Welcome to 2017. I’m sure most of us are excited about the new year, along with the new opportunities it will bring. Since it’s already the second week of the year, many already have their goals outlined. This is great. I took a little time over the break to read many of the post from newbies looking to start their career as real estate wholesalers, and I’ve found some recurring questions that often get asked.
6 Most Common Newbie Wholesale Questions: Answered Now
I want to make sure you get off to a great start in 2017 by answering these questions. You will generally find these questions in the forums; however, they either go unanswered or the answers vary tremendously.
First, you maybe asking yourself — is Marcus legitimate enough to answer these questions? To remove any questions about my legitimacy, I will just say this: I’ve been where you are, and I remember the pressure I put on myself to get started. Still, I did not know where to start and who to depend on. I remember the anxiety when asking a question, thinking to myself, “Is this a dumb question? Why is no one willing to help? How can I put all the information I’ve learned from hours of YouTube education into practice?” I remember those feelings like it was yesterday. I am not here to tell you how many deals I’ve done or anything like that because it’s not about me. It’s about getting you started in the right direction.
Now, since we have all the preliminaries completed, let’s get started. Here are the 6 most common newbie wholesaling questions according to my research on BiggerPockets.com. These are in no particular order.
Question #1: Is wholesaling illegal?
This is normally the first hurdle we have to jump. You may think to yourself, this can’t be legal because it sounds too good to be true. To answer the question, YES, it’s legal. Many people question this because they say you are brokering a deal without a license. I am licensed now, but when I got started, I was not licensed. I will discuss the license in a later question.
Wholesaling is legal, but you will need to be strategic in your verbiage on your contracts. Remember, this is not legal advice so you should consult legal counsel yourself. It should be noted on your contract the buyer’s name as ABC Wholesalers and/or Assignee. Also, feel free to have an open discussion about this verbiage with your seller. Keep in mind, you want to do everything in the highest level of integrity. At no point do you want to hide anything from them. Your goal after having a fully executed (signed) contract is to then market your agreement to potential buyers.
If you are unclear about question #1, feel free to ask questions in the comment section. You have to have a clear understanding of this before you can proceed.
Question #2: How do I find a mentor?
This question is asked so often that I believe it goes unanswered in the forums now, so let me help you with this. I’ll answer like this — in the Bible it says, “Ask and you shall receive, seek and you shall find.” Lao Tzu states, “When the student is ready, the teacher will appear.” You will only find a true mentor when you are ready. How do you know when you’re ready? When you’re taking massive action.
Many newbies are looking for mentors, but they are not looking for deals. A true mentor will not acknowledge your request unless you provide some value. You need to ask yourself whether you’ve been consistently driving for dollars (emphasis on consistently), whether you’ve started a small direct mail marketing campaign, whether you’ve put out bandit signs, and whether you’re knocking on doors or cold calling. What are you doing? If you are just trying to learn from YouTube, turn the computer off, beat the streets, and talk to people.
How do you find a mentor? Start taking action on some of the things you’ve learned. I swear to you, once you start doing this, you will find your mentor — or better yet, they will find what they are looking for in you.
Question #3: How do I find motivated sellers?
Reread question #2. I put some great actionable tips you can use to help you find sellers in there. Again, you have to tell everyone you know what you are doing — I know you may be ashamed to tell anyone because you haven’t done a deal yet. So what? You won’t do a deal because a lot of times, you find deals in the most unexpected places.
Here, let me give you an example to prove my point. I had someone refer a newbie to me. They knew I’d been closing transactions and could help sellers. This person gave the newbie my number, and we began to talk. He told me how he spent nearly $30K on one educational seminar, but still didn’t have anyone he could contact to help him navigate his way through a deal. To make a long story short, I asked him, “Who in your circle knows what you are trying to do?” He stated, “Just a few people.” I told him to go back and tell those people he was seriously looking to buy property. He did that — and I’m being honest — his brother said, “Well, why not buy my property? I want to sell it but have not told anyone.” We are under contract right now on both legs of the transaction, and he is finally getting hands-on training.
You find motivated sellers by taking action, by cold calling, starting a direct mail campaign, putting out bandit signs, and calling “for sale by owner” listings. You have to get out there and beat the pavement.
Question #4: What should I say to a seller? (I have no money to buy their house.)
You are absolutely right — you have no money to buy their house, but you will have the money by the end of the inspection period. Stop second guessing yourself. You have to speak to sellers with confidence. A seller can smell rookie fear. Before speaking with the seller, build your confidence. Whatever you need to do to become a bulldog, do it.
When speaking with a seller, you need to do more listening than talking. Ask the necessary questions, such as:
- Is there any particular reason you’re looking to sell?
- If everything was perfect, how would you want the sale of your house to go?
- As a buyer, is there anything I should be concerned about with regard to the house?
- What are the repairs that are needed?
Always ask open-ended questions and then shut the heck up and let them talk.
Again, you want to find out about the house, but more importantly, you want to find out as much about the situation as possible. What are the motivating factors that drove them to speak with you about selling?
Question #5: How much do I offer for their house?
OK, now this is a science, and it varies from market to market. Most people use the rubric ARV x .70 – Repairs -Wholesale Fee = Max Offer. This is a great starting point, but again, each market is different and some markets are more aggressive, so you can push the envelope a little. Please use that as a starting point.
Normally, the next question is how do I estimate repairs? I discuss that in another post, “Wholesalers: Having Trouble Estimating Rehab Costs? Try This!” When making your offer, be confident. Even though you may be shaking in your boots, kick those boots off and make the offer. Who cares if they don’t accept make the offer? Studies show that only 1% of those you market to respond, and only 1% of those may lead to a deal. So the the numbers are stacked against you regardless.
Question #6: How do I find buyers?
There are two ways to answer this question:
- If you have the property under contract, work with a local wholesalers that have experience. You can find them by Googling “sell my house [your city] fast.” They will have a buyers list, and they will be able to handle the disposition for you. It is my experience that finding a buyer is not the issue because as long as you have a nice deal, anyone will either buy it or help you sell it.
- Now, if you’re looking to build your buyers list and you do not have any deals, create ghost ads on Craigslist. Also Google your city again with the same verbiage because a lot of cash buyers are trying to find houses like wholesalers. There are also products out there to help find cash buyers. You can review all the real estate sales in a certain area that sold for cash, and there is your cash buyer. Send them a letter letting them know you would like to offer them off-market properties first.
Bonus Question: Should I get a license?
My suggestion is yes, if you are looking to become an investor with longevity, you need to have a license. It opens up other avenues for income. You can do traditional sales and property management, you’ll have access to the MLS, and it provides a level of credibility.
I wanted to write this post because I see these questions go unanswered. Please, if you still do not have your questions answered, feel free to ask. No question is dumb if you don’t know the answer. I’m sure there are many other questions I could have attempted to answer, but again, if you have questions about contracts, assignments, or anything else, please ask.
Any other wholesaling questions?
Ask them below!
Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.