaler, but first you will need to identify what the numbers are and understand the numbers. I'll get specifically into that in a second.

But in this case, the first and foremost thing that is most important to me is the $65,000 purchase price which included his wholesaler fee. I can be all worried about how much he is making on that deal, but what is most important to me is does that number work for me as an investor. Well that number just happened to fit right.

He's a good wholesaler and I'll prove that to you in a minute because it fit right into my investment numbers that I need to buy at. You may have seen some of my videos in regards to the 70% rule, and we'll get into that in one moment. To answer the question, most wholesalers will make on average, between five to ten thousand dollars on a deal, and more.

This particular wholesaler made, I think it was roughly around $20,000 on this deal, which was really a score for the wholesaler. Yet it was his experience, relationships and skills that allowed him to make that much. I did try to negotiate on the price, as I mentioned earlier, but negotiating was not going to happen which was OK. I still bought it at a good price and everybody made out perfectly fine on that one.

Ryan: Where did that $65,000 come from? I know, for me, that seems like a lot of money. I would be scared to cough that up out of my savings or whatever I have going on.

Mike: Sure. Fair enough. I usually carry around with me a briefcase full of 100 dollar bills and I just open it up. Just kidding folks. You don't need hundred dollar bills to buy real estate. Becoming a real estate investor, you need to make an investment in time; investment in time building relationships.

You try to get to the credibility stage of who you are, what you do, to be able to work with others-to be able to work with other people's money. I think we refer to that in some of the other videos  as OPM.

In this particular example, I worked with a friend of mine who has a full time job which he does very well with. He got tired of the market not producing the way he wanted. He had some money in some CDS, making I think less than 1%. He got to know me and my business, and I explained to him how we could give him a nice rate of return on his money.

This particular property, I believe it was a 10% note, and what that means is a 10% note is a promissory note that we provide. If it was you, Ryan, and you had money, I would provide you with a promissory note saying I would promise to pay you back, and I would secure that with the real estate. Just like the bank does when they lend money to you to buy a home personally.

Here, we have an investor or a lender, making 10% on his money annually, as opposed to one percent in his CD. He is extremely excited because we're doing him a very good service and paying a very nice rate of return. I'm real happy because we are able to borrow the money and do this deal without having to grab money out of our own pocket. In this case, let me elaborate a little bit more on this, because I think as a newbie you might want to know...

Do I get the money first or do I get the deal first?

Quite honestly, I think you want to be working both sides of that equation all the time. Looking for deals and telling people what you do. Explain to them how you are building your business, and just talk to them about the opportunities. You'll be surprised how quickly people start asking you questions, and then you can explain to them how you can make their money work for them. So that's how we made this particular deal happen.

Ryan: So it sounds like a good investment opportunity.

Mike: It's definitely a good investment opportunity, absolutely.

Ryan: All right. In the next video, we'll dive into the details of the rehab.