Wholesaling is the selling of merchandise to anyone other than a retail customer. The merchandise may be sold to a retailer, a wholesaler, or to an enterprise that will use it for business, rather than individual, purposes.*<\/p>\n
With a few tweaks, we can cater this definition to describe real estate wholesaling<\/a>.<\/p>\n The selling of real estate (or the right to purchase real estate) to anyone other than the retail home buyer. \u00a0The properties may be sold to another real estate investor, rehabber or landlord that will use it to provide business profit rather than individual use.<\/p>\n Whenever I hear someone ask about how they should get started in real estate investing, the response is typically to become a wholesaler. \u00a0The classic “guru” pitch for perspective real estate investors is that you can get started in real estate quickly, easily and make huge checks from wholesaling houses for just a few hours worth of effort and no money. \u00a0Just like every other guru pitch, this sounds good in theory but is very different in reality.<\/p>\n I cringe every time I hear that advice. \u00a0Sure, there are people that get started with wholesaling and have success, but the vast majority do not. \u00a0So I was very happy when I listened to\u00a0BP Podcast 037: Full Time Income, Part Time Lifestyle Real Estate Investing with Aaron Mazzrillo<\/a>. \u00a0Aaron, who has done quite a few wholesale deals, also recommends that new investors do not start out with wholesaling.<\/p>\n Below are a few examples that I have seen of people who try to start wholesaling and fail.<\/p>\n In his interview, Aaron<\/a> mentioned 5 key areas that you need to be great at in order to wholesale.<\/p>\n Real estate investing is all about finding good deals. \u00a0Generally the best deals are not the ones that everyone has access to, such as those listed in the local newspaper or the MLS, so you will need to determine how to find these deals. \u00a0This generally means doing some form of marketing (and in reality multiple forms of marketing) and being persistent with that marketing.<\/p>\n Real estate is a people business and negotiating is a fundamental concept. \u00a0As the common saying goes, “you make money with you buy, not when you sell”. \u00a0Most people believe their property is worth more than it really is, so being able to understand their motivations and needs are fundamental to creating a deal that works for the seller and yourself. \u00a0If you are a wholesaler, you need to be even better at this, since you will need to negotiate a good enough deal that you can take a cut of the profit and still leave enough in the deal for the person that you will sell the property to.<\/p>\n There are several different ways to wholesale real estate, some are more complicated than other. \u00a0On the simpler side, you write-up a contract to purchase the property and have the buyer be your name and\/or assigns (ex. Tom Sylvester and\/or assigns). \u00a0Then when you wholesale the deal, you add the person who will purchase the property at the end. \u00a0Another scenario is a double close, where you actually purchase the property and sell it right away. \u00a0Then there are more complicated methods such as purchasing a property in an entity such as an LLC and transferring ownership of the LLC. \u00a0Either way, there are different scenarios for different situations and you have to understand the proper route and paperwork for your situation.<\/p>\n In order to know if a property is a good deal, it is critical to understand what it will cost to rehab the property. \u00a0Unless you have a construction background, most new real estate investors will not have the understanding of how to properly estimate the rehab costs<\/a>.<\/p>\n Understanding the ARV (After Repair Value) is absolutely critical. \u00a0Finding a good deals means starting with the ARV, subtracting out the rehab costs as well as the profit for you and your buyer. \u00a0If you don’t understand how to get the ARV, then you will most likely struggle to find a good deal. \u00a0Even worse, you mat think something is a good deal, even when it is not.<\/p>\n If you want to get started with real estate investing, skip over wholesaling and actually do a deal<\/strong>. \u00a0This could mean doing a rehab<\/a> or becoming a landlord<\/a>. \u00a0If you purchase your property from a successful wholesaler, they should have done most of the legwork for you. \u00a0You will obviously want to double check their numbers, but they will have found the property, negotiated with the seller, signed the contract, estimated the rehab and determined the ARV. \u00a0If you find the property yourself, you can work through all of the steps that I just listed and get experience with them.<\/p>\n Either way, once you have gone through the entire process of finding the deal through getting it rented or sold, you will be in a much better position to start wholesaling if you are still interested in it.<\/p>\n Do you agree? Leave a comment below and let’s talk.<\/p>\n *Source:\u00a0http:\/\/www.britannica.com\/EBchecked\/topic\/643010\/wholesaling<\/a> Wholesaling is the selling of merchandise to anyone other than a retail customer. The merchandise may be sold to a retailer, a wholesaler, or to an enterprise that will use […]<\/p>\n","protected":false},"author":1302,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5524],"tags":[],"class_list":["post-48664","post","type-post","status-publish","format-standard","hentry","category-real-estate-investing-for-beginners"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/48664","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/1302"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=48664"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/48664\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=48664"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=48664"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=48664"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Real Estate Wholesaling<\/h2>\n
Signs of a Newbie Wholesaler<\/h2>\n
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5 Reasons Wholesaling is Hard<\/h2>\n
\u00a0 \u00a01. You Need to Understand Marketing<\/h3>\n
\u00a0 \u00a02. Negotiation<\/h3>\n
\u00a0 \u00a03. Contracts<\/h3>\n
\u00a0 \u00a04. Estimating Rehab<\/h3>\n
\u00a0 \u00a05. Appraisal<\/h3>\n
My Recommendation<\/h2>\n
\nPhoto Credit: Jacob B\u00f8tter<\/a><\/font><\/p>\n","protected":false},"excerpt":{"rendered":"