Episode #24 – Tis the Season to Make Money Wholesaling Houses
Welcome to EarlToms podcast. Today we’re going to do an episode on what is, in my opinion, my favorite time of year? Yes, the holidays are here we just had Thanksgiving. And Christmas is coming. But that’s not the reason that this is the favorite time of the year for me. The reason that this is the favorite time of the year for me is because if you will monitor your KPIs, you will see this is the time of year where you make the most money wholesaling real estate. The reason that that that is we’ll we’ll cover in, in this episode, but it’s what I refer to as the buying season of real estate. And the buying season of real estate is basically when Black Friday starts, because that’s when people are going out starting to spend money for Christmas up until the end of February. And I’ll explain while those things are later in the in the episode, but the buying season is when you need to put all of your effort into your marketing, making sure that you have more leads than you can handle. Because you will find this this three month period will be the most profitable period of your entire year, every single year. It never fails. That always happens. It’s it has a lot to do with with the holidays. But more so it has a lot to do with people are not actually out there buying so a lot whether it be a house this listed on the MLS and you don’t have a lot of people out there looking, you know to buy houses have always said You know, when school starts football season is here, and then you put the holidays on top of it. You compound, the amount of people that are willing to go out the weather a lot of times has a lot to do with it as well because when it gets cold, a lot of people don’t want to get out, drive around, walk around the house, those kind of things. So now you are you are right on top of the trifecta of school starting parents not wanting to move kids. You’re in the football season, whether you’re college or foot or Pro. And now you’re in a you’re right in the middle of holiday season because black friday starts the holiday season, really because a lot of people don’t do much for Thanksgiving, those kind of things. But no one misses Christmas. So you look at it now to where black friday starts.
What I’ve always called is the buying season. And I learned this years ago when I was appraising. It didn’t really make too much sense to me. But over the years, I started charging, I started realizing why it was a buying season. I had a boss many many years ago that did a mobile home park. He did it with an HOA with curbs a clubhouse and pool those kind of things. And I would sit there and just kind of ask him why in the world did you do a mobile home park that has an HOA is this nice, those kind of things. And he told me years ago, he said, the way that I the way that I did it. Number one is is basically rent the lights. So when I retire, I’m kicking everybody out and I’m going to build a subdivision because they’ve already paid for these improvements and things like that the utility so now all I’ve got to do is put the houses on it and cash out and I’ll move to the beach or the lake or wherever. But when I retire, that’s my retirement. So the way that he did it when he originally started the park was he said that during the wintertime when sales were slow, he would go to these dealers and get a get a home get a mobile home because they weren’t selling as much so he would get a better deal. When he told me that is when it it kind of clicked in me because he said he would bomb in the buying season these three months. And then by the time he got them all set ready to go. Then come the spring whenever when the weather warms up. People are ready to move those kind of things. His property was ready for a new occupant. So that’s how he made money. He bought it loader in the buying season and then rented the past. Or the house for more when the spring season rolled around, which I thought that was, you know, very, very smart, because it goes back to that, to that rule that my father always told me is that there is a legal way in every deal to to make money twice, you just have to figure it out. And when he gave me that example of I want to rent all these pads until I get to the point of retirement and then build houses on them. That was him making money twice on that, on that piece of property. So it’s a initial make money and it’s a 10 2030 years down the road make money. So you put all your infrastructure in your utilities, your roads, club houses, things like that, on the dollar of say 2000. And then when you retire, say 2030 you’ve got the the appreciation for everything involved in it. So now you’ve sat there and made this this money in 2000. But you had 30 years worth of appreciation and then you go in and you change the usage of it and put a subdivision there. And your your cost to build that out to build that subdivision is really just the cost of the house. So that right there is what what really made the buying season click for me.
When you when you look at the reasoning behind the buying season, it does have the aspects of like I said the school starting football season and the holidays, but what amplifies and what really turns it into the buying season because all of those things that I just mentioned, school football season, and holidays are while people won’t sell, you have less inventory during these three months than you do at any other point in time in the year. So when things don’t sell, you have a three month window of being a buyer’s market, wherever you are. So what amplifies this being a buyer’s market is the amount of money that people spend on Christmas. Every single time every single year, people spend too much money on Christmas. When I was appraising December, January and February were my busiest months of appraising real estate. And every time or not every time, but the majority of the time I would go out. Because it was a it was a job of the appraiser to kind of ask questions. same scenario of of wholesaling houses, why are you refinancing your house? or Why are you selling your house, but these three months, the December, January and February, the majority of what I was doing was a refinance. So you would go out and you would talk to these these homeowners and say, You know what, what are you refinancing? Well, I need to pay off some credit cards or, you know, I spent too much for Christmas I need to refinance, put that money back in my bank. And you would always think to yourself, living live within your means don’t overspend. So that you have to come back and put a credit card on a 30 year loan. That is not good financial sense. But that’s what the majority of people that are encountered when I was appraising, were doing this because they would sit there and have to refinance because they went overboard for Christmas. And a lot of these houses you would go to, and these would be you know, high end houses. And you just think to yourself, why don’t you sell one of the five Lexus is sitting in your driveway. every dollar that you could have come in every month, you’re going back out you you might make $20,000 a year, but your family is spending $20,000 a month on credit cards. So you’re not cut that back. Spending 10,000 a month if you’re making 20 or spending 15 a month if you’re making 20 don’t overspend what what you’re making because at some point in time, the market is not going to allow you to refinance and bail you out. So what winds up happening in those situations is the people that say if we’re if we’re in a stagnant economy or the market starting to go down, things like that, and they might think that my house is going to appraise for $300,000. You go out there and you appraise it, but because of the way that the economy is, now all of a sudden that house is worth $250,000. They can’t sell it, they can’t refinance it. So they’re stuck. That’s where you had a lot of little short sales come in 10 years ago, is because so many people bought without equity in it, and then just lived above their means the entire way out thinking, well, I’ll always have my house this and that. But when say you lose a job, something like that, it’s it’s what causes that string to break, because you no longer have that piggy bank. So this year, if you take the virus that we’ve all been been going through for, I think around 10 months now, and I think we all wish it would just go away. But you put you, you put that on top of people trying to have a good Christmas. And it’s not necessarily a good Christmas for a husband and a wife or parents and things like that. It’s people trying to give the kids a sense of normalcy. Just because we’ve got a pandemic in the world, they’re trying to shelter their kids from it. So let’s go and give them a normal Christmas, things like that. Except this year, the money is not the same, they may have lost their job, savings might be going down. So now they’re fixing overleveraged themselves on these credit cards. Black is typical around Christmas. But now the income coming in is not what it was in 2019. So you’re further underwater. And you take this year, a lot of people have been going underwater all year long. So now you’re about to end the year, even further underwater.
So you need to look at it and this and this way, every single year, go through your normal marketing, lead generation go through the normal process of this is what I need to do. And then when it when Black Friday hits, turn the dial up, market more make up make a better effort to get leads in. Because the leads that you’re going to get in these three months will be better leads than you’ve had all year long, you are going to get more people that will just lay down in these three months than you will at any time during the year. They know that they’re in trouble. They’ve taken what they can get all year. Now. They say they want to give their kids a normal Christmas, they can’t afford it, they do it anyway. And the string breaks. They try to go refinance. They may not they may have an extra house, they may not owe anything on the house. But because they lost their job they can’t refinance. So now they can sell their house at a discount get money, go live on apartment for a little while, maybe go pay cash for for a house that is not as expensive as the one that they’re living in their tribe they’re having to recapitalize their life right now. Because of everything that’s happened this year, and then trying to give Christmas in a normal way is just going to amplify to the point of no return for a lot of people. So what I typically do in these three months, for example, let’s say that I typically send out postcards, the the direct mail, instead of sending out my normal stack. I go and find a new stack, I send out the regular stack, but I find more I expand what I’m doing. And I’m really going fishing for what I’m looking for. Because all I need right now are those are those people ready to sail needing to sail. You’re not going to close a lot of things before Christmas. But once Christmas happens, first of the year, people will start selling the house Lou, you’re gonna find a lot of people that’s got a vacant house that they spent too much on Christmas. Last year, they had five houses this year, they only have one, it’s their last chance. So if they go and spend $5,000 for Christmas, they don’t have it. They’re in debt. Now they don’t have the revenue, the income coming in, now suddenly need that cash. So if it’s a $50,000 house, maybe now they sell it for 25. Christmas time is when you find the people that are legitimately stuck.
So you have to go through your marketing portion of it and turn the dial up a little bit, do more is going to cost you more and you’re not going to necessarily ever hear me spend more on marketing at any point in time in the year other than these three months. But when you spend more this, these three months, whether it be Google AdWords, Facebook ads, direct mail, cold calling, whatever it is that you’re doing, turn the dial up. And then you’re going to sit there and you’re going to look at your, at your bottom line, come March, the first if you do it, or what you have in the pipeline, that you’ve been working on these three months, even if it takes to March the 30th, to get it closed, you’re going to look at your bottom line and think to yourself, wow, I’m glad I did that. Because if you’re spending $5,000 a month, normally, on your marketing, I’d say bump that up. $7,500. So if like say with with Facebook, if you typically spend $10 a day, expand your market, spend $20. If you’re spending $100 a day on Google AdWords, maybe spend $200, you’re gonna see that money back. Because you’re going to have a lot more people that need to sell, not want to sell the financial aspect of it around Christmas is why people need to sell because it’s in their mind. And what usually happens is somewhere around the 15th of the month of January, when everyone starts getting their credit card statements is when they go, Oh, crap, what did I do? Then nice, it’s the panic sets in. And then that’s when the market just gets flooded for the wholesalers.
They realize that they overdid it, they do it every year, so they know what’s coming. But when that when they see that credit card statement is when it sets in, and the panic goes, and then they think to themselves, all right, I gotta do something. So they may fish for a little while they may kick tires, but eventually, they’re gonna they’re gonna break, because the February statement that’s going to come out is going to be about the same thing, because the money that they had coming in, they might be able to pay $100 $500, maybe $1,000 on their credit card bill, but they’re gonna see it to where the interest, whatever it is on their credit card statement, whatever they paid, didn’t really move that balance a whole lot. Because the interest, say on $5,000 worth of a credit card is probably in the neighborhood of 150 $200 a month. So if you’re going in and you’re only paying $100, you know, or $200 on your on your credit card, you paid it down $50 or you paid it down nothing if you just had to make the minimum payment. So you’re gonna keep cycling that until the person gets ready to break a lot of deals that are close. And they may be in April, they may be in July, but they come in these three months. It’s a it’s a process to where the realization of overdid it, and then you you just keep following up with them over the time. And they keep seeing their bills pile up instead of going down. And eventually they break it, you’re not necessarily going out there and being a vulture on it, because you are providing a service. But the follow up part of it is where you is where you really get your deals. So for example, a lot of stuff that you’ll see right now, let’s say that you have $100,000 house because somebody knows that they need money, or it’s going to you know, really have a negative impact on their life. Maybe they sell you this house for $50,000. When three months ago, they would have sold it to you for 70. So you turn around and you sell it to one of your buyers for 75,000. Because your buyer is not in the same financial position as the homeowner, they have a little extra money to be able to do Christmas the right way and not go in debt for it.
But your buyer would have given you seven will give you $75,000 you know for the house. But three months ago, you could have only gotten that house for 70. Now you can get that house for 50. Because you have a more desperate person because they’re looking at their bills and realizing they are not going down they are going up and they have to do something. So now instead of you making $5,000, 3 months ago, now you just made a fit a $25,000 profit on the exact same house because of the time of year. You go through when your deals right now with the knowledge kind of interview these people because every single owner that you’re going to come in contact with. They typically have a distressful a distressed situation that you’re dealing with anyway. But now you’re Going to, you’re going to find the people that had the distressed situation. But now, it’s magnified by five times 10 times, whatever percentage it may be. They’re more desperate in these three months than at any point in time during the during the year. And when you when you’re talking to them, just ask them, have you tried to refinance, if they’re telling you the truth, 90% of them will probably say, Yeah, but it didn’t appraise for what I needed. That that will wind up telling you the story right there, you are there last chance to, to give them some relief of what they’ve what they’ve got. Because they were trying to go and cash out, take the 10 $20,000 and go pay the credit card. But the market wouldn’t appraise. So now, they were used to having say $5,000 a month worth of bills, and they made five $6,000 a month. But now all of a sudden, they have 678 thousand dollars worth of bills, they can’t hold that. So that’s why everybody tries to go through and refinance their house after Christmas, is to pay that off to get their bills back to where they where they can afford it every month. But it’s a it’s a losing cycle, because they do it every single year. So eventually, it’s not going to be possible. And that’s where you’re going to find the people that will almost lay down for you and say, take my house, just please take my house, I can’t afford it. It’s and you’re gonna make more on your spreads from the homeowner to the to your buyer, during these three months, or deals that come in these three months, then you will at any point in time for the rest of the year, you have the the Christmas band keeping up with the Joneses. fancy new toy for the kids fancy new car for the wife, you name it, this is when people lose their mind and do things they would not do any other time of the year.
Because it’s an appearance. Oh, my neighbor has got a brand new Mercedes or a brand new car, whatever it may be. And now, you know, my wife’s been on me for all these months. I’ve got a I’ve got to go get her something. You couldn’t afford it. But she thought okay, well, they do Black Friday deals on Christmas. Unfortunately, they do not do Black Friday deals for Christmas, not for cars, then you look at it for your kids. Okay, well, Billy down the street has a brand new Xbox. Well, I want to give my child something better. So now I’m gonna go stand in line and pay whatever it is for the brand new Xbox, and I’m gonna get them 10 games, or I’m gonna get them whatever subscription it is, that’s just one present, and you just drop $500 on one present. It’s not. It’s not feasible for these homeowners to be able to do that. So when you when you approach your December to February deals, understand those people are calling you right now because they are desperate, they’re more desperate than any other time of the year. And not, for lack of a better word, you need to take advantage of it. Because this is where you set yourself up for your coming year. Because if you can go in and have a good bank account to work off of, for the say, first six months of the year, first eight months of the year. You go in and you make a splash right now. And then all of a sudden this is when you can grow your business because you have a little extra money. This is when you can go in and try new things to see if they work. Twitter may be a good place for you to do an ad I have no idea. But you go in and you try certain things you may want to redesign your website or you may want to upgrade, you know to the top of the line investor carrot template, I have no idea what you would want to do. But this is where you go in and you set yourself up for the rest of the year. But all the while predicting Black Friday of the following year. You need to have something put back to where you can go after the market a lot harder than you have for the other nine months of the year. If you do that, then you start growing your business because like I said your your spreads on your profit are going to be a lot bigger in these three months than they will At any point time of the year, because your buyers are not gonna stop by your buyers know that this is buying season. They know summer is selling season. So they’re all out there trying to load up on deals, no one that the summer season is coming, they’ve got this amount of time to get things renovated, and get ready to put on market. This is the shift. And this is the meat of the shift. Because when say September October rolls around, a lot of people start gearing up November. But when Black Friday hits, that’s time to put the hammer down and go get it because your buyers are waiting on you to give them something so that they can have it renovated and ready to go when selling season starts so that they can make the most money. You’re doing the exact same thing. But you’re doing it ahead of schedule so that your buyers can be on their schedule to make the most money. So when they get through the summer, again, they’ve got their money sitting there that they can spend again, this and that. So now everybody’s ready for the cycle again, buying selling seasons. It’s the cycle that happens every single year. So from this Black Friday, to every black friday you have in the future in your career, make sure you are looking at Black Friday as goto for your business. Forget Christmas right now. Black Friday is go time for your business.
If you take that approach, it will set you up nice with your bank account, to start your year to get your business off the ground. To be able to maybe hire another employee, try some new marketing, update the business aspects of your company, whatever it is that you’re trying to do. If you start on Black Friday, that’s when you set your business up for the next year. It’s not wait till the selling season wait till March. If you wait till March, you lose. You’re going to you’re going to want you’re going to look back into at the end of 2021 and say this year wasn’t good. But if you start on Black Friday, every year as the first part of your year, you will look back on New Year’s Eve and say wow, that was a good year. That’s how it works.
So with that I’m gonna bring it to a close if if you got any questions feel free to to get on the website at EarlToms.com and ask you can also find some other things you know to help your business grow on the website. Hope everyone had a happy Thanksgiving. And we will see you again in a couple of weeks. And do a do an episode about maybe two weeks before Christmas. And then let everybody rest for the holidays so that they can enjoy. Enjoy the season with their friends and family. But again, go over to EarlToms.com. Check out what might help you with your business. And we’ll see you in a couple of weeks.
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