Boost your bottom line by getting more deals across the finish line

In my interview with David Olds, he shared a startling statistic: just 50% of real estate wholesale contracts actually close. 

That means wholesalers and investors are only earning half their potential revenue. And they’ve already done most of the work on those deals that don’t close. 

But with a few small tweaks, you can get that close rate up to 65-70% — earning massively more revenue without more work. 

So how can you get more of your contracts to the closing table? 

Avoid Common Pitfalls

Most wholesalers and flippers make the same few mistakes that kill their deals. Here are the big ones that sink investors and drag down their closing rate. 

Mistake 1: Overpromising on Speed

Don’t promise you can close next week if you can’t. Hard stop. 

Not only does it destroy the trust you worked so hard to build with the seller, but it creates a ton of work for a deal that may never see the closing table. 

Establish close ties with a title company, and specific workers there. Find out exactly what they can and can’t do — before you promise a timeline to the seller. 

Mistake 2: Lack of Transparency with Sellers

Likewise, don’t try to pull the wool over sellers’ eyes. Tell them up front if you plan to assign the contract to one of your colleagues. And don’t neglect to tell them that if one of your colleagues or partners ends up taking over the purchase, you might charge them a fee for all your work setting up the sale.

It takes practice to learn how to explain it truthfully without turning off sellers. Invest the time to master this explanation, because it will prevent your deals from falling through due to angry sellers feeling betrayed when they see the settlement statement.  

Mistake 3: Not Verifying Title Issues Early

If there’s a cloud on the title, such as a lien that the seller didn’t tell you about, you need to know that before you market the property to your buyers list. 

Run the title search before you do anything else. It prevents you from spinning your wheels, and preserves your credibility with buyers. 

Mistake 4: Signing Poor Legal Contracts

Strong contracts help you prevent the other parties from backing out of deals at the last minute. 

Spend a little money on ironclad purchase and assignment contracts, that don’t leave loopholes letting your other parties pull out. 

From there, you can upload your template to REsimpli. Our CRM will help you auto-fill the details and e-sign the contracts, in the sequence you set. After all, you need the right people to sign the contract in the right order. 

You can set multiple buyers or sellers, along with email verifications for legal validation. And when contracts are signed, you can set REsimpli to automatically email copies to all parties — including the title company. 

Professionalize Your Real Estate Business

Professional athletes don’t duct tape together their shoes. So why are you trying to duct tape together your real estate business?

If you want to earn profits like a professional real estate investor, use the tools your pro competitors are using. That starts with marketing and accounting tools like REsimpli. 

Don’t take our word for it. Try it out for yourself with a 30-day free trial. 

We look forward to hearing your feedback and successes after your first month running with the big dogs. 

Hire a Transaction Coordinator

The single greatest way to close more deals is to hire a transaction coordinator to manage them. 

David Olds’ clients who use a transaction coordinator close 67% of their contracts, compared to 50% of those who don’t. How much money are you leaving on the table by trying to do it all yourself? 

Transaction coordinators handle title issues, closing logistics, and communication with all parties. That frees investors like you to focus on acquisitions and marketing instead of paperwork.

And no, you’re not “too small” or “too new” to use a coordinator. Hire one from the very beginning to borrow their expertise, push through obstacles, and close more deals. 

You don’t have to hire on an employee, either. Check out Olds’ company ezREIClosings, which offers an option called The Closer’s Club. They coordinate transactions on a per-deal basis for a flat fee, with 10% off for REsimpli members.

That lets you test transaction coordination without hiring someone or long-term commitments.

Get Your Loan Approved Fast

Flippers and BRRRR investors need to borrow money to close themselves, rather than assigning contracts to another buyer. If their financing falls through, so does their deal in most cases. 

Follow these tips to make sure your loans close in-full and on-time, every time. 

Develop Relationships with Several Lenders

The better a lender knows you, the more likely they are to approve your loan. And the faster they can typically approve you too, since they’re already familiar with your income and assets. 

Don’t stop at just one lender however. You probably need relationships with different types of lenders, and perhaps backups for each.

Recap of Hard Money vs. Portfolio vs. Conventional Lenders

As a refresher, here are the three types of lending businesses you’re likely to work with:

• Hard money lenders issue short-term loans to buy and renovate properties. Flippers and BRRRR investors use them to cover 70-90% LTV and 100% of renovation costs. Hard money loans are typically expensive, fast, and flexible. 
• Portfolio lenders issue long-term mortgage loans, but they keep them within their own portfolios rather than bundling and selling them. They usually charge a little more than conventional lenders, but far less than hard money lenders. Often portfolio lenders offer some flexibility for unique deals. Community banks, credit unions, and some regional or online lenders offer portfolio loans for landlords. 
• Conventional lenders write loans that fit Fannie Mae, Freddie Mac, or government agency loan programs. They then bundle and sell these loans on the secondary market. These bank loans are often the cheapest loans available — and the most rigid and slow. 

You can also arrange for contingency financing to keep on hand, such as unsecured business lines of credit or business credit cards. In case of credit cards, you can tap into them without triggering cash advance fees and limits with services like Plastiq. 

The 10-Loan Rule

Most conventional loans only allow a certain number of mortgages on your credit report. Over that limit they disqualify you. 

The exact limit varies by the loan program, but the most common caps are four, six, and ten mortgage loans. 

As an investor, you have a few options. The easiest is simply to stop borrowing conventional loans altogether and stick with portfolio loans. 

But if you prefer conventional loans, explore creative ways to approach the limit. Find loan programs that allow ten mortgages, rather than four or six. If you’re married, consider buying some properties under just your spouse’s name, and others under just your name. 

Loan Discounts

Ask your lenders about interest or fee discounts for properties in certain areas. Some offer them for properties in low and moderate-income census tracts to meet federal lending requirements.

Lower LTVs Make for Cheaper, Faster Loans

Often if you put down a larger down payment, lenders can offer you lower interest rates, lower points, and faster underwriting. 

Even borrowing a loan-to-value ratio (LTV) of 75% instead of 80-85% can make a huge difference. The more cash you have on hand to get a deal done, the more likely it is to actually close. 

Learn How Novations Work

David Olds shared a fascinating stat in our conversation: his average wholesaling client earns $18,000 per deal. But that average profit jumps to $40,000 for clients who do novations. 

The novation strategy involves putting a house under contract, just like you would as a flipper or wholesaler. But instead of keeping or assigning the contract, you list the house for sale on the MLS. 

Wait, what? How does that work? 

The legal process of novation allows you to modify your original contract with the seller to replace you as the buyer with someone else. It also lets you build your fee into the new contract, and releases you of all legal obligations. 

The seller must sign the new novation agreement, once you’ve found an end buyer. As you can expect, the process takes longer than wholesaling, since you’re selling the property to retail homebuyers. 

But as Olds’ data shows, it can prove far more lucrative than traditional wholesaling. 

Novation adds another tool in your arsenal, another option you can offer sellers who want a higher sales price than what you can offer by wholesaling. Consider offering it as a backup option when sellers demand more than you’re willing to pay. 

Tying It Together

When your contract falls apart just before closing, you’ve done 95% of the work only to earn $0 in profit. 

That’s a recipe for staying busy but broke. 

Make it a priority to get your contract closing rate over two-thirds, preferably higher. Hire a transaction coordinator. Avoid the mistakes outlined above. Develop relationships with several lenders. Learn how novations work as another way to negotiate deals with sellers.

You want to spend most of your time refining your marketing machine and conducting sales negotiations with sellers. Don’t waste your time chasing paperwork. 

Fortunately, REsimpli can help automate much of the paperwork required to close deals. From drip campaigns to e-signed sales contracts, automated expense tracking to lead tracking, lean on REsimpli to systematize your real estate business.

That leaves you to focus on actually making money by closing deals. Try a 30-day free trial of REsimpli’s CRM today, to shift your real estate investing machine into high gear.