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The 5 Areas Where Newbies Trip and Fall in Wholesaling

by Marcus Maloney on June 25, 2014 · 14 comments

  
The 5 Where Areas Newbies Trip and Fall in Wholesaling

There are many moving parts to any real estate transaction, and many people get snagged in one of these parts. With wholesaling these parts can trip you up very quickly.

The 5 Areas Newbies Trip and Fail in Wholesaling

Although this list is not all encompassing of a wholesale transaction, there are just a few parts that can cause you to fail as a real estate newbie.

1. Marketing Techniques

There are many techniques when it comes to marketing for wholesale deals:

  • Direct Mail
  • Adwords
  • Click-to-Mail
  • Bandit Signs
  • Word-of-Mouth
  • Online Marketing (FB Ads, Website)

These are to name a few. Anyone can get started on their path to marketing but consistency is the key to success. I have seen, heard, and yes even I have fallen into the trap of starting and not completing my marketing plan. This is one of the biggest ways to slow momentum.

To ensure that you remain consistent, make sure that you have a reasonable budget for marketing alone. This should be an integral part of your business plan. There is no deals without any marketing, make sure you follow the path of many successful real estate investors by consistently following your plan.

2. Seller Conversation

Oh boy, this is the holy grail of fear for new investors.

The conversation with the seller can be a big disaster if you are not confident in yourself, what you have learned, and what services you are able to provide. The seller does not know that you are just starting out and many times they have no idea how a person can purchase a house for cash.

Make sure you have pre-scripted questions to ask. During the initial conversation you are just gathering information and gauging integrity and motivation.

The key is not to be afraid of making a mistake, if you trip your way through the first conversation you will eventually get better.

You can portray your confidence to the seller by doing your homework. After gathering some information from the seller; make sure you are familiar with the area and you communicate that to the seller.

A new approach I use; after I get the address I find a familiar landmark and ask them how far is their property away from that landmark. For example; if there is a large park in the community I ask the seller how far away is your property from “Lincoln Park”. This can also be used as a rapport building tool as well, they may begin to tell you a neat story about the park.

Here is another excellent way to increase your confidence when speaking with sellers; record your first couple of conversations and listen to them. This will help you identify the areas where you made mistakes and how to address them if another seller ask a similar question.

3. Negotiating

Put on your academy award winning performance; act like you been there done that.

Negotiating can be challenging but if you have thoroughly screened your seller you are aware of what is important to them. You have to drive that point home. Remember you are the buyer and they called you for a reason.

If they are serious they will be willing to play ball, you have to decide if they are ready to go all 9 innings or they are just trying to play the field.

Related: 6 Rules for Negotiating your Next Real Estate Deal like Frank Underwood

Focus on some of the key reasons they called you, why do they want to sell without a Realtor, why do they need cash? Once you have identified the answer to these questions you have vital information in your negotiating toolbox.

One great tip I learned is that if you ask the seller what do you think the repairs will cost or how much you think your home is worth, normally their reply will be; “I don’t know that’s why I contacted you.”

That is great now you can respond by stating; “it is impossible for me to give you a solid number without seeing the house.” If they welcome you to come and see the house, do your negotiating there (in the worst part of the house), If they don’t welcome you to see the house normally they are wasting your time, or they are shady, and You Can’t Do A Good Deal With A Bad Person. (tweet-able)!!!

4. Inspection Period (IP)

This time is critical if you want to protect your initial investment (earnest money).

During this time you really need to work on getting your end buyer in place. Many newbies trip and fall during this time because they do not market the home right away.

Related: 20 Of The Weirdest Things Documented During Property Inspections (Some Of These Will Blow Your Mind, Especially #2)

If you are unaware of what an inspection period is; this is the time (normally 10-14 days can be longer) you have to inspect the property and make sure what you are buying is what you agreed to buy, if you don’t like the property or can’t sell it during that time you can cancel the contract and there is no harm no foul.

5. Selling

 There are many ways to sell your property but one sure fire way to get the deal sold is to have great contacts with other investors.

This can be cash buyers or other wholesalers. Real Estate Investing is a business of networking, newbies feel as though no one will teach them or show them the way. The best way to start is to take action and trip and fail along the way.

You can sell your deal to cash buyers that you have met at the court house steps, by posting craigslist ads, or by subscribing to wholesalers mailing list. By taking these actions you will find who is buying or you will find who knows who is buying with cash.

Conclusion

Getting a property under contract there are many moving parts.

The topics in this article are introductory steps. There are many more steps that must be taking into consideration such as: how to estimate rehab cost, finding an escrow officer, how much earnest money to put up, how to negotiate with your end buyer. By continually allowing yourself to be exposed to failure will increase your capacity to learn. Remember its ok to trip and fail.

“There is only one thing that makes a dream impossible to achieve: the fear of failure.” Paulo Coelho

If you have an area where you have failed and it was not discussed please share, but add how it increased your capacity to learn.

Be sure to leave your comments below!

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{ 14 comments… read them below or add one }

Ben June 25, 2014 at 2:10 pm

I prefer to know what their asking price is before I even look at the property. No use in looking at properties if buyers are asking retail for a home that needs thousands in repairs. Great Article!

Reply

Marcus June 25, 2014 at 2:41 pm

Ben you are exactly right. I normally also try and find out how much they owe, if this exceeds what I am willing to pay for the house there is no need to go to the house.

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Darrell Kilgore June 25, 2014 at 2:33 pm

Great article on how to improve as a wholesaler. Always looking to step my game up and make more money. I also agree with you Ben, that way you can gauge what you need to say and do.

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Marcus June 25, 2014 at 2:43 pm

Darrell, thank you glad I can provide some valuable information to help out others. Everyday is a learning process, some-days you get it other days you don’t, but each day you have to promise yourself I’ll be back at it again.

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Darrell Kilgore June 26, 2014 at 2:07 pm

Right on Marcus that’s whats up. I wake up and learn everyday what I need to do in my business. What I need to learn now is how to come up on a crap load of off market properties any ideas would be greatly appreciated from any one reading this, I have active and deep pocket cash buyers looking for wholesale deals. So until then, my marketing for motivated seller’s never stops. Thanks again Marcus and keep up the good work.

Reply

Marcus June 26, 2014 at 5:04 pm

Darrell,

Have you started a marketing campaign, post cards or yellow letters. This is the best way to find off market deal. Also do you have a lead capture website that is highly optimized? Having cash buyers is no good without deals

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Tanya June 30, 2014 at 10:57 am

Great article thank you

We have been bless with cash buyers for our area, We would like to go into holding the properties now. But we have never work with a transaction or transitional funding company (hard money). From what we have read it seems very expense and almost like a bank loan at times very hard obtain one. Any thoughts…

Reply

Marcus June 30, 2014 at 12:11 pm

Tanya,

Hard money is normally not giving for buy and hold strategy because of the cost of the money in upwards of 18-25%, and the short length of the loan. Hard money is primarily used for fix and flip projects that you can get in and out of within roughly 120 days or less (could be longer), if not the interest on the loan eats up all profit. Also transaction funding is strictly based on the deal, this gives the lender an opportunity to re-coup their losses if you can not perform.

Reply

Recia June 25, 2014 at 9:00 pm

thanks, Marcus. nice article.

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Marcus June 26, 2014 at 5:05 pm

Recia,

Thank you I try to provide good content for Newbies I know the struggle.

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Stuart June 25, 2014 at 11:11 pm

Great article – great advice!

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Marcus June 26, 2014 at 5:13 pm

Thank you Stuart! I try to help

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Trevor June 26, 2014 at 1:10 pm

Marcus: Very good point, “what they owe.” No body seems to touch on that subject. That would be my biggest FEAR factor. What if someone is so desperate and so eager to sell the house and there IS and mortgage on it and they tell you that the amount X dollars and later, after all of your hare work, you find out that they are lying and owe more.

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Marcus June 26, 2014 at 5:12 pm

Trevor,

Asking what they owe is essential, because many wholesalers and investors look for people in distressed situation and sellers believe that everyone can help them with short sales and this is not always the case. I normally approach the question by prefacing like this; “Mr. So, thank you for providing me this information, we work with some sellers that are not always forthcoming and I do not believe this is you (pause…..), because we find some fraudulent sellers we ask if you have an outstanding mortgage, second mortgage or a lien that we may need to be aware of? Some may say why you need to know how much I owe and you refer them back to the integrity statement you just told them. It works, and they are forthcoming with the information you need. Title will do a search on the property regardless.

Just a little FYI

Reply

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