This question is kind of like another question where people can’t seem to agree on the answer; “Which came first; the chicken or the egg”? Real estate investors all have a different opinion when they are asked whether you should find a deal first or start a buyer’s list and then find a deal. For me, the answer has always been “the deal.” If you have a great deal, you can always find a buyer for it.
I had someone email me recently that said they had wanted to begin wholesaling houses for a couple of years, but he just couldn’t bring himself to buy that first investment property. He was afraid he wouldn’t be able to sell it. This man had spent a number of years learning the business, but had become paralyzed with fear over this prospect of putting a house under contract that he wouldn’t be able to sell.
If you are just getting started and you find yourself having the same problem, here are 4 tips for you.
1. Know What a Good Deal Looks Like
This is no doubt the hardest part when you are brand new. You almost always pay too much for your first couple of deals. Before you sign on the dotted line, run your potential deal by someone that is an experienced investor. Marginal deals are hard to sell. If you have any doubt about the numbers or the area where the house is located, just walk away and find another deal. There’s always another one around the corner.
2. Know Where Investors Like to Buy
It won’t do you any good to get a house under contract at a great price if it is in an area where investors don’t like to buy. Ask experienced rehabbers and landlords where they like to buy. Be sure to find out what types of properties they like, and the price range they prefer. In general, you will be pretty safe in bread and butter neighborhoods; the kinds of neighborhoods for first time homebuyers. In my area there is a market for more expensive houses, but there are fewer investors in this group. Buy houses that would work for either a rehab that would be sold to a retail buyer, or a home that would make a great rental and they will always be in demand.
3. Put an Escape Clause in Your Contract
This is vital especially when you are brand new. Make the deal subject to inspection or partner approval. This is your safety net. It will make it easier for you make offers with confidence.
4. Begin Immediately to Build Your Buyer’s List
There is nothing like having a good buyer’s list to call or email when you have a property you want to sell quickly. It is truly a wholesaler’s secret weapon. These folks will be loyal repeat buyers if you always have great deals for them, and if you conduct your business with them in an ethical manner 100% of the time.
Implementing these 4 tips will make it easier to make those first offers and get your first few houses under your belt.
Finding a Buyer for Your Deal
There are a number of ways you can quickly find a buyer for the property you have under contract even if you don’t have a buyer’s list.
You can take the deal to your local REIA group where you will find a group of people that are looking for their next house. At my monthly meeting, we have a table set up for vendors and for folks that want to put out fliers about properties they have to sell. This is usually the first place people head after signing in.
You could list the house on Craigslist. I have sold several properties there, but I would rather much sell to someone at my REIA group; they are usually more experienced investors. But even if they are brand new, they will almost always be educated to some degree if you find them at this meeting. Most investors are more than willing to help them if they can close the deal.
Concentrate on getting a great deal, and you can be sure you will find a buyer.
Photo: A McLin