How to Start a Lucrative Wholesale Business

Question

I'm new to wholesaling and Real Estate industry. How do I start a legitimate successful business? Do I need a LLC?

How do I keep track of income and expenses?

How do I get Sellers? How do I get buyers? How do I estimate the repairs needed?

Any tips that will help me out along the way? I would like to use less money as possible!

Is anyone is the Maryland or Washington, Dc area??

Nick C. · Answer

Judging by the questions you're asking, I don't think your goal should be to start a lucrative wholesale business. You should be looking for a job in real estate to learn as much as you can, and then maybe in a few years when you have some experience and knowledge you can try to branch out on your own.

Wholesaling is a simple process; buy low, sell higher. But it's extremely difficult, especially with no knowledge, experience, or money.

Gary Leonard · Answer

Step 1. choose an area to wholesale in

Step 2. don’t worry about building a business.... Yet

Step 3. Find median price per square foot in the area you chose (there’s ways to find this) however just ask a realtor... Seriously pick up the phone- call a keller williams office and say “hello, i’m new to the area and I am a RE investor- Im looking for the current median price per sqft currently in ( your county here)?

Note: Don’t really tell anyone what you are doing until you have completed 2x deals

and ignore all shiny object

syndrome stuff.  Forget about buy and hold- lease option- and creative financing

Step 4. Once you found a median price in your area subtract it by 65%.

ex. say the median price is $220 per sqft- what you want to do is the following $220 x 65%= $143.  Then substrate $143 to the median which is $220 which will look like ($220-$143=$77.00).  Now your goal in this example is to find all properties listed that’s  $77.00 per sqft or lower up to or anywhere between $143.00. No higher than $143.00 stay disciplined . So if a home is $300,000 and has a sqft of 2900 to see if this qualifies is divide the list price of $330,000 / by the sqft of the home which in this ex is 2900 which is $113 per sqft ($330,000/2900sqft= $113.00 per sqft)  $113 falls between $77.00 and $143.00 doesn’t it?

Step 5. Go to craigslist and set up keyword search under housing wanted section- search keywords such as “TLC-Need-Sell-Quickly -Now- vacant -need money- owner finance, needs work- Condemned- fixer upper- fix and flip

Step 6. Then go to Redfin and put the zip of your area in search. Once there go to filter and put all homes currently for sale with min sqft of 600 and max @ 2000- Choose “Houses” ONLY- And out 3-6 months.  Then put 3 beds and 2 baths ( ask why later) For now just do it.  Then press “show” or “done” m

Step 7. after you click done Go to the upper right hand side and click the word that’s underlined “list” you will then be presented a list of all the for sale properties of homes in your area. Scroll down to where you could change pages on the far right you’ll see the word  go to the upper right hand side and click the word that’s underlined “list“ he will then be presented a list of all the for sale properties of homes in your area. Scroll down to where you could change pages on the far right you’ll see the word ”Download”.  Click download and a excel spreadsheet will ask you to Open on your page window.  Open it

Step 8. The excel spreadsheet will have all the homes between 600-2000 sqft for sale in your area in excel lists.  Then Find the column “List Price”

Step 9.  Double check you did this correctly by looking at the second column - Every cell in the column should say “single family home”. Then highlights the column “list price” and go up to the upper right hand excel menu and click on the function option and scroll to “Average”.  Click Average.  You will then have displayed in the last sell within the “list price” column a dollar amount which is the avg list price...

Step 10.  Go to sqft and do the same thing- Find the average sqft.

For ex.  After your highlight both columns “list price” and “sqft” you will get both column averages which say the average for list price is $335,000 and the avg sqft is 1525 sqft.  You then want to find the median price per sqft (this whole exercise is to do 2 things) 1) check the current and actual validity of the median price per sqft figure the realtor gave you for the area. 2) to help you find your first deal.  Yes you can wholesale on market deals ( if you do it correctly)

Once you have mother figures (use my example) $330,000 divide by 1525= $216.00

Then take the average square foot of the realtors figure ($220) and add it to the ($216)= $436.00. ( since you are only comparing the data the realtor extracted that same day of $220 and the actual real time figure you just extracted of $216, then you are comparing only 2 two dollar amounts.   You will then divide $436/2 figures we are comparing = $218.00

This is more or less near $220 ( do the realtors data was well recorded and should be trusted.

Step 10. Then Go to the column “ price per sqft” highlight entire column.  go up to “sort” and then click ascending to descending. this will organize all the low price per sqft to the highest.  Basically all prices from $143 up to the highest figure on this excel spreadsheet and highlight and delete leaving all properties ranging $143 down.

Step 11. Start with the figure closest to $143 and work would way down by going back to redfin and send an offer to each and every properties listing agent.  Don’t offer the listing regardless if it’s already very low. Even if the property is low, at least if it’s “on market” you still want to at least offer a lower price.

ex- say your first property is $132.00 per sqft and is a 3 beds 2 bath @ 1625 sqft totaling $214,500,00. You glance at description and it says key phrases such as “no VA or FHA” or “Cash Sale only” “As is” or “Contractors special”.  Also the photo of the home will show inside and out will probably need work.  Basically if each room needs updating to repair add $5,000 per room. For the roof calculation, automatically assume it needs to be replaced.  Is the home in this example is 1625 - this means the roof is composed of 16.25 Square ( each square is about $180 to $200 per square) In this example let’s say its $190.00 per square x 16.25= $3,087.5 will be your roof cost.  If siding is needed simply calculate anywhere between $4.00 to $6.00 per sqft - let’s say in this example that the price is five dollars per square foot.  ($5.00 x 1625=$3087) Thus your siding would be $3087..  Add $850 per all windows ( regardless if they look like they don’t need replacing) So say there are 5 windows (5 x $850 =$4,250.00). And for landscape, walks ways and misc stuff add $2,800.00.  Then for interior add an additional $3000.00 for misc (use these for your offset cushions) After adding it all up you get $42, 837.00 for your repairs ( alway round up to nearest 1000th) which would be $43,000 in repairs. needed

Step 12: Go to zillow, trulia, redfin and realtor.com and go to your area then on each platform filter by putting min price at $300,000 and Max price $5,000,000. Then choose only houses, change from for sale to already sold in. the last 3-6 months ensure you put 3 beds up to baths. Then put arrange from 1000-1525sqft. then in keywords out the words “updated”

and “renovated” and watch the search lessen - Then click search.  Quickly find the highest list price and make sure the price per sqft is about 65% increased from the median (for ex the median of your chosen area is $218 ( $218 x 65%=$142) Then add that figure to your median of $218 which would be ($218 + $142=$360.00) - Repeat this entire process for 4 of the platforms.  Add all the figures up the. multiply by 4 (4= 4 different platforms) You will find for example a figure of $318,000-   This will be your ARV.  To double check this go to

www.reikit.com and click on their Free ARV calc. So when going down the list of properties on the excel spreadsheet work your was down- Since you already know give or take ARV is around  $320,000-

Now for the place we are looking for we know that the ARV is $320k and repairs needed are $40,000

Now you can give them your offer price - ( so basically finding all low prices sold only identifies the properties condition. We are looking for the starter fixer uppers

so to give an accurate offer price do the following formula ARV x 65% - Repairs - Wholesale Fee= Max allowable offer

Wholesale fee = $10,000

$320,000 x 65% - $40,000 - $10,000= Max allowable offer

Then your first offer would be

Max allowable Offer - $15,000= Wiggle room for negotiation.

If you go above the Max allowable offer you will be eating into your standard wholesale fee of $10,000

with the above example We will offer first $133,000 and we can negotiate up to $148,000.  That being said- go back to that first deal of low price per sqft on redfin.  Scroll down to listing agent and right click and search the realtor on google 7 out of 9 times you will find the listing agent #I follow a script and tell them I would like to place an all cash offer for (address) for the amount of (First Offer)

Followed by telling the listing agent that your unrepresented and that being said, would like for the listing agent to write up an offer to their listing client representing you as their buyer client.   Therefore tell them they will receive both sides of the commission when and or IF your offer is accepted.  Now you have the realtor doing all your dirty work.  Repeat this process right down the list until you are done sending an offer to all those properties currently listed on the excel spreadsheet using the exact formula.  leave room i case they counter.  Then after finishing the list on excel send 3-5 other offers using regular retail price homes in your area that have been on market between 120-180 days - (yes even if they don’t need work) and minus $110,000 from the listing.   Then the figure you get, send that “ low ball offer”

to that listing agent.  If they come back saying that “how dare you low ball me” simply ignore them and move to the next until you have 3-5 reg priced homes that have a DOM of 120-180 completed by sending a low ball offer.  This is gauging motivation.  Keep doing this until you get a deal - is about 2-3 x a week do this stuff or hire a VA to train how to send offers to listing realtors.  Pay them in advance and haven’t them do at least 100 offers a month.

Ok since you now have a deal, by filtering find again pricing that is high and recently sold.  Use key word “ newly renovated and updated”. Then look for homes similar to the deal you have under contract that has been recently sold in your area.  Make sure the buy history has a 3 to 6 month max.  Look at photos and look for renovated kitchens bathrooms etc. as well as has a small gap between when it was last sold to when it was resold. Also check for what they originally sold the similar property for as well as what price they bought it for.   This is a sign of a fix and flipper who just sold their flip not too long ago and prob looking for another. Make sure that their buy price is somewhat close to your markup asking for the assignment deal.  Instead of searching for them call the listing agent who represented them and tell them you are a flipper who acquired too many properties and is willing to assign a few to fellow flipper in the area.  They would love to serve a deal up on a platter to their client because they will get commissions 2x without you having to pay them anything.  You are helping them out as much as they are helping you bring a cash buyer to the deal.  This process usually takes 10-15 minutes which you will have a willing and able cash buyer without making a list first.

Of course create a solid list as you go

Fail Forward and don’t why analysis paralysis

start building your processes as you complete deals and create your business each time you complete a deal.  You are building as you go. Remember- making deals and getting paid and build your business as you go

Brett Snodgrass · Answer

@Kiara Keller

The biggest thing is to learn in a “needs-­only” incremental approach and to take action. When you are just starting out, there is so much information out there that it’s easy to get bogged down. First determine what strategy you’d like to start with. Then only learn what is needed for the next step. Then once that’s completed, learn what’s needed for the following step, and then the next and so on. This way, you won’t get distracted or overwhelmed. If after you’ve done some deals you want to try a different strategy, that’s fine but when first starting out pick something and stick to it until the end. Whether it’s getting your first flip down, wholesaler deal or rental property, choose only one, see it through and then assess if you’d like to make any adjustments from there. Hope this helps!

Account Closed · Answer

Wholesaling is an interesting beast. It is very competitive. I wasn't able to do my first wholesale deals until I really developed connections within my local real estate market and found out how to approach it. I also work with wholesalers who do 200+ deals a year. Here are some tips I can offer:

Make an LLC. Any business venture should protect themselves and their assets with an LLC. With that being said, read up on what is defined as a "broker" in your area! Many wholesalers are being fined right now because they are not registered brokers. But there are many different viewpoints out there and you need to read up on it.

Make a website, develop a brand and get your name out there. Post on craigslist, it is free advertising... great tool for people just starting off and not looking to spend thousands of dollars a month on billboards that say "I buy homes for CASH".

Connect, connect and connect some more. Go join an investment club. Go to BP Meetups. Find ways to connect with EVERYONE. There are so many people out there in the real estate business right now. When you start mingling with local real estate investors and professionals, you will find that a lot of them are looking to make connections too! Next thing you know, you start learning from others and making your first deal.

Finally, CONNECT SOME MORE! Like I said, wholesaling is extremely hard to do especially if you are just starting off in real estate. However, hard work ALWAYS pays off. If you study, connect with others and perfect your process, you can be better than everyone else.

Brian Foster · Answer

Kiara, wholesaling is actually a good way to get started. It will force you to learn quickly the fundamentals of REI. I liked @Nick Colamarino response because it is about knowledge. Rather than spend money on LLC (do that later) you might consider education as an expense. Go to a local boot camp REI course, soak it up, they typically cost $500-$1500) and then focus your resources on marketing. You will meet other local, like minded people and possibly a mentor. The networking process will begin. Your network is your networth in this business.  BP will be a great resource to validate and fine tune what you are learning and to help you all along the way. Good luck.

Ray Lai · Answer

@Kiara Keller

Based on your questions, you would be way better off investing in yourself and becoming a licensed real estate agent first with a large, firm that offers training. You'll learn how to do comps and to sell homes in excellent condition.

To do wholesaling requires a ton of knowledge. Besides knowing the after repair value (from your comps), you need to be able to estimate rehab costs. At a minimum you need to do some serious reading like J Scott's book for estimating the costs. Prices differ by region.

Your question on tracking income/expenses is like asking how to do multiplication before doing addition/subtraction first. You need to figure out how to make money in the business before worrying about starting a business.

And please attend your local REIA and listen to some podcasts. It will help you out tremendously.

Kiara Keller · Answer

Well I've been doing research! I do know the answer but want to see what other ppl do

James Green · Answer

@Kiara Keller how did you even hear about wholesaling, with some of the questions you are asking? It sounds like you went to a seminar, b/c some of your questions are way, way, way basic, & I'm saying this with no disrespect. We all start at that level. BP has a lot of info on here, go the wholesaling forums & listen to the podcasts with wholesalers.

Marshall Weaver · Answer

@Gary Leonard Thank you so much for the post! This is invaluable info!

How to Start a Lucrative Wholesale Business

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