Episode #18 – Do You Charge What You’re Worth?
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Welcome to EarlToms podcast today I want to cover something that that bothers me about this industry but it’s something that a lot of people can overcome very easily. But it’s directly in line with with everyone self worth. And it’s, it’s basically being able to charge what you are worth. So I want to go through and try to explain the mentality behind the reason some people don’t charge what they’re worth. The reason some people do charge what they’re worth, because a lot of it has to do with the success that you’re going to have in your business. So, when we think of charge what you’re worth, it’s it’s hard to put a value on your individual, worth. You have It’s a an inner reflection that 99.9% of people struggle with being able to determine their self worth. They’re either going to underestimate it or overestimate it. And a lot of times they don’t get it in that sweet spot. That is an accurate representation of their work. That’s not to say everyone is not created equal. Our Constitution says that that’s that’s not what I’m getting at. If you look at at wholesaling the same way you’ve looked at life, or your initial career when you, you know, started out working. You know, if you take, if you take your school, for example, you know, when you’re in kindergarten, you were, you were like a sponge, you absorbed everything that you could, that you could, you didn’t really understand what you were learning, you didn’t even understand that you We’re actually learning but you were watching your parents or watching your teachers. And as you grew up, you became more knowledgeable about life in general, whether it be math, science history, you know the real world how the how the world treats people. It, you gain that knowledge and that experience. So by the time let’s say you get to high school or even college, if you look back on what you know then versus what you knew when you were in kindergarten, there is a very big discrepancy of your worth between kindergarten and high school or college versus where you are today in your life. So when you look at your career, you you don’t get into wholesaling and go. Every one of these deals is going to be a $50,000 profit is just You know, I know a lot of people get in the business and they think I’m getting into it for the money. I can’t blame me, if you do it the right way the money is good. But you have to have realistic expectations of what you’re doing and how you’re going to get to the point of being able to pass over a deal. That is not your worth. And it doesn’t really and I know I’ve said it, a lot of times as I pass over the $2,500 deals, the $5,000 deals, I pass over a lot of sometimes if I know they’re going to be easy, I’ll go ahead and take them because it would be foolish for me not to take those $5,000 bills. But the reason that I pass over them a lot of times is because what I’m getting them for if anyone decided to negotiate with me, and I only had a $5,000 markup, they basically have to pay My asking price for me to maximize that $5,000 and get the full $5,000. If they say, oh, I’ll give you you know, $4,000 less than what I was asking for is $1,000 with the work that you’re going to put into, it doesn’t become worth your time to be able to do it. So I want everyone to to realize that when you start in this business, you’re going to make mistakes. I’ve ran into a couple of investors this this past week that were just getting into the business and they had, they called me about buying, you know, some of the houses that I have for sale that I actually owned, but I’m selling and I just tell them, I’m 100% honest with this is your first deal. I’m going to work with you on price because you are going to make a mistake. No, I made it on my first deal that I ever bought to flip. It’s going to happen, I still make mistakes now. But if I work with you on price, then you can, you can absorb that mistake a lot easier than if I don’t work with you on price. And in a lot of ways, that’s karma. Because they’ll wind up coming back to me.
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So let’s say that I give them five or $10,000 off of the purchase price. They remember that I helped them that I understood that they were new, and I wasn’t trying to take advantage of them. So when they come back, when they want to buy something in the future, they’re going to come back to me and say, Hey, what do you have for sale that I could buy from you? And even though I passed up that $5,000 or that $10,,000 today, I’m going to get it back in the future. So it’s it’s not a a scenario of I didn’t charge my worth But at the same time, because of my experience, and the education that I’ve gotten over the years in the business, my worth, is also helping people the same reason that I do this podcast. So I’m to the point to where I mean, I’m not a hedge fund wealthy by any means, but I have money in the bank, the and that’s what everyone’s goal is to be able to get to is to not work paycheck to paycheck, to be able to say, tomorrow is Wednesday. I’m taking the day off and be able to do that. That’s what the goal is.
6:44
So when you get in this business, it’s it’s not a bad idea to go ahead and if you get if you get a property under contract that you know is going to be a skinny deal or $2,500, whatever it may be to go we’ll head and get that under contract and try to sell it for as much as you can get out of it. That’s not overselling it. But that in itself is going to show you your negotiation practices. Where did you win? Where did you lose? What can you work on? How can you get better? So the next deal that shows up, let’s say that you got it under contract for $100,000. You think you can sell it for 110. But your previous deal, you got under contract for $100,000? You thought you could sell it for $105,000? You wound up selling it for $102,000. So you made $2,000 on it. But this deal, you’ve got a potential $10,000 spread, you gave up $3,000 on the last deal. So you go back in your mind and you think where did I lose? Where did I lose that $3,000 On that deal before was it the way that I bought it? Or was it the way that I sold it. So when you are putting your houses under contract, you almost have to anticipate the sale and negotiation you’re going to go through when you’re putting it under contract to buy it. Because if you know that there’s going to be a reason an investor is going to come back and you’re only going to make a $5,000 or something like that. That’s where you have to do one of two things. You either have to pass it over, because it’s not going to wind up being worth your time. Or you have to get better in your negotiation to be able to get the full spread and to maximize the money that you’re making on that deal. So you have to you have to train your sales process of buying the house and selling the house because you You really make money. When you buy a house, you don’t really make money when you sell it. Because if you if you bought it the wrong way, you’re never going to sell it so you’re never going to make money.
9:13
It’s all in how you how you bought the house, and then how you turn around and presented. One thing that I learned when I was appraising is I would go in to do an appraisal. I wouldn’t do it for the homeowner for the buyer for anybody else. I did it strictly for the underwriter. Every appraisal I ever do and I did it for the underwriter because what I was trying to do was paint the the best possible picture in that appraisal so that the underwriter would approve that loan and that person could buy that house. That is when I started going for life. I was doing a house when I was appraising. I think the fees were $350-$400 but I’ll got to the point when I was appraising because I was the I was known as the appraiser that could get appraisals through, to be able to, for these loan originators to actually make money, that I was able to actually start raising my fees. So when somebody would call me, let’s say they had a, a $200,000 house, but they needed to get it appraised for $210,000. That wasn’t too much of a stretch. So I might say, I’ll charge you $500 for somebody would come in and say, I need $220,000, I’ll charge you $600 for the appraisal, but I got the appraisals through. Now, I didn’t do anything fraudulent. If the if the value was there, and I could prove it. That’s all I had to do. And it was all how you presented the picture to the underwriter of what you were able to get them to buy and the same principle applies when you’re trying to sell a house.
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When you’re trying to sell it, you’re you’re trying to paint the best possible picture, but you’re not overselling the picture. You’re giving the buyer the realistic expectation to be able to make an educated choice on whether they want to actually buy. If you go in and you make false representations, which I see a lot of wholesalers do. The house has been burned down, but you’ll see these pictures and I see these memes all the time online. That wholesaler with a burning house, you know, it needs paint and a roof. We both know it needs more than that. So if you’re honest upfront, the more information you give a potential buyer upfront, the more trust they put into you, the more likely there they are to not fight you. So you start being able to Charge what you’re worth. So if if you have a house that’s $100,000 and then you decide you want to put it on the market for $120,000 to try to get a $20,000 spread, but you begin to get that reputation that you’re up front, you’re knowledgeable, you’re not sitting there saying that a burn house only needs paint and a roof. You’re giving them a realistic expectation of how much it’s gonna be. It’s gonna it’s gonna cost to renovate the house, what the renovation is going to require, whether it’s, you know, HVAC paint flooring, you give them a scope of work, that’s detail, that they can actually make an educated decision. Do I want to pursue this or not? Because it goes back to what I’ve said in previous episodes. If you’re sending a potential buyer out and looking at something saying a birdhouse only has only needs paint in the roof. They’re not going to continue to take your phone calls very long and you’re going to lose that buyer. So the more that you’re honest with them, the more knowledgeable you become because you’re getting more educated in what you’re doing. It helps you in the long run. So when you know I’ve got I’ve got clients that they’ll actually send their contractor, the same time I’m going to look at a house because I find out what a what a buyer is looking when we want to sell seller is looking to get out of their house and I have an idea what this buyer will pay for it. So I’ve I’ve worked with him long enough to where it becomes beneficial for them to just go and look at it at the same time. As when I’m looking at it, and then they get their pictures they get their construction estimate from their their contractor. Pretty well at the same time. So it speed things, it speeds things up. Now they don’t have we haven’t discussed the price to take it by four. But I know their criteria. And I know it’s something that they’re interested in. So you know, they get the address, and we talk about it. And, you know, that’s, that’s pretty well the extent of where it goes. So the only thing that that it comes down to is me doing my job, getting it under contract for the right price, so that I can turn around and sell it to him. Now, not every time it works out that way. I remember one not probably a month, month and a half ago, they had already the same client had already bought one house from this from me from the seller, their mother passed away. So they bought this house, but they wanted to sell the house that they lived in. So they called me back and said, Hey, you know you’re a man of your word. You do what you say. When you come in and look at at the house and see if you’ll buy and if not, you know, we’re First over to some of your friends. So they actually sent their contractor out the exact same time that I went to, to look at it. And when you know it all when the rubber hits the road, so to speak, of what we could get it for. We were just too far apart. So I didn’t want to be in a deal. But those are few and far between. So the my worth to a buyer is proven because they’re willing to take a chance before I even have something under contract, because I’ve proven myself before with them enough times to where they’ve they’ve gained the trust on. So that’s what that’s where you have to grow in this business if you start out, basically making minimum wage. Do not expect to go in on a CEO salary when you originally get in this business. When you get in this business, you need to be that kindergartener that this is public. You need to absorb every bit of information that you can. And then after two, three years of being in the business, you should have enough knowledge to where you’re able to pass over deals that that seem like they’re going to be too complicated for the amount of money that you’re going to make on it.
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I’m not telling you to pass over them, because some people are not going to pass over. It’s just what I do. Because I have a a figure in mind of what I will accept on a deal because there’s there’s also liability involved in these transactions. Because if you go through, you don’t close a contract, you don’t send somebody a mutual release. If you don’t do the paperwork the right way, you’re liable for that. So if let’s say that you put a house under contract and then you just sent somebody an email or a text and said I can’t buy. Truthfully, that does not get you out of the contract and remove liability from you. That’s why they call it a mutual release. So that person could honestly come back and sue you for what they call a specific performance. And what specific performance is going to mean, whatever’s on that contract, is what you owe that person because you’re gonna lose. Not a lot of people do it. But the way that that I see wholesalers conduct business, it’s probably not too far away in the future, to where people start doing. They’ve even come up with an app now. I forgot what it’s called. But I read something about it a couple of months ago to where you can fill out all your paperwork online and see Robo callers and whatever. Just from my So the if the technology is starting to develop itself to where it’s gonna be very easy for people, you know, to just come so you because I want to because you didn’t keep your word. You always do what you say you do it the right way. And then that removes the liability from when you’re going out there, putting houses under contract just to do it, but you’re not doing a mutual release and a mutual release means both parties agree to terminate the contract, their signature and your signature is required on that mutual release. Because if you go in and put a contract on it, they don’t agree to it. You turn around and get sued. All the sudden they find out that you didn’t actually have the money to buy the house in the first place. You could truthfully go to jail for that because that is real estate for all. The paperwork part of it, it’s like my attorney always says it’s all how it’s written. trust but verify, always, because you’re gonna run into issues, but the longer you’re in this business, see when you’re when you’re in that kindergarten stage, just getting in the business, you don’t know all this. You learn these as you go, you’re gonna wind up having a different situation every time until you finally get a repeat situation, that you’ve been there before you know how to handle it. And that is basically let’s say you’re in middle school as far as your knowledge and your education and wholesaling goes. And by the time you get to high school or college, it becomes second nature to you. And typically that takes anywhere from five years, three years, something like that. Be able to get to that level to where you’re starting to see a lot of repeat. Because it the repeat that you need are the problems. That’s what’s going to teach you the most. It’s not a, it’s not beneficial to basically get in and the deals that you put under contract, you’re able to go make five or $10,000 off every single time because you’re not running into any issues to overcome to actually teach you this business. You’re living on Easy Street. And everyone knows when you live on Easy Street, and you don’t have to overcome something, you’re you’re headed for a head on collision, at some point in time that Murphy’s Law is going to hit you squarely in the face. So you need to have these little minor problems to overcome to be able to train you have stay to take steps to avoid and how to actually structure deals, not to make money, but to make money and protect yourself at the same time. So that’s where you go in and you charge what you’re worth.
21:17
If you’re if you’re only making $2,500 a deal, $2,500 is going to going to cover attorney fees if something goes wrong, is $2,500 going to cover three months worth of bills if something goes wrong with that buyer? You have to you have to, to structure these things in a forecasting kind of way to where you’re predicting future issues, and maybe a market decline. It might be a coronavirus to where everyone just got turned upside their head and none of us are coming up. It could be for some reason your marketing didn’t work that month. So now you’re you don’t have the same amount of money that you thought you were going to have to live off of for the next two, three months. It’s a predict the future type business and habit sitting there to be able to, to make it through the good times and the bad times. So that’s why it gets important to charge what you’re worth, because your worth is your lifestyle. It’s not to say, everybody needs to have the best of everything. But you need to be comfortable. You need to have that security of knowing if something goes wrong, I’m protected and so as my family it’s a it’s not a reckless abandon. Let’s go put everything under contract because if you’ve been doing this for two years, honestly and you’re not to the point of being Unable to do multiple deals a month, and actually making more than $5,000 a deal. It is truthfully time for you to do one or two things, either to go back to school and learn all over again, start a new method, a new process, or it’s time for you to get out. Because if you’ve been real estate is not for everyone. It can be for some, the best decision they’ve ever made. But it can also be the worst decision they’ve ever made. I see a lot of people say if I’ve got $10,000, what should I do to market?
23:41
If you were asking that question, you do not need to be in this business. That’s that’s part of learning but it’s also a scenario to where that person needs to go and be an acquisition manager for a bigger company for a little while to learn. There’s not a single thing wrong with that. Just don’t sign a non solicitation or a non compete agreement. Because if you do you once you leave, you can’t get into the wholesaling. You can’t, you’ll get sued, they’ll win. But if you’re asking those type questions, you need to be an acquisition manager for a little while for another company to be able to learn what they’re doing, what’s working, what’s not working. Then when you’ve got some money in your pocket, and you’ve and you’ve absorbed that knowledge, now you’re more likely to succeed. When you have that extra liability set know you that the company you are working for beforehand. So it’s not a don’t get into this business. It’s a treat it as a business.
24:55
Understand it can be the best situation you ever put yourself in, but Can also be the worst situation you’ve ever put yourself in. If you’re, if you’re new, the very best thing you can do is go be an acquisition manager for somebody, that is the very best thing you can do. Because you’re gonna, you’re gonna learn what to do, what works, you’re gonna see how they treat their customers, whether they’re buyers or sellers or whoever it may be, and you’re gonna either go, that’s good, or that’s bad, I will never treat them that way, or that’s exactly how I want to treat them. You’re able to be that sponge in that kindergarten way and soak up all that knowledge to where it’s not going to cost you anything. It’s costing the company, you’re working for everything. But if you don’t do your job, then you lose your job. But it gives you the opportunity to have that learning period to where it doesn’t ruin or potentially ruin the rest of your life. Because you made a bad financial decision. And you just got tied up with a guru that taught you this class and showed you how to run these Facebook ads and said, Send out this mailer, but you didn’t understand how to talk to people on the phone, how to conduct Property Inspections, you didn’t learn any of that stuff. But when everyone looks around and says, you know, can somebody mentor me, go be an acquisition manager, you’re gonna get mentor, because if you’re not making that company money, they’re not going to keep you around. So they’re going to invest time with you to make them money. It’s I don’t know why people don’t do this. But that’s the easiest way if you want to do this full time to get into this business, and be able to gain knowledge for free, is just being an acquisition manager or being office manager sit in there and take the phone calls, the good ones, the bad ones, whatever comes in, but that right there. You’re basically In the beginning stages, being able to charge what you’re worth your own salary or commission for every deal that you do whatever it may be. So you’re not getting the full spreads of them. But you’re still making what you’re worth. Because your knowledge and your experience is kind of on the kindergarten, elementary school level. So you don’t need and you don’t deserve a CEO salary. You have to work for that. So once you learn that, and then you decide, you want to step out on your own, go get it if it’s some what you want to do, go get that CEO money, go get that in entrepreneur money, but learn before you do so that you can be successful and actually charge what you’re worth. And then when you go and meet the sellers, Mr. missile, I would like to help you but at this price, I just can’t, I gotta have to keep my doors open. And if I do this, that puts me underwater. It’s just not a good it’s not a good deal for me. Be at peace when you walk away from. I can’t tell you how many times I’ve done that. And two weeks A month later, I get a phone call from, Hey, will you get it for this? Now I can, I can buy it for that. And you get to do because sometimes you have to let them come down so that you can make what you’re worth. It’s not that you’re being greedy, or anything like that, but you can’t put your own livelihood at risk, just to help somebody out. Because they always say, no good deed goes unpunished. So the more if you put a house under contract, that’s $100,000. But you can you can only market it for 105 though we get to get somebody to look at it, but you’re only gonna make $1,000 or $2,000 off of it. Not a deal. I mean, it’s $1,000 – $2,000 more than what you had, but it’s still not a deal. Not What you had to go through not for the risk that you put out there, it’s just not a deal. So you have to go and, and gradually, over time, get to the point to where you can, your worth increases, so that your spreads increases, that you get comfortable walking away from a deal. And it’s and it’s not gonna, it’s not going to affect you. Because you’ll start sitting there thinking to yourself, once you’ve done this enough, and gotten gotten the knowledge and the experience, you’re not even going to want to take a second look at those deals that are under $5,000. Because there’s something else sitting out there that’s $20,000 to $30,000.
29:42
For example, I’ve got one of my investors. They sat there the other day and said, Hey, I’m coming, I’m coming. I gotta sell a building. But when I sell this building, I’m gonna have about two or two and a half million dollars. And it’s coming straight to you. So be ready to go find me, you know 40 or 50 houses. Sir, I have no problem doing that, I will be glad to go find you 40 or 50 houses as just the previous relationship that I’ve had with an individual investor, this is not even a fund or anything like that this is just a semi retired man. But I’ve done enough with them. They trust my opinion on things. I need you to go find me 4045 houses, I’m just putting a bug in here. So that you’re out there looking. If I’ve gotta buy a couple portfolios for higher than what I would normally do, then that’s what I’m gonna have to do. But the good thing about this is is I have a good enough relationship with this investor that I actually think of them as a friend now, more so as a as a client will wander. Opening a business together, and everybody make money and nobody is mad at each other. Because one side might make more one side might make less. No one cares what the other side makes as long as everybody’s making money. That’s when you get to the point of your knowledge and your experience, to where you can go charge that CEO. Money. Because you know it’s there for you, you’ve earned it. When you first get in this business, you have not earned it. Do not think you’re entitled to it. It doesn’t belong to you. When you earn it and you work for it, you get the experience and the knowledge, myself and hundreds of other wholesalers and investors will gladly walk up to you shake your hand give you a high five and say welcome you earned We’re glad you’re here. It wasn’t easy. We know that we know It’s hard. But we’re so glad you saw it through. Because this is the payoff. This is what it’s about, this is what you work for. We’re glad to see somebody have that kind of success. If that doesn’t make you want to get to that point and put the work in, nothing is going to nothing in life is free, you have to work for it. And if you really want to get to that CEO level money, you have to work for it. You have to gradually increase the amount of money that you make on your deals, because your worth is going to increase. So as you go, make sure that you’re increasing your spreads, because you don’t want to get into the the downward cycle that a lot of wholesalers get into that every investor that they work with. They basically Lay over and let the investor take advantage of them. So this house that you have under under contract for $100,000 should sell all day long for $130,000 the way that it is, but your investor beat you sideways and bought it for $105,000 or $110,000. Because, oh, that’s, that’s just the way that it is. You’re not charging what you’re worth. Those are the investors that you don’t want to be around. They’re not going to get you to the level of being successful. They’re going to be successful. But that’s what they’re that’s what some of those investors are, are known for. They want to be the one the people that are successful, let you make just enough money to keep you dependent on them. So that they can make more money than you do. And you need them more than they need you. When it shouldn’t be the other way around. They should need you more than you need them. When you understand that your worth is going to increase exponentially, because there are 5,000 fly by night wholesalers that they can deal with frustrate them all day long. But you need to be the one that they can pick the phone up and say what do you have? I’ll take it. Because you’re a straight shooter. You give them the information up front, they don’t have to question you. So they need you more than you need them. So when you charge what you’re worth, understand what you’re worth. That’s what’s going to set your price of what you’re doing, how you do it, and when you do it.
34:49
Hopefully y’all enjoyed this, this rant demanda to rant too much, but it is one of those things that everyone needs. Understand what their what their worth is. Because when you have that self confidence, not arrogance, not conceit, but when you have that self confidence that you know what you’re doing that these investors need you more than you need them you will start making more money and you will be successful but the only way to get there is to get knowledge to get experience and to do business the right way every single time with with that we’re gonna we’re gonna draw it to a close help you hope you enjoyed the URL Tom rant but we will we will see you again in a couple of weeks. If If you’ve got any questions or want to look for some more information about ways to do business the right way. Feel free to look at the website at EarlToms.com. We have a lot of things. It’s just gonna help you business wise, keep you on the straight and narrow so that you do have an actual chance of being successful. We’re not charging you well. We’re not selling you. Go buy this data, do this do that. Here’s this course. We’re not doing anything. The information on EarlToms.com is free. Go read it, listen to the podcast episodes if you haven’t listened to all of them already. Learn as much as you can be a sponge. So you can start going to get get that CEO money. Well, we’ll see you again in a couple of weeks. Thanks for listening.
