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Don’t Start Wholesaling Until You Read This: Wholesale Advice from a Fix and Flipper

by Marty Boardman on January 26, 2013 · 29 comments

  
Wholesaling

Have you ever wondered how Google knows exactly what information you’re looking for after typing 2-3 words in the search box?

How did Steve Jobs figure out the American consumer would go nuts over a little portable device that stores and plays our favorite music?

Who knew combining a pickup truck and a station wagon to make an SUV would be so popular?

And what genius at the Girl Scouts of America decided even the most health conscious individuals on the planet would be incapable of resisting eating an entire box of thin mint cookies in under 30 minutes?

Some might say that the creators of these products just got lucky. Others may chalk it up to intuition. Perhaps Steve Jobs had a “gut feeling” that the iPod would take off. It’s been well documented that he was a visionary. However, I suspect the answer is a little simpler than that.

Maybe, just maybe, the most successful companies and entrepreneurs today are doing something even more revolutionary than relying on a hunch to create new products and services for consumers.

I suspect they’re actually asking their customers “what do you want?”

The First Step to Becoming a Real Estate Wholesaler

Before you run out and buy a CD set from a guru, or pay $4,997 for a weekend boot camp, or spend $20 for a book about it at Barnes and Noble, or stress out about whether or not you have the right purchase contract and disclosures, find a real estate investor in your area that might actually buy a property from you.

Now I’m not talking about building a “buyers list”. What I’m suggesting you do is figure out where the buy and holders and fix and flippers are in your market and ask them “what do you want?” Explain to them that you want to get started in wholesaling and are looking for some direction. You need to know their preferred acquisition price, rehab budget, desired rate of return, tolerance for risk, etc.

Where can you go to find these prospective buyers? Here are a few places:

  1. The courthouse steps – bidders there are usually looking for deals.
  2. A title company – chances are their escrow managers work with at least 1-2 real estate investors.
  3. Realtors – some may have clients that are investors.
  4. The tax assessor’s office – search the tax records in your area and look for buyers that purchase more than 10-15 properties a year, or more. Contact them by mail, phone, etc.

As a fix and flipper, I have buying criteria in place and a formula for calculating my maximum offer/bid price for a property. I share this information with wholesalers, Realtors and anyone else that can bring me a deal because I want them to know exactly what I’m looking for in a deal. I even give them the contracts, disclosures and language I use to put the transaction together. I offer this information and feedback for free because I want a good deal. So do most buy and holders and fix and flippers I know.

Can you imagine McDonalds creating a new sandwich without doing market research and taste tests to make sure the buying public would eat it? Of course not. So why would you build a website, start sending out direct mail, door knocking or cold calling before determining what the buyers in your market are looking for?

Don’t get caught up in the mechanics of structuring a wholesale deal. Stop making excuses for getting started. Go find a few willing buyers, and then find them a deal.
Photo: Fey Ilyas

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{ 29 comments… read them below or add one }

Charlie January 26, 2013 at 1:37 pm

Thanks Marty. I’m new to investing, went to a FortuneBuilders course, and feel a little overwhelmed. This is a really easy and good start. Thanks!

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Marty Boardman January 27, 2013 at 8:03 am

Charlie, not familiar with FortuneBuilders but I wish you good luck! Putting together a wholesale deal can be tricky and no two are exactly same. However, if you know what your customer wants beforehand it helps strip away some of the complexity.

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Mike January 28, 2013 at 7:05 am

Marty, Fortune Builders does do good work overall, IMHO.

But before you spend the money to go full bore, why not do just a littel market research in your local area to see how you do before you take the plunge? One of the best non-real estate books Ive read is The Lean Startup by Eric Reis. He says, don’g do anything in business until you determine if there is a market.

If youre going to sell a product online, buy some PPC traffic and send it to a sales page and see how many times people click the “add to cart” button. If they do, then perhaps you have a good idea. Stupidly simple and not always applicable in every business, but thats the idea.

Jut going to a local REIA meeting (beware of the sales pitches), meet an investor and have a few conversations about what you discuss above. Simple and “Lean”! Solid advice and very little investment on your part except for time.

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Joshua Dorkin January 26, 2013 at 5:15 pm

Wait a minute, Marty . . . are you suggesting that investors should think like business people? Say it ain’t so! Great post and probably one of the more important reads for new investors, IMO.

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Marty Boardman January 27, 2013 at 8:10 am

Josh, I heard it said once – “don’t treat your business like a hobby because hobbies are expensive.”

A few weeks ago I had an interesting conversation with my daughters. They both want to start their own business. Their motivation is mostly financially driven. I challenged them to come up with a product/service they’re passionate about AND is something a consumer would actually want. It was an interesting conversation and since then they’ve been doing lots of research – online and in books.

This exercise is important because it’s forcing them to really think about what people want.

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Erion Shehaj January 27, 2013 at 8:50 pm

There’s also the famous Henry Ford quote: Had I asked people what they wanted, they’d have said “a faster horse”. If you are trying to create a product of service that doesn’t currently exist, asking consumers what they want can actually be detrimental.

But if you’re getting started in a well established business, it is wise to seek “best practices” from more experienced people.

Most newbies get these two scenarios mixed up. Great post.

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Al June 11, 2013 at 5:44 pm

Good insight Erion…would like to connect with you further because I am that “newbie.” LOL

Brian Gibbons January 26, 2013 at 5:49 pm

Wow, interview buyers and get their wish list!

Marty I do the same thing, but with Tenant Buyers with Lease Options ( Assignments and Sandwiches)

I actually go see them at their home, like a buyer’s agent, and the goal is to find out:
– Date of moving out of rental
– Monthly take home income and then I use a multiplier of net income for total rent + option payment
– Option move in payment avail

Then the traditional buyers agent must haves and nice to haves.

Then they go on a VIP list, and I find them a house on Lease 2 Own.

They are relieved that someone is on the case for them!

This is called “Get the Tenant Buyer First”.

Similar to your article!

Best Wishes,

Brian

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Marty Boardman January 27, 2013 at 8:12 am

Brian, that’s an excellent strategy. I do some seller financing and use a similar approach although I do the interview over the phone. Thanks for the comment!

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Brian Gibbons January 27, 2013 at 10:47 am

You are welcome!

Also, I put this info on a Tenant Buyer Info Sheet, and if possible talk a iphone pic of mom and dad.

Then when I talk to Potential Sellers on Lease Option, I show them the Buyer VIP Sheets with photos sheets…

“Mr Seller I have these 5 buyers right now that will pay you full price for your home, no agents commission, pay minor maintenance, treat your home like they already own it, they just need time to work on their home loan qualifying…, is this something we could talk about, or maybe not?”

Talk is cheap,
The visuals of these Buyer Profile Sheets work wonders to then be able to sit with the sellers to show them what I can do for them!

This is only my opinion but a knock on the door of a listed seller or an expired listing seller with a free report on Lease2Own works better than just mailing and hoping.

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Ronald January 26, 2013 at 6:02 pm

Great article! Except that Steve Jobs really didn’t ask customers if they wanted the iPod. :)

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Marty Boardman January 27, 2013 at 8:16 am

Ronald, I’ve heard Steve Jobs didn’t really ask anyone anything – he just knew what people wanted. Unfortunately, for those of use with less brilliant minds in the real estate world taking the direct approach of asking the consumer what they want is more efficient.

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Kevin Dickson January 27, 2013 at 8:49 am

Just continuing this train of thought… the only important thing you probably won’t get from asking customers questions is the idea for an innovation. “Just knowing” is what the greatest innovators are good at.

Can this industry benefit from an innovation? Yep.

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Marty Boardman January 27, 2013 at 8:59 am

Kevin, I agree. Most consumers don’t know what they want until it’s been created. I had no idea I wanted an iPad until my Mom got one for Christmas.

Brian Burke January 27, 2013 at 5:56 pm

Good stuff, Marty. I think most beginner wholesalers freeze up because they are so worried about how they’ll find a buyer, what will happen if their offer gets accepted, what they’ll do if they are forced to close, etc, etc. Having a professional buyer lined up, and a deal that meets that buyer’s criteria, solves those problems. More wholesalers will actually do deals if they follow your advice.

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Karen Rittenhouse January 28, 2013 at 8:23 am

Great teaching, Marty.

Wholesalers should go where the players are and not hesitate to talk with them. Attend REIA meetings, local investor seminars and workshops, Google real estate investors in your area (yes, many of us come up in searches), and talk to them! We WANT wholesalers to do the footwork for us and are willing to pay, over and over.

Wholesalers come to our office and we, like you Marty, tell them exactly what we’re looking for and how we buy.

If you’re thinking about getting into wholesaling, your buyers are out there. Know what they want and bring it to them. Pretty darn basic.

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Jason January 28, 2013 at 10:32 am

I have yet to find a wholesaler in my market that put their customers needs first. They want to make $x and really could care less if the deals works for the customer. This is evident with the typical under estimated renovations and overpriced ARV seen from a lot of wholesalers.

Jason

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Travis Daggett January 28, 2013 at 3:56 pm

Great advice, Marty!

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Nichole January 29, 2013 at 11:04 pm

Hi Marty! This advice was right on time for me, and got me out the door this morning to start looking for vacant homes! One quick question, when you work with new wholesalers, how do you handle them making rehab estimations? Is that somehow a part of your formula? :D

Thanks for the awesome article! :D
n

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Billy Miller February 21, 2013 at 8:31 pm

Marty,

Thank you for this awesome post. I am new to real estate investing, and this is exactly the kind of information I like to get more even more motivated and structured. It’s as if someone peeled the veil from over my eyes. Thank you so much

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Junior Salters May 3, 2013 at 10:39 am

Great words, Marty! I’m just now getting started out in the wholesale business in my small tonw in South Carolina, and that was one of my main concerns, it what exactly am I looking for? And you’re right the best way is to go to the sources!

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Reginald Vickers June 21, 2013 at 9:07 am

Hey Marty,

I am newer than new at this and feel that I just saved myself months and months of struggles just by reading this article. Thank you, thank you, thank you!

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Lazau June 23, 2013 at 7:43 pm

Thanks Marty, awesome advice, great starting point

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Clara November 13, 2013 at 11:40 am

Thanks Marty
This is awesome information especially for me who just start a wholesaling,
I have one problem,I have buyers list who are willing to buy any type of houses ,but I don’t have the deals ,and because I don’t cash it become difficult for me to look for Reo or foreclosure houses.
What should I do?plse need your help
Thank you again
Clara

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Lorna January 24, 2014 at 12:18 pm

Thanks so much Marty, you make it a little more easier finding these buyers is no joke. Anyway I will get on the county assessor’s website and start from there, working hard on making my first deal” can’t wait to make it happen. Thank You
Lorna

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Heather March 22, 2014 at 1:50 am

This was such an awesome thread to read! Simple and true. As a wholesaler your JOB is to find what your buyer needs and wants. This is the way I am starting out with my business because I want to learn the types of properties I want to flip myself. I know that I will not make tons of money this way but I will learn invaluable lessons.
Thank you BP,
Heather

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Lamontay Garrett May 17, 2014 at 8:55 am

This is a lot of good simple information. I got started right away and received information. Thanks.

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Christian May 17, 2014 at 11:57 pm

I would only add that, in addition to asking the questions. Prepare a professional looking, line item by line item scope of work based on the walk through. Wrap it up like a present, make sure the end user understands they will still have a contingency to inspect and accept or get out (if you’ve worked with them a couple times they should eventually get that) Make sure your contingency is not less than theirs.

Getting the deal prepared with comps, scope of work and being able to handle all the paper work will go a long way to closing the deal.

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Howard Curtis June 24, 2014 at 2:12 pm

Hello, Clara you said you had buyers but no deals. i have few lines for you that may help you; i am also new at this game, but i may have a property under contract. all i did was make a bid on the price but make sure you discount it about may be 30% and then come down if you have to ,but stop at 10% o k

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