When I was fresh out of college and getting started in this business I jumped in head first. I had almost no money, I didn’t know much at all about real estate, but I was full of enthusiasm and I knew that I would figure it out along the way. I certainly didn’t want to read books and study for 5 years before buying a property, when I could be reading, studying, learning, and making offers at the same time.
In fact, almost every successful person I know has taken this approach. I’ll admit, it’s a little scary, however in my opinion it was much better than knowing I’d have to work a job for the rest of my life that I didn’t enjoy. This approach is best suited to wholesaling, particularly if you’re broke.
What Comes First: Buyers or Deals?
That said, you need to be very careful wholesaling if you’re so brand new that you don’t have any end buyers lined up and you don’t have anyone to sell your property to. In other words, it’s great to take massive action, but you don’t want to be dishonest and get a property under contract with a seller and then have no intention of actually wholesaling the property.
Every once in a while I’ll meet someone at a REIA meeting who says they’re going to gain experience by making a ton of offers and getting a bunch of deals under contract and they don’t have any plan to actually complete the wholesale transaction.
This is not a good idea for several reasons. First off, you won’t make any money. If you’re going through the effort of trying to locate deals, then you might as well have rehabbers that you can wholesale the properties too. However, the most important reason is that it’s a disservice to the seller you’re working with.
If you get a property under contract, you need to fulfill your obligations and keep your word to the seller. But, I do realize there may be times when you truly aren’t sure that you’re going to be able to get rid of a property.
Not Certain You Have an End Buyer for a Wholesale?
I have been in those situations myself, and in those situations I was 100% upfront with the seller. I told them that there was a chance I might not be able to get rid of the house because of certain conditions. I told them this upfront before we signed the contract and we’d usually have an agreement that would give me 60 days to sell it or the contract would become null and void.
Besides the honesty issue, another reason you don’t go around putting contracts on houses without closing them is because of your reputation. Believe it or not, the real estate business in your local area is very close knit. If you get a bad reputation the word will spread quickly and nobody will want to work with you. I’ve seen it many times in my area and I have several people on my “blacklist” that I wouldn’t do a deal with if they were the last person on earth.