Check List: The Top 7 Reasons New Wholesalers Fail (with solutions) #1 is a BIG SURPRISE!

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I am often asked about my early success in wholesaling real estate. Avoiding these common pitfalls that I see in new students will help you achieve great results.

1. Education over Action

By far this is the #1 Killer of new wholesalers success! Too much education is an absolute cancer in this business. Education will make you feel like you are moving closer to your goals when nothing could be further from the truth. It is like a warm blanket fooling you into thinking that you are progressing.

SOLUTION:

    oTake immediate action on new information you learn.

    oOnly reward yourself with education after taking Massive Action; let it end your day, not start it.

    oAccept that you will never know everything about this business and be comfortable with that fact.

    oBe honest with Buyers and Sellers that you are just starting out, do not “act as if”.

    oKnow that 99.99999% of your education in wholesaling will come from doing, not learning.

    oOnly use mentors as instruction manuals (Mr. Miyagi/Daniel San) not College Professors!

2. Reinventing the wheel

I understand this is a “cowboy” business filled with creative entrepreneurial Type A personalities who all think they know better; however, right now is NOT the time to try new ideas! I can promise you one thing about this business, a proven method has already been developed!

Solution:

    oBe sure you are extremely clear on the instructions you are receiving. They should be step-by-step, in order and very easy to understand.

    oIf you are not sure on the instructions, clarify them directly with the source they came from.

    oDo not edit/revise/change any piece of the instructions. What may seem not important to you may be a critical piece of what makes it work!

3. No real faith in the business of Wholesaling

These students are usually very skeptical of wholesaling as a business. You don’t really believe that wholesaling is a real business, producing these insane results. I can tell you this really wasn’t an issue for me as my mentor was my brother Todd Toback, who I already knew was making over a million a year wholesaling.

Solution:

    oAsk your mentor to see copies of all the checks he/she has picked up in the past 3 months (from wholesaling, not selling products) and make your decision from there.

    oAsk your mentor to speak to some successful students who have closed more then 1 deal.

4. No real faith in yourself to make money at wholesaling

Maybe you believe the person you are learning from is just very good or very lucky. Maybe you believe you do not posses the skills needed to close these deals. There is very good news for you! You, Me, Cris Chico, Sean Terry, Todd Toback, Joe McCall, Kent Clothier - NO ONE will ever be able to “convince” anyone to sell their house significantly below market value! (Not legally anyway and not while creating a win/win scenario). When you are a good wholesaler, you are good at one thing – Being a Deal Finder, not a Deal Creator! When you are a Deal Finder you DO NOT have to be good at sales, because sellers are giving you their houses! I was fired from my sales job for not selling enough, then I started wholesaling and closed more than 100 deals in my first 18 months!

Solution:

    oFocus on Finding Deals – Not Creating Deals (You are not a Real Estate Agent … You are a Pawn Shop for houses!)

    oIt’s a numbers game. Get your numbers up and you will close more deals!

    oRemember that it is imposable to mess up a Motivated Seller Call. If you are not closing deals it is because you are not in front of the right sellers!

    oListen to Todd Toback’s podcast episode #10 on how to meet with a motivated seller, follow it exactly and it will work!

5. Too many marketing channels too soon

Many new students try to run multiple marketing channels simultaneously instead of absolutely crushing just one. An example would be a week where you put up a few bandit signs, make some cold calls from Craigslist and mail 500 post cards. No good!

Solution:

    oStop dipping your toe in the water and go ALL IN on one marketing channel (in case you are wondering, Direct Mail is my bread and butter when it comes to finding motivated sellers).

    oMake one channel Fat, Healthy and Producing Leads first. Become the number one person in your market dominating that channel. Then move onto another marketing channel.

    oAlways be measuring your results from your marketing channels. Use different phone numbers to know what is working and what is not working.

    oIf you really want to kill it, split test all your marketing all the time!

6. S.O.S. (shiny object syndrome)

GUILTY! I must admit this has been a weakness of mine! One of the biggest killers in this business is distraction. You are on one path when someone else starts shouting about how great something else is – and BAM! – you’re off starting from square one on a whole new adventure.

Solution:

    oFind an accountability partner (seriously this works!). Tell them your goal and call them when you start focusing on building a mobile motivated seller app rather then wholesaling. LOL This happened to me…

    oWARNING: The harder you try to stay focused, the better the distractions will start to become!!! Here are some examples of my recent distractions:

    §Unnecessarily learning Podio while I’m crushing it with Highrise HQ

    §Unnecessarily switching from Ring Central to Vonage Business Solutions

    §Going through a Probate Course when I have access to a kick-butt inheritance list with US Lead List

7. Lack of GRIT

I learned this lesson a long time ago from my mentor Bob Parsons of GoDaddy.com: “When you are about to quit you are closer than you think.” No truer words have ever been spoken about Wholesaling. This business is simple but not easy! There is a ton of rejection and if you think your first deal was difficult to close, I can promise you the second one always seems to be even more difficult! If you do not have tenacious persistence, grit, determination and insane Stick-to-itiveness you most likely will not make it to deal 3.

Solution:

    oRead The Dip by Seth Godin

    oStay LASER FOCUSED on taking MASSIVE ACTION on REVENUE PRODUCING ACTIVITES (not education!!!)

    oDo not give up – BELIEVE that wholesaling works!

    oSTAY FOCUSED ON REALLY WANTING IT! You are sitting at a café with your family; a van pulls up, shoves your family inside and drives away. The next day you get the call, “Hey, you ever want to see your family again you have to wholesale a deal.” I guarantee that you will wholesale a house immediately!

    oRemember what grit looks like: Picking up cardboard boxes from dumpsters to make bandit signs, selling your stupid TV for direct mail money, using your lunch break to cold call Craigslist, etc.…

BONUS!!!

The following are some common traits shared by successful wholesalers

    1.Reading business books constantly!

    2.Always having a mentor no matter how much success comes (be careful of the mentor without a mentor)

    3.Mastering Networking

    4.Utilizing a database

    5.Always maintaining an abundance mindset (read the Go Giver!)

*** NOTICE THAT LACK OF MONEY IS NOWHERE ON THESE LISTS! ***

I truly hope Wholesaling is as much a blessing to you and your family as it has been for mine!

To Great Real Estate Adventures,

Tom Krol

Love the post Tom! I heard of a syndrome from a guru named "seminar junkies" of people that continually pay money to go to seminars, but never have any results due to not putting the information into action.

Not to say that I haven't done the same, but things are now in motion!

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Hey everyone,

In regards to wholesaling, I'm kind of stuck on the Ernest money part and was hoping you could better inform me. When I get a property under contract is it always necessary to put down an Ernest money deposit? If I do put down an EM and don't have a buyer within time, is it possible to retrieve it or is it lost?

I apprecite you giving this perspective. It is very helpful for anyone wanting to get (or not get) into wholesaling hearing from somone who has been active in it. I look forward to a blog post.

This is not a good post at all.

It is a Great post, well done. While there are other factors and reasons for why would be wholesalers fail, this post captures the majority of the main reasons and takes it a step further by including how to avoid them. This is a great follow up read to my thread found here for anyone looking to get into this business:  http://beta.biggerpockets.com/forums/93/topics/583...

One other factor I would want to add and include here is building a quality (not quantity) buyers list. While there are those who will argue find the deal and buyers will come, there is no negative to getting the buyers first as opposed to the opposite which does have negatives. The reason for this is multifaceted, but the main reason is that if you have a real buyer with their specs of what they are looking for, you can go shopping for that very thing and knowing you have the buyer places you in a much stronger negotiating and confidence position.

It's a paradox...you shouldn't invest until you're educated and know enough not to do anything dumb...but you have to pull the trigger at some point and be willing to make some mistakes. I think the #1 is a little bit extreme though...I think there's no way you can become too educated. However, some people use this as an excuse for delaying taking action.

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Would-be real estate folks often fail to start where they are and think that they can build an empire when they have never really made a decision.

I started when first out of college but didn't have enough confidence that I could make a living to generate cash flow and pay my bills. So, I wasted my time (and my corporate employer's) until I ultimately got fired. That helped me find the fire in my belly and my desire to succeed was greater than the fear of failing.

Those of you who know me are aware that I'm verb big on education. That being said, it doesn't do you any good if you don't try and apply what you've learned so far by taking daily, focused action.

Study the basic to learn the fundamentals. Learn what makes a deal and how to generate workable leads. Don't be afraid to share the ones you don't understand, can't fund or outside your skill area to other, more experienced investors. You'll learn a lot from the ones that they, not you, made work.

Alas, many new people, opportunity detectives who pre-maturely refer to themselves as investors, find a single property, try everything in the world to squeeze something out of it themselves, but fail to monetize it and eventually loose interest.

It's still about attitude AND action. Having a positive attitude is important, however it won't put fish on your hook if you don't cast your line out.

Originally posted by @Michael Q.:
@Tom Krol

Love these statements...

  • This business is simple but not easy!
  • Always maintaining an abundance mindset.

I wonder how many people actually live a life of prosperity and abundance?

Great post and yes turn it into a blog..

Michael, no way I would have been able to achieve this level of success without you and your team at Yellow Letters. My family and I sincerely thank you for helping to change our lives. By the way my calls just started coming in from my last order, the 6,350 split test, should have one locked up tomorrow!

Originally posted by @Christopher Montgomery :
I was wondering can you forgo the earnest money deposit with a solid proof of funds letter

Thanks again for the article

I do not leave EMD with my sellers. I leave $100 at my title company in escrow for the house I am wholesaling.


I do not leave EMD with my sellers. I leave $100 at my title company in escrow for the house I am wholesaling.

That's what I'm trying to do. How is this accomplished?

Steven

Tom's right about earnest money. We write that check to the title company, not the seller. NEVER give the seller a check or cash for an EMD. Your contract should state the EM will be held by the title co.

Best thread I've read to date! I swear this has spoken to me on so many levels dude and I want to thank you soooooooo much for writing it. Much success to you! Account Closed