The virtual world has undeniably allowed multiple kinds of business to transpire online. In this episode, we explore one example of that: virtual wholesaling. Host, Paul Lizell, guides us to understanding what virtual wholesaling is and shares how he uses it expand in new markets. He then dives into detail on the process of buying and selling real estate in new markets and gives out proven strategies for disposition of properties in rural markets. Learn more as you find how to enter a new market and who can be your boots on the ground.
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Virtual Wholesaling In New Markets
Virtual Wholesaling And Disposition Methods In New Markets
In this episode, we get into virtual wholesaling. I give a backdrop on virtual wholesaling when I got into it. I started virtual wholesaling back in 2009. I had been doing it for the last decade. That’s how I started from my local market and expanding into other markets, eventually, blanketing and buying all over the continental United States. It’s not just continental. I have bought and sold in rural Alaska. I have not bought in Hawaii yet. That one may be coming. That’s how I got into the whole virtual wholesaling mindset. It is totally a mindset you need to get into.
On the back half after that episode, I have a couple of updates. One is the student loan crisis that’s going on. How much student loan debt there is, how that affects the future of real estate investing as far as Millennials and the next generation and what it looks like for them. Lastly, I have a few minute videos on an Auction.com update, which is a little short update on the status of sales in the real estate all across the country and which markets are getting effected. I’ll do a deeper dive into that in another episode. We’ll hit target markets. We’ll talk about what markets have a good outlook for the future and what markets look like they may be hit by downturn. We are going to get into a different market. We’ve already entered it. Sales are showing that. We’re in the beginning phase of that. Enjoy this episode.
We’re going to get into my favorite topic, virtual wholesaling. This is the virtual wholesale deal that I did years ago. This dates back to 2013 timeframe. This was a bank-owned property I bought in Bushkill off Auction.com. I picked this thing up for $22,500. I enjoyed it for a couple of years. Our family used it for skiing because it’s near ski resorts up there. They also have a lot of different things in this HOA community, which made it a lot of fun. I also did this as a short-term rental back in the days of VRBO, that was before Airbnb. I did this for a little company called FlipKey. We did pretty well. We average around $1,800 to $2,000 a month, renting it short-term through FlipKey, which in itself had a lot of maintenance.Technology continues to make it easier and easier to do business. Click To Tweet
I had somebody come in and offer me $70,000 to buy it as-is. I ended up selling it for $35,000 to $45,000 somewhere there and net profit, not bad on a $22,500 purchase and probably ten or fifteen renovations put into the property. Virtual wholesaling to me is far and away the most fun thing. I thoroughly enjoy it. It’s my favorite thing and we don’t see most of the properties. It’s interesting because most investors that I deal with and talk to find it the scariest thing on earth. Most investors want to get out there, put boots on the ground, take a look at the property and visually inspect everything. They aren’t comfortable unless they do that. That’s the difference between being a market investor and a virtual investor like myself.
Enter New Markets With Virtual Wholesaling
Virtual investing will become more and more commonplace down the road. Everything is available online for you to be able to go and take a look at properties without yourself going to visit it. You can have people go there. You can speak to realtors about it. You can get videos and pictures. You can get lockbox put on there. You can get the locks changed on it. You can do everything without ever stepping foot on a property, which is what I do with probably 95% of the properties that I get. Virtual wholesaling allowed me to enter new markets. I started in the Pennsylvania market. I stretched it out and went into Indiana, Ohio, Pittsburgh, which is Western Pennsylvania, New Jersey. It started building and going from there. Once I got into these other markets, I started to learn the different nuances of them.
I realized it’s not that hard to learn a new market. I spoke to a few wholesalers in these markets. Your best resource for learning a new market is talking to other wholesalers. They can tell you the ZIP codes that are going to be good. They could tell you the ZIP codes that are not going to be very good. They can tell you what type of market it is, whether it’s a buy and hold, fix and flip market or dead market. I own a couple of property in Youngstown, Ohio. That’s a dead market. There’s not a whole lot of jobs out there. Now it is starting to grow and come back a little bit, but it is still an old coal town. There’s not a whole lot available.
It’s the same with Scranton and Wilkes-Barre, Pennsylvania. These were old coal towns, but now new industries are starting to move in there. They’re starting to revitalize. These are good up and coming locations to invest in. One of your jobs when you’re in virtual wholesaling is to find what is up and coming market, what is the next market to be your up and comer? It was Denver, Colorado in 2009. It’s where Silicon Valley has moved to out in the Colorado area. There are a lot of businesses out there. Your first job as a virtual investor and virtual wholesaler is to learn new markets.
I have a snapshot from back in 2017 when I was over at the Note Expo in Dallas, Texas. That’s one of the other great aspects of being a virtual investor, you can travel all around. One that I learned with the Dallas market was it is a very hot market. A lot of businesses are moving there. Toyota’s got that new plant in Plano, Texas, just North of Dallas that were in the process of building, which is creating all kinds of new jobs. You have a lot of companies moving from California to Texas because of the tax advantages. I believe you’re paying 12% to 13% state tax in California plus other local taxes, potentially in regulations out the wazoo.
You go to Dallas, Texas, where you have no state income tax, much better regulations and much lower level. It’s much easier for businesses to move and to build. You also have lower-paid employees for the most part than you’re going to get in California because the cost of living in California is extraordinarily high. This is a very important factor when you’re looking at investing in other markets. I’ll get into a little bit in an article. I’ve read this article a couple of years ago, but it is still up-to-date as far as to what is pertinent. Dallas to me is a tier-one market. It’s obviously a big market and big population boom. That’s a very big market to be in.
There are tier-two markets or your smaller level markets. You got tier-three markets. Tier-two would be like Philadelphia and St. Louis. Your tier-ones are going to be Chicago, LA, Boston, New York and Dallas. Your tier-two will be Phoenix. Your tier-three will be Tucson, Arizona, which where I invested quite a bit over the years and still continuously do. You have your tertiary markets where you get into the four, five, six that get way out there more out into the hills and the mountains. It has lower population densities. These are the different markets. They’re great to be in because you have less competition. They generally are up and coming markets. If you’re looking to buy and hold, those would be the markets to buy and hold, in my personal opinion because the tier-one markets already hit their growth.Virtual wholesaling is the most fun thing to do and it allows you to take multiple vacations each year. Click To Tweet
It’s not that the rents won’t go up there, but they may not go up to the same level that they’re going to go up into tier-two to tier-six market. There are areas that are lower-taxed markets like Indiana and Ohio. These are very low-tax markets and lower costs for labor in those markets like Louisiana and Alabama. That’s why a lot of these car factories are moving into these markets because they have lower costs of labor. As a result, these companies were able to turn around and sell their products for higher profits. It makes total sense. Why wouldn’t you do it this way?
These are great markets to be into. As a virtual wholesaler or virtual investor, you don’t have to be just a wholesaler. You could virtually invest and hold rentals in these markets. You can do wholesaling or small scale or even large-scale fix and flips if that’s your desire. A couple of examples here are some real rural areas, Boonville, Indiana where I’ve purchased properties. You can get properties very inexpensively here in these markets, turn around and make good profits on them. Your ROI could be through the roof in some of these. You’re not going to have that same ROI in a Philadelphia, St. Louis, Dallas, Orlando or Miami market as you’re going to get in Allentown, PA.
There’s a big warehouse up there in Allentown for Amazon.com. It wouldn’t surprise me one bit if Amazon puts another headquarters there in the eastern side because PA state tax is only 3.8%. It’s pretty low. You do have some local municipality taxes, generally 1% or so. I’m not sure whether Allentown charges one there or not, but that is a great location for them. It’s easy to get to New York, New Jersey, Washington and the Northeast and even to the South Central and Southeast from there.
Methods Of Acquiring Inventory
I’m going to get into methods of acquiring inventory. For us, going back in 2013, I was still doing yellow letter campaigns and again, I would do those locally. Virtually, not as much with the yellow letter campaigns. You can do yellow letter campaigns virtually. It becomes a little different whether you’re sending postcards or whatever. This is a direct mail marketing. For those who don’t know what the yellow letter is. The yellow letter is bright yellow paper so it catches people’s eyes. It looks like it’s handwritten. There’s cost in yellow letter campaigns that you don’t have when you’re buying off the MLS, REOs, online auction platforms or even the sheriff sales. I don’t get into the sheriff’s sales. I haven’t done those. That’s a whole other animal. We’re not going to get into it here. There are other risks involved with that.
Let’s get into the methods of acquiring inventory, how we do it, what your deposits are and what your marketing costs are. It’s zero marketing costs when you’re buying online auctions and buying off the MLS. You generally have the positives anywhere from $500 to $5,000. The auction is depending on what level of property you’re buying. You’re going to be in a $2,500 minimum to $10,000 deposits. When you are doing direct mail marketing, you’re going to have far lower deposits. Most people put a $10 deposit. Some people don’t like that so they’ll put $100. I’ll put $500 maybe up to $1,000 depending on the deal. If I know it’s a great deal, I don’t mind putting more on. Otherwise, I’m putting as minimal as possible so I can get out of the contract with as minimal risk as possible.
You’re going to be spending $3,000 to $5,000 a month doing direct mail campaigns. That is your risk with those. We stop this. We cut this off at the end of 2013 and by exclusively online auctions, of the MLS and from word of mouth. There are different positives and negatives to either these. In our opinion, the best way to do it beginning investor wise, online auctions are great. If you have $5,000 or $10,000 that you can play with to be able to put down as deposits, you’re going to get $7,000 to $15,000 wholesale fees on these properties when you resell them. You’ll be able to build some income that way without having to do the direct mail and wait three to six months to start getting action on properties from your mailings.
When you’re making offers on the MLS or buying in online auctions, you can get them within 30 days, sometimes less. Our newest student was able to pick up three properties in the first 30 days. He turns it around and sold two of them quickly, paid for his whole education and some in his first two deals. The third deal is under contract to be sold. It’s all going to be extra profit for him. That one he listed on MLS to sell. He has a fourth one under contract now. You can get into action right away doing online auctions. Doing it through Auction.com, Hudson & Marshall, RealtyBid, HUD Home Store, HomePath, HomeSteps. These are all methods for you to jump in there and get in there right away.The best resource for learning a new market is talking to other wholesalers. Click To Tweet
Find your paradise. What is your paradise? What is your preferred way to do virtual wholesaling? Do you want to pick five markets? Do you want to pick ten? Do you want to open up to the whole country as I do? I bought in 42 out of the 50 States. I will let the deal dictate which states I’m going to be in. It just happens that we’ve had five deals in Wyoming. I haven’t had a deal before in Wyoming. There are only 522,000 people that live in Wyoming. It’s mostly federal game land and parks in Wyoming. This is the way the ebbs and flows go here. A lot of times it’s Louisiana, Texas or the Carolinas. There’s always good inventory in Pennsylvania and New Jersey. There’s always a bit around me in my local market.
There’s always a bit more on the MLS because of that as well. Find your paradise, find what you want to do and what markets you want to be in. Perhaps it’s a place you’d like to vacation in. Maybe you like to vacation in Charleston, South Carolina each year or Hilton Head. If you do, start to look for properties down around those areas. It might be another excuse to take another vacation that year, even if it’s just a long weekend to go look at a few properties you’re going to want a bid on in an upcoming auction. There are all kinds of different ways to skin a cat here. It’s whatever your preference is. My preference is I like to do a little bit of everything. I buy all over the country. I occasionally visit these properties, but I haven’t visited a property in a few years that I bought out of state. You don’t have to.
Technology continues to make it easier for me to do this business. I like to look at myself as a pioneer in doing this. I’m not sure how many other investors out there bought in 42 of the 50 states. There may be others, but I don’t personally know any. I know there are people that bought in several different states or they focus on five to ten or they focus on just a few different ones. Whatever your paradise is, whatever you’re looking to do that’s what I recommend. Hit those markets. You may already know those markets. You may know what it’s like as far as the costs there, if it’s an up and coming area, if it’s an area where companies are moving out of, all the important factors.
Find your paradise, do you want to do a fix and flip? Do you want to be a buy and hold investor? Do you want to strictly wholesale? Do you want to do owner financing? You could pick one or you can pick all. I personally use all of them. I use every different exit strategy. Our first initial exit strategy is always wholesale. If we can’t wholesale and make the money we want, we’ll go to the next one. Is it owner financing? Maybe it is, maybe it’s not. Is it wholesaling? It only needs a few items to repair to be able to get this thing up to snuff, to be able to turn around and put it on the MLS and make some decent money on it.
If it doesn’t need a full-scale fix and flip, maybe we reach out to an investor partner in that area and say, “Do you want to do a joint fix and flip on this property? We’ll purchase it. You do the rehab on it. Let’s split it however you decide, 50/50, 60/40, 70/30, 75/25.” That’s up to you to do. There are many different exit strategies, many different ways to acquire property out there and many different ways to make profit. It’s endless and I want to make sure everybody knows that here. There are a couple of examples of properties I bought off of online auction. There’s $88,000 that I turn around, sold and made decent money. We sold it for $20,000 something. Another one we paid $12,500 for it. I regret getting rid of that one. I could have put $20,000 on it and sold it for $100,000. There’s one I bought from land sale. It’s very local to me. It was a full-scale rehab. We dropped $40,000 to $45,000 and picked it up for $68,000. We sold it for $190,000. It’s a huge profit.
There are many different ways to skin a cat. I want to let you know, pick your exit strategy or exit strategies. You don’t have to be married to just one. Continuously look at different options and find your paradise. Virtual wholesaling is the most fun thing I do. I love it and I live it. It allows me to take multiple vacations each year. It allows me to live the virtual lifestyle style of my choice. Whatever that choice is for you, go find it and go do it. If you’re looking for a mentor or somebody to teach you how to do this. We do have an educational platform. We can show you from A to Z and hold your hand at the highest level possible you could ever want. We can also send you our more basic program where we overlook deals for you. Whatever you’re looking for, we can help you with. If you know a mentor out there, fine. Utilize them. Maybe you can partner with them. However you want to do it, go ahead and do it. Virtual wholesaling is the future. It’s been another episode of Flipping Out. See you at the next one.
- Note Expo
- Hudson & Marshall
- HUD Home Store
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