Wholesale deals as a stepping stone?

Question

I want more than anything to create better housing for Western NY and to have incredibly well maintained rentals. However, I currently barely clear my bills and my credit is shot from when my wife lost her job last year. I have been reading about wholesale deals and think it would be an effective method of learning about neighborhoods while building the capital to invest in rentals. Is this smart, or is it a distraction?

Dev Horn · Answer

Truth is, it's hard work and it requires a marketing budget to make consistent income from "wholesaling" (contract acquisition & assignment to an ultimate cash buyer).  It can cost $100 or more to generate a phone call or web lead from a motivated seller.  Maybe 1 in 20 (5%) is a cash deal that you can get under contract, so 20 x $100 = $2,000 marketing cost per deal.  Be prepared to put that kind of investment into this.

You're in an area where there is very low density of housing.  To find enough deals, you'll need to market to at least all of Chautauqua County and that's an area of only 132,000 with only 66,000 housing units.  So, in addition to having a marketing budget, be prepared to drive a lot to see houses.  Jamestown NY is just too small to generate enough deals.  Of course, start there and start with your circle of influence, but you'll have some challenges if family and friends know that you have no money.

Wholesaling is not the easy, no-money-required, road to riches that people make it out to be.  It's ALL the challenges of doing the deals, which is the hardest part (until you start doing the rehabs, which can kick your a** also).

If you have a passion for this and you're willing to invest every spare penny and minute into it, then go for it.  Just know what you're getting into.  Wish you best!

"If you want something you've never had, you have to do something you've never done." ~ Thomas Jefferson

Dev Horn · Answer

Hi @Matthew Forbes - yes, you do have a similar situation with Westport being a small town and Bristol county only having 552K population, so let's do some analysis on your backyard there...

552K is not a low population, but low density as Bristol county is very large for only 1/2 million pop  So, it's a bunch of small towns (vs. one or two big ones), but your advantage is actually that the higher density is down near you.  In New Bedford there's 95K, Fall River 88K, and Dartmouth 34K - together with Westport 15K that's 232K population - so 40% of the pop in Bristol county is down near you.  The other 60% is all spread out up north.

So that is what I see as a marketable RANGE to start (at least 200K pop) drilling down for good lists, etc.  But of course, you know those communities, so some might not be desirable, or too expensive, etc. so there are other factors at play.  But I like that pocket of 232K around you there.  In statistical terms, that's a decent area to work.

You can get a lot more interesting insights into your county and those cities on this US Census website:

http://quickfacts.census.gov/qfd/states/25/25005.h...

Also I like to do searches on Listsource.com to see how many houses in my target area, how many are within my ARV target (market value range), number of homeowners with at least 50% equity, how many of those are absentee owned, etc.  You can get a ton of info from Listsource just by drilling down on the search; you don't have to buy the list unless you want it...

Hope that helps!

"There are two kinds of failures: Those who thought and never did, and those who did and never thought." ~ Laurence Peter

Alex Franks · Answer

In this business for example cash flow rentals.These are for long term wealth but not immediate capital. So diversification in this business  the key multiple streams of income.

Our company does  1 retail flips ,  2 whole sale flips , Buy and Hold rentals .  1- 2  Work to free up capital. So that we can buy more rental homes. 3 is our long term buy and hold strategy. So not every property fits our retail criteria or buy and hold properties. We then look to whole sale these properties to our preexisting client base.

So yes it can be beneficial to you and your real estate Plan. ( goals )I would start to net work at all local Rei Meeting.  These meeting are just a abundance of free information. As well helping to build a buyer list for your  ( wholesale Properties )

John Rogers · Answer

The most important word to know is... networking.

Wholesaling focuses on two things... where do you find them, and who do you sell them to.

Your reputation is what will make you successful in this. Here in Florida, we find properties for Investors that focus on wholesales, and they are quite successful because of their network of buyers.

The point to remember is that for it to work, you need to not be greedy as every deal needs to be a win/win... or you won't sell it. If you guesstimate that you will mark up a house by say $ 5,000 and sell it to a rehabber, and a rehabber can make 20K in profit on a house, then you arwe doing 4 transactions to his one... Plan on having virtual assistants or working long hours.

Matthew Forbes · Answer

@Dev Horn  Fantastic Post.  I am in @Edward Westbrook camp as well.  I would love to get your thoughts on Wholesaling in Southern MA.  My direct mail campaign goes out in just 2 weeks, so any last minute advice would be welcome.

Matt

Jack Butala · Answer

@Edward Westbrook

Great post.  I have the pleasure of being exposed to hundreds of new investors every month.  In your question is how I answer nearly all of their first round questions.

The absolute first step is to learn how to identify undervalued property and then wholesale it with someone who is experienced.

Nice work.  Learn about direct mail and data as tools to find unwanted property in the markets you have chosen.

Please let us know how it goes.

Matthew Forbes · Answer

@Edward Westbrook

I am also a new to this world and am about to start send out direct mail as a wholesaler.  so I will share with you what I am doing to get myself educated:

• 1)Go pro – No I don’t work for BP, but you get the tools you absolutely need to be successful as a pro member hands down.

• 2)Listen to every single BP pod cast.  So far I am about 90 in and it is exactly the education you need.  I listen to them in order from newest to oldest regardless of the topic so I can learn about all angles of this business.  It is truly amazing what you can pick up.

• 3)Take action.  Get a goal and go make it happen.  Without it you are guaranteed to never make it happen.

• 4)Don’t take it too seriously – it’s a lot to lean and that is why people never really get in to it.

Good luck!

Matt

Edward Westbrook · Answer

Thanks! Do you know of any good reads that help walk through the process of actually working up offers or the paper work it entails?

Wholesale deals as a stepping stone?

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