What Is Reverse Wholesaling?

Reciprocity is the psychological word for fair play. When we do something for someone, they usually feel obligated to do something for us. It works both ways.

You can find blank assignment contracts on the Web. I recommend paying the money to have a good lawyer in your area draw one up.

This post originally appeared on the Hermit Haus blog on 2016-08-27.

I’ve talked about the benefits of wholesaling real estate on a couple of posts. In short, wholesaling is the process of getting a property under contract and selling that contract to another investor. (For a more in depth explanation, see “What Is Real Estate Wholesaling?” In “Marketing Pays Off!” Sue Ann discusses a double-close wholesale deal that brought us a needed cash infusion.

Today, I want to talk about a specific variety of wholesaling called “Reverse Wholesaling.” Now Reverse Wholesaling technically isn’t a different type of wholesaling. It’s really more of a wholesaling strategy. Simply put, it’s all about knowing who is going to want to purchase the rights to your contract before you make the offer.

Here’s how it works:

Let’s say you’re out Driving for Dollars (driving around looking for off-market properties you might want to buy). You find someone loading a U-Haul trailer, moving out of a house. So you stop to chat. You find out that they are going to walk away from the house for personal reasons (that matter a lot to them but not to this discussion). You walk through the house with them and realize that you can help salvage their credit score by buying the house. You make the offer and they accept. You now have a marketable interest in the contract to purchase the house.

So far, this scenario fits the wholesaling model perfectly. But what about Reverse Wholesaling?

You know this house is a good investment at the price you now have it under contract—just not for you. But your friend Samantha is looking for exactly this type of deal. You call Samantha and she’s thrilled you found the house for her. You assign the contract to her and collect your assignment fee.

How is that any different from traditional wholesaling?

It’s different because you never had to market the contract. You had a list of buyers, and you knew what they were looking for. You simply called one of the investors you already knew wanted to buy a house like this one.

I was involved in a transaction very similar to this one just last month. Eugene, a wholesaler, blasted a property to an investor group’s email list. I went to see the property and knew immediately that the deal was too thin for the Hermit Haus model, but I knew someone whose model it fit perfectly. I put my friend Larry in touch with the wholesaler, and Larry bought the house. I did not collect a fee because I had no equitable interest; I never owned the contract. But I earned goodwill points from both Larry and Eugene, who has since given me first dibs on several of his wholesale deals.

There are numerous tactics for building your buyers list, but that is the topic of a future post.

Open House: Ash

We added a few plants to the front walkway. I like how the colors pop against the gray brick.

This post originally appeared on the Hermit Haus Redevelopment website on 2016-07-10.

We had our first open house at the Ash House today. Sue Ann promoted it on all our media outlets for a couple of days, but because I'm not the Social Media thinker, I forgot to mention it anywhere until it was over. Sigh!

Carol and I worked it, and we had a pretty good turnout that included a lot of our neighbors. One even followed Carol from where she put out the open house sign to the house! All of our neighbors were grateful for the project and seem genuinely enthused to help us sell it. This is one case where you really can pick your neighbor.

Another thing I love is Fredericksburg peaches. One of our neighbors gave us these to say thanks for fixing up the Ash House. I forgot to give Carol any. Wonder if there will be any left for the next meeting. Hmmm... Still life by Suna

We only had a couple of serious buyers, and one of them said the split level was a deal breaker. Even with only two steps, they were concerned about frailty and balance as they age. But they were really nice people who are looking to downsize and relocate to Temple. Carol may be able to help them with selling their home and finding the right place in Temple.

That’s one of the things I love about this business. You meet really interesting people if you take the time to learn their stories. There are so many ways to help others. Another thing is making the houses happy again. We had nothing but good comments on all of the selections. Preserving the character of this house instead of redeveloping it was the right choice. The most common comment was, "I can't believe how beautiful it is! Did you see it before?"

We learned that there is a fault line running through the neighborhood at the bottom of the hill. The neighbors all told us that the houses on top of the hill (like the Ash House) are fine, but all of the houses farther downhill have foundation problems because of the constantly shifting soil. I will have to understand the issue better and find a solution before we take on a project in the more mobile part of the neighborhood.

Finally, we also made a couple of good contacts. One of the neighbors is a probate attorney, and another buys furniture from estate sales. We find it rewarding to help families through the hurdles of probate and selling a house.

Work-Life (Im)Balance or “My Why”

I’m sure I’m not alone in feeling this is how we balance work and life in Corporate America. Actually, I should’ve tipped the scale a little more toward work.

You’ll never find this guy in an airport. Driving the country enables you to enjoy life and see the country. Photo by Carolina Bird Club

A glass-bottomed boat captain told us it would bring five years of good luck to have our pictures taken standing in the embrace of this tree. So here we are. Not that we’re superstitious or anything. Photo by Anita

This post originally appeared on the Hermit Haus Redevelopment website on 2016-06-09.

When I used to work in the corporate world, management had this thing they called work-life balance. They understood on some level that you couldn’t just work people to death. One even told me with a straight face, “We work to live; we don’t live to work.”

Unfortunately, management always lost sight of that goal at some point, no matter how much Mahogany Row would like to. Between product release deadlines, understaffed departments, and the unending goal to “do more with less,” the employees (if not the management) began referring to the work-work balance. In other words, “How do I work hard enough to keep my job without going crazy or postal?”

Well, that is one of the reasons I love running this company so much. You haven’t seen me post on [the Hermit Haus] blog in over a week because we ran away to Florida to celebrate Sue Ann’s high school reunion in person. No, I’m not putting a number to the reunion. (Sue Ann says, thanks.)

We chose to drive, because I think you miss out on so much of the country when you fly. And driving lets you avoid being treated like a piece of pink slime in the airports. But seriously, when was the last time you saw a roseate spoonbill in an airport? We saw several—not to mention countless other interesting birds—in their natural habitats while driving through Texas, Louisiana, Alabama, Mississippi, and Florida. Did I mention the Everglades?

I got to meet a lot of my wife’s oldest friends, and I liked all of them. I’m not usually good in a crowd of strangers unless I’m on stage or have a microphone in my hand. But I have to admit all of the folks she’s kept in touch with are genuinely nice and interesting people.

I have to admit; I didn’t leave my phone at home. We participated in the daily huddle meetings while driving or from our hotel rooms. Nor did I stop marketing. We told everyone we met about the business. Almost all of them brought it up first. We sprinkled a pleasure trip with business contacts. We also looked at projects wherever we stopped. You can truly do this business anywhere.

So that’s one of my “why’s.” Sue Ann and I were able to take a week off and drive across the country with minimal involvement in our business. While we were gone, work continued on all of our active redevelopment projects, and our acquisition pipeline kept active. I met old friends who may become new partners. And I had a genuinely relaxing and good time while doing all of this.

After decades as a wage slave to corporate America, I can finally say I have achieved that elusive balance between work and life. And that’s not counting my dad’s adage: “If you love what you do, it’s ain’t work.” That attitude kept him planting corn when he was 92. I hope to be redeveloping houses at 100.

Philanthropy and Networking

This ad will appear in the playbill for every performance by the Milam Community Theater this season. Consider sponsoring a community group in your area. It is “doing good” that does good for you, too.

This post originally appeared on the Hermit Haus Redevelopment website on 2016-04-02.

Sue Ann and I attended the Milam Community Theater’s (MCT) “Night on the Town” tonight. It included a nicely catered dinner of roast beast and veggies followed by MCT’s presentation of Agatha Christie’s The Unexpected Guest. I won’t comment on the play here, but Suna was asked to write a review for the local newspaper.

So why am I mentioning dinner out on a business blog? I wanted to point out the power of networking and advertising at these otherwise “social events.” For dinner and the play, we were seated with the Cameron city manager, the host of a local radio broadcast, and two other business owners. In the audience was our insurance broker, a real estate broker, a lawyer, and several other Milam County elites.

All of these local big wigs had at least one thing in common: we had all helped sponsor MCT’s season this year. And we got to mingle with them and revel in that commonality.

While this kind of networking inevitably brings about new business contacts, that isn’t why you do it. As our mantra says, “People first, profits seconds.” In large cities or small towns, relationships are how you get things done. You have to be nice to people first, and you have to be nice to them because they are people—not because of “who they are.” I actually enjoyed the company we were in and only mentioned our business when someone else brought it up. But now when people see my name on a permit application, they have a friendly face to associate with it. When they know someone who needs help selling or buying a home, they know someone who (I hope) made a good impression on them to refer.

And there is the sponsorship aspect. Our ad will appear in every playbill for the current MCT theater season. It is a very low cost form of advertising and networking.

Number Three

Temple (magenta circle) is pretty far north of Hermit Haus’s focus area (magenta glob).
 

Here is the house with the pile of ashes featured.

This post originally appeared on the Hermit Haus Redevelopment website on 2016-03-11.

My mentor Phill Grove always says, “Your Net Worth equals your NetWork.” Here’s an example.

A few days ago, I got a call from Dominic G, another redeveloper working in Central Texas. He was checking references on a General Contractor with whom I’ve worked for many years. As we chatted, we found out we have a lot in common, including the back office system both our companies use. Then Dominic mentioned he had a house under contract in Temple. Since Temple is well outside of his normal range of operations, he wanted to know if I would be interested in buying the contract from him.

Now Temple is also pretty far north for Hermit Haus to go. We don’t usually get much farther north than Georgetown. But the numbers looked good on the surface, so I said I was.

Last month, I met yet another redeveloper at the Houston Summit who has done roughly 20 houses over the last 20 months in the “Greater Temple” area. We’ve been chatting a bit, so I called Larry and asked if he’d like to JV (form a joint venture) with Hermit Haus to get the deal done. He did. We did an onsite evaluation with Larry’s lead contractor, revisited the numbers, and came to an agreement on how to proceed. Hermit Haus is now under contract to buy its third house since December.

We’re calling this project “The Ash House” because the previous occupants appear to have heated the house with a lovely wood-burning fireplace for several years. Unfortunately for the neighbors, they just dumped the ashes in a flowerbed until the pile is at least 36 inches tall and a couple of feet in diameter. One of the first items to clean up on the list!

Everybody wins!