I have often heard from many investors that real estate wholesaling is a great way to gain a handle on real estate investing. Although I am not opposed to this philosophy, I do believe that in any area or niche, you must be willing to perfect the minute aspects before being responsible for greater areas.
You may be asking how is this applicable to real estate wholesaling and how can this be applied to me directly? Before diving into the areas of wholesaling, I want to preface this article by stating that you must become a student and a master on every level before truly excelling in your craft. There are many facets to real estate wholesaling: marketing, negotiating, property valuations, networking and team building.
Perfecting these skills and building a team does not occur over night. Many newbie investors want to forgo the process of becoming successful and jump to the end result. We’ve been programmed to believe that in our society, everything is done instantaneously: WE WANT IT NOW. We have to have our microwaves and direct deposit accounts, we even hate when it takes our computer too long to boot up — but the process is often more important than arriving.
The great guru pitch is that you can become a successful wholesaler NOW!!! I can say that you may close a deal or two fairly quickly, but this does not make you a “success.” With success comes sustainability, and anyone who is deemed successful had to go through the levels of student and master on each step along his/her path. I bring this to your attention because everyone believes that they can be an overnight sensation in real estate with a few clicks of a mouse and a few dollars spent on direct mail or pay per click advertising.
When I speak with some of the local wholesalers in my area, they often tell me about the failures and the small success before being recognized as a successful wholesaler. I would like to inform you on some of the areas you will need to be astute in and a master of in wholesaling to have any measurable level of success.
4 Major Areas of Real Estate Wholesaling to Master FIRST
1. Master Your Market
Starting out wholesaling, the most important step is to master your market. You need to know what sells, how long it takes to sell, and who the buyers are. Again, practice makes perfect. This is not the glamorous side of wholesaling, but it takes knowledge and skill in order to know what a deal looks like. Comparing properties is an exercise that must be perfected.
I recently met with a buyer on a wholesale deal, and we were discussing how wholesalers get two areas in structuring a deal wrong: they have a skewed knowledge of the after repair value (ARV) or they minimize the repair cost. Not knowing these two things can kill your credibility as a wholesaler fast in any market.
2. Master Your Marketing
Direct mail is the most successful way in my opinion to source deals. Direct mail marketing is providing an opportunity to assist someone who may be in need. In order to be successful in this area, there are two options: you can hire a professional who has a successful track record or you can do it yourself.
I would suggest outsourcing this task, but again, you will need to have an idea of who you would like to mail to. This is done by sending mail to pre-foreclosure leads, expired/cancelled listings, absentee owners etc. In each market there are different ways to source this information, so you will need to know how to pull this data in your area.
3. Be a Master Negotiator
The best negotiators are those who can listen intently and understand what the other person’s needs are. It is good to learn negotiating from observing others. Many people fail in this area because they are only thinking of what is best for them in a negotiation, and they minimize the reasons of the other party. Win-Win solutions are an opportunity to provide a valuable experience for both parties.
While negotiating, I often repeat what is important to both sides. Although I may place more emphasis on what’s in our best interest, I never discredit what the seller or buyer wants. In negotiating you have to be willing to walk away if the negotiations are not going to produce a win-win.
4. Master Your Team
No one can stand alone wholesaling, especially just starting out. I often hear many newbies say, “I can’t find a mentor” or “How can I start building my team?” The first thing to do is to always be optimistic and remember you need to reciprocate some value to someone else. If you are not willing to swallow your pride and let go of your ego, you will not be able build a formidable team.
No matter what your credentials are, there will always be someone smarter than you, better than you, and more experienced than you. These are the people you need to continually be around and learn from. You have to be able to assist in building the team. You may not be the captain or the quarterback, but remember, you are a member, and on this team, you might have to start as a ball boy. Many groups are not teams; they are a collection of individual players that have different aspirations, but once you decide to help someone else build, then you will begin to build your team through genuine relationships.
One of the main things I try and advise those starting out wholesaling is to remember: this is a business that is being created, and it does not happen overnight. The effort that is put into it is what you will get out of it. Closing 2 or 3 deals is good, but building a sustainable business is the start of generational wealth. There is one critical difference between being rich and wealth — those who are wealthy can lose everything and gain it back again because of their resources and relationships.
Master these 4 skills, and you will be on your way to building a sustainable wholesaling business. Although there is more to share, I believe these are critical.
Do you know of any other areas that need to be mastered in order to be a fruitful and successful wholesaler?
Please share your experiences!