Now, at the time, there weren\u2019t many resources like BiggerPockets out there, and I hadn\u2019t even read a real estate book in my life at that point. I just saw the opportunity back in the 2008 crash and simply bought cheap houses and then sold them slightly higher.<\/p>\n
It was simple and clean, and it\u2019s been an incredible ride ever since!<\/p>\n
One of the Simplest Ways to Make Money in Real Estate<\/h2>\n
You know, I really love what I do as a wholesaler, and it\u2019s such a shame that people only consider it as a beginner\u2019s strategy.<\/p>\n
Today, I want to challenge this and make a case that if it\u2019s done correctly, being a real estate wholesaler is one of the simplest ways to make money in real estate<\/a>.<\/p>\n Now, notice I didn\u2019t say \u201ceasiest\u201d but \u201csimplest.\u201d I don\u2019t know of anything in this world worth doing that is easy 100% of the time, but simple is a different thing.<\/p>\n My company is called \u201cSimple Wholesaling\u201d because I strive to live a life that is as simplified as possible!<\/p>\n Becoming financially successful doesn\u2019t have to be complicated. It just has to work and be done consistently over time.<\/p>\n So many newbies out there think that they have to learn everything there is to know about real estate before they can do their first deal, but if that\u2019s the case, I\u2019m sorry, you\u2019ll never end up actually investing! I\u2019ve been in this business for close to10 years now, and I\u2019m still learning new stuff about what I do everyday.<\/p>\n It\u2019s all about learning just enough to take your next step, and if you do that, eventually you\u2019ll have made enough steps to truly reach success.<\/p>\n Don\u2019t worry about knowing so much! Just take action and learn as you go.<\/p>\n The following are the only 4 aspects there are to know about the real estate wholesaling business. Sure, there are some details and nuances to be hammered out beyond the scope of this article, but those just come with time. If you take these 4 simple steps to heart, you\u2019ll find that this is all you\u2019ll need to begin making money. Again, just learn enough for the next step, and with time, you\u2019ll get there. Let\u2019s get started!<\/p>\n As a wholesaler, 99.9999% of your buyers will be people looking to flip a house<\/a>, or people looking to hold a property as a rental<\/a>. So, naturally you need to be buying properties at a low enough discount where it would still make sense for your ideal buyer\u2019s needs.<\/p>\n If they buy a property from you, they need to know that they can still make money from the property you sold them. It\u2019s pretty simple, like I said!<\/p>\n So, your first step is to know exactly how to analyze a deal<\/a>, to determine if it is a deal or not and then to determine your highest possible purchase price. What I mean by this is you need to first determine how your buyer\u2019s typically run their numbers and then on top of that, you need to factor in your profit.<\/p>\n The 70% Rule<\/strong><\/em><\/p>\n So, let\u2019s break it down:<\/p>\n When someone is looking to flip a house and it comes to determining their purchase price, they typically use a formula called the 70% rule and it goes as follows:<\/p>\n Purchase Price = (ARV * .70) – REHAB<\/strong><\/p><\/blockquote>\n Comparables — which are similar homes that have sold in close proximity to your property within the last 6 months to a year — help you determine the \u201cafter repair value\u201d (ARV) or what the house can sell at retail once it\u2019s all fixed up.<\/p>\n Once you have the ARV, you multiply it by .70 because you want to purchase the property at a 30% discount in order to secure your profit margin as a rehabber. After that, you simply subtract what you know the rehab costs will be, and boom —<\/em>\u00a0you have your highest available price point. (We\u2019ll cover rehab costs in a minute.)<\/p>\n The 65% Rule<\/strong><\/em><\/p>\n So, now that we know roughly what people looking to flip a house are wanting in a deal, as wholesalers, we need to now factor in our profit margin. Enter: the 65% rule.<\/p>\n Purchase Price = (ARV * .65) – REHAB<\/strong><\/p><\/blockquote>\n This way, we have at least a 5% profit margin to play with in terms of our \u201chighest and best offer\u201d (obviously, you\u2019ll be negotiating with the motivated seller and trying to get the best deal you can, but this is a great guide to start).<\/p>\n Now, when it comes to determining rehab costs, this is more of an art than a science. If you don\u2019t have a construction background, the best way to learn how to determine rehab costs is to hire 3-5 contractors to give you bids on the property. This is time consuming and costs money, but it\u2019s the simplest way to get an accurate feel for costs in your particular market.<\/p>\n The 2% Rule<\/em><\/strong><\/p>\n Now, when it comes to buy-and-hold investors, the typical rule-of-thumb is something called the 2% rule. In essence, what a buy-and-hold investor is looking for is to gross at least 2% of the purchase price on a monthly basis.<\/p>\n Depending on your market, this may be a 1% rule or a slightly less than 1% rule, but you\u2019ll have to learn your market to determine that. In Indianapolis where I live, it\u2019s a 2% rule market (sometimes 3%).<\/p>\n So for simple numbers, if I purchased a 4-plex for $100,000 I would want the property to make at least $2,000 every month in order for the deal to work.<\/p>\n So as a wholesaler, I need to make sure I get the property discounted enough that I can resell it under the 2% rule.<\/p>\n So, using the same numbers as above, if a buy-and-hold investor purchased a 4-plex at $100,000 and it grossed $2,000 a month, I would need to get that same property at $90,000\u2013$95,000.<\/p>\n That way, when I resell, I make a little profit, but the numbers still work for the buy and hold investor.<\/p>\n Make sense? Great!<\/p>\n Once you learn how to analyze deals, the next thing you need to know as a wholesaler is how to find deals. Now, I\u2019m at a point in my business where I spend thousands of dollars a month in direct mail marketing<\/a>, but when you\u2019re first starting out, this may be impractical.<\/p>\n There are several free ways to find deals that you can use when you’re first starting out, but they aren\u2019t glamorous — they take a lot of hard work!<\/p>\n The first I\u2019d suggest is searching Craigslist daily in the FSBO section. Most of these will be junk, but through Craigslist, you can probably get at least one deal a month, depending on your market.<\/p>\n Another strategy is to make several extremely low offers on properties through the MLS, both personal residences and REOs.<\/p>\n This will require that you have MLS access either as an agent<\/a> or through an agent, but it\u2019s a strategy that can work pretty well.<\/p>\n When I first got started, I would make an average of 500 offers a month and would usually close about 3 percent of those.<\/p>\n The final strategy I\u2019d suggest to consider is something called driving for dollars, where you simply jump in the car and drive around looking for houses that look distressed.<\/p>\n
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\nRelated: <\/strong>Contract Assignment 101: The Beginner\u2019s Guide to Wholesaling Real Estate<\/a><\/em><\/p>\n![\"honest-wholesale\"](\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2016\/02\/honest-wholesale.jpg\" "\\"\\"")
<\/p>\nWhy Real Estate Wholesaling is Stupid Simple<\/h2>\n
1. Take a look at the 65% rule and the 2% rule.<\/h3>\n
2. Find deals.<\/h3>\n
![\"work-with-wholesalers\"](\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2015\/11\/work-with-wholesalers.jpg\" "\\"\\"")
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