The Truth About Wholesaling!! It’s not easy, or free!!
The Truth About Wholesaling!! It’s not easy, or free!!
As a full-time real estate investor, I’ve dealt with a lot of wholesalers, and have wholesaled some of my own properties when locating good deals that didn’t fit my own portfolio. This is what I have learned about wholesaling through my own experience.
Most wholesalers quit before they ever succeed, or really learn the business, due to the false promise or dream that it's something you can get rich doing with zero money. This is the biggest lie in our industry. The majority of wholesalers have no training or education on real estate investing. They watch a YouTube video or attend a seminar, and think anyone can do it and get rich with no money involved. Or worse they pay some guru or mentor who just takes their money, shares very little information with them, and leaves them on their own. Most people who try wholesaling only last a short time before they quit.
Now don’t get me wrong, there are people who are very successful at wholesaling. If you learn the business, and can consistently produce good deals, you can make very good money. But it’s like any other business, it takes time and money, and the more you learn the better you will become. It’s probably the hardest part of this business, and isn’t easy or free!! The wholesalers who are most successful are the ones who actually have money to spend on marketing, most are actually investors themselves who decide to wholesale some of the extra properties they pick up when they find deals that don't fit their own needs.
Gurus and Mentor programs…Good or Bad?
Not all of the gurus or mentors are overselling the dream, and many are truly trying to help others learn the business, but you have to do your research before joining any of these programs, and ask a lot of questions. There are successful wholesalers out there who become gurus/mentors trying to give back, and mentor others for a fair price for their time. These are the ones who grinded for years to build their wholesaling business, became very successful at it, and learned to scale their business. Just be aware there are also many out there just trying to make easy money. It’s a lot easier to get paid by multiple people at a time to “teach” them wholesaling, then it is to actually go out and wholesale.Do your due diligence.
So, who succeeds at wholesaling?
- Person A: is an investor who has money to invest, and wholesales some of the deals they come across that do not fit their own portfolio.
- Person B: starts off with at least a few thousand dollars to float their wholesaling business for the first 90 days, investing in education, and marketing.
- Person C: joint ventures with another successful wholesaler or investor on their first few deals.
- Person D: gets LUCKY and lands a big deal right off that funds their business getting started.
What do you need to learn to be successful at wholesaling?
- Learn the local state laws regarding wholesaling where you operate. There are many states where wholesaling is illegal, or certain ways people do it is illegal. For example, in Oklahoma where I live, it’s illegal to wholesale real estate unless you have the “ability and intent” to close on the property. Learn the laws in your market. Have a real estate attorney review your contracts before using them. There are grey areas that many wholesalers operate in, you don’t want to be one of those who gets a “cease and desist order” from your state real estate dept. So COYA!!I suggest only wholesaling deals that you can close on yourself, if you do this, you’ll never have any issues.
- How to locate off-market properties available at substantial discounts. These can be distressed properties, inherited unwanted properties, properties where the homeowners are behind on their mortgage payments, or properties owned by homeowners going through a divorce, or relocating due to job, etc. Any property where the owner is motivated to sell fast. Some sources for properties include direct mail, driving for dollars, cold calling, properties advertised FSBO on sites like Craigslist, or other classified ads.
- How to find accurate ARV or Comps values on properties. There are many resources for this, you need to use more than one on every property, not just the highest one you find. Many wholesalers use Zillow, which isn’t always very accurate unless you know how to use it for comps. Don’t take just the highest priced comps just to make your deal look good, take an adequate mix of similar sized properties sold within the last 90 days (6 months if needed), in the same neighborhood if possible. If its older than that, or if you cross into another neighborhood, it’s not necessarily accurate.It’s best to locate 5-10, then eliminate the most expensive and the cheapest and use those in the middle.
- How to estimate repair costs. This is probably where most wholesalers really fail. If you’re not good at this, just tell investors the truth and let them determine the repair costs themselves. Some ways to learn more about estimating repairs, go to HomeDepot/Lowes, etc. and research materials pricing; or if you google average cost to repair XYZ, you can find may sites that are zip code specific and give you a general estimate. There are also online calculators to help with estimating repair costs. One of the best ways to learn is become friends with a local contractor in your area, tell them what you do and you’d like to be able to refer them to investors when you wholesale properties, in exchange for them being able to give you rough estimates on repair costs when you have questions.
- How to find cash buyers, or transactional funding to close fast on deals you don’t have your own funds available.Cash buyers are easy to locate if you take care of everything else on this list. If you do not have your own funds available to close on properties, you should probably find some sources for transactional funding, prior to starting your wholesaling business.
Conclusion…
You can be very successful wholesaling, and make a lot of money if you treat it like a real business…But it’s not easy, or free!! Please add your comments and feedback.
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Good Luck, Keep Grinding and hitting Home Runs!! – JeffFilali.com - (OklahomaCashHomeBuyer.com)
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