How do you get started in real estate with no money? If you Google something along these lines, you’ll probably find a list of articles, websites, and books teaching real estate investors how to “invest” with no money down. Yes, there are many different techniques for acquiring real estate deals with no money down, but there are better ways to get into real estate with no money than immediately jumping into owning property.
Gaining experience as a wholesaler first and working up from there can be incredibly beneficial for someone starting out in the industry. Keep in mind that consistency is key. Most strategies will take time and money. Building a real estate business doesn’t happen overnight, but it can happen without a minimum amount of capital.
But you may be wondering how to start wholesaling real estate with no money.
Let’s first set the foundation.
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Do you need a license for real estate wholesaling?
A real estate license isn’t required for wholesaling—but it might make you more credible. It’s a good idea to have specialized knowledge about wholesaling and the real estate industry in order to avoid any accidental malpractice. After all, wholesaling can be a risky business venture.
How much money does a wholesaler make?
While the business can be risky, a wholesaler can make money in the short term. Some wholesalers make a couple thousand dollars per sale, with the average being $5,000. That being said, there are certain deals, especially those with more expensive properties, that can make between $10,000 and $20,000.
The average amount of wholesale deals per month is five to 10 sales, so there’s a large potential to flourish in the industry if you play your cards right. Your monthly revenue could range from a modest $25,000 to $50,000 if you make the average amount per sale and multiple sales per month.
Don’t forget that any business expenses will be subtracted from your monthly revenue. But how do you get started with zero business expenses?
To help those who want to know exactly what steps to take starting wholesaling today with no money, here is a simple road map to use.
Step 1: Do your research
Before you get started in real estate, it’s imperative that you do your research. Talk to other investors about their experiences in your local market so you know what to expect. Short-term success is possible in real estate if you have the specialized knowledge to achieve it.
You should also learn as much as you can about wholesaling from credible sources. This doesn’t mean Jim from next door who has dabbled in real estate once or twice.
It’s also useful to learn about your local area. Knowing what houses sell for and what different neighborhoods offer serves as an advantage for when you start.
Step 2: Build a buyers list
The most valuable asset you will own and develop as a local real estate wholesaler is your buyers list. A strong list of people who will buy deals from you is your golden ticket for being successful in this business. The beautiful thing about this is that it does not cost money to compile one; it just takes a little effort on your part.
Here are a few outlets you can use:
- Local REIAs
- Newspaper classifieds
- Other wholesalers
- Bandit signs
- Tax record research
- Local lenders
Step 3: Find deals to market
Most wholesalers find deals by sending out postcards, knocking on doors, putting up signs, and networking with agents. But somebody who literally has no money to start with may not have the capacity to do this. As such, when just starting out, it often makes sense to form a joint venture with other wholesalers on deals. You will find that there are other active wholesalers in your market who are constantly finding deals.
A viable strategy is to align yourself with a few of these wholesalers and help them find buyers for their properties. It depends on what you negotiate with the wholesaler, but you can typically build in a referral fee of a few thousand dollars for finding buyers for their properties.
Again, this is where having a good buyers list comes in handy. That wholesaler may have great resources for finding good deals, but you may have compiled a strong list of buyers who can be used to help sell those properties for that wholesaler. In a joint venture, you could both succeed.
Step 4: Graduate to buying property
Once you have spent a good deal of time looking at properties and selling wholesale deals in your market, you will have a much better idea of what is a good deal and what’s not. Over time, as you begin to get some paychecks under your belt, you will be in a better position to begin investing yourself.
On top of this, you’ll figure out that you can cherry-pick the best deals you come across for your own investment. It makes a lot more fiscal sense to have some cash reserves as well as experience before investing in properties yourself.
Step 5: Find financing
Finding financing ahead of time allows you to jump on a property when you find the perfect wholesale deal. The process of buying a contract can be sped up if you have secured financing already.
You can find financing from either a private or hard money lender. However, hard money lenders often require you to put some capital down. Private money lending is all about building connections and growing your network, so start having conversations!
Step 6: Have an exit strategy
Wholesaling includes buying and selling a contract or double-closing on a property within minutes. But what if something goes awry?
Like anything, there are risks in the wholesaling business. Preparing for the risk with an exit strategy can put you ahead of the game. Plus it can let you make decisions without fear holding you back, which is an advantage in this industry!
How can you make sure you won’t get stuck with a property? Let’s review a few strategies:
- Buy and sell a contract rather than the property itself.
- Buy the property and then resell it as the owner (can be done in minutes as a double-close).
- Consider the option of rehabbing a distressed property or making repairs and reselling (fix and flip).
It’s important to know your exit strategy before going into a wholesale deal.
How to find wholesale deals
If you’ve built on your knowledge of wholesaling and understand what it takes to get started, you might be ready to know when you can get started. Here are some methods to find your next wholesale property:
For sale by owner (FSBO) sites
These people are all ready to sell their houses. Generally, you will find they are too cheap to pay a real estate agent, but you still might find a deal. It will be better if you can use different strategies, like a lease option or owner finance. With owner finance, the price is not a big factor. The most important thing is the terms.
Ads on Craigslist
The second way is through Craigslist. Call the “for rent” and “for sale by owner” ads. Again, this has to be done every day. It will take time and diligence.
To work this strategy, you should block out two hours out of your day—every single day—to make phone calls to these people. The more people you talk to, the better the chance you have at getting a deal.
The third tactic is the hardest; it is an old school strategy using cold calling. So, you might start by buying a list or finding absentee homeowners. Then you would go to a site like 411.com or White Pages and see if you can get their information. At that point, you would try to make initial contact.
People use this strategy to get deals, but they work tirelessly at it. Maybe you can go on your city’s website to see who has code violations and search for the seller and call them. This will take more time due to research. But if you don’t have any money and really want to get into the business, this can work. You might get a deal on the first call or the 101st call. Results will vary.
Knocking on doors
The fourth way is by knocking on doors, and you can perform this in two different ways. The first is by getting access to a highly targeted list like a pre-foreclosure list… or you can randomly knocking on doors.
If you don’t have a car, maybe start walking in your neighborhood. Or get on the city bus to a different neighborhood and start door knocking. Most people will laugh and say, “If you don’t have a car, how can you buy someone’s house?” Ignore them.
It all comes down to how badly you want it. This business is not for the faint of heart. This business is for people who go out and make things happen.
Common wholesaling mistakes
When you want to make things happen, mistakes can happen, too.
Listening to gurus
The fact of the matter is gurus are out to make money off of you. They want you to depend on their knowledge rather than succeed on your own.
A lot of “gurus” are pretending to be rich and successful in order to earn your trust and eventually make a profit off of you. They sell an easy lifestyle, acting as though success in real estate comes overnight if you follow their exact steps.
Building a real estate business doesn’t happen overnight, though. It takes commitment and time rather than “five specific steps.”
Not understanding cash investors
Finding a great wholesale deal will only go so far if you can’t find the financing to back it up. You should know what price you need to buy the property for to guarantee cash will be invested. In order to know the price, you will need to talk with cash investors and other local real estate contacts to understand what cash investors are willing to pay.
Similarly, you should know what buyers want to pay for a property. Your property prices should be low enough to entertain interest from your buyers list.
One of the reasons so many people are drawn to real estate is because of the opportunity to get started with very little capital. While this is the case, it’s important to go about it the right way. With a little creativity and diligence, just about anybody with a computer and a little networking ability can begin their real estate investment business.
More on beginner wholesaling from BiggerPockets
Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.