I am a very active investment property buyer and seller in San Antonio TX. One of the keys to my success the last 15 years is that I NEVER charge an investor the highest possible price for one of my properties. I make sure he or she makes plenty of money too, even if it means I make less!
One of my investing partners – who has only been working with me for two years – recently was baffled about why I refused to charge an investor as much money as possible on a transaction.
Let’s take a look at the property in question. The house below in San Antonio on La Violeta St. actually has two small houses on one lot:
One house is a 3/2 that needed only $8000 in repairs, and the other one is a 2/1 that was rehabbed and ready to be occupied. The renter in that house wanted to buy it with owner financing – $5000 down, $995 per month PITI, 10% interest.
The wholesale price? Just $55,000.
As you can guess, there was a huge demand for this property when I released it to our buyers’ list last January. We had 25 people call us to buy this house. This was a great opportunity for many real estate investors/wholesalers to increase the price by $10,000 or even $20,000 and pocket the rest.
The final price I charged: $55,000.
My business partner was baffled by me not raising the price on this fantastic deal. Here’s why I didn’t increase the price, and why I never charge top dollar for these hot deals.
The most important thing to do as a wholesaler is to get a new real estate investor a FANTASTIC first deal. At the $55,000 price, my investor was able to owner finance that property for $85,000, netting him nearly 15% return annually, with no maintenance costs!
Since I sold my CA cash buyer that house in January, do you know how many more houses he has bought? 9!
Here is a case study on one of them that makes him a 12% return.
So, by not getting greedy on the first house, I have been able to make thousands of dollars more. And the investor has made even MORE money than he would have if he had just bought one or two houses. That investor also has referred other investors to me, who have bought several houses.
I refuse to get greedy. I share the wealth with everyone involved. In the end I make more money, and so does everyone else!
New investors usually are in a rush to make as much money as possible. I take a 180 degree opposite view: I want to make money SLOWLY :). Because I know from 15 years of experience that getting rich in real estate takes time, and the wise investor will make MORE money every time by taking the long view of things.
Take Away: Don’t be in an all-fired hurry to make as much money as humanly possible on 1 deal! Don’t try to make $20k on one deal every year. Try to make $3000 on FIFTY deals a year! Treat your investors and money partners like gold, and never overcharge them. They will come back to you again, and again and again.
Have comments or questions? Please share below!