May 27, 2022
Looking into wholesaling?
In this episode, we welcome Rafael Cortez. He is a real estate investor who started his first business at the age of 21. He has since sold his transportation business and is now in the wholesale business, fixing and flipping properties. He has a real estate license and is currently working to increase his brokerage's presence in the Phoenix area. He discusses how he structures wholesaling deals so that sellers are able to get the best possible outcome. Rafael also has an organizational psychology practice and an education business where he coaches real estate wholesale to new entrepreneurs. Listen in if you want actionable tips to help you get started with wholesaling!
[00:01 - 03:52] Automate, Delegate, and Elevate
- Rafael shares his early start as an entrepreneur
- How he keeps up with his different businesses
- Creating systems
- Bringing people on board
- Personal growth
[03:53 - 14:53] Building Processes Like a Pro
- Running a wholesale business and a brokerage
- How Rafael makes sure that they don’t compete with each other
- Having a discovery conversation with the seller
- The six stages of setting up a successful wholesale business
[14:54 - 18:45] Focus is Key
- Rafael into pivoting to retail and office spaces
- New opportunities that they are currently exploring
- How the structures he put in place help him scale and diversify
[18:46 - 20:04] Closing Segment
- Reach out to Rafael!
- Download Rafael’s FREE Wholesaling Business Blueprint!
- Links Below
- Final Words
Tweetable Quotes
“I'm a big believer in automation, delegation, and then elevation of yourself as a business owner, as a CEO. You grow not just from the business standpoint, but from the personal standpoint.” - Rafael Cortez
“Once you have conversations and you actually care about bringing in legitimate solutions to sellers, the deals kind of work themselves out.” - Rafael Cortez
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Connect with Rafael! Follow Rafael Cortez CEO on Instagram and subscribe to his Youtube channel. Want to start a wholesaling business? Get Rafael’s blueprint to success now for FREE!
Resource Mentioned
The 4 Disciplines of Execution by Chris McChesney, Jim Huling, and Sean Covey
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Want to read the full show notes of the episode? Check it out below:
[00:00:00] Rafael Cortez: I used to think that the main problem was money. I was seeing everyone, I started doing wholesaling and real estate investments and getting into, you know, this whole space.
[00:00:07] Rafael Cortez: I was like, Nope, everybody wants to top dollar everybody. Like, those are my glasses, right? That was my perspective, my cognition of things. And because everything mattered too, or the dollar amount in, you know, was a big thing in my head. I thought that's what everybody else was seeing, but it's really not.
[00:00:22] Rafael Cortez: Once you have conversations. And you actually care about bringing in legitimate solutions to sellers. The deals kind of work themselves out, really.
[00:00:31] Sam Wilson: Rafael Cortez, welcome to the show.
[00:00:46] Rafael Cortez: Thank you very much for having me, man. It's an honor.
[00:00:48] Sam Wilson: Hey man. The pleasure's mine, your based in Phoenix, right? Phoenix, Arizona, correct? That's fantastic. I love it. Same three questions I ask every guest who comes to the show, in 90 seconds or less. Can you tell me, where did you start? Where are you now? And how did you get there?
[00:01:03] Rafael Cortez: Well in real estate investments, 2009, I launched my first business though when I was 21, right around 20, 2007. And on my first business, I used to be a fireman. So I started out as a fireman when I was 19, I launched my first business at the age of 21, and that was a medical transportation business Non-Emergency and then they transitioned into real estate investment.
[00:01:22] Rafael Cortez: I've been used to having my own business, you know, from an early age and kind of, you know, putting up with the struggles and the hustle and all that. Long story short, I sold that transportation business in 2000, what, 14, 15. And in 2009 though, while I still had it, I started doing real estate investment. I began fixing and flipping just because I had some cash and they wanted to allocate and invest, diversify.
[00:01:43] Rafael Cortez: And I was starting to learn all those things, all those words, right? And I came across, you know, the possibility of flipping a property. I ended up breaking even on that first couple of deals. I mean, it was a nightmare just because I was trying to do everything myself. I actually kind of like to think that I began backwards, right. I started flipping and then I got into wholesale. So yeah, fast forward a couple of years from that, I have a degree, I'm an organizational psychologist. So I do a lot of coaching and consulting for businesses altogether. So now I own a real estate brokerage in Phoenix. We do traditional sales, commercial stuff as well.
[00:02:17] Rafael Cortez: And then I own a wholesaling business fix and flip business. And then my organizational psychology practice where I coach consult. And then I have an education business. Focus on coaching real estate wholesale to beginning entrepreneurs.
[00:02:31] Sam Wilson: That's a lot of moving parts. How do you give attention to the various businesses that need you in a meaningful way?
[00:02:40] Rafael Cortez: Systems, brother, systems. I used to think that I had to micromanage and like, if you want something done, right, you've got to do it yourself to have a deal. And that led to me burning out when I was around 26, 27 years old. And this was during the transportation business company, the hard lesson, there was like, you can't do it all ourselves.
[00:03:00] Rafael Cortez: Even if you have one thing to focus on inevitably, when it starts growing and new parts start to get attached to the business, you got to have a way to delegate that. So I'm a big, big believer in automation, delegation, and then elevation of yourself as a business owner, as a CEO, you grow not just from the business standpoint, but from the personal standpoint.
[00:03:21] Rafael Cortez: And I've learned to delegate well, and the set up good systems, I think that's, you know, some of the stuff that has helped quite a bit along the way in terms of hiring and bringing people on board and, you know, kind of creating an overall picture for the direction of whatever business, you know, it is.
[00:03:37] Rafael Cortez: It's one of the biggest challenges that we can have as entrepreneurs and investors, you know, for that matter. But when you have the ability to do that, and then you throw some practical strategies, like, you know, time-blocking and being adamant about unit a schedule, I mean, you can make it work.
[00:03:52] Sam Wilson: The two businesses that come that, you know, your traditional residential real estate brokerage and then your wholesaling business, even like they would almost be competitors in their own right. You have probably people in your brokerage who want to get houses under contract to list them, to sell. And then you have your wholesalers that want to get them under contract, to flip the contract.
[00:04:15] Rafael Cortez: Well, yeah, we have actually, a lot of my agents do wholesale, so it's interesting, man.
[00:04:20] Rafael Cortez: But when I set off, I didn't think, I didn't see everything like it's working now. So I, okay. I'm going to set up a wholesale operation. I started doing the wholesaling by myself first. I jumped into another company where I cut the learning curve. So that helped me a lot under somebody else's guidance. And that was amazing.
[00:04:38] Rafael Cortez: So I kind of learned, you know, the ropes, of wholesaling. I set up my wholesaling operation and then next thing you know, like, okay, cool. I'm gonna throw a fix and flip again into it because now I feel like a little bit more of, a notion of what I'm doing that whole leg just kind of came to it. One thing that I started noticing was we would have conversations about, you know, no, you know what? I don't want to sell my house because I'm not in that type of distress. And you gotta be completely honest I think in wholesaling, and I don't know if your audience is very familiar with what wholesaling is, but it's about at the end of the day, we'll try and solve a problem for the seller.
[00:05:11] Rafael Cortez: There's some type of distress or some type of headache, something that they can't deal with. That's why they're selling, you know, via the wholesale route, right? If their best course of action is to list the property, we have ride out. Even when I didn't have a license. So, you know, we let them know, listen, you're going to make more money if you list the property.
[00:05:28] Rafael Cortez: So anyways, they started noticing that, you know, I could have gotten that listing and there was a lot of businesses just falling through the cracks there. I was like, you know what, I'm gonna get my real estate license. And yeah. So I did, I got the real estate license. Now I'm doing wholesale and fix and flip and, and walk around with a real estate license.
[00:05:42] Rafael Cortez: Then just, you know, I started meeting people and they asked me for advice and whatnot, next thing you know, it was like, Hey. Why don't you set up brokerage? So kind of like one thing started leading to the next it's crazy, but we don't have to have everything figured out, right? As we take action, the master plan kind of begins to come together.
[00:06:01] Rafael Cortez: And we ended up with this brokerage with a, you know, a good chunk of agents. Most of them do the well-aware about wholesaling. We follow the same professionalism and fiduciary that we have in the real estate side, traditional real estate. We'll bring that to the wholesale side, which makes things work.
[00:06:15] Rafael Cortez: But yeah, no, they don't compete at all. On the contrary, they feed each other.
[00:06:20] Sam Wilson: That's really interesting. Yeah. I mean, how do you structure it on the wholesale side? When you have somebody that needs to sell, they can't go the traditional route, like, but they maybe came to you through the traditional channels of, Hey, you know, your company, can you guys list this for me?
[00:06:34] Sam Wilson: It's like this doesn't work. Yeah. How does that conversation go? And then how do you, because you have a fiduciary duty to them and obviously the wholesaler, the objective is to maximize the spread between what you pay the seller and what the buyer then ends up closing on it for. I mean, that's yeah, that's what you take. So how do you navigate that?
[00:06:51] Rafael Cortez: So good question. We have a process of how to come up with the, with the wholesale offer, right? At the end of the day, like the beginning, I mean, I call it a discovery conversation. You're having a discovery conversation with the seller. Anybody who's got a property.
[00:07:03] Rafael Cortez: I mean, it actually transfers over to commercial as well because we've locked a bunch of commercial deals, you know, using the same framework. So, incredibly right. I used to think that the main thing, the main problem was money. I was seeing everyone, I started doing wholesaling and real estate investments and getting into, you know, this whole space.
[00:07:22] Rafael Cortez: I was like, Nope, everybody wants to top dollar everybody. Like, that's their main prompt. And those are my glasses, right. That was my perspective, my cognition of things. And because everything mattered too. Or the dollar amount in, you know, was a big thing in my head. I thought that's what everybody else was seeing, but it's really not.
[00:07:37] Rafael Cortez: Once you have conversations and you actually care about bringing in legitimate solutions to sellers, the deals kind of work themselves out, really. I'll give you some examples, right? You walk in, somebody can, somebody in the middle of a divorce, somebody is going to relocate it. Somebody has to move the property and it's a time issue.
[00:07:53] Rafael Cortez: They're going to be willing to make less on that property, right? Because you're solving the time issue, giving them the convenience of not waiting around. And that's one thing. Repair, I mean, it's a classic one condition know physical condition of the property. I mean, that's huge. You don't have to do any repairs.
[00:08:09] Rafael Cortez: You don't have to do, you don't have to worry about appraisals. You don't have to, you know, all those headaches. Believe it or not, one of the most common things or issues that we get is people having a problem with other people walking through their house. They just, you know, they're adamant about privacy, you know, it's because, you know, I don't know, they're used to having a mess on the house and then, you know, they might be embarrassed about that or just private. It goes both ways, right? Yeah, they like, that's a huge thing was like the first time that happened to me, it was like what you're willing to part of what, 30, $40,000, you know, less. So people don't walk through your house, through your property.
[00:08:43] Rafael Cortez: Am I hearing this right? At the end of the day, like every situation is different, right. But if we actually take a moment to slow down and have some critical thinking into how can we come in and help them out? The answer is going to lay out by themselves. And then we just presented our offer. We never convince anybody to sell.
[00:08:59] Rafael Cortez: We don't do, you know, we didn't do any of that stuff. We present the offer and we let them know, look, this is what we can do. This is the number that we would have to be at. And then we start negotiating a little bit back and forth and whatnot. But I mean, if it works, it works and it's a volume game. Sam, think about it this way, right?
[00:09:13] Rafael Cortez: Like if you have a hundred people want to sell, there's a hundred people out there that they made up their mind, they need to sell the property. Only three to five of those are going to sell to us. So we're looking for a very small percentage of the market, but when you go to markets, for example, Phoenix, right?
[00:09:28] Rafael Cortez: We have 1.2, 1.4 million single family. I mean, that's a big market. There's plenty of properties out there. Like the idea is, or the belief is that, you know, there's not enough, you know, to go around, but it's a volume thing. Once you set up the process to actually process volume and get volume through the door and fill up the pipeline, you're going to be okay.
[00:09:48] Sam Wilson: Yeah. Tell me about that process that you feel like people could take from a page out of your book on the residential side and apply that to their commercial acquisitions.
[00:09:59] Rafael Cortez: So I break it down and it's somewhat of a, like a business model crash course. I break it down into six stages. It's the first stage it's going to be sourcing.
[00:10:10] Rafael Cortez: And the reason I break it down into the six stages is because we know what to hire for where to hire. And then more importantly, you're able to see where the bottlenecks are. If you have any bottlenecks as you go through the business, which 99.9% of the businesses do. And the other 0.1% are lying because there's always bottling, but you're able to identify them, right?
[00:10:29] Rafael Cortez: If you segment, you break it down like this, and it doesn't matter if you have a team of one or two people, or you have 10, 20, the process, the framework is still the same. And it goes, you know, residential, commercial and whatnot. The first stage is going to be sourcing. You have to have a process for sourcing your deals.
[00:10:44] Rafael Cortez: In our case, we go heavy on cold calling. We go heavy on SMS marketing, Facebook ads, PPC. I mean, those are all sourcing strategies, right? Basically what we're looking, we're just plowing through records and looking for gauging for interest. That's all, we're pre-qualifying anything we're just sourcing. And this is where say that you're I dunno, you're reaching out to 10,000 people through cold calling.
[00:11:08] Rafael Cortez: Maybe 1000 are going to raise their hand and say, okay, give me an offer. A lot of those, a lot of those, I mean, great majority of those are going to be retail or just tire-kickers. So that's the first stage. The second stage is to pre-qualify. You come in and then you pre-qualify. We have a four pillars of prequalification that going to the prequel stage where the conversion stage and that's based on timeline, motivation, condition and then the price. So if those four things are there, I mean, we know for a fact that we have a deal, like there's, you know, we're going to be able to make it work. So it's timely condition, motivation and price, the timeline they want to sell within the next six days, the condition physical condition helps a lot.
[00:11:47] Rafael Cortez: It's not the end all be all, but it helps a lot. So if it's in distress or whatnot, we can come in, then there's some value add, right? What's the motivation there. What type of situational distress? Is that a divorce? Is that a relocation? Are they, is it just too much care-taking of the property? Are they getting older or, you know, what's that, that gives us a framework of how to kind of, you know, have that prequalifying conversation and get to that deeper root of the problem.
[00:12:12] Rafael Cortez: And then of course the price, right? We have a range on the. The third stage is acquisitions. So after they get pre-qualified, then we send them over to the acquisitions rep and they negotiate the deal back and forth. They do a full property analysis, you know, comps, cap rates if you're in that space, get the signature done.
[00:12:31] Rafael Cortez: And dispel, I mean, you've got to have a solid buyer's base and solid buyers list the better. That's like the holy grail for all wholesalers, a solid buyers list, right? Because the better it is, the faster you can dispel the deals mean you can sell the contract. And what we're doing is we're selling the contract.
[00:12:45] Rafael Cortez: We're not actually selling the property, the wholesale. So, that most businesses stop at that stage and then they just start the cycle again, I add two more stages to it. And this is like religiously. We do this on a weekly basis. We just go over all the deals in my company. The fifth is measuring. So we track KPIs or scorecards. There's accountability, right, for each one of the roles that take place. And we tracked, for example, it was the reach and lead generation. What were the amount of offers that were actually made and sent out what's the conversion rate on those? So there's a set of KPIs that we follow for each one of the roles. And that's how the whole machine just kind of stays, you know, accountable.
[00:13:20] Rafael Cortez: The, you know, the people are, they know what targets, you know, they're supposed to hit and there's direction, I mean, more importantly, right? There's no, that's a high degree of accountability. The last thing that we do at stage six is improvement. Every time we go through a deal, we ask ourselves, so we have a little set of questions.
[00:13:37] Rafael Cortez: So we ask ourselves, okay, you know, what could we have done better? Where did we leave money on the table in that deal? How did the negotiation went? So we started kind of going through the whole process, dissect it. And what didn't work, I mean, we don't, we try not to do it again as a future, what didn't work, we try to, you know, build it into a SOP standard operating procedure.
[00:13:56] Rafael Cortez: So, I mean six stages, right. But building machine like that, like I have the ability to step away from it because I have a director of operations that knows what to follow and then the team is right below it. It took a minute to get it to that point. But the same framework can be applied for, you know, any of the specialties, commercial, luxury, whatever.
[00:14:15] Sam Wilson: Yeah. A hundred percent, man. Yeah. I mean, cause those are all things that, you know, minus maybe if your goal is to acquire real estate and on the commercial side versus wholesale, it, you know, obviously you're probably gonna skip step four of what this position looks like. Yeah. Even that's part of it though, in the long term.
[00:14:32] Sam Wilson: Just maybe not something you ride in on the front end. I love anytime that there's organization and a consistent pattern, like, Hey, this is what we do every single time. I think to your point, you can step away. And go, all right, let the machine, let the people do it. And I'm going to do either something else or nothing, depending on whatever it is you want to look like.
[00:14:53] Sam Wilson: So that's really awesome. Tell me about your guys's commercial real estate, holdings, if any, you know, what's that look like for you? And I guess, why have you invested on the commercial space?
[00:15:04] Rafael Cortez: So my background is multifamily. I mean, multifamily, I mean, the largest one I had personally in my personal portfolio, 16 units.
[00:15:12] Rafael Cortez: I mean, it's nothing too crazy, right. I'm pivoting into more of a retail and executive office basis. And that's just coming from somebody else who knows a lot more about commercial than I do. So I'm following their lead on that. So yeah, I've had a couple of multifamily buildings and it works well for that.
[00:15:32] Rafael Cortez: You know, residual one thing, I don't know, right now I'm in the middle of the pivot, right. I'm pivoting into commercial and retail space and the second two offices in that sense. And then I'm also pivoting to the software as a service, so, you know, space.
[00:15:44] Sam Wilson: You got your hands full, man. Tell me, you know, a certain amount of money, I think, that you could make on every potential residential deal. What I would think if you are able to take that same system and apply it to acquiring 16, 32 48 unit multifamily buildings, the margins would just be that much bigger. Has that ever been a consideration for you?
[00:16:06] Rafael Cortez: Yeah, it has. The thing, the only thing that holds me back is from jumping in, you know, fully into, for example, the multifamily space and whatnot is the management. I know there's big opportunity on Airbnb and whatnot. Right now. I did sell a lot of my portfolio about a year and a half ago. And location wasn't stellar where I had the properties. You know, that was one of the things I figured it. Yeah. I wanted to capitalize on that sort of thing.
[00:16:29] Rafael Cortez: Like the model works. So if you're taking something, like this approach, you can actually just, all you do is change the campaign, right? So we're doing campaigns for single-family. What do you do now? You do campaigns for multifamily and then process them through a pipeline. Same thing. The average deal that we get, I mean, we do real well in wholesaling.
[00:16:45] Rafael Cortez: I think the average deal it's about $34,000 and we keep it steady. So I like to measure the level of my headaches. We keep it steady to about 12 deals a month. I mean, it's a pretty healthy revenue with a small team, so there's not a lot of overhead. There's not a lot of things that come back on us and whatnot.
[00:17:01] Rafael Cortez: It just gives me the opportunity to create revenue, right? And then just allocate it. Right now, honestly, I'm looking at a few different things. So again, I mentioned software, we're developing software right now in terms of holdings. I'm looking at the commercial space and executive office. And then I'm looking at crypto, like every other dude out there, right? It's like, what is going on there? I'm curious. So, yeah. I mean, that's where I stand right now and I mean, it's panning out well.
[00:17:27] Sam Wilson: Yeah, I guess the question which you've answered by question, right? Well, it's really, you know, what would prevent you or somebody else from taking this same system, as opposed to wholesaling single family, they wholesale, you know.
[00:17:38] Rafael Cortez: Yeah, no, nothing. I mean, all you do again, is to change that campaigns and then follow that same process. I actually have students in the country and they are looking specifically for like, you know, four units or less to keep it commercial because of blending and whatnot. And then I have others that are just gaming too big as they can a multifamily.
[00:17:56] Rafael Cortez: It's a good market. It's a good, you know, space to play, right? I don't see anything that would hold anybody back in terms of why wouldn't you implement that and run with it to us, it's just a choice. This is the shiny object, you know, like right now we're focused on doing realy well. And the track that we're on and focus is key, man.
[00:18:13] Rafael Cortez: I mean, the attention is key. I've gotten bitten before, just because of, you know, getting spread too thin and I tend to have, you know, tap into a couple of different things at the same time. And yeah. So like right now it just focus is a scarcity. It's a luxury.
[00:18:28] Sam Wilson: Absolutely. Yeah, it absolutely is. I'm finishing a book now called Four Disciplines of Execution and the number one, they talk, the thing they talked about in the beginning, it's like focus. If you can learn to focus, then you know, that's the first thing you've got to master. So I love hearing that yet again from somebody else, Rafael, I certainly appreciate you coming on the show today, telling us all about the business. Tell us about, you know, how you guys have scaled your various businesses, your kind of processes behind multiple steps you'd take.
[00:18:55] Sam Wilson: And then just kind of the various things that you're also looking at as well on the commercial and other business interests sites, tons of fun to learn about. Yeah. A very, very cool story and love what you're doing. So thanks for sharing it. If our listeners want to get in touch with you or learn more about you, what is the best way to do that?
[00:19:11] Rafael Cortez: Well, I'm very active on all social media. I have a lot of content on YouTube and Instagram. It's Rafael Cortez CEO. That's R A F A E L C O R T E Z C E O. You can find me there. I will say have a, they want to do a download of the process that I just kind of mentioned. They can go to reiwholesaling.com and they can find it there as well.
[00:19:31] Sam Wilson: Awesome. We will make sure we mentioned that there in the show notes as well. Raphael, thank you so much. Appreciate it. Have a great rest of your day.
[00:19:38] Rafael Cortez: My pleasure. thanks, Sam.