#28 Wholesaling Commercial Real Estate with Danny O’ Bannon
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Itunes – www.TonyJavier.com/itunes
Guest Bio: I loved my conversation with Danny O’ Bannon about his high level wholesaling business that is doing 15 to 20 deals a month.
Danny is doing something that not many people are doing. Wholesaling Commercial Real Estate!
More about him – https://www.call2scale.com
Welcome to today’s episode. We have a really cool guest for you, Danny O’Bannon he’s wholesaling to multiple markets. And the cool thing that I like that we’ll jump into he’s wholesaling commercial real estate. One of the only people that I know that is wholesaling commercial real estate. So what’s going on, Danny? Ready to jump into this?
Yeah man, appreciate.
Yeah man, doing some good stuff. So your multiple markets, you said you’re, you’re wholesaling in Tacoma, Boise Spokane. And you’re doing some commercial real estate. So I guess tell the listeners and you have your own podcast by the way. So you can mention that later if you’d like to. So tell us a little bit about how you got into real estate and where kind of your journey from where you started to where you are now.
Yeah, so I actually, I’ve been in real estate for almost 10 years. I started in 2012. So and I actually got into it. I was in college and I wanted to get into stock investing. I grew up with a single mom of six kids and I had a friend whose dad was pretty, pretty wealthy and I knew he did some of the stocks. I had no idea what that even meant at the time, but I understood it at an early age that you could either train your time for, you know, getting paid by the hour and you can leverage your money. Right. my mom was single mom of six kids, so she was working six, seven days a week and I saw, you know, how much he worked and how much my mom works. And I’m like, okay, I want that lifestyle. You know? So I had my own lawn mowing business in college and I would just have my headphones in while I’m mowing, listening to music.
So I thought, why don’t I try to find some podcasts on and figure out how to invest stocks, just figure out if I can learn something while mowing lawns. And in that research, like trying to find popular stock investing, I found real estate investing on podcasts. And so I would just eight hours a day listen to all these podcasts. And I joined Facebook groups and I’ve seen all these checks that people are generating from wholesaling. And so I just kind of made a decision. You know, it was like a few months of doing the research and being in that analysis paralysis mode. And I kind of realized like, all right, I’ve learned everything I can learn in this business without doing it. Like if I’m going to go any further, I need to actually take some steps. So I bought a $500 course at the time. It taught me to pull absentee owners from ListSource was the only list I knew about. I was only listening to a poll and taught me to send them yellow letters. So I just started doing that. Like it was in my mom’s basement, printing off yellow letters, hand-writing envelope stuff and I’ll, and I’m sending them out. And it took me about three months to get my first deal. It was pretty brutal. You know, you’re getting these calls, you don’t know how to talk to these sellers. And I’m just making a joke of myself on the phone, right? And I was getting pretty discouraged. And finally, I got a call from a seller and she’s like, well, how are you going to buy my property if you haven’t seen it? You need to come see it, come out and see it. So I’m like, okay. And so I set the appointment and I did not want to go like the day came.
And I just knew that, you know, I didn’t know what to say to this person. Like I was just thinking of every reason why I shouldn’t go. And I finally was like, you know what? I’m just going to go. Like, even if I fail, I’ll learn something. So one thing I did was I had already started kind of networking. So I reached out to an agent and I just said, Hey, will you send me the lowest comps in this area for this house? And so I met the seller at the house. It was a vacant house. We walked the property, we stood in the kitchen and she’s like, well, what do you, what can you pay? And I said, well, you’re the sales in the area for probably like this. And she said, Oh, wow, okay. She’s like, well, how about 50 grand?
And at the time, like, I didn’t think it was a good house. I didn’t think it was a good area. I didn’t really even think that the 50 grand would be a good price. But I had found one person in this market that was, that was doing deals. I found them on Craigslist and I previously took them out to lunch. So I kind of knew him a little bit. So I called, so I signed a contract with her. She gave me the key right there. I had to put a hundred dollars on the contract written lease money, and I had to drive to my brother’s house and borrow a hundred bucks. And then I drove to her house and gave her the a hundred bucks. Cause I didn’t know you were supposed to do it at the title company. And then I called that buyer and I met him over there.
And thankfully I didn’t say the price first because I was thinking, I was hoping I could make 53, you know, maybe he’ll pay 55. And he ended up saying, you know, I can pay 70 for this property. So we did the deal. I made 20 grand and that was, that was kind of my entry to the business. You know, that year I ended up doing 9 deals. And my 9th deal I took down is a rehab, which made every mistake you could make doing a rehab. I was on the job during demo, like doing all the work myself and I, figured, you know, while I’m rehabbing, I’ll just do more wholesale deals. Well, I didn’t do any wholesale deals cause my time was split, right? I was going to school and I was working in my rehab. Uand so I actually had to go back and get a full-time job once I graduated school. And I did that for about 3 months, I’d worked from like 7 to 3:30 and then 3:30 to 10 I’d worked in real estate. And after 3 months of doing that, I had made double what this job was paying me a year in 3 months. So I quit that job. And I’ve been in real estate ever since. And that was probably since like 2013 or 2014.
Yeah. I was going to say, I love that story, man. Cause like a lot of people get analysis paralysis and don’t even go on the appointment. Right? I mean, you, you almost didn’t, right? It’s like, it’s a mental game. It’s like, you can get as much education as you want to. And a lot of people will spend, I know people spending 50 to $100,000 on education and they don’t use it, right? So just showing up, right? You didn’t have to have like the greatest skills you didn’t have, like you showed up and you had someone that gave you a price that worked, right? You didn’t, maybe didn’t quite know it at the time that it worked, but you made it happen. And then you took action and found someone that would go look at the property to see if you can hold a sale to them. They made you an offer and bam, boom, that gives you the confidence to put that deal together and move forward. Right? Because without that deal, it probably would have been a lot tougher for you to do the next, to continue to share in the business. Right. You just need that taste that you know, that one deal you get under your belt and, and you probably look, I look back at it now and you think to yourself, that was the most easy deal that I could have done knowing what you know now. Right.
A hundred percent. Yeah. It’s funny that you say, just show up. Cause like that’s kinda my been my motto even to this day, you know, business gets hard. You know, especially when you’re trying to scale either learn a new thing or get into a new market. And that’s always been my motto – just show up every day show up with your team, your team shows up every day and you drive forward, you constantly push through those barriers. And so, yeah, I mean, we’ve had quite the journey over nine years. The company’s changed a lot and it’s, I feel like it’s, we’re always changing. We’re always tweaking things and doing any stuff. So
You hit a point that not a lot of investors say you did a, you’re doing a hundred deals a year or you did at one point. I can’t remember what exactly what it is, but let’s transition – that that’s not the most impressive part. Let’s talk about the commercial real estate. Cause I’ve had three pretty successful commercial real estate guys on the show. You may know some of them, Corey Peterson. Oh my gosh, I’m sorry. I’m drawing a blank on the other two. So Corey Peterson – very successful commercial developer – and I’ve had a couple of others as well that I just interviewed. But they take properties down. Like they actually buy them, then reposition them, or just cash flow them, syndicate them, bring investors in. But you wholesale commercial property and I think you said one of them you didn’t even really mean to and you got some pretty big checks from those. So tell us about those. I want to hear about those.
Yeah. So, you know, I met a lot of the guys, you know, probably some of the guys you mentioned that, you know, I know and I see how what you can do in the commercial space, right? Closing all these properties. And so we made the decision last year that we’re going to go all in on commercial and add that division to our business, but we’re wholesalers apart, right? Like I’ve never done a syndication. I’ve never done a value added repositioning to property, especially one that’s out of state, that’s 108 units or anything. Right. So once we made that decision, we just started applying the wholesale model that we know that’s works into the commercial space. Right. I mean, it’s completely, entirely different business, but in terms of the acquisition generating leads and acquiring deals, like we just applied them. And I think that gives us a competitive advantage over a lot of people in the commercial space. But so we started doing marketing and we got a deal on our contract that was of 86 units and Nacadocious Texas never heard of it never been there.
I just heard of it the other day. I have, I have someone that’s getting ready to do TV in that area. So that’s funny as the first time ever heard that. And then you mentioned it, so yeah,
So we got a crazy good deal. I think we got it for like, gosh, I’m trying to remember the numbers. I want to see we got it for like either 800 and we sold it for 1.1 or we got it for 1.1, it sold it for 1.4, but either way we got, we got a really good deal on our contract. And we brought it to one of the guys that we know that are closing on deals. And we wanted to be a part of the deal. We want to at least get, he was going to pay us a hundred grand and give us an acquisition like limited partner percentage equity in the deal. But his financing fell through and we’re like already 30 days into this being under contract. And the reason why it fell through, by the way it was because it was such a, it needed like a million dollars in renovation.
We had this thing for like a million dollar purchase price, right. So the bank looks at, okay, what is your, what is the percentage of the repair budget versus the purchase price? And they want like, I think they wanted it to be around like 64%. Well, we were well above that, but it was because we got such a good deal, right? Like we got such a low price that it was, it was like 90% of the purchase price was going to be in the renovations. So his financing fell through and rather than exploring other options, he just pulled out on us. And so we started scrambling and we ended up finding a buyer and we assign it to that person for a 300 K assignment fee. But what was interesting is he actually turned around and reassigned it for 175 K assignment fee. So this deal had a 475 K assignments spread on it.
And you know, there was a lot of the, I would say, like doing TC in single family, there’s a lot of problems that come up doing transaction coordination in commercial. There’s like even more problems, right. There’s just a bunch more real agents, a lot more reports that you have to get and financials. Uand this particular seller that we’re working with, I mean, to put it lightly, like they were just a little bit crazy. Uand so we learned a lot in that deal. Ubut yeah, we got to closed and our first deal, we made 300 grand and then we, that was kind of like, okay, we can do this, you know? When we got into coomercial a lot of people told us that you really can’t assign apartments or commercial deals, like it’s not really a thing.
Like people were kind of like saying that I was surprised, but, you know, I figured there was a way to do it. And since then we’ve closed another deal. That was 108 unit apartment Kosciusko, Mississippi, which again, I’ve never been there, no one on my team has seen these apartments, but we got it under contract. An acquisition guy that used to work for me actually got under contract for 1.78. And it was way too high, like absolutely too high. So we ended up renegotiating this property all the way down. So $1.2 million dollars. And then we ended up assigning it to a cash buyer for $1.6. So not only we made 400 grand, we paid an agent who brought the buyer to us 35 grand so I get this 365.
That’s crazy. That’s phenomenal. How did you find those deals? So, you know, obviously residential real estate, there’s all kinds of marketing mediums, commercial real estate is a different animal. You can use some of the same mediums, but how did those deals fall in your lap? How did you get such good deals?
Yeah. You know, it was interesting because another thing that we got into when I got into commercial, I said, you know, you really can’t have like a, because we have a call center, right. We built in the Philippines that does cool calling for other investors. And we built that for our company and we were getting, you know, 15 to 20 X returns. And so we had people reach out and it just kind of organically grew into its own company that does for investors, but it’s in the Philippines. Right. And the commercial guys are like, you know, I don’t see that working like cold calling these property owners type of callers. And so we’re like, well, we’re just going to test it.
And so we have that, that company does our SMS marketing and our cold call marketing. And so that’s what we did. We just plugged into the commercial list into SMS marketing channel and the cold call marketing channel. And the first deal was a text message lead. And the second one was a cold call lead. So what I’ve found honestly is, you know, a motivated seller is a motivated seller, whether they’re selling a house or an apartment, like they’re, they have problems that need to be solved and you as an investor are a problem solver, right. So you’re there to help them. And if you can’t help them, if they don’t have a problem to be solved, like you’re not going to do a deal anyways. Right. So we found that so far, we’ve had success with the same marketing channels that we were using in single family.
You know, it’s so interesting. I saw your hat and I’m like, that hat looks so familiar. I actually am getting ready to sign up with your company Call2Scale, right?
Devontae is who I’m working with. I can’t even, I don’t even know how I got in touch with him, but,u
He’s an animal.
That’s so funny, dude. Yeah. He just sent me a link to sign up, I think yesterday. I haven’t had a chance to sign up the talk to him and, and love it. Cause I’m paying per lead. You have a per lead program, discharge brower, which I really like. So so that’s awesome. So, so the website is called2scale.com and that’s with the number two. If you guys want to go there and check it out it’s pretty cool program. So commercial real estate, so cold calling with commercial. Again, I don’t like, I think about 15 years ago, I’ve been in the business 20 years. About 15 years ago. I remember someone telling me they heard about a deal where someone made a million dollars wholesaling commercial real estate. And at the time I was like, man, that would be awesome. Maybe I need to look at commercial real estate and wholesaling and all that. Over the last 15 years, I don’t even think I’ve heard of anybody really wholesaling commercial, maybe like a four unit building or something like that. And making, you know, 20, 30, 40 grand, but wholesaling big commercial buildings, what would be so, so that’s something you’re obviously getting into more. So you starting to take down more commercial deals, or are you wanting to still wholesale commercial deals?
Yeah, so we don’t, we don’t want to be in the, we will always be wholesaling deals here and there, but not everything fits our black box. Like for example, we got a 48 unit under contract. That’s not necessarily a value add, like the person who bought it, just did all the work and he’s already at the top of the market rents. Uso we assign that one for just a 100 K assignment fee. Right. But we.
Just a 100K.
So we want to be closing on these. The biggest hurdle is, you know, we don’t have a base networking needs to say, well, you have to have the balance sheets. Right. And you have to have liquidity to get approved for a certain type of like size loan. And so when you’re buying five million dollar asset, like, you know, I think it’s like at least 10% liquidity in the bank and I’m not sure what, what you have to be worth, like maybe at least 5 million something along those lines. Right. So we need to develop relationship with people who could sponsor loans that have the experience. So a lot of my friends, like I have a buddy who got into at the same time as us and he closed on his first deal. And basically what he did was there was a guy who’s done commercial deals, he’s got a portfolio. So he’s got the balance sheet, he’s got relationship with banks. So he was able to sponsor the loan, get a third of the deal. And he brought another guy who brought in some money. He got a third of the deal and my buddy got a third of the deal. So I’m trying to put together some relationships to where I can find good guys that we want to work with and that we can do some business with where we can actually close on some deals, start raising money, and then eventually we’ll start off bond. And then we’ll close on deals in the fund.
Awesome. Yeah. I’ve got some really good relationships. Cory Peterson. I mentioned if you don’t have his contact information, I’d love to connect you with him. I’m sure he’d love to, to maybe participate in helping you with your deals. And then I’ve got another guy that started exactly the way you did in commercial, where he was getting sponsors. He was given up like 70% of the deal. Long story short. He I was actually interesting enough. I was loaning him money to keep his business going. And now he’s, I think he’s got like 3, $400 million dollars in real estate. Like he just blew it up over the last five years. So if you want a connection with him, I’m sure he’d love to really good guy would share any kind of information with you, but he’s scaled up really quickly. He’s raising a lot of money. He’s actually going to, I don’t know if it’s hedge funds, but he’s going into these big funds now, now that he’s done a certain amount of deals. And instead of having to raise a hundred thousand at a time or even 500,000 at a time, he’s got these big funds that are given him millions of dollars at a time to invest in deals. So he doesn’t have to raise the money from a lot of different investors. So he’d be a cool guy to talk to.
Yeah. So anybody you can connect me with, that’d be awesome. I might know who you’re talking about, but I haven’t met Corey and stuff.
What else would you like to share? I mean, you’ve done a lot in the last eight years, man. Congrats on your success. I’ve been in the business 20 years now eight years you know, the business has come more and more competitive every single year, especially in the last 10 years. What would you contribute other than just showing up? What would you contribute to the growth and success of what you’re doing? So not only have you done residential, you’ve done commercial, you started your own call center. Like you’re doing all these great things. What would you say the secret to getting to where you are now that you’d want to share with the listeners?
Yeah. So what I’ve been really good at is like, I don’t pretend to be the sharpest guy in the room. I am very impatient, so I don’t want to recreate the wheel anyways, because I want to, if I want to do something I want to deal with as quickly as humanly possible. So just aligning yourself with the right people in the industry. There’s somebody, you know, that has a business model or is doing something that you want to do, like seeing if you can get around that person, maybe they sell education or maybe you can just bring some value into their business, then they’ll work with you because I was able to really grow quickly. Uwhen I started getting around people that were either doing education or, you know, I can create an Alliance with them and we can learn from each other,ubecause it’s, whatever you want to do chances are it’s, it’s being done right now at a pretty high level. And if you can learn that model and just model it, you know, you can get into it a lot quicker than spending a year or two years to figure it out. And the other thing I would say is it’s focus. Ucause I’ve been really, I’ve had times where I’ve been really focused and had a lot of success and I’ve had times where I haven’t been and I’m chasing multiple rabbits and I haven’t had as much success. And that actually goes back to commercial. I mean, last year when we started commercial, we turned off single family altogether just to be a commercial. And then we realized, well, when you start a new marketing, it takes three to six months to really hit anyways. Right? And then you get your first deal. Roughly, it takes 90 days to close. So we realized we need the consistent deal flow that single family spits off. So last year was actually really rough because it was like, we’d built this huge business where we’re doing 15, 20 deals a month, and then we turned it off to get into commercial. And then you had to turn it back on and build it back up. Right. So,uI’m actually the building phase of two divisions now and building back up single family, I’m building back up or building commercial up right. So,ustaying focused and waiting till something is truly stabilized before you go off into your next venture, what would be a huge recommendation. Because it’s something that, you know, as an entrepreneur, I stay on all the time because I want to do all these things and I get myself in struggle through that the fence.
Yeah. Two key points that I reiterate. One is you know, surround yourself with great people, find a mentor, find a coach, find a mastermind find somebody or a group of people that will inspire you, help you grow. You can learn from their successes and especially from their failures. And then to laser focus a lot of entrepreneurs, especially in general, but real estate investors can chase, chase, shiny objects. That’s where I’ve gotten in trouble in the past where I didn’t have my business fully automated to where I started chasing other things, had to come back and regroup and you know, probably lost a few steps in the process, but I’m fortunate enough now that I’ve got great people in place to run certain businesses to where now I have those businesses where I don’t have to be in them. And now I’m chasing the shiny objects, which are leading to great things and chasing one at a time. So those are some good some good, good points. So I mentioned call2scale.com. If you guys want to go there and check it out in any other websites or any other ways for people to reach you that you want to mention before we wrap it up.
Yeah. You can check out our podcast. It’s called Step-By-Step REI. We started that because selfishly we wanted to talk to high-level people and find out, cause people get on podcasts and they’re like, they’re all so great. I do this, I do that. But it’s like, how are you doing that? You know, so we really wanted a show that we could dive into some of these business and give real value of how they’re doing it. And so we started that it’s on iTunes, Step-By-Step REI. Since then we’ve had some people reach out wanting to do some consulting and teach. And so we, we have some courses that kind of showed us exactly how we have our wholesale business set up which you can see at StepByStepWholesale.com.
That’s awesome, man. Congrats on your success, man. I’m glad that we connected and we’ve got a lot of, a lot of synergy and a lot of things that that I look forward to working on you with. So yeah. Get ahold of Danny, if you want to to scale up your business with, with cold calling and he’s got some commercial real estate, if you want to invest in some deals, get ahold of them. So thanks, Danny. We’ll connect soon and we’ll see you next time. All right. Have a good one.