I have been studying the wholesale strategy for a little while now and in my research here on BP I have definitely run into conflicting opinions. 1) Build your buyers list first- find the criteria wanted and go find the deal. 2) Find the deal first and the buyers will come. (No one will take you seriously with out the property marketing package with all the numbers and evaluations. As much info and pictures for Due Diligence. 3) Find a deal, buy it yourself and fix it for rental, then sell, in order to understand the repair cost and ARV, in order to learn before starting to work for others wholesaling. 4) Just jump in with no knowledge start mailing and offering and offending and mistaking until you either quit and make a bad name or learn the correct way. I must me missing a bunch of others. Please recommend a path. I tired of reading and thinking and analyzing. I just want to start. I will go with the most recommended path. It's as arbitrary as any other number in REI. :)
@Stephen Dominick if you can do it #3 is the best. But still start to get a buyers list for when you do get a property. So do #3 and #1 at the same time. I would be glad to lend some time and advice on a deal.
#1 - Is the only way to go. You're not wasting your time since you are just filling orders.
#2 - Wrong. REI isn't a movie, filmed in the fields of Iowa. Why would they come? Who will come? Too much work.
#3 - This isn't wholesaling...this is flipping.
$4 - This is suicide, but a great way to make sure that nobody takes you seriously when you do have a good deal.
It all depends on how good of a deal you can find. It works great to go talk to potential buyers find out what they are looking for and then go pound the street to look for the deal. Many buyers will humor you. It rare that a new Wholesaler finds a deal that I would buy.
Spend some good time figuring out what a deal really is. Most Wholesalers calculate rehab costs 10-25% to low and ARV's 10-20% to high. Do that a couple times and most of your buyers will ignore any deal you bring them.
But in most markets if you have a really good deal you can resell it on craigslist or so someone working in that neighborhood in a few minutes. When I have a good deal my buyers are asking if they can immediately drive a check over to my house without ever looking at the house.
The best thing would be option #3, but then you are not wholesaling, you have already taken the next step in realizing profits from your efforts. I would suggest doing this for all the deals you find, until you find yourself with so many deals you can't handle them yourself, then wholesale those.
Market for motivated sellers and let the deal dictate what to do. How are you offending anyone by sending a mailer that you want to buy their house? You should be ready to buy it, wholesale it, owner fi it, short it, list it... leads are too valuable to only have 1 strategy.
And yes, buyers WILL come if you have a GOOD deal. But not without marketing to them as well. But that's the easy part... the hard part is finding the good deal. What a waste of time to "develop a buyer's list" before you have a property. That time should be spent locating motivated sellers. Being "busy" is not the same as being "productive". You need leads.
My rant of the day! This has been addressed 100 times.
First thing people in any public forum seeking information, being STEP ONE, is figure out who the hell knows what they are talking about, who on that site seems to have contributed good information, look at profiles, do they have experience or did they start in the activity last year? Some common sense in any public forum will keep you from getting bad information regardless what the topic is. Take a little time to figure that out, it doesn't matter what the topic is, cars, boats, frying fish, baking an 8 layer cake, fixing a generator or buying a house. There are people who post on all kinds of sites thinking they know, they post to see their comments posted, they may not have a clue and then, there are some who intentionally try to mislead just for giggles. Do some due diligence before you dive in.
Just look at this as a general business position, what does a wholesaler do?
I understand the frustrations newbies have with public forums.
First off, you're not learning real estate here or by looking at wholesaler stuff, you're trying to learn a marketing system for real estate.
If you knew real estate, common practices, expectations of buyers and sellers, you'd know that property owners react differently.
A homeowner who resides in a home has different needs than one who owns an empty house.
How you approach these owners should be in considering the problem they have, what their needs are, these needs drive what a seller might do, how they react.
In law, there is a thing called tortious conduct, that means doing something stupid can put you at a higher level of responsibility and risk, causing someone to suffer a loss can come back on you, it damages your reputation and your pocket.
What does a homeowner, who lives in a property do when they get a sale contract? Did you ever get ready to move? Aren't they suppose to leave the property when it sells? Isn't it reasonable, for any prudent person with half a brain to understand that a homeowner has to move out? I'd say it is and I can assure you that a judge will think so too!
My next issue is how crapheads approach homeowners' they lie and deceive them in most cases. Here is my offer to buy, but I have to get my partner's approval (they don't have any freaking partner). They also can't buy it, no money, no credit, no knowledge and no ethics or forethought of what actually goes on. They only look at half the side of some marketing aspect.
You approach a homeowner as if you're buying, they are under the impression you are buying. You little exit strategies aren't truly disclosed, you ability to buy isn't disclosed, so they are led to believe you're the man!
What do they do? They get ready to move. They go look at houses to move into, the start packing junk, they get a storage building rented, they may have a garage sale a sell stuff, they may well put money down on another house, they contract, they apply for a loan, pay for an appraisal, they may get title work, all contingent on the closing of their home. This happens EVERY DAY!!!
Now comes Willy Dumbazz Wholesaler, graduate of the We Mess You Over Guru School, he puts the house on CL (illegally advertising the house most likely, because he has no clue as to RE requirements) and beats the bushes looking for some buyer. A week before his contract is up (some probably wait till the day before) he calls and says "Deal's off" whatever his weasel clause was.
Now comes the Realtor involved in the sale the owner was going to buy, but can't now. They want the deal to go through, so they call that owner and see how they can assist them. That owner explains what happened. The Realtor looks at the sale contract, with all the BS crap wholesalers use. The Realtor now knows what went on. The Realtor informs that owner and says, call MR. Slaughter, my attorney!
Willy can get and needs to get nailed and nailed hard! The deal needs to be gone through with a microscope and jam Willy into a jail cell for RE fraud! At the very least, cut to size for ALL the financial damages caused by Willy. He scammed that homeowner!
How can Wiley avoid these issues?
First, by taking two weeks on a part time basis, time from messing around in guru books and RE sites and learn the basics of RE instead of the tactics of how to move it.
Then, know what a buyer is looking for, he understands what a buyer wants and needs, he understands because he has the RE basics down pat, he knows about what it will cost to repair, he knows his buyer wants a 3/2/2, he knows the buyer is interested in that part of town!
Willey has a PROSPECT for that house occupied by the homeowner!
That changes everything, Willey doesn't need to lie or deceive any more, he doesn't put himself in a position that he needs to pull tricks or play games, dang, he can be truthful!
Mr. Homeowner, I'm a RE investor, I MAY be interested in buying this house (MAY because it's not impossible for you to buy it because now you know other methods to actually buy) But, I also have other investors I work with and if I don't buy it, I'm confident I can get this property sold for you, quicker than listing it and at a price we can agree on. Mr Homeowner, do you really care who buys your house?
How many sellers do you really think care who buys it? I never heard anyone say "Yes, the must be 6' tall, blue or brown eyes, and be married with kids" NO! They don't care!
Guess what, now you have been honest, they know your investors will be looking!
Cut your deal and show it to your known buyers.
You don't need CL or go beat the bushes, before you even approach a seller you know pretty much if you have a buyer. You spend HOURS, NOT DAYS, marketing that deal.
And, you also understand that you aren't advertising or selling the property, you're selling the contract, the right to buy the property!
NOW, let's take that empty house. That owner isn't moving, they may or may not look for another property, they aren't under any time constraint as the place is sitting there empty!
There can be other issues, say you keep a property off the market, a landlord may not lease it, but in the big picture, your liability in dealing in this property just went way down!
You can tell that owner the same thing you told the other homeowner, guess what, they don't care who buys it either!
That empty house can be presented to know buyers, but if there are no takers after hours worth of effort, you can put more time in it and beat the bushes, advertise the contract on it, you can spend more time without the concerns of those who live in a home.
So, you can do both. but under different conditions.
If anyone tells you to just find houses first and go beat the bushes, LAUGH AT THEM! They have no clue what they are talking about!
Besides, after you actually learn real estate, you can follow the advice of Jeremy and Dawn, you can learn how to do it yourself!
To be good at wholesaling you need to know what you're looking at, you need to know what the ARV is and the costs, you need to understand the rental market to identify a good rental for any landlord. By the time you learn how to wholesale well, why would you mess with it, do it yourself!
So, yes, you get buyers first, it saves you time, you aren't attempting to buy what you can't move and you're not taking properties off the market assuming unnecessary liability. :)
Very informative, I appreciate your time.
I say # 1 + location.
I hear it all the time... Find a deal and they'll come! NOT ALWAYS TRUE.
For instance, say you get a 3/2 house under contract, you're stoked! Woohoo you got a deal! But it's basically a tear down in nowhereville and 500 hundred people live in that town! Nobody wants to invest there! So now you wasted all your efforts on junk.
My point is you need to know not only what the buyers want but where they want it. You need to know where to target. My brother and I have spent countless hours/days breaking down my entire state to the zip code.
In addition, do you know how many "buyers" say they are cash buyers but really aren't? Dozens and dozens we talk to are nothin but tire kickers. These are mostly people wanting to get into the game but can't or won't pull the trigger for whatever their reasons. So finding the real cash buyer, real buy n hold and the real house flipper (like more than 3-4) a year is essential to succeeding. Until you personally know they've bought several a year keep looking.
If you know what a real buyer wants, what they have purchased before and at what price range, sqft and location well, you just put the ball on the tee my friend.
Nathan, if it's a tear down, you don't have those issues I mention. By say #1, isn't the answer as to how to head into all of the inventories available to a wholesaler, it is to the property example you gave.
And, if you have issues with tire kickers, that's because you fail to qualify your proposed buyers. That's another matter, you don't take some slim ball's word for it, check his name in deeds, is he buying? Did he obtain financing evidenced by a deed of trust or did he actually pay cash?
And, if folks think they should only have buyers who pay cash, well, you missed the basics again in RE, many leverage the deal, I can go to a bank and get financing on a fixer in a heart beat, experience and capital along with an investor's banking experience means they can cut the deal......so, thinking finding cash buyers is just more guru junk, you're missing out on 2/3s of the potential buyers. Again, because wholesalers fail to learn RE and financing requirements and how to qualify a buyer. Qualifying a buyer doesn't have to be having them fill out an application, a little research can tell you if they can buy. Maybe that hast to do with a lazy approach too, not sure. Ahhh, but gurus don't teach this, so it's left out of the "program" and it's easier telling folks to go find cash buyers. :)
Hmm I think you took my comments a little to literally... I do not fail to qualify my proposed buyers. I thought I made this clear by stating "until you know if they've bought several a year". I wouldn't know if they did or did not if I didn't research/qualify them right? If you can't close in 2-3 weeks you're not my buyer.
I do not deal with retail buyers (yet only because I choose not to) needing conventional lending trying to fix n flip because of obvious reasons. I receive a LOT of calls from these buyers. These would be UNQUALIFIED buyers. If you have experience and capital then you have 2/3 qualifications I look for. The problem is for as many "wholesale gurus" there's just as many "house flipping get rich overnight gurus".
What works for you bill might not work for others. Do not lump everybody into the same pot.
The term "cash buyer" is a term I use lightly... Just about every transaction in today's society is electronically transmitted. Sooo unless you're walking up to a seller with a suitcase full cash to buy their house zip it...
Maybe "assuming" someones practices without knowing them on a forum is a lazy approach. Ahhh but that must of been left out of Bills book on "Living the dream of Bill G". :)
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing