Episode #21 – I’m a Cash Buyer
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Welcome to another episode of EarlToms podcast.
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Today we’re going to talk about some terminology. And what I’m going to focus on is the terminology that 95% of an of wholesalers use, that is legitimately the wrong thing to say. Whenever, whenever anyone gets in this business, they always say, and you can go online, and you can see it anywhere you want to look, the the response that wholesalers give is, I’m a cash buyer, really, you have cash to buy all these houses. You’re not actually helping yourself by saying that. And I’m will give you a couple of reasons why you’re not. Because in real estate, a lot of things or statements, how they appear?
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Are you are you getting yourself in trouble by how you conduct your business things that you say, because in this business, if you make a statement that you cannot back up, you get yourself in trouble or risk the ability to get yourself in trouble. So when you say, I’m a cash buyer, you basically pigeonhole yourself, because now, you’ve mentioned nothing about financing. You’ve mentioned nothing about having contingencies, of being able to close that deal. You have legitimately just told a factual statement to someone that you miss represented your ability. So while people say that, honestly, I have no idea.
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A seller doesn’t care how you’re going to buy their house, the only thing that they care about is that you do buy their house. So when you go through, and you say, I’m a cash buyer, you don’t close their house. And you use the inspection contingency on that that’s not something that you need to continue to do very long. Because that’s going to wind up down the road, giving you a bad reputation, and could very well get you in trouble with people that you don’t want to be in trouble with. Because Take for example, I’ve done this, I’ve been in real estate over 15 years. I have never one time said I’m a cash buyer. I have never one time put a We Buy Houses sign out. Yet I’ve been able to survive in this business, and do multiple deals on a monthly basis for many years. So I can go through and I can pick and choose which one I actually want to do, which one I can actually close. Because if you if you think about it, just in simple terms, when you go let’s say you go buy a house, buy a car, something like that, and the person sitting in front of you that whether it be the mortgage broker or the car salesman, they’re qualifying, is this going to be a cash deal? Or is this going to be financed, you don’t sit there and look at the mortgage broker in the end the car salesman and say, I’m a cash buyer. You don’t do that. Because when you’re you’re about to have to put up or shut up. So you don’t mislead that person. The way that you get around that is that you are an investor. So you go out and you look at these, and you present it in a way of I have handlers. Anybody that is that is successful, has handlers. They have an accountant. They have an attorney. They have people that look out for them. So what you do when your approach is, I’m an investor, you don’t mention how you’re going to buy this house unless they ask. And usually when somebody asked me, because I’ve done this long enough, I can tell them, I’m gonna buy it one of two ways. I’m either gonna pay cash for it, or I’ll get financing. If I get financing. Most of the time. It’s from a private individual that I’ve worked with over the years that I say hey, I need $100,000 to buy renovate this house. Do you want a piece of it? And I can get that money.
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A lot of times now, people don’t have the actual private lenders, private investors. But now you’ve got so many people or so many companies out there that are lending to investors that you don’t really need private lending, because I see it on online all the time people ask the question, Hey, who’s got private money? Stop looking for, you don’t need it. You’re pigeon holing yourself, again, on something like that, because now you’ve got Lima One, you’ve got CoreVest, you’ve got Finance America, whatever the BlackRock group is, you’ve got Anchor Loans, you got plenty of these people, these companies out there that are that are set up, to lend specifically to investors. So when you’re going through, the only thing that you need to work with one of these groups is actual experience, they’re going to evaluate the deal, and get you closed on time. There’s Lima One, and Corevest. For example, if if you can prove that you have a minimum $200,000 or $250,000, in liquid assets, basically meaning cash in the bank, they’ll give you a million dollars in a line of credit. So there’s plenty of ways your local banks, you just go get you a simple line of credit. And if you believe in that deal, then use the line of credit don’t go in and try to finance every single, every single deal. You’ve got the ability right now with what’s going on with the virus to go and get a small business loan. You don’t even have to pay it back for a year. I think if it if you get a small business loan, so you basically get a year’s worth of freedom to grow your business without having to pay a loan back. So you go in and you look at all these things. When you’re going out, and you’re talking to the sellers, I’m a cash buyer. Okay, let me see your bank account. And then that’s where everyone I see online starts turning around and saying, Hey, where can I get a proof of funds letter, if you don’t actually have the money to buy it. Don’t tell someone that you’re a cash buyer. I mean, I do I do a lot of things like I’ll put houses that are own, whether I intend to sell them or not. I’ll put them on Zillow, just to see if say someone out of state is looking at my market. And most of the time here lately it’s it’s shifted to where used to actual investors would call and say, Hey, I see you have this property of such and such address to where now, I don’t know what guru was teaching this, but it doesn’t work at all. So if you’re doing it, you’re wasting your time. That’s just a truthful statement. But now you get all of these wholesalers that call and say, Hey, I saw your house, you know, out of auto for you X amount of dollars. Well, someone that’s been in this business for long enough, my response to them is, don’t sit there and tell me you’re going to pay something without actually seeing it or sending someone over there to look at it before you make an offer. Because that right there tells me that you have no idea what you’re doing. Because you’ve already made the mistake of calling me and telling me that you’re a cash buyer, a cash buyer, those two words tell me you are a wholesaler and there is a 50/50 chance that you’re going to be able to do that deal. So once someone tells me they’re a cash buyer, basically what I tell them, you’re welcome to put it under contract. Once you actually have an investor that puts up earnest money on it. But you are not going to put this house under contract and tie it up and go look for a bar. I do the same thing. But I also hold I’m an actual investor.
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I don’t have anything against your hustle, but I know what you’re doing. So go about it in a more professional way. And nine times out of 10 I don’t ever hear another peep from that wholesaler. Which is sad, because I’m an actual investor as well. So if they would sit there do things a little bit more professionally, when they actually got house under contract from an unsuspecting seller, they could pick the phone up and call me and say, hey, I’ve got this deal would you be interested, but because they get called out originally owned, I’m a cash buyer.
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And I tell them, go find you a buyer, tell them put earnest money down, you have the deal. Until then, just keep hunting for the buyer because I don’t have to sell it. I’m not a motivated seller. If someone wants to give me the offer, that’s reasonable. I’ll sell it, but I’m not going to give it away.
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That’s, that’s a very big turnoff to people that are actually in this business. Because when we hear I’m a cash buyer most times, and y’all are in this industry just as much as anyone, you know, those people that say, Hey, I’m a cash buyer. When you’re finished dealing with him, you typically want to go take a shower, because you feel nasty. Something about that deal wasn’t professional, it didn’t go the way it should have always problems, always having to chase them down, not getting an answer, until they finally magically find that buyer and wind up closing on it. usually don’t extend the contract. There’s very few wholesalers that say I’m a cash buyer, they close the deal own time in a professional way. So go through your your process of saying stop saying I’m a cash buyer if you say that if you don’t say that, say I’m an investor and don’t tell them how you’re gonna buy that house unless they ask but one thing that I would that I would caution you on is to get to that point of being able to just pit put the houses under contract that number one you know you have a buyer for or number two you’re actually going to buy yourself and do something with it. So when when you move these extra avenues, it’s not gonna hurt hurt you to reach out to these lenders like I just said, Lima One CoreVest, Anchor Loans. Whatever the BlackRock one is the Finance America something. I think that’s what it is. But anyway, you get the experience of basically being able to say, hey, I’ve done this. And then you can actually open up your possibilities. Because I’ve said it before in previous episodes, if you’re willing to spend your own money on something, then it’s a deal. Also, in previous episodes, I’ve talked about something called the fever. So when you’re going out there, and you’re putting something under contract, if you wouldn’t spend your own money on it, that’s the fever. So you need to always make sure you’re putting things under contract you would spend your own money on, because then it’s a deal. I ran across a deal last week, I’m helping a local investor out. Because he he’s actually local. So I don’t know why in the world, he did it. But he bought a house from from a local wholesaler here that doesn’t have a great reputation. He burns a lot of bridges. Because he’s one of those wholesalers that if you don’t agree with him, he’ll send you nasty emails, things like that, which you don’t, there’s no reason to do that. But he went ahead and just help this guy out. And then bought the house sight unseen. Well, I go out there and I look at it. And it is terrible. I have no idea why in the world, this guy bought this house sight unseen from this guy, but he did. And he knows he’s not gonna be able to sell it himself, even if he does renovate it to be able to get his money back out. So I’ll send it to one of the one of the hedge funds that I work with. And I’m $3,500 away from from a deal on it, that I can actually make some money home and help this investor out as well but they’re trying to find the $3,500 in the renovation budget to be able to do it because right now, the renovation budget is $63,500 but they can only buy houses with renovate the capital, their renovation budget is $60,000. So we got to figure out $3,500 and that renovation doesn’t have anything to do with the purchase price. But this local investor made a mistake by his own doing to be honest with you. And he had doesn’t really have a good things to say about this wholesaler. You know now, I talked to this wholesaler once in my life. And he was telling me, this is the ARV. This is This, this is this area is great this area and I’m sitting there, in the back of my mind, I’m not even challenging. But in the back of my mind, I’m thinking to myself, I’ve done this twice as long as you have these areas you’re telling me are great and wonderful. I’m going over there and buying houses and putting them on section eight. And number three, I used to actually appraise real estate. So you’re sitting there giving me these unrealistic ARV ease. And I know for a fact, you have nothing, no idea what you’re doing by even stating this. Because you’re giving, you’re giving an opinion that you can’t prove, which again, goes back to that whole, I’m a cash buyer type thing. A lot of times wholesalers run into the problem of wanting a deal so bad, they over promise and under deliver.
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So my recommendation with all of this is that you slow it down, do a lot of marketing, not in any way saying don’t market, because you need leads to be able to have deals. So the more leads you have, the more deals you have. That’s how it should work anyway. But if you’re not slowing this down to the point of being able to essentially crawl through the deal, then there’s no reason for you to do the deal. Because anytime you rush something in real estate, it’s gonna blow up on you, it never fails. If you have to force something, it’s gonna blow up on you. Now, you take the the way that the market is going right now, a lot of people are asking more than what their house should leave. They’re desperate, but they think that the market is is great and wonderful. What they don’t realize is, is you have less people selling so you have a limit on supply right now, which is forcing prices up. But it’s an artificial increase. Once supply hits the market, it’s not gonna be able to hold it. So everyone that’s paying more for these houses right now are really making a mistake. The, the issue is the way that the market is reacting right now. And the the wholesaler is pretty much driving the overpayments on a lot of things. Because you’re not looking and using the unknown factor to your advantage. You can look in we’ve got an election coming up. No one knows who’s gonna win a lot of the people out there polls and this and that they have they have a candidate that they think is gonna is gonna win. That may want to be true.
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You look back, what four years ago, poll said that one candidate was going to win and another one won. So you don’t that’s an unknown, that’s a that’s a guess. So you use that to your advantage whenever you’re putting these these houses under contract, but slow it down to the point of being able to effectively manage that deal. Because what you what you wind up running into is I’m a cash buyer that says hey, I’ve got money in the bank. All I’ve got to do is write a check. We can close it tomorrow should be simple. I don’t know why anyone would do that. Because you’re you’re now you’re given that that owner that seller the mentality that okay fine. He’s gonna send his contractor out here but you know, he’s he says he’s done this for a lot of years that he’s flipped ever how many houses so he should know how to estimate a renovation and be able to put something under contract for this price.
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So when you go through when you say I’m a cash buyer, and then you send your in quotations contractor out there and they come back with a $10,000 more renovation or $15,000 – $20,000 whatever it may be. You just lost that deal. And now you look like you’re just getting in the business, your credibility is destroyed. You know this and that. So you’re sending somebody else out there and you’re telling the seller, yeah, he came into high, I’ve got to send somebody else out there. Well, if this is your, your go to buyer because you if we’re being honest about it, you always send your best buyer first. You always do that. So if they come back and they say No, it’s too high. Now you’re stuck, and you know you’re stuck and the panic is about to set in. So you’re you can’t keep pigeonholing yourself in this business with I’m a cash buyer go in and say I’m an investor. That’s all I need to know. And if they ask for a proof of funds, you know, there’s nothing against using one of those lending companies that are that I’ve mentioned twice already. To get us. I mean, even if it’s a smaller line of credit, go get something that way, you’ve got a proof of funds, go to one of your local banks that you do business with, and say, Hey, you see the amount of deposits that are put in your bank. You know, what about a line of credit for me, now, you might have to pay a higher percentage on the loan on line of credit, but you’re only paying interest on money that used so if you don’t use it, you don’t pay for it. It’s kind of a win win all the way around. But it gives you another avenue to get something closed. So even if you don’t want to renovate it and resell it, it gives you the ability to get it close to keep your word and then turn around and put it on Zillow. Now, that’s where what I used to do, and it did have benefits is I would get something under contract, whether I was going to whether I planned or bought it or not, I would get something under contract. And then I would put it on Zillow used to, I would have these pretty well sold by the time I was going to buy it. And sometimes I got to the closing table on time. Sometimes I didn’t. But if someone came in and gave me an offer that I could live with, and I could make the money up front without having to do the work. Take a run ahead, take it, I don’t need it. Because that saves me and lets me move on to what I call is new money. If you’re not finding new money, you’re not gonna be in business love. So don’t keep pigeonholing yourself, own this, I’m a cash buyer. Because you’re you’re basically committing fraud. That goes back to that episode of How to legally wholesale houses. If you’re making a representation that is false, you are committing fraud.
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If you put a house under contract, without the actual means to close it, you are committing fraud. So do this in a more professional manner. And you’ll have more success, because you’ll free up it, you don’t realize this, but you’ll free up more time. And more time that you free up, the better decisions that you will start making. Because you’re not constantly I gotta get this deal closed, I gotta find a buyer for this, I gotta do this, I got it. Because it clouds your judgment. Without peace, you don’t have clarity. So you need to find that peace, to be able to have the clarity, to be able to put the houses under contract for the right deal, negotiate them, have that clarity, turn around to your seller, negotiate it with clarity to your seller to get the most money out of it. There’s there’s plenty of wholesalers that I know. And the one that I from earlier that I just gave you the example of. He’s notorious for sending these houses out. He I mean, he’s good at getting them under contract. But he’s not good at getting them closed. What he does is he sends them out at these ridiculous prices. And then after a month, he can’t get them sold. He’ll call somebody and say, Hey, just give me this and he’ll take like $1,000 assignment fee. You just worked over a month, because by the time you put it under contract work that lead originally to get it under contract. 30 days later, you’re calling saying, hey, basically just take it for $1,000 more. You didn’t make any money. Why in the world do you do that? It makes no sense. You’re sending something out like you’ve got the iPhone, when really you got the LG. So just sit there and look at it in Rational terms, instead of trying to get a steak dinner and screw every single investor that you come across. Because the only way that you survive in this business is to have dinner on your table every single night. So the more you screw your investors, the less they’re coming back. And the more you’re actually going to have to go out and hunt for food so you can have something to eat at night. But the more you help them, the more they’re going to come back. The better deals you’re able to give them, the more they’re going to come back. So even though they may pay you $100,000 for a house, if you can get it to him for $85,000 and that’s what you ask. You just gave them $15,000 and that’s $15,000 they can put towards another deal. So you think that you’re not making enough, right now. Now I’m not saying go and sell something for $2,500, to be able to give to them for $85,000, you make money, when you put it under contract, the way you buy it is how you make money. It’s not how you sell it. So if you put it under contract the right way, if you can sell it to him for $85,000, maybe you got it under contract for $60,000, $65,000, or $70,000. So you just made a decent amount of money, they made money, but you save them some money so that they could come back to you again. So you get those repeat buyers, and you get your bills paid on a monthly basis. Instead of going out. I’m a cash buyer, I need to take a bath when I’m done with you. And in that now, you you don’t have that buyer anymore, because they’re looking at this property now and going What did I just overpaid for this? What did I do? A lot of investors don’t actually do their own due diligence. Many of them now just buy it sight unseen. I don’t know why that is. But a lot of them do. They have these, I can pull it up on Zillow or another website and realtor.com and say it’s worth this. Okay, great. you telling me it’s $20,000 artists a deal, I’ll take it. And then they get their contractors out there their agents to go look at it. And all of a sudden that $20,000 rehab turned into $40,000. And now there’s no money in it. And they’re going to be what it’s their own mistake. for not doing their due diligence, don’t don’t minimize that. But they’re going to be mad at you for making a misrepresentation to get them to buy it, they’re going to feel like you misled them, to get them to buy it. So be an investor, invest in the properties, but also invest in your investors. If you do that, you’re successful. If you’re a cash buyer, you’re not you’re not investing, you’re misleading, because you don’t have most of you that are out there. And I don’t mean this with any disrespect whatsoever, because I was the same way when I got started. But most of you out there that are just getting started, don’t even have $5 in your bank account. I’ve actually had a negative bank account. So not disrespecting you at all. But you have to do it the right way, regardless of your circumstances. Because if you don’t develop the habits that are good now, you’re not going to be able to be around later own and make any money. You have to develop the habits now pay your dues, because no one’s going to get in this business immediately and start making six figures if you do, I hats off to you, you’re you’re one of the very, very, very few that can do it. But it’s it’s not for everyone. Most people when they get in this business have to do it for three to five years before their before they get get it down to the point of where they actually are comfortable to make money. I know plenty of wholesalers that were in this business for 10 years, they did it on the side until they finally started making money and basically broke away from their nine to five job. But they saw the mistakes everybody else was making, they didn’t jump right into it with the fever. And then they were able to become successful with doing it. So your goal, your habit, your mindset that you need to develop is I’m going to wholesale to hold. If you’re not in that mindset, you don’t need to be in this business.
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You’re trying to use the money that you make on the wholesaling aspect of it to number one, keep your doors open. Number two, get your monthly bills paid on a regular basis. And the way that you do that is with the rental income. So when you have a down month, you don’t suffer because you can lean back on. So when you’re going out there and you’re and you’re wholesaling these houses, you’re making this money now the sudden you can actually go buy one of these deals, put a tenant in it and now you’re making $1,000 a month so that your bill you you have a fat you’re building a foundation. If you’re going out there and saying I’m a cash buyer you’re just you got to change or there’s no hope for you to be 100% honest with you calling around looking at things listed on Zillow like these gurus are teaching you know, Hey, I got a house under contract and then you go search it do your due diligence. every investor is going to do it. Well this is on Zillow. This realtor.com Why in the world would I buy it from you, when I can pick the phone up and call the agent and say they don’t have $5 to their name, they’re trying to sell it to me, would you like to go ahead and cancel that contract and just sell it directly to me. And investors are getting to the point to where they’re doing that, because cash buyer wholesalers are becoming a nuisance to investors. Actual wholesalers that do this professionally, investors like me and thousands of other investors, welcome the wholesalers that are doing it the right way, getting it under contract the right way being able to pass on equity to you. Because you saved us the time and hassle of having to go out there and do it. My point behind it is do this the right way. Do this as an investor, find multiple ways to get a deal closed, whether it be cash financing private money, some way to get that house closed, so that you can keep your word so that these these sellers will turn around and give you a good review, give you a referral. Leave them happy, instead of leaving a morning to take a bath. I don’t know if there’s another way that I could have said what I’ve said in this in this episode. But this is a profession, this is your livelihood, this is how you pay your bills. If wholesalers could stop being so reckless, in their approach, and how they do business, they would make more money, they would have more time to spend with their family to go on vacation, whatever it may be, they would have more time and be happier than the way that they’re currently doing it. Because all they’re doing right now, whether they understand it or not, is burning bridges. Because once you burn a bridge in real estate, you’re never building it again, there’s too much money on the line and real estate to build a bridge again, you can apologize to whoever it is to you’re blue in the face, they’re never gonna forgive you. Because money does not forgive. take that to the bank. If you don’t take anything else to the bank. Take that to the Bible. Do it in a professional way, learn. I’m an investor, get cash buyer completely out of your head and go about your business like you would if you had a brick and mortar store and somebody walked in and wanted to buy something from you. This is not a business to work in the shadows to not answer the phone. That’s that’s not a way to operate a business. If you’re not answering your phone, like a brick and mortar does, you’re you’re gonna give skepticism to every single person you work with.
33:03
I know I’ve gone on somewhat of a man rant today. But I wanted to make sure that you know wholesalers need to to really look at their approach in business, how they’re running their business, and make changes if it’s needed. If you run your business, the way that we’ve gone over in every one of my episodes, that I have no doubt whatsoever. Your bank account has a couple of numbers in front of the in front of the comma. But if you’re if your bank account does not have a couple of numbers in front of the comma, change the way you’re doing business is very small. Just it’s just mentality. It’s education, its knowledge, it’s the way you present your business. If you make small incremental changes, do one every month, train it, make it a habit, practice it, whatever it is, make those small little changes. And then you’ll start seeing a couple of numbers in front of that comma, because now many of you probably don’t even have a comma in your bank account. And that’s not what any of us want you to live like.
34:17
We want you to have numbers in front of your commas.
34:21
With that, I’m gonna draw this to the to a close I hope you’ve enjoyed the episode in the man rant. If you need some more information to help grow your business and some things that you can do to grow your business whether it be online or habits or anything like that. run over to EarlToms.com. And check out the website. There’s plenty of information all the podcast episodes are on there. We’ve got we’ve got the blog post as well that kind of give you idea Is pants products, you know, service providers that we work with, you know, that are actually good providers. We’ve used it or we wouldn’t be putting it out there got reviews or a good number of these service providers, whether it be mailers or investor carrot or lead propellor, you name it, they’re there on the website. But again, that was Earltoms.com.
35:33
Go about your business this week, professionally, do an internal look at how you’re running your business, make some changes, and in a couple of weeks, we’ll come back and we’ll revisit it with a with another episode. I hope you’ve learned something from this and it can help you.
35:55
Until next time, thanks for listening. Have a good week.
