February 23, 2024

Everyone wants to know how to get rich in a recession. The problem? With many asset prices plummeting and a bipolar real estate market, parking cash in any asset could be considered a risk. But, a particular sect of real estate still makes money even if the housing market starts to crash and home prices freefall. This is one of the lowest-risk ways to start investing, especially during a recession, and it made our expert guests, James Dainard and Jamil Damji, very wealthy.

James and Jamil have been using this strategy since the early 2000s. When home prices started plummeting in 2008, buying rentals became risky, and fix and flips got decimated. Thankfully, this often misunderstood type of “investing” allowed them to capitalize on the price action, picking up deals that would make great buys and passing them along to buyers who could hold their own during the crash. This same strategy still makes them millions of dollars today, and you can start using it!

In Jamil’s newest book, How to Wholesale Real Estate, you’ll learn how to build a scalable wholesale business without much cash, experience, or contacts. This is one of the BEST ways for new investors to get started and is a phenomenal source of supplemental income for investors and flippers who have too many deals on their desks. Think it’s too late to make money in an economy like this? Think again!

Dave:
Everyone, welcome to On The Market. We have a very special bonus episode for you all today, because Jamil wrote a book. Jamil, congratulations.

Jamil:
Thank you, man. You’ve written books, and so you know it is one of the most difficult things that a person can do, but I got through it. And honestly, it was cathartic for me, because I was able to really dive into my world and articulate just why I love wholesaling so much. It’s because it’s a very polarizing thing. For BiggerPockets, especially for BiggerPockets, to put out a book on wholesaling, it is a really powerful statement, and I’m happy to have had the honor to be the first and hopefully the only person that ever writes a book on wholesaling for BiggerPockets.

Dave:
Yeah. Why would we need another one? We have yours, and it’s an excellent book, so this is going to be hopefully just one and done.

Jamil:
Thank you, brother.

Dave:
We’ve also got James joining us today. James, you are an active wholesaler as well. How are you doing?

James:
I’m doing good, man. I’m excited to talk about wholesaling, best way to get going in real estate.

Jamil:
Agreed.

Dave:
That’s a great transition. Jamil, can you just give us, this episode we are going to talk about why wholesaling is such a good way for people to get started in real estate, why it works in a variety of market conditions, including the ones we’re in right now. But Jamil, just tell us a little bit about your book. Give us the 60-second pitch.

Jamil:
Well, the concept of wholesaling is finding opportunity, finding potential. And so I go through and explain how I built my business from literally no money, no cash, no real estate license, no credentials, but having an understanding of the mechanics, finding an opportunity with potential, finding somebody who wanted that opportunity, and then making a profit by putting myself in the middle of that. And again, to do this in a way that is A, legal and ethical, you’ve got to create relationships, you’ve got to be able to know and understand your role in the deal.
And so I think the book is an incredible journey into that process. And also, I just want to say that you can take this process of wholesaling and build a scaled business like I have. I have a nationally franchised company right now that does this business across the United States, and I would say that from the cash flow I get from that business, I would have to own all the real estate to be able to match it. So it’s really great, and I’ve been able to do that in six years.

Dave:
Yeah, that’s incredible. It really is amazing what you’ve built so quickly, and it’s great that you’re sharing that knowledge with everyone.

Jamil:
Thank you.

Dave:
So you talked about relationships. What is one example of a great relationship you have formed in real estate?

Jamil:
Well, the greatest relationship I have in real estate is Pace Morby, right? That’s my best friend and co-collaborator, my competitor. We wholesale a lot of deals together. But I want to pivot from that for a moment, because I just want to talk about a real estate agent relationship that I have made that has made me very wealthy. And this is one agent, one agent that I cold-called over 10 years ago, Monique Walker.
I give this lady a call, she has a listing on the MLS, it’s been sitting for some time, and we talk about it. I get the details and find out what the seller is actually trying to accomplish here. And from that one relationship, I have made millions of dollars, millions of dollars in fees, and I’ve been able to serve her clients in a way that has A, made them happy, and B, made her more money than she would’ve made just having standard commissions as her opportunity in the deal.
So wholesale and a wholesale cash buyer isn’t for everybody and it isn’t for every situation, but a real estate agent should know and be able to present the opportunity and the possibility if a seller so fits into the situation. And so that relationship that I have with Monique Walker has made me over a million dollars. We work and do dozens of deals together every year, and if I only answered her phone, I would be a wealthy person. If I only answered her calls, that relationship would still have me fed and paid for years and years and years and years.

Dave:
Let me just ask you, I want to get to you, James, but let me ask you, Jamil, how many agents did you cold call to establish a relationship like the one you have with Monique?

Jamil:
Thousands.

Dave:
Thousands.

Jamil:
And it wasn’t thousands before, Monique, right? My goal and my process is very simple. I talk to 50 agents a day. Hear this, right? If I was cold calling out there, you generally have to talk to 200 homeowners to get a lead. You’ve got to talk to 200 homeowners to get a lead. Now, my math this. I’m a lazy guy, so I’m like, “I don’t want to do that, because if I do a deal with a homeowner, and it’s done, then I got to call 200 more. That sounds like hell, right?”
But what if I talk to 50 agents a day, who are each talking to 50 people a day? What if I do that? What if I only talk to 50 agents a day, who are each doing their job, talking to 50 people a day to prospect and do business? The number of effective conversations that I’m now having with homeowners becomes 2,500 a day. Look at the exponential math here. So it makes sense for me to talk to 50 agents every single day, tell them exactly what I’m looking for, and then let them go do their jobs and talk to people, talk to homeowners, and see if I fit in any of those situations.

Dave:
Wow. I don’t think I’ve talked to 50 people on the phone in the last two or three years, but I applaud you for doing that. It’s just the Millennial in me. James, what about you? What’s the most valuable relationship you’ve formed in real estate?

James:
The most valuable one, it’s kind of a no question for me. So I’ve been a partner with my business partner Will Heaton for the last 18 years. We got in the business together as wholesalers. We started about 18 years ago, so it was a little bit different. There wasn’t this networking Internet communication channels that are out there today. We started off, we both got in the car, and we learned how to find wholesale deals by just banging doors all day long. And so that connection, it was like we were both in deep, we both didn’t know what we were doing, we both got in at the same time, and we learned together. And during that time, we kind of formed this bond that turned into this great partnership over the last 18 years to where we started all sorts of different companies, but it all started with wholesaling.
One thing that Jamil talked about just now is the relationships in wholesaling are so important, and a lot of people today, they forget about them, because the market was moving so fast, it was very easy to transact, so it was more just moving deals around. “Hey, will you pay me the most? If not, move on.” But these long relationships, like what Jamil’s just talking about, that’s how you build a long-term wholesale business. There’s been people we’ve been doing deals with for 15, 20 years, and I have probably made more money by keeping in connection and having that balanced work relationship with them. And it’s a very, very important piece of wholesaling that I think gets missed. Everyone’s looking for the deal, they’re looking for the buyer, but the right partnerships and people can exponentially grow you.

Dave:
Awesome. Well, as you can hear from Jamil and James, wholesaling, it’s about a lot of things, but relationships first and foremost. We’re going to get into a lot more of this, but if you want to buy Jamil’s book, we have a 10% discount for everyone listening to this as a thank you for being a listener of On The Market. If you go to biggerpockets.com/wholesalebook, you can use the coupon code “wholesale110.” It’s 110, wholesale110, you get 10% off the book, and you can learn everything Jamil has learned over his career as a wholesaler.
We are going to take a quick break and get back into our conversation about why wholesaling is such a good thing to do in the confusing economic climate like the one we’re in today.
All right, Jamil, for people who aren’t familiar with wholesaling, what’s the 30-second overview? What is it?

Jamil:
It is selling potential. Our job is to go out and find opportunities with potential, and then instead of this concept of finding equity, we don’t find equity, because there’s no equity in these until you take a risk and force appreciation. So if I can find potential where I can force appreciation, I now take that opportunity to a buyer, and I take a little bit of their profit off the table. That’s it. That’s what wholesaling is. And every business model has it. I can tell you this, every business model has a wholesale step-up model. When I go to McDonald’s, the patty, I pay $8 for that Big Mac was like a cent when it was in the cow. Everything has value, everything gets stepped up, gets transported, gets more appreciation, more value gets added to it. Same thing happens with a house.

Dave:
So you’re basically saying that you are finding deals, and you sell the opportunity to other investors to take advantage of these deals.

Jamil:
Correct.

Dave:
And take on the risk and hopefully earn a reward.

Jamil:
Exactly, to force appreciation. So I have to find opportunities where you can actually make money. You can’t wholesale a house where there’s no opportunity to make money. That’s it.

Dave:
And so in a traditional sense, wholesaling’s not exactly “investing.” Really, you’re trading. You’re not like putting your money into an asset for a long term, you are selling, like you said, you are selling an opportunity. So if it’s not “investing,” why did you choose to become a wholesaler?

Jamil:
Well, first and foremost, when I got into the business, I didn’t have the money to invest, right? Let’s just face it. I had limited opportunities and limited cash. But what I did have was an I for potential, and I did have a relationship with a buyer who was looking for a deal. And because I could put those pieces together, my first transaction was a $47,000 profit, after all the people were paid. Wow. That’s my first deal, walking my dog. And for me, the reason why I like it better than buying and holding, a buy and hold investment, people call it passive. It’s not. You got to do work. It’s still going to be something you got to take care of and manage. Well, even if you have a property manager, you got to manage a property manager. I’ve been in the business before, and I can tell you that’s what happens, right?
And so when you look at this whole concept of buy and hold, yes, it’s great for wealth creation, yes, but it’s slow. It is slow. You’re going to make a few hundred dollars a month over time, and that is not going to get you out of your W2. Not quickly, at least. For me, wholesaling provides such an opportunity to create real wealth that I can then invest into buying holds, which I do. I buy and hold Airbnbs, I do midterm rentals, and I’m buying assets that now cash flow for me that I can take advantage of so many things, but I love to be able to make big chunks of money in short amounts of time. And the only way that you can do that is by fixing and flipping, which is very risky, and wholesale.

Dave:
James, is it the same reason for you? Is that why you got into wholesaling?

James:
When I originally got into wholesaling, I was 23, a senior in college, and it was all about actually learning just the real estate business. It was the best introduction to real estate, because the beautiful thing about wholesaling is you are exposed to all of the pieces when you are that central hub for sourcing deal flow. You get introduced, and it allows you to scale really quickly, because A, you can get in the business, you can learn the business for free. You don’t have to pay anybody, and you can get money during that time and build your liquidity.
The biggest thing that wholesaling did for us is it got me in the game, and then once I started collecting checks and saving the checks, it got me to where I could start building wealth and getting more opportunities. Because as a wholesaler, you are working with tons of different buyers, tons of different relationships bring you deal flow that give you more opportunities, those opportunities you can revenize in any way, whether you’re wholesaling to another investor or you keep it yourself. In addition, too, you start building these relationships with other investors, lenders, brokers that last a lifetime that will help you grow as an investor 10X over the course of your career.
And so that’s why I love it so much. It’s the easiest way to learn, learn for free to where you don’t have to buy anything, in addition, too, you can make money and then start to build your platform. I can make money on any deal because of wholesaling. Learning those principles in the very, very beginning, it A, built liquidity for me, built my skillset, and then it gave me the opportunities to take steps in my investing career to start buying and holding, buying and flipping, and buying and developing.

Jamil:
Well said, brother.

Dave:
That’s awesome. I’m going to make you tell everyone how old you are, James, but what year did you get into wholesaling?

James:
It was 2005.

Dave:
Okay, so it was peak frenziness, right?

James:
Yeah, 2005 was very similar to the last two years, and that was back when we were banging doors. I’m going to sound so old right now. We would go out bang doors all day long, and we had a Blackberry Pearl. We didn’t have all the apps to get you around. You couldn’t check things. It was very, very old school, a stack of papers, you’d go bang on the door. And I used to hide out at houses, waiting for people to get home, and there’d be like 20, 25 people knock on the door at the same time as me.

Dave:
Oh, really?

James:
Yeah, I had all sorts of little tricks to get people gone, but it was competitive.

Dave:
You were just doing the stepbrother tricks that they do to make sure they don’t sell that house.

James:
“I already bought it,” those kind of things. But I’d be sitting in an appointment with somebody, and there’d be like 10 people knock on the door as I was trying to get the deal done. It was definitely chaos back then.

Jamil:
For me, it didn’t work that way, because I started in Canada, and it was not even known.

Dave:
In what year, Jamil?

Jamil:
I started in 2003. Okay.

Dave:
And what was it like then?

Jamil:
It was a blue ocean for me, because I would get the newspaper, and I’d look at the classifieds, and I would call all the people that had houses for rent, and I would just ask if they wanted to sell them instead. Then I would drive around, and I’d look at all the neighborhoods where there were developments going on, and I would write down the numbers of all of the handwritten signs. Anything that didn’t look like it was being managed by a property manager but by a homeowner or by a … Because I graduated from single-family wholesaling to multi-family wholesaling, I started wholesaling apartment buildings, and I’d be making $100,000 on one of those. And the seller would be happy and the buyer would be happy, because they’d be converting them into condos. And I would just be calling people that had handwritten For Rent signs, just self-managed stuff, people who are just tired, landlords ready to get out.

Dave:
We’ve just lost every listener we’ve ever had under the age of 30. We’ve talked about Blackberries, paper maps, newspaper classified sections. They have no idea what we’re talking about.

Jamil:
Oh, it was a different time.

Dave:
So tell me, Jamil, you’ve been doing this for 20 years now. How has wholesaling, how have you changed your wholesaling practices as the economy has changed and how the housing market has changed to continue to stay profitable and have a strong business, even as things are constantly in motion?

Jamil:
Well, the thing about wholesaling is I haven’t had to do a lot in terms of changing. The only thing that I’m ever pivoting on is my valuations. So I have to constantly be looking at the market. I got to be looking at where are buyers buying at? Where are sellers selling at? Where is it making sense? Are we appreciating? Are we depreciating? And I have to have my finger on the pulse of where the market is trading at right now for the investor-buyer, because the investor-buyer’s always at the table, but the price changes, and I have to be able to articulate that to the people who I’m buying from. And I’m honest about it. I tell them, “Look, the market is going up. The market is going down. This is where we’re sitting. You want a cash solution, this is where this has to be,” and we create trades.
And so just like you would in any other market, whether it be the stock market, the foreign exchange, whatever it is that you’re playing around in, you do the same thing in houses. So I’m constantly watching, I’m constantly looking at where the market’s going, where pricing is going, and feeling out my buyers, feeling out the sellers, feeling out the agents, and I’m putting things together. And so the beautiful thing about it is when the market is going up, I’m trading. When the market is plateau, I’m trading. When the market is going down, I’m trading. I’m always able to create money.

Dave:
So what are you seeing right now, how are those dynamics changing, or how have they changed during the peak over the last couple of years, and where we are today during this correction?

Jamil:
Interestingly enough, it used to be where I could make a sweeping generalization for the housing market nationally. I could say things are moving up, things are moving down. We can make these really broad stroke adjustments. It’s not the case anymore. Right now, what we’re having is all these individual little markets popping off in different sections, and now I’ve got to be even more specific about what’s going on in each market, because there’s going to be some markets that are really depreciating and there’s some markets that are appreciating, and I have to know the difference.
And so it’s more work for me right now, and it’s more work for our teams, but it’s more exciting, because we get to change our messaging, we get to change our approach depending on what city we’re in and what state we’re in. And so being really on top of the data, being really mindful of where things are heading and where things were allows me to stay on top of the numbers and to make appropriate offers and to make appropriate opportunities available to my buyers.

Dave:
What about you, James? How has your wholesaling business been impacted by market conditions over the last few years?

James:
The last nine months, it’s been a different game for the wholesaling, at least when you’re going direct-to-seller and doing your own off-market kind of generation of leads. Like what Jamil does a lot is he’s working with brokers. Brokers are talking to people that already want to sell their property, whereas a lot of what we do as a direct-to-seller to where we’re engaging with people, seeing if they’re interested in selling.
And the issue with wholesaling that’s been, and it’s starting to turn the corner, is people’s price expectations were just well out of whack. This came off this huge bull run. They didn’t feel the pain of the compression, and so they still want it a lot. But in any market shift with wholesaling, this is why it’s so great, is any different type of market, every new market cycle, every new market condition creates new investment opportunities and new platforms to go buy.
So as the market changes for us as wholesalers, we then narrow our focus with what kind of product that we’re targeting on what is in highest demand. So right now, wholesaling multi-family is very difficult, because the rates are really high, sellers are getting good income, so they don’t really want to wheel and deal on their pricing. And so we kind of backed out of that segment a little bit, because the odds of converting were very low, whereas things that were in high demand are actually flips that just need a little bit of work, because people want to reduce risk. They don’t want to be in the market for a long time, thinking there could be a recession coming. So we’re having a lot more conversions on actually slimmer deals with lower margins, because they’re fast and easy. People would rather buy that than a big spread deal.
And so as a wholesaler when the market changes, we have to change what we’re targeting and how we’re going to position, and that’s where we get the best conversions, and that’s how we turned our conversions around. It got pretty low, five to six deals a month, which is pretty low for our team. And now we’re back up to 15 just by making that pivot of chasing what people want. As a wholesaler, you convert better if you’re going to the masses. I heard Jamil say one time, “Play in traffic …

Jamil:
You’re going to get hit.

James:
… you get hit.” That’s 100% true. So you want to find in the market where the busiest sector is, what people want, and we reverse engineer it and go after that product.

Jamil:
Love it.

Dave:
That’s great. That’s excellent advice. Are you seeing, James and Jamil, both of you, persistent investor demand right now? Is it harder to find buyers, they just want something else, or have you seen the number of buyers drop off?

Jamil:
In our business, absolutely not. We have not seen the buyers drop off. In fact, they’re more ravenous than they were. They’re phoning us. “What do you got? What do you got? What do you got?” It’s a very interesting time right now, because I think that the way that they’re looking at inventory, the way that it’s very difficult to get your hands on, even if you’re on the MLS right now, it’s difficult to get your hands on an opportunity. They don’t sit. And so the investor-buyer right now, at least for us, because I’m national, right? I’m looking at the numbers for our franchises across the nation, and there is a ton of demand.
Now, here’s the pivot. We always can’t meet that demand, because again, James had said, you got to find the opportunities of what they’re looking for. So right now, there’s been more deals in that luxury in that $700,000 to one-and-a-half million dollar range. There’s more opportunities available there, because there’s less buyers buying there right now, because at the end product, those guys are a little bit more sensitive to the rate situation. But in that starter home range, oh, my God, man, I just can’t keep that inventory available.

Dave:
Is it the same thing for you, James, people are still buying?

James:
Yeah. The cheaper, more affordable, straight-over tackle product, the margins are really slim right now, and it’s very, very competitive. And to kind of piggyback on what Jamil said, that luxury market, it comes with more risk. I think a lot of people did burn up capital, and capital’s starting to get burned up the last six to nine months. People were making a lot of money, but they were spending a lot, and so all of a sudden, they went to go do more deals, and they kind of ran out of cash based on some bad investments and their spending habits. And so it has limited the buyer pool in the luxury market.
We actually did almost a two-hour sales meeting about this on Monday. We were in the MLS for two hours, just going, “Where is the margin?” And it is in that more expensive, bigger renovation projects, but the margins are probably 2X what they were 12 months ago. So as wholesalers we’re going, “There’s where the opportunity is. We have a big, big margin here.”
But then also as wholesalers, we have to go out and make sure that we have the right client and buyer base for that product. So we also reverse engineer our buyer’s list. “Hey, if this is where we’re seeing the most amount of opportunities and the biggest margin, that’s where we’re going to revenize this the best.” So then we reverse engineer it and then track down the buyers looking for that. Instead of going for the masses in the buyers, we’re going for specifics, because we can convert and transact so much better.

Dave:
Given that we are either in a recession or on the verge of recession, depending on who you ask, I’m curious, Jamil, we’ve talked a little bit and hinted at why wholesaling is recession-proof, but to you, why is the wholesaling work in any kind of market?

Jamil:
Well first, the evidence, I’ve been in it. I’ve been in it, and I’ve profited through it. And so I can tell you that it works, because there’s always a buyer at a table, depending on where the price is. During the great recession, I was smashing wholesale deals. It was phenomenal. And this is at the bottom, the bottom of the market where everybody was running away from real estate, I was able to get in, get opportunities, and sell them and make money fast.
So the reason why I call it recession-proof is again, when you have a ready and willing and able buyer that’s going to be at the table, but the price has to work, that’s the only thing that you’ve got to figure out. So the reason why I’m bullish on wholesaling is because, again, I’m not exposed. I’m never exposed, I don’t lose money. I watch and I trade, and that’s why I’ll always make money. So if you can make money on an upmarket and you can make money on a down market, that’s recession-proof to me in a nutshell.

Dave:
And is the reason you say you don’t lose money is because you’re not ever really putting any of your own money into the business or into the deal?

Jamil:
I put money into the business. Of course, to operate a company like mine, it has costs, but I’m not putting my money into the assets. I very rarely take assets down. I do fix-and-flip myself, but I’ll tell you what, during the last year, I took a lot of losses on my fix-and-flips, and I didn’t take losses on my wholesale business. Wholesale business is what kept my whole thing going. I’m thankful for my wholesale business, because my fix-and-flip business, if that’s all I relied on, it would’ve sunk me.

Dave:
Interesting. So how do you decide which deals you’re going to wholesale and which ones you’re going to flip yourself?

Jamil:
Phenomenal question. It is always, just like James, I’m looking for the money. I’m looking for the greatest opportunity with the least risk. And so the beauty of a wholesale business is it lets me cherry-pick the deals. I get to decide, I get to look at every single deal, and I get to make a decision. Do I like this one? I do like it, but it’s too far. I like this one, but it’s maybe a more complicated remodel than I want to be into. I like this one, or this one is exactly right for the amount of money we have available, for where our crews are stationed right now. This makes the most sense for us to plug into our business model. Let’s go with that, sell the others. So it really allows me to engineer my business, my lifestyle, the way that our companies operate, where people are stationed and located with respect to crews, because that becomes a costly thing.
There could be a great renovation at one end of town and another one at the other end of town, and having people having to go from this to there is going to be very damaging to the workflow and schedule. And it’s going to end up costing us more money than it would’ve if we’d just bought something that had a little less margin but was super close to the project that we’ve already got going on. And so we pay attention to all that. So allowing us to cherry-pick opportunity, location, renovation size, all of that is the reason why having a wholesale business feeds your fix-and-flip business is … And James is exactly the, he’s the model, this is exactly what he is doing all the time. He’s cherry-picking. They should call him Cherry-Pick James.

James:
He’s already got so many nicknames, DJ 100 Proof. We get the leftovers, though. That’s the problem. When you start running multifaceted businesses, we have to service our investor clients. We also have to work our money with hard money. And the demand is always for what everyone wants, which is the straight-over tackle rehabs. That’s why I’m always stuck doing these massive projects. I take what everyone else doesn’t want.
When people come in, they’re like, “Hey, do you cherry-pick out all the properties? We think you get all the good ones.” I’m like, “Let me pull up my list of properties I’m working on. You tell me if you would buy one of these.” Almost 99.9% of the time people are like, “No, I’m not buying that. I’m not buying that. I’m not buying that.” But I also am a glutton for punishment. I just like the big margins. Big margins also are recession-proof, because even if the market flattens out, you can absorb it, there’s so much cushion.

Dave:
But does your mix change based on market conditions, James? We’re in a high interest rate environment, there’s a correction going on in Seattle that you could call it a crash probably. I don’t know. I don’t know what you want to call it, but does your mix of how many wholesale, how many you flip change at all?

James:
It can, and the reason being is we are buyers in the market always, and if we hit these little row bumps, because what the thing is, wholesaling is recession-proof, but there can still be dry spells. Like anything, as things transition, it’s harder to get more deals done, which it can be a dry spell for a wholesaler. But in 2008, we were wholesalers actively wholesaling 15, 20 deals a month, but it was really hard to move product back then, because there was limited cash in the market to buy these deals, limited buyers.
So because there was no buyer demand, we stepped up and became the buyer. And so we were basically wholesaling to our own investment business at that time, because we kind of had to step up, because we saw the good opportunities. So that’s typically when we’re going to be buying more is if we’re seeing the opportunity and there’s no demand, because we like being wholesalers, flippers, and lenders, because it allows us to have multiple income streams that can feed us in every which way, and then we’re not stuck in one asset class, and we’re not handcuffed to one income stream.
So as operators, it’s actually really important for us to balance that out at all times. But yes, we do buy more if there’s no demand we’re seeing there. And if we are seeing the deal flow, for us, we typically get more deals done if we’re the ones buying stuff that no one else wants. Because if I have no buyers to buy this stuff, I’m just losing out on transactions. And so we actually fill the gaps a lot for our clients too.

Dave:
So one thing you both have mentioned is buyers, and I think it’s really important to talk about this, because casual home buyers, people who are just getting into real estate, I think think during a correction during these uncertain times, everyone stops buying. But fix-and-flippers, it’s their job. They don’t just stop working. People are still buying. You both are saying that you’re still buying. So can you tell me a little bit more about who these buyers are who are buying in these types of market conditions, what they’re looking for, and how you find people that you want to work with?

Jamil:
It’s a great question, Dave, and I think it’s an important thing to understand. The buyers are the lifeblood of the business as well. They are the ones bringing the liquidity to the transactions, they’re the ones who say yes or say no. And I think where a lot of wholesalers go wrong is they don’t believe their buyers are sophisticated. They try to put out a product that is just not going to work for their buyers. They’re not thinking about the product or the buyer’s profitability, where that’s all we think about. The only thing that we think about when we’re putting a deal together is how is someone going to be able to make money on this opportunity? That’s it. If it’s not available, it’s not a deal. I’m not going to touch it. I don’t want to even send it out. I don’t want to look bad. I don’t want to waste people’s time.
So how do we focus there? Well, we talk to them. We create relationships with these buyers. We ask them what do they want? What are they seeing? Where are their fears? Where are they bullish? And by getting that data and understanding that information, we are able to curate opportunities for them. So again, my buyers aren’t going to see everything. They’re going to see what they want to see, and we’re going to hand deliver the opportunity to them. The thing is, buyers, they’re not looking in their email, so not a lot of our deals sell on an email blast. And that’s a very, very elementary way that people do this business. It’s not going to work. My buyers buy from their relationship at our company.
So they have a great relationship with one of the representatives, they’ll have been working with them for years, that person knows that buyer’s buy box. As soon as they see something that fits the buy box, they call them. They say, “Look, I got a deal in your zip code. This is the margins. I think you can make 15% or 20% conservatively on this deal. I’m going to send you a deal text. Let me know your thoughts. I’ll try to have it just in your hands for the next 15 minutes.” And they let them do that, because the buyer is not in their email all day, they’re not sitting there comping houses all day. They need to trust you, they need to know that what you’re going to send them is real. So I think having those conversations, curating those opportunities, really getting a depth of relationship with your buyer is tantamount to being a successful wholesaler. And if you don’t do that, it’s not going to work.

Dave:
Is it the same thing with you, James, or how do you structure your relationships with buyers?

James:
Yeah. The thing about wholesaling is everyone wants to chase the deal, but that’s just half the transaction. For me, the buyer’s actually the most important thing for wholesaling, and I learned that lesson in 2008. When there was no buyer and there was no money, it was really hard to wholesale. And so we always want to be working with our clients, working with our buyers, and identifying what their buy box is, because we actually kind of wholesale a few different ways.
The one is we go for the masses, which everybody wants, which is your cookie-cutter fix-and-flip. We can put a huge target list together, chase it that way. But that gives you only a certain amount of transactions in a certain market. We’re backyard investors, we work three counties in Washington State. We are going to only get so many opportunities. So for us to scale our wholesaling business, we have to then create new channels as well.
How we do that is we source directly on what the buyer’s actually telling us. So some of our best clients are the huge buyers or the institution or the big builders in Washington. We doubled our wholesaling business last year and over the last 24 months, because we met with these big buyers, identified their buy box to a tee, and we direct marketed just for that kind of product. Because we were hand delivering them exactly what they wanted, they were the highest buyer in the market. And so it was very easy for us to transact. So we set up different buckets for a wholesaling company, one that goes to the masses, big buyers, they can buy unlimited, they’re buying anywhere. I think one builder, we sold 75 lots to over a one-year period.

Dave:
Wow.

James:
Out of those transactions, I would’ve maybe been able to stick five of those for a fix-and-flip client. So that got me 70 more deals that year. And not only that, then we also take it to our 1031 exchange buyers. We have a big buyer pool of people trying to reload up in different types of product, we can market it to sellers and create a different type of lead that all these other buckets wouldn’t work in. So the more buyers you have, the more marketing channels you can set up, and you will transact at 2X, 3X, or 10X what you’re doing today.

Dave:
Jamil, last question here. You mentioned before that normally you could give a synopsis of the national housing market, but things are so different regionally. Are there certain markets where wholesaling works particularly well right now, and are there certain types of markets or even specific markets that you would avoid?

Jamil:
So I am not avoiding any market, but there are some markets right now that are just on fire. Anywhere in Florida right now, I can’t keep product. Texas, I can’t keep product. Things are just moving too quick. The Carolinas, it’s insane. So wherever migration is going right now is where there’s going to be an increase in wholesale activity and in fix-and-flip activity. It’s just rampant out there.
Now, the West Coast for that is the opposite. So California, it is hurting right now, but there’s a lot of opportunity, and you can get some really, really, really, really crazy deals. I can’t get crazy deals in Florida right now. I can’t get crazy deals in the Carolinas right now. I can get crazy deals in LA. In fact, right now I’ve got a seller in Los Angeles, who called me and wants to trade on an ocean front piece very close to the house that I already have right now at a price would’ve never been able to get last year, impossible, and terms would’ve never been able to get.
And so seeing that opportunity is available right now, I’m going to strike because people are not there. And if the people aren’t there, that means that I have an opportunity to come in and really dictate what I want. And then maybe it’s a longer hold, maybe it’s a different play, but I can still capitalize on opportunities where there is less volume, less activity.
So I’m still trading everywhere, but there’s obviously some markets where I don’t have to be aggressive on my attitude towards the seller and aggressive in my attitude towards the seller and aggressive towards the buyer, either. Because right there, right now in Florida, for instance, things are moving so quickly, and the market’s appreciating. It’s pretty great.

Dave:
Well, it’s just a perfect example of everything in investing, where it’s just a trade-off between risk and reward. Like a market like Florida or Texas has less risk right now, because there’s so much demand, but the deals are a little bit thinner, because so many people want them. Whereas in California, it’s a little bit riskier, but there’s probably a little more meat on the bone for people who are willing to go do that. And it’s really just a question. This is true of wholesaling or any asset class. It’s really a question of your strategy. Is there a dock for James’s boat next to your house? You guys could be neighbors.

Jamil:
It’s not in the marina, but it’s on the main beach there in Marina del Rey, but I think James could sail by, and I could wave at him.

Dave:
He pick you up? You buys could go for a, you guys could go for a race.

Jamil:
Yeah, just drop and let me … But I don’t swim.

Dave:
It’s all right. You don’t swim?

Jamil:
I don’t.

Dave:
Do you float?

Jamil:
I flail. I die in water. I get as far into the ocean as where my feet can touch, and then as soon as that stops happening, I go back.

Dave:
What about a pool? You don’t like pools?

Jamil:
I like a pool where I can touch the ground.

Dave:
Okay. All right.

Jamil:
Kiddie pool.

Dave:
All right. Well, this has been really, really helpful, and obviously this has just the tip of the iceberg of all of the insights and information that you can get from Jamil’s book to learn how to wholesale. Before we get out of here, Jamil, is there anything else you want our audience to know about wholesaling or about your book in particular?

Jamil:
Yeah. If you have had an ethical concern about wholesaling, because that’s something that I’ve heard a lot. People want to be able to sleep at night, people want to make sure that the way that they’re operating the business is with integrity and is not going to get them in trouble, not going to have them have a newspaper article written about the way that they did business. You really want to read this book, because I approach this from an ethical perspective in the point of view of a win-win-win scenario. There is nothing wrong with making money. It’s only wrong when people have the wool pulled over their eyes. That is not what we’re trying to do. What we do is good business with integrity, where everybody is getting what they want. End of the story.

Dave:
All right. Well, go check out Jamil’s book. What is it called? We didn’t even say what it’s called.

Jamil:
It is called Wholesale Real Estate, The No Cash Strategy to Build a Scalable Business.

Dave:
All right. Well, check it out. You can find it at biggerpockets.com/wholesalebook. The coupon code, if you want 10% off, which you should, is wholesale 110, that’s wholesale-one-one-zero. Go check it out. You learn a lot from one of the, if you know, the best wholesaler in the entire business, Mr. Jamil Damji. If you want to connect with him, I’m sure you’re selling it on Instagram everywhere, right? What’s your Instagram account?

Jamil:
J-D-A-M-J-I, and you can check out my YouTube, Jamil Damji.

Dave:
All right. And James, if people want to check you out?

James:
@jdainflips on Instagram’s a good way, or @jamesdainard.com.

Dave:
All right, James, you’re next. BiggerPockets Publishing is going to get you to write a book one day, sooner or later.

Jamil:
That’ll be a big book.

James:
Fix-and-flip, ugh.

Dave:
Well, Jamil, congrats, man.

Jamil:
Thanks, brother.

Dave:
It’s a huge accomplishment. Writing a book is very difficult, and I know you’ve put a lot of time and effort into helping people understand what has been your life’s work. So we really appreciate that. Recommend you all check it out. Thanks for listening. We’ll see you next time for On The Market.

Dave:
On The Market is created by me, Dave Meyer, and Kailyn Bennett, produced by Kailyn Bennett, editing by Joel Esparza and Onyx Media, research by Puja Gendal, copywriting by Nate Weintraub, and a very special thanks to the entire BiggerPockets team. The content on the show on the market are opinions only. All listeners should independently verify data points, opinions, and investment strategies.

 

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.

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