Transcription
[Music]
Hello and welcome back to another episode of the Collective Clicks podcast. This week, I'm joined by Robert Wensley, the founder of Investor Lift. We're going to talk about the national wholesaling model, why you should have less diversity in your exit strategies and specialize more, and the marketing companies are using to get to one or two million dollars per month in wholesale assignment fees.
How you doing today, Robert?
Excellent, excellent! Thanks so much for having me on, Brandon.
Yeah, super excited! Sounds like today is day number one for you in the DR, right? So we're at your new office. You know, a lot of people, they they look at investors, they see we're moving billions of dollars of deals every year, and they assume that we have this massive office with hundreds of employees. We've actually been working out of a couple little apartments here and there for the last few years. And actually, I'm sitting now, today, in our first official office that we just opened. I think there's going to be—I'm going to post an office tour video on YouTube pretty soon—but officially just moved in yesterday, so pretty excited about that.
Yeah, cool. That's fantastic. Why the DR of all places?
So my co-founder is Ukrainian, but was born in Russia, lived in Ukraine for the last 15 years. As a result, a lot of our team is Russian and Ukrainian. When the war started, I was like, "I got to get you out of Ukraine." He didn't want to leave Ukraine, so I played a little trick on him. I'm like, "Hey, for my birthday, why don't you come down to the DR and we'll rent a yacht for the week?" He said, "All right, cool." So we came down February 21st for my birthday, and of course, while he was down here for my birthday, Ukraine got invaded. I was like, "Called that one!" Looks like I had—had him, got him out. So he came down here. I think he was just coming down here for a week for my birthday and ended up never going back after the war started. And then, over the last couple years, we've actually moved our entire Russian and Ukrainian team to the DR because you get visa-free access from all countries, and it's on the same time zone as—as we are on the East Coast. And I do not want war interfering with my business.
That's crazy!
Yeah, well, that's—that's a unique solution though. So you just like—you actually like took these people and moved them from their home country into the Dominican Republic. Was there resistance on that, or were they like happy to—happy to get out?
I'm sure you got a mixed—mixed response from different people.
Not everyone was happy. I—I mean, there's like two—I think we got two guys hanging behind because they have older, like, parents or grandparents, so they're taking care of, so they're kind of, you know, they're—they're stuck behind enemy lines, so to speak, taking care of their older family members. But everyone else was like, "Yeah, no, like—this seems like a good opportunity." And I mean, they live—we live in a beautiful place. We're a few blocks away from the beach here. We got swimming pools, soccer fields, gym, pools. Like, it's not like we're—we're in a third-world country. We're in like one of the nicest areas in the Caribbean. So good—good place to run a satellite office.
Yeah, that's—that's fantastic. Well, good for you. I'm excited. I'm honored to be your first podcast appearance in your brand new—not studio, studio or whatever—whatever you're calling that—that place you're recording from. And honestly, just really grateful and excited for this podcast episode overall. It's funny, we were just talking before we even got—got started, what to talk about, because the overlap between—um, you know, what we both believe in and what we care about and what we teach and all those things is just so massive. I feel like making this podcast shorter than eight hours is probably the biggest challenge of them all.
We both believe in the gospel of making millions of dollars.
That's right.
But believe it or not, there are different gospels of—of making millions of dollars. We—we subscribe to a specific—specific denomination—um—that—that tends to be really effective, but it's newer, and that's why people are—are less into it. But in many ways, I think—I think that you have—um, you know, every—every big movement that happens, there's always going to be a few companies that are kind of behind it, enabling it, making it possible. And I think of Investor Lift like that for the—for the virtual and national wholesaling model—uh—where it makes it so much more feasible.
So, on the—on the chance that there's somebody listening that doesn't know you, your background, how you got into this—um, you know, I wanna—I wanna spend the meat of the episode just kind of talking strategies, tactics, all that kind of stuff, but I think it'd be super helpful to know kind of like, who are you? What does Investor Lift—what are you doing here? All that kind of stuff.
So I was born in—no, I'm just kidding. No, we'll go—we'll go back a little bit, but not too far back. So growing up, I always wanted to make a ton of money. My friend whose dad made the most money was an investment banker, so I actually grew up trying to become an investment banker. And—uh—you know, I asked him like, you know, "How do you become an investment banker?" He's like, "Go to a top school, preferably Harvard, go and study economics and finance, work on Wall Street, and then, you know, get—try to get a job at like Goldman Sachs or, you know, one of these big investment banks." So—uh—that was the—the ladder I was trying to climb for the first part of my life. And I got into Harvard, got Mark Zuckerberg's dorm room, did economics, did finance, graduated dean's list. But I was doing summer internships at finance firms, and what I realized is I didn't really like doing finance. I'm like, "Yeah, yeah, I'm gonna make a few million dollars a year, but I'm working for some other rich…" And I was more of an entrepreneur. So—uh—right before graduation, turned down all my job offers and decided, "Hey, I'm gonna go learn how to be an entrepreneur," but I didn't have a good idea at the time. It wasn't like I had some billion-dollar idea that I wanted to kick off. But I remember looking at this one stat from the IRS that's like, "90% of all millionaires make their money in real estate." So I'm like, "Well, a safe bet would probably be to, you know, go learn real estate." So I started cold-calling house-flipping companies, pitching them on coming to work for them, ended up taking a job on Brad Chandler's team, Express Home Buyers in Washington, D.C., and came in thinking I was gonna learn how to become a house flipper. And—um—little did I know that that would really turn into me learning how to wholesale, which I didn't even know about. And then not just how to wholesale, but how to create this new era of mega-wholesaling—um—that we've never seen before, but I believe really is the—the future of—um—real estate investing. You're going to have this—this split, you know, the split between the guys doing the construction, the guys sourcing the deals. That split has started to emerge, but it's just gonna—it's just gonna accelerate—um—and accelerate more and more. So—uh—worked on Brad Schindler's team, took his team to over a million dollars a month. Then—um—after I left there, worked on our team, took them from about 150 000 to over a million within—I believe about six months. And then five months later, we broke two million a month in assigned fees earned—um—then was like, "Hmm, done it twice, let's see if I can do it a third time." Um, started working with a few other companies, Charcoal Moose's team—uh—took them from pretty much zero wholesaling to over two million a month, and I believe we did that one in about seven months. So we started doing it over and over and over again, taking these companies that, you know, had some real estate experience, where like maybe making a few hundred thousand dollars a month flipping, a lot of times keeping the existing team in place or even shrinking the team to a much smaller, leaner, lower overhead team with less burn and pivoting them into wholesaling and turning them into these mega-wholesaling machines that pump out millions of dollars a year and have super high net margins—um—and we were doing this over and over and over again. Every time we try to do it, we've done it. But of course, dispositions was always our bottleneck, right? Uh, acquisitions, you know, you get—it's somewhat easy to crank up Google Ads, you know, to come and double your budget. I know it's a little bit more complicated than that, but, you know, you want twice as many leads, double your budget, you're going to have some diminishing returns, but you're going to get more leads—um—you want to double your sales team, hire twice as many salespeople. On dispositions, when you start scaling out into multiple markets, you have a really good core buyers list in one market, and you start scaling up into other markets, a lot of times you get kicked in the ass real hard because you don't have the buyers you need to move the deals, the numbers that make sense. And you end up having high contract follow-up rate, you end up not making the assignment fees you should be making—um—there's a lot of issues you run into. So after getting kicked in the teeth a few times myself trying to branch into multiple markets, I built this product called Investor Lift, originally for myself and for my friends. And originally, it was just kind of like our secret sauce, right? I'm just like, "This is just gonna be our secret sauce. I'm not opening it up publicly." And—um—we used it to allow ourselves to branch out into multiple markets and become nationwide wholesalers. And then a couple years ago, about a little over two years ago, I opened it up to the public, and it just took off. We—we now move more—more real estate investment deals than anyone else in the world. Last time I checked, we were doing two and a half times more properties per month than all the iBuyers combined—um—and generating just, you know, billions and billions of dollars of offers and selling billions and billions of dollars of deals. So we got a lot of data, and—um—we're changing a lot of businesses. And also the cool thing is I see a lot of trends in the data because we have—we're spinning off over a quarter billion data points per month. So what that gives me is a little bit of a crystal ball and like where things are headed, where things are going. And—um—to be honest, I haven't even talked about much of that on a podcast. I don't think I've talked about very much that at all on podcast before, so we'll dive into some of that today, and I think it's gonna be a great episode.
Yeah, I'm—I'm really excited to do that—um—and for—for what we've—yeah, we—you may not have talked about this on podcasts, but I know we've certainly talked a lot about it and—and used some of those insights and everything to kind of drive our location strategies across our clients—um—because it all starts with the product that you can sell, right? You need to get contracts that are sellable and ideally with larger gross margins. And—and to do that, I mean, understanding the dynamics of what produces that, I think is—I think is huge. So that's—that's fantastic. So Investor Lift, if I were to simplify it, let me—let me see how I see it. You can correct me because I'm sure you've thought about this a lot more than I have. I think of it like access to this list of cash buyers along with the technology and some of the tools required or needed on a day-to-day basis to kind of manage that whole—that whole piece, you know, whether it's like emailing or texting buyers or whatever the case is and accepting offers. So it's sort of like the data is the list and then—and then some tools for—for contacting that list—um—and that's what I view is like the bulk of the product. Is there anything to add to that?
Yeah, I mean, the main thing we're trying to do is give you liquidity on your deals, give you liquidity in your contracts. We're going to help you sell your deals faster at higher prices. The—the average wholesaler in America typically, off of Investor Lift, will have an average assignment fee of 14 or 15 000. But our guys consistently clock average assignment fees, and last month nationwide—um—I believe was 32.1 thousand dollars nationwide across the entire Investor Lift network, which is huge, right? Like that's—that's over twice as much money per deal. So people ask you, "Okay, how the hell do you get assignment fees that high?" The way we do it is just by giving people access to better tools to drive more demand for their deals, better data, more buyers, putting more eyeballs on their deals. So, you know, if you had one deal with one offer on it and you had the exact same deal with five offers, which one's gonna make you more money, right? And on a half a million dollar house, it's really easy to make in—five, ten, fifteen thousand dollars per deal, right? For the buyer, they're only paying a fraction of a percentage more for that property to secure that—that deal. But for you, the wholesaler, if you go from a fifteen thousand dollar assignment fee to a thirty thousand dollar assignment fee, you've just increased the profitability of your business by 100 percent. So that's really our goal is to like really shed light on like the real money in wholesaling is in nailing dispositions. Everyone focuses on acquisitions, but you can do everything right on acquisitions, but if you don't get dispositions down, nothing on marketing and sales and acquisitions matters. It's always—you gotta cash that check at the end of the day.
Yeah. In my opinion, it seems like there's way too many companies that just focus on selling the deal, right? And that's kind of the focus of dispositions is we're going to do this until we get an offer and it's accepted and we have found a buyer for the property. And not nearly enough effort put into, "How do we sell it at the highest price we could possibly sell it for?" So I think that's—I think that's super interesting. Like you—like you said, the distinction of Investor Lift could be, in some cases, the difference between one offer and five offers. You know, in both circumstances, you may have sold the property and you would have made a profit, but you can make significantly more profit if you can—if you can sell it for more, and you've already gone through all that hard work of acquisitions and you've already gone through a lot of the hard work of dispositions and all that stuff to make that happen—um—that's fantastic. I kind of think of you as—as a sort of leading the—the change to more this virtual model—um—because so many of these people that we talk to, they've been in a local market model for a long time, right? You talk to these real estate investors that say, "I'm a—Salt Lake City or a DMV or Orlando, Florida, you know, whatever the case is, real estate investor. What I look for is more deals in whatever that city is, and then I have a variety of exit strategies for those deals." That's like the standard model right now—um—some of those people lean really heavy towards flips, do some wholesales, some lean heavy towards wholesales, do some flips. Like everybody seems to do a little bit of everything. Novation is getting really popular, et cetera. So I'm really curious to—to hear about your—like, what would you say to—to that person about different ways that they could go about their business?
Yeah, so I'm gonna go through—I'm gonna shoot straight on all this. Everyone's up on—okay, if you think about how to make a ton of money really fast, the way that most people are looking at their businesses right now is they're like, "Hey, I'm gonna go nine out of ten—like, I'm gonna be—I'm gonna be in the top 10% at what I do." If you're in the top 10%, fast forward three to five years, you're out of business. Okay? And there's some guys that are gonna be like, "Okay, I'm gonna go 10 out of 10. I'm gonna be the best." If you're the best, you're gonna do okay, but you're not gonna absolutely crush it. Well, you really got to do what I always tell everyone on my team is you got to go 11 out of 10. 11 out of 10. You got to be better than the best. You need to develop some sort of competitive advantage where you literally are the best in the world at one specific thing. And the problem I see with so many of these real estate investing businesses is they're all over the place. They're doing buy and hold, they're doing development projects, they're doing fix and flip, they're doing wholesaling, they got a coaching program, they got affiliate sales, they got a podcast, they got a million different things going on. They're a jack of all trades, but they're master of none. And you know where you see that? You see that on their—their net—their net profits at the end of the year. You'll see that on their tax return. You'll see that on how much do they actually take home to their family? Because when you're doing a million different things, you're never going to develop a sustainable competitive advantage on one thing. You're never going to really dial in the numbers on one thing. So like, I remember when I was working at Express, we had 70 rentals, we were doing 60 flips at a time, we had development projects, we had a coaching business, and then wholesaling was kind of like this ugly little stepchild, and we were making no money. We're making absolutely no money. And the first thing we had to do was go cut all this and just start focusing on just wholesaling. We probably went from over 150 people working for the company, like either directly or through subcontracting and things like that, to maybe a dozen people. But what happened to the—like the net bottom line is we became way—way more profitable. So it's like—it's like Adam Smith, right? You ever know Adam Smith? Like basic economics, all markets shift towards specialization. And when you shift towards specialization and becoming the best at whatever it is—the best at doing—creating some widget—the entire market benefits. So like, when I got into the game back in like 2015, you had people running their own PPC and building their own landing pages and building their own phone systems and doing all their own marketing and then building their sales team and then having in-house construction and in-house design and in-house this and then—how's that? And you have these massive real estate businesses that were trying to do everything but weren't doing anything well, then we really weren't making that much money. Okay? And no one really saw wholesaling as—is—like, you know, a real way to make money. They're like, "Oh, we can make twice as much money on the flips, why would we wholesale?" But what I realized is—uh—if you just focus on one thing, and it doesn't have to be wholesale, it could be like, "I'm just going to focus on building a crazy rental portfolio. I'm going to focus on being the best at construction and flipping," or whatever it is, but you got to pick one thing and just go all in on it. And for me, that was wholesaling, and I just want to become the best at wholesaling. And of course, once you master one market and you've kind of tapped out one market and you're the biggest in one market, then you gotta tack on more and more and more—um—so I think that's the biggest mistake people are making right now is they're trying to do too many things. They got a million different exit strategies, they got a million different divisions in their business. And anytime I get on a call with a CEO like that, I know that their pro—their books are probably in pretty bad shape. Conversely, the guys that are more focused, are just focused on one—one thing, those are the guys that are taking home serious checks every day, every month, every year.
Yeah, I understood. And I think that level of focus is fantastic—um—and different people focus on different things. I'm curious what you would think through if you're looking through—like, if—if a company was to focus on a single exit strategy, why should that be wholesaling versus flipping versus novating versus more of a hotel model or creative finance? You know, there's all these different exit strategies that you can use. I know wholesale was the one for you, but do you—would you advise anybody to focus on those other exit strategies? Like, is your advice just, "Choose one and focus on it," or is your advice to choose wholesaling and focus on it?
I can—I'll tell you what my experience was. My experience was like—so, for example, let's look at like creative finance, for example. Creative finance is super sexy. You can make more money on the actual financing than you can on the actual wholesale assignment, right? —um—so when I found out about creative finance, I wanted to—like, I'm like, "Let's do a pilot where we introduce this is like, you know, different acquisition strategy. Let's try to pick up as many creative financing deals as we can." Um, we did it for about three months, and then what we realized it was—it was crushing our cash flows because the sales guys, if the seller didn't say yes to the cash offer, they would just automatically default—it was kind of like we give them a crutch—"Oh, let's go over to creative finance for seller financing or like whatever some sort of other exit strategy"—um—and the county department hated it because now they have to manage all these payments and like—"We—like, what's going on here?" It was too ad hoc. It was a distraction from the core thing that generates cash flow for the business. And I believe if you really want to be really—really good at wholesaling—um—you got to run your business like McDonald's. So when you have new salespeople coming in, you know, a lot of times you're pulling them in out of other industries, and now you're going to start teaching them about seller financing and creative financing, all this—like, now you've just made the whole training process way more difficult. You've made your sales process way more difficult. So I personally like to just stick with like, "Cash offer, cash offer, cash offer." And if it doesn't fit that bucket, it doesn't mean we can't monetize it, but I'm going to refer that out to someone that is a realtor or I'll refer it out to someone that does creative finance and I'll get a cut of them doing the deal, but I don't—I want my guys just focused, right? Just focus on one sales process and just doing that—running it like McDonald's, as simple as possible. If it doesn't fit that bucket, let someone else do it and get it kind of that way—um—the reason why I like wholesaling as an exit strategy better than, you know, wholesaling or—like, novations is—like a really popular thing right now, right? There's like a new fad every couple of years—um—the new—the latest greatest fad is novation. I think there are some instances where novation makes sense, like if I was in Seattle, you know, when I had leads coming in, their million-dollar-plus houses that were built like after year 2000, like yeah, novation model makes sense on a lot of deals like that—um—the challenge that I've seen people run into with novation and wholesaling—you know, wholesaling is much more capital-intensive, but with novation specifically, it just takes way more time to get the deals done. There's way more steps in the process, so your cash conversion cycle goes way out, right? You're not turning your money as fast, and also you need a lot more people to handle the same volume of deals. It's not simple turn and burn like—do a deal a day. Like when we're doing million-dollar months, we're doing multiple deals per day. You can't do that with novations, right? You could get to a few hundred thousand dollars a month with novations, but you can't do a million dollars a month in novations. At least I've never seen anyone do it. And a lot of guys that I've seen go really heavy into novations have run into really serious cash flow issues. I get calls all the time—once a month—from—from guys that are like really in cash jams, they're investor lift bill bounces because they went too heavy into novations too fast and—um—they screw up their cash flows. You know, if you think about—people never pay attention to cash conversion cycle. If you go from 30 days on your cash conversion cycle to 60 days, you make half as much money per year—half as much money. And when you go from 30 days to 120 days, you make a quarter of the money you did. So when you—when you add on to your cash conversion cycle like that every day you're adding on decreases the percentage—decreases the amount of money you're gonna make in the business. So I like wholesaling because it's super—super scalable, it's simple, I can run it like McDonald's, it has great return on ad spend and great cash conversion cycle—better than any other exit strategy. And the other exit strategies, you know, if you're just getting started—like I'm talking about this just in the context of trying to build a million-dollar-a-month business—in the context of just doing a few deals, yeah, learn seller financing, learn novations, like get every tool in the shed, because when you first getting started you don't—you're not spoiled with a bunch of leads—um—but in the context of building like a real money-printing machine, I like to just stick with wholesaling.
I understood. A lot of people would use the same—what's the word—like, I guess train of thought, so to speak, that you're using with focus and specialization. They use that to argue why they should be in one market versus in multiple markets, versus what you're arguing here is one exit strategy, and then it seems like you almost don't care about the number of markets—um—or you're a little bit flexible towards that, which is like the same—the same underlying—like principle driving it, but a really different application. What do you think about that?
Well, you know, fix and flip is a completely different business than wholesaling. You know, wholesaling is—wholesaling is marketing and sales, right? You have a certain skill set that you need there—marketing and sales skill set. Fix and flip is construction—construction management, operations management—completely different business, right?—um—so doing both of those at the same time, you really need to run two companies. Doing two markets at the same time—yeah, it might take you a few days or a few weeks to get to know the different buyers in that market and get to know the geographies, but we're not doing an entire—it's the same core business processes. We're running the same business processes. We can use the same salespeople with the same skills, we can use the same marketing campaigns—um—and we're running the same business. Yeah, there's going to be nuances to that market; there's going to be different areas that are high-crime areas we want to stay away from, but we can educate ourselves on those very quickly. It's not like we're reinventing the wheel—um—we're just running the same gameplay in a different place. Now, the reason why you want to do that is imagine this—so, Brandon, let's say you won the jackpot tomorrow and you win a billion dollars. You're now America's newest billionaire, and you want to go invest that billion dollars and get a return on investment. Would you put it all in one stock? No. Would you throw it all in Tesla? No, right? Because that'd be crazy because you'd be putting all your eggs in one basket. You would diversify your risk by investing in an entire portfolio of different stocks, different companies, different asset classes to diversify your risk, so you're not beholden to one stock going up and down—Elon Musk tweets something, all of a sudden you lost 100 million dollars, right?—um—even if you—I love Tesla. I only drive Teslas, and—uh—I would never put an entire portfolio all in one stock, just because it would be insanity. That's kind of the same thing with putting all your eggs in one basket with one market. Okay? I'll—I'll tell you like an example of this—so there's been times where I'm in a market and I'm running Google Ads, and then I have a competitor who hasn't been in Google Ads that all of a sudden decides, "Hey, I'm going to start running Google Ads," and I'm pretty dialed in with my numbers where I know how much I should pay for a keyword to get the return on ad spend that I want to target, and then all of a sudden they come in, they start paying crazy amounts where like—I'm like, "You're just gonna spend yourself out of business, idiot!" But while they're spending themselves out of business, my sales team is not getting any leads off those campaigns. Now, if my numbers work and they're—I know their numbers don't work, I know they're—they're gonna—they're gonna be out of that campaign within a couple months, and then my leads are going to come back. But in those couple of months, I'm up the creek, not getting leads, right? So if you're just in one market, you're—you have exposure to competitors coming in that market and disrupting your market position. That's number one. But then number two, you have—you have market exposure to the entire macroeconomic environment. I'll give you an example—the guys in Phoenix right now are—are all getting their asses kicked because that market is behaving right now like the East Coast and the rest of America was in November and December. November, December, all US East Coast guys, we got our asses kicked really hard, right? It was some of the worst months in wholesaling the last few years. Average assignment fees went sub 20K on Investor Lift in December—the lowest they've ever been. Now they've bounced back up to the 30s, but we got our asses kicked in November and December. The thing is—um—on the East Coast especially, seller expectations have gone down, so we're now able to get stuff at efficient prices where we can now make an efficient market between the buyer and seller expectations and—and—and capture a sizable profit there—um—for making the deal happen. In Phoenix, the seller expectations haven't gone down; the sellers still want last year's prices, so all the Phoenix wholesalers—they're just in Phoenix—they're all screwed right now. They're getting their asses kicked really hard, and I see it on the numbers, and I've talked to some of the biggest guys in the country, and I've been like, "Dude, why the hell do you have all your eggs in one basket in Phoenix? Like, you need to diversify out of just one market because all the macroeconomic forces of that market now are impacting your business. When that market is up, your business is up, everyone's happy, everyone's buying Lambos. When that market is down, you're cutting the staff and cutting salaries and cutting bonuses. So why not diversify? Why not tack on three, four, five more markets? Is it really that hard?" Think about how much time it takes to go learn the nuances of comping and stuff in a few different markets—building up your buyer—buyer relationships in a few different markets. Yeah, that's a small cost, but you can get through that in a few weeks or a few months, and then you get the benefit of not having like the micro exposure to competitors and not having the macro exposure of the actual market—whatever the whims of that market are. So it's absolute no-brainer to be in multiple markets, and if you're not, you're—you're leaving money on the table, and you're put—you're taking on this unnecessary risk that you could de-risk from your business very easily.
That's—yeah, so interesting. It's—for what it's worth, I—I really believe in what you're saying, dear, because I see the numbers across our clients—like our clients who are in multiple markets versus one market and how that affects things. There's also some aspects of—depending on the marketing channel that you're using—that could be more friendly or less friendly—um—and the channels that I'm personally familiar with—the digital channels—tend to excel in that kind of scenario versus—uh—some other channels might be a little bit more difficult to manage in those scenarios. So there's—there's something to that, I think—um—but it's so interesting because a lot of people would say specialization in market diversification, in exit strategy. You're saying diversification in market, specialization in an exit strategy, and it's—it's a completely—I think a completely different model. I have noticed that a lot of people seem almost irrationally fearful of that—maybe it's just because they haven't done stuff in other markets before—um—you know, one—one person—uh—who I actually had on this podcast—um—Aaron Gaunt, you might know him—um—he's a—he's a client of ours and—and of Investor Lift as well, doing fantastic. You texted me the other day, I think he had like 40—40-something contracts last month and—and their dispositioning pretty well, mostly from PPC, so he's doing awesome—um—but he started in Southern California when we started working with him as a client. He's in Southern California, then he started—he got one because, you know how this kind of happens with PPC, you get these stray leads in areas that you're not familiar with.
Yeah, it happens all the time, right?
So he gets some lead in San Antonio. He's like, "Well, might as well try to make the most out of it," and he successfully dispositions the property. And then he thought to himself, "That wasn't actually that hard. I can do that. It's not my backyard. I don't feel comfortable with it, and I'm not familiar with it, but it's totally possible." Now he's—he's—uh—in at least probably 15 or 20 states. And every time he's gone a little bit wider, he's done a little bit better. So some people kind of get over that—maybe they just need a little bit of a—you know, a kick in the butt to—to see that—like they can actually do that. But do you have any opinion on—like, the people who are—like listening to this and they're just thinking like, "Ah, that sounds nice, Robert, but I
He makes it work, and it's a fantastic business. Granted, he's not doing a million dollars a month because it's harder to scale, and it's also relatively new. Some companies scale faster than others based on their appetite. Not everyone wants to grow to a million dollars a month in five months; it requires significant investment. However, I know people who do fantastically well with this, and many who do poorly.
I'm a fan of moving in your desired direction incrementally. If you're in one market, add several and see how it goes. You don't need to jump from one extreme to the other and fail. Gradually expand or contract based on what works. Be really good at what you do; otherwise, it will be tough. Even allocating 20% of your budget to test one market might reveal a 2x higher return on ad spend, even if cash conversion is lower. You won't know until you try.
Over the next few years, I predict a push toward mega wholesale services dominating the business due to the data and technology advantage. Data and technology are constantly improving, raising the barrier to entry. Anyone with a cell phone could once run a successful wholesale business. Now, you're competing against those with the best marketing, tech, sales, and everything else. With just a cell phone, you might get lucky, but you won't be consistently successful. Larger wholesalers will outcompete smaller ones.
These mega wholesale services run their businesses scientifically, A/B testing constantly and learning. Improving by just 1% daily compounds over a year to create a massive competitive advantage. In the next two to three years, I predict the first hundred-million-dollar-a-year wholesaler, followed by several more. One company already did eight million in one month (an outlier), and then 750,000 in a single day last month. These huge numbers require multiple markets; it's not possible in one city. You can do $100,000-$200,000 a month in one city, but for massive growth, you need multiple markets.
What else are you seeing, Robert, that differentiates successful companies? You have a unique perspective, seeing many companies through your platform and having back-end access to their actual performance (which can differ from what they report). Summarizing what we've discussed: cash conversion cycles matter, as do specialization, exit strategy, and market diversification. What else sets successful companies apart?
They focus on the McDonald's model – doing one process really well. They're not jacks-of-all-trades. They focus on fundamentals. They avoid rural markets. Data shows a direct correlation between deal closing time and county population. In counties with over half a million people, deals close in 30 days or less. In smaller counties, deals can sit for 100+ days, with high contract fallout rates. Assignment fees are tiny in rural areas.
Conversely, successful companies focus on major metros where sales are fast and markets are liquid. The probability of selling a deal is high (90%+), and average assignment fees are high (e.g., over $50,000 in Southern California). Cash conversion cycles are under 30 days. The future expected value is significantly higher in major metros. This informs marketing spend. In a major metro, the expected value might be $45,000 versus $1,500 in a rural area, allowing for higher marketing spend.
The most successful companies understand the future expected value of their pipeline and reverse-engineer their Google Ads spend to acquire customers. Whoever can pay the most wins. One customer scaled from $8,000 to over $400,000 in monthly ad spend in a single market because they knew their return. To get Ferrari assignment fees, you need Ferrari leads, and you must know their price.
Regarding marketing, many use TV, radio, SMS, cold calls, direct mail, PPC, Facebook ads, SEO, and billboards. Diversification is important, but each channel has its own lead generation and processes. Specialization can work well. For example, clients focusing solely on PPC close better than those combining PPC and cold calling because it's a different mindset.
Top performers (over $500,000/month) allocate 80%+ of their budget to Google Ads because of quality leads, low cash conversion cycles, and solid return on ad spend. It's predictable. Sustainable competitive advantages are hard to develop in other channels. Direct mail, for example, is difficult to differentiate because everyone uses the same data. Even getting your mail piece out earlier doesn't create a significant edge. Competitors copy successful campaigns. This isn't true with Google Ads. As you spend more, the algorithm learns, creating a better and better targeting. The more you spend, the more intelligent it gets, leading to more money and more spending capacity. Entering Google Ads now puts you five years behind.
Companies with the most buyer relationships have an advantage. Large companies acquire deals at better spreads. Our clients collectively are Google's largest client in this industry, and we share data. Clients spending $1,000 or six figures monthly have similar ROIs, which is atypical. The more data you feed the AI, the smarter it gets. Our data sharing is analogous to the advantage larger companies have in building buyer lists. We’re tackling different problems with a similar business model.
If you're in this business, the biggest mistake is thinking you're happy with a smaller amount. Even if you only aim for $200,000/month, using the strategies for a million-dollar business will make your smaller goals more consistent. Build your business as if you’re selling it, even if you aren't. Keeping your house clean is easier if you have guests over regularly. Doing things correctly will reduce risk, improve sleep, and make you happier.
We track different client segments, and our highest return segment is national clients. Many of these (if not most) are InvestorLift customers. If you're doing national wholesaling, InvestorLift is almost non-negotiable. Use code "Bateman" at get.investlift.com for 10% off your first year.