The 5 Major Components of Real Estate Wholesaling

The 5 Major Components of Real Estate Wholesaling

4 min read
Marcus Maloney

Marcus Maloney is a value investor and portfolio holder of residential and commercial units. Marcus has been named the “Equity King” for his impressive ability to find real estate opportunities with massive amounts of equity.

Experience
Marcus, a high school dropout, went from G.E.D. to M.B.A. Although his education has a major impact on his investment philosophy, the real impact came from his upbringing.

Marcus thrives on completing successful transactions. As a young kid, his parents and grandparents faced many challenges; as a result, it made him think of ways he could help. His mother and grandmother were avid investors—not in the market but in people. Marcus was a recipient of those investments. And his early years were hard work growing up on a farm.

Marcus was a strategist at an early age. To relieve the burden of his family buying him clothes when it was time to return to school, he decided to make a small investment that paid big dividends. Marcus decided to purchase a small piglet at the beginning of summer, feed it until it became fat, and then sell it to a local farmers’ auction before the school year started. This was one of his first transactions and the beginning of his adventure of finding equity in every opportunity.

Marcus’ hard work continues today: He has completed over $3.3 million in wholesale transactions. Currently, Marcus is a licensed agent who wholesales virtually in multiple states while building his investment portfolio. Although wholesaling provides great money, he saw the opportunity to buy some of the deals he found and convert them into cash flowing rentals.

Marcus currently holds seven rentals, two of which are commercial units. He’s also done the unimaginable and purchased a school, which was converted to a daycare center. Again, he turns what is a marginal profit into a significant equity position. He leverages the equity by using the BRRRR (Buy, Rehab, Rent, Refinance, Repeat) strategy to increase his portfolio without any money out of pocket.

Marcus has been featured on numerous podcasts, such as the Louisville Gal Podcast, the Best Real Estate Investing Advice Ever podcast, FlippingJunkie, and many others. He’s currently a featured blogger for BiggerPockets, the largest community of real estate investors in the world.

Along with completing transactions and working to build his portfolio, he provides mentorship to aspiring investors. This is done through one-on-one interactions and through his successful YouTube channel and blog.

Marcus does utilize his M.B.A. for more than real estate. As a consultant for a successful non-profit institution south of Chicago, he uses his expertise in the development of human capital. His philanthropic efforts help existing stakeholders develop in their capacity to serve those in need of assistance.

Education
Marcus completed his M.B.A. in 2011 from Olivet Nazarene University.

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Here is something I’ve been thinking about: how to simplify the explanation of wholesaling.

I’ve been speaking with a lot of people who have interest in what I do. I try to explain the concepts of real estate wholesaling, but it often goes over their heads. This include those who are interested in using this niche to help them get started in real estate. So for a brief moment while I have your attention, I’d like to dive into the major components of a wholesale transaction.

Before I start, I want to preface this by stating that these are just the five major components of wholesaling. Within each component, there are many smaller intricacies that need to be mastered.

So lets begin.

The 5 Components of Wholesaling

1. Marketing

This is one of the most important components. Marketing is important because it’s the heartbeat that keeps your business going—or helps it get going. Simply put, without marketing, there are no leads. And without leads, there’s no business.

When I started, I hated marketing. It sucked for me because in order to market a product or a service, you have to have a budget. Well, in the beginning, most budgets for people who are just getting started is $0.00—and I was in the same position. Lucky for me, I’m an outside the box thinker. The main question I asked myself (I’m also a self-talker): How can I get noticed and find someone to bring me leads?

Related: The Ultimate Beginner’s Guide to Real Estate Wholesaling

Thinking outside the box, I used the power of proximity. I would go to open houses hosted by realtors in my neighborhood and talk with the listing agents. I found this to be profitable. I found an agent who had a property that fell out of escrow, and the owner was distressed. Without delving into the deal, I was able to walk away with a $2,200 joint-venture deal (check in hand). What some people would pay $20,000 to learn from a course I learned in my first bird-dog deal.

You have to think outside the box to market to sellers, agents, and buyers. You have to utilize social media, direct mail, cold calling, newspaper, and any other marketing tool you think may be useful. However, the most important thing to do is measure to see which tool is successful for you.

2. Market Analysis

Ahhhhh. You have to know your market. One thing that trips people up is thinking real estate is a one-size-fits-all project. They believe you can do the same thing in California that someone is doing in Miami and get the same results. I’m sorry but you have to be an expert on your market.

Being an expert in your market is knowing the different values of properties in different areas. It’s also knowing the value of two similar properties in the same area but with different features. Knowing what is selling fast and what’s not selling at all will help you know where to focus your markeing efforts. For example, in my market anything under $200,000 sells like a bottle of ice-cold water in the Sahara Desert.

You have to become a subject matter expert in your field.

3. Communication/Relationship Building

Let’s marry these two together. The reason I put these together is simply put: If you can’t hold a decent conversation, you will not be able to build rapport.

People like to do business with people they like. You can have the best marketing strategy and the greatest product offering, but if you’re unable to provide a decent level of customer service, then you’ll fail before you get started.

Many people believe that relationship building is a product of finding commonalities. The essence of rapport building and communication is listening. I advise you to slow down and embrace each moment, each interaction, and each conversation. This brings to mind an article I wrote years ago: Real Estate Newbie Shut Up & Listen. This still holds true in today’s market.

The best way to build a relationship is to be genuine and provide feedback.

4. Administration

Surely you’ve heard someone discuss the other prior components, but this one is hugely overlooked. In an effort to clarify, I speak of administration as being organized and structuring your deals. As real estate agents and investors in our field, we use transaction coordinators. The responsibility of the transaction coordinator is to ensure all documents and responsibilities are aligned to meet a required outcome; which is to close the deal.

You have to be organized when conducting business. To me, there is nothing worse than a person claiming to be a professional when their actions speak otherwise.

You are assisting in conducting the largest transaction in most peoples lives.

Make sure you have your stuff together. You will be coaching most sellers about the transaction, and your level of knowledge and organization will make the transaction pleasant for them. If you’re a disorganized person, you will need to focus on developing your administrative abilities—or hire someone to do it for you. Organization will help in all areas of the transaction, from working with the closing agent, attorney, end buyer, and all others vested in the transaction.

Related: A 60-Day Action Guide to Wholesaling Your First Property

5. Character

So lets wrap this up and put a bow on it. Your character is the most important piece. You can make a ton of money, but if you can’t sleep at night and are not pleased with your level of integrity, then I really feel sorry for you.

Your character exemplifies you, your business, and the way you conduct business. This goes back to doing business with people you like. There have been times when people have told me, “You didn’t offer me the highest price on my house, but I feel as though I can trust you.”

That’s saying a lot. Its important to do what you say, and do it from a position of sincerity. Real estate investors, and wholesalers in particular, get a bad rap for being greedy, slimy, and sleazy. But if we check our motives and do things with integrity, sellers will feel more comfortable selling to us without a realtor.

I focused on these aspects, but as stated earlier, there are many more facets within each of the five components mentioned here. I could delve into a lot more like negotiating, closing tactics, and property valuations, but I believe these overarching components are a general starting point.

I want to hear from you!

What can you add to this list? Share your ideas and opinions below!