Oct. 31, 2005 Edition

Give Yourself A Raise

It may be time to make changes
By Michael Blatney

Mike Blatney

Most franchisees establish a few favorite investors to call when they want to wholesale a property under contract. These investors are mostly rehabbers who have proven themselves as dependable closers that also respect timeframes and terms set forth in the purchase agreement. Is there anything wrong with this picture?

According to Atlanta franchisee John Holman, Aspen Funding, it’s time to “Move them to the back of the line when it comes to working with them,” he said. “They are stealing profits. We (franchisees) are spending a lot of money on overhead and advertising. And we spend all that time away from our family meeting potential sellers at their convenience, and for what? I’m getting tired of handing over the lion’s share of the profit on the deal to one of these investors.”

Now may be time to make a change and give yourself a raise with an alternative method after the closing of the property. An industry trend spreading across our franchise network is to close the property first, then shop it. Wholesaling can be very stressful as the closing date begins to creep up. Why not remove the urgency by closing the property first, and then give yourself time to execute a plan to sell?

Many franchisees have recently tried the “wholetail” approach. This exit strategy involves marketing the property as if it were rehabbed. It's another way to take advantage of the hot real estate craze. However, your target buyer is an investor or a semi-investor. It may be necessary to remove trash and debris and even repair or replace the scary items such as a bad roof, foundation problems or exposed wiring, etc.

The real estate Multiple Listing Service (MLS) is a great way to market wholetail properties. Every real estate agent has a stable of investors, and every investor has (or should have!) at least several real estate agents checking MLS two to three times daily for newly listed “below market,” or “as is” properties.

When you list your properties in MLS, make sure you or your agent include in the remarks section of the listing keywords such as "fixer upper," "TLC," "as is," "needs work," etc. Agents will be searching the MLS database to identify these properties using keyword entries.

Tim Risley of Front Door Properties, Phoenix, decided to try the wholetail exit strategy. He had the property wholesaled for $12,000 profit with one of his usual investors. He then decided to close on the property and without doing anything major, he placed it in MLS. Within two days, he had multiple offers and ended up making more than $40,000 on the deal. A difference of $28,000!

Sometimes the status quo is fine if you want the same results each sale. Yet, if you are thinking about a change, increasing your profit per transaction with the wholetail strategy can make a huge difference in your year-end bottom line.

Franchisee Mark Zimmerman of LMK Properties, Houston, began to focus on increasing his profits per transaction more than a year ago, and today his average profit per deal is up over $4,100! Multiply that times the number of homes you will buy this year, and you might see a significant raise for yourself in the future, and less (or no) money for an investor.   

   …Michael Blatney is HVA's Director of Franchise Support. He can be reached at 972-761-0046, ext. 106.