Ted is an investor in the Bay Area and in this episode, Ted will tell us the challenges of starting a wholesaling company, getting his first few deals executed, and the lessons learned along the way.
Ted got started in real estate in 2010. He realized that he didn’t like working traditional jobs since working for other people wouldn’t enable him to reach his financial goals and the freedom he wanted. So he went ahead and listened to educational materials and attended events for building wealth.
On his own, he started trading for dollars and door-knocking until he got a wholesale deal and made $10,000.
Ted sought a mentor to teach him the skills he lacked to do well in the industry. But the mentor became sick leading Ted to stop and find a job again. He targeted the solar industry because it was growing aggressively, and it presented the opportunity for him to develop his people skills and grow through professional development. He worked for several more years in project management and changed jobs as he looked for more growth opportunities.
By 2017, he had saved up enough capital to leave his job and commit fully to real estate. After attending some courses in marketing and business, he ran a direct mail campaign. But, it didn’t work out as he made too many mistakes.
But he kept going to clubs, meeting and networking with people until he met his business partner, Jason Lefley.
Most people would hesitate to step away from a good job with benefits to try doing something on their own. If it fails, they’ll have gaps in their resume that might make it difficult to find another job.
When Ted went back to being employed, he used a temp agency to find a job and got paid an hourly rate. But after proving himself a person of value, he got noticed by the CEO of the company who brought him in as a contractor in another company.
Start small and once you prove yourself, you can get back to where you were before.
Ted was stuck following the outdated ideas and methods of a guy investing in Florida. He was hesitant to explore ideas relevant to the San Francisco Bay Area. Because of that, he ended up overspending on his mail. He did 100% handwritten letters, did only a single drop, and didn’t do any list stacking or list mining.
Now, they do drops consistently every 5 weeks. They use Open Letter Marketing for their direct mail. They also weigh in the pain points of sellers to maximize the likelihood of getting them to respond.
Property owners in the Bay Area are more sophisticated. You need to understand what problems they may have and approach them from the perspective of offering them help.
Using an answering service was another mistake he made as the people didn’t know how to answer the sellers’ questions. They answer calls personally now and use tracking software CallRail.
Building rapport by getting them to describe their situation and scheduling a time to meet are important for the first call. It’s better to not give them an offer yet, but if they insist, give them a range of what you may offer.
Ted worked alone from late 2017 to mid-2018. He kept running into Jason, who was also working full-time. They started doing weekly check-in calls and got to know each other better. It made sense to work with somebody who provided accountability and complementary skills to what he lacked.
The book “The ONE Thing” by Gary Keller inspired them as they later on decided to spend the last 6 months of their savings to do a mail campaign.
In March 2019, they started a mail campaign for $25,000. They spent $20,000 for the mail campaign and $5,000 for additional costs. Also, they made a plan and decided how much capital each would contribute and specific activities each would do. They also constantly coached each other.
By May, they got a realtor through the ringless voicemail. After two months of using a ringless voicemail, they got a pocket listing. It was a property in San Mateo. The seller was going to assisted care, but her adult son who was living with her wasn’t cooperating with the sale. Because of the roof and safety issues in the property, traditional buyers couldn’t get a loan for it.
Ted and his partner made a cash offer with no financing contingencies and provided the family with a timeline to get things in order. He and Jason had to scrape away to get the earnest money to lock-in the contract. They did a joint venture with another investor, Raul, and closed on the property in June for $1.417. They immediately sold it to a hedge fund a week later for $1.625M. This happened without needing to repair the property or do a flip.
While it was pretty ballsy spending the last of their savings, Ted didn’t want to wonder later on whether he could have made it work, so he went all in.
An out-of-state seller had a property in San Francisco bought 30 years ago. Their realtor reached out to Ted and told him they would hold on to their information until the seller was ready to sell. When the seller was ready to sell, Ted and Jason brought in contractors and architects to figure out what can be done with the property. After doing their homework, they asked for a reduction in the seller’s price and the seller agreed to go down a few hundred thousand to the price that they needed.
They did another double close on that property. They had closed on it for $1.8M and sold it for $2.1M.
They’re still doing direct mail and realtor voicemails. Ted himself is looking for a property that will be his personal residence.
They’re looking at multi-family properties and are still making calls. His partner, Jason, is working to automate the business.
Since driving for dollars takes up a lot of time, they are no longer doing that. But they’re actually getting leads now from the driving for dollars they did last year.
Ted had gone through two years of not getting any leads with his savings about to run dry. It’s difficult to keep going when you’re not getting results. His advice is to understand first what you actually want out of life and what real estate is going to do for you. Most people go from one thing to another.
Once you understand what you want and why you want it, you can draw your motivation from it and come up with strategies to get there. You’ll be aware that it takes time to make things stick and it’s okay to make mistakes as long as you learn from it.
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