Hey all! I was wondering if anyone can offer or suggest a kind of to-do list for a new wholesaler (like myself) to get to through the first deal? I realize there are many things involved, especially in the self-education side of things. What I'm looking for is what needs to be done before I engage a deal. (e.g. setting up an LLC, finding buyers, "power team" members etc.) From some of the books I've been reading, it seems like I need to make a full-blown office with a team of paid staff before I can even do anything... I'd appreciate your wisdom! -Mike
Step #1 - get a job in real estate and learn how it works for a few years until you get the knowledge required to go off on your own. Education is good, but it's no replacement for experience. Learn from people who are doing what you want to do.
This is probably not the answer you were looking for. I'm not saying you won't be able to do a deal on your own, but a blind squirrel finds a nut every once in a while. If you're truly trying to build a business, learn the ins and outs of the business you want to be in first.
I've learned that setting up an LLC doesn't give you any added tax benefit if you're going in by yourself. You'll be taxed at the same rate as if you were employed full-time by any old company. An LLC does however offer asset protection. So of course the choice is up to you (also, I'm not a tax professional or lawyer. These are just the things I've learned, as I am on the same journey as you). I'd say the best place to start is to begin building your cash buyers list. You can make a Craigslist add in your area reaching out to cash buyers. Ben Clardy has an excellent course on Udemy on how best to do this. It's nice having a bunch of serious cash buyers lined up before your first deal so that when you finally DO sign your first contract with a seller, you don't have to worry as much about finding someone to buy your contract. If you're nervous about doing your first deal alone (I certainly am), then you might consider doing a co-wholesale, or joint venture, with another experienced wholesaler in your area. You find a motivated seller, they find a cash buyer. You shadow them as an "intern" and watch how they structure the deal, so that you can see how a professional does it and gain more confidence to go out there on your own.
Cheers mate! Send me a colleague request. I'd love to follow your progress
I'm not a wholesaler but here is my personal input:
I don't think you need to get a job in real estate for few years before you start. I suggest you enrich your experience by connecting with wholesalers and real estate investors. Attending meetup groups, read books, listen to many podcasts, and you'll be familiar with the business. It isn't rocket science!
I have been told recently by a very respected investor/flipper that the money follows the deal. If you have a great deal, you can sell it within hours! So I would focus on finding great deals and make sure you can make a good margin and still manage to make your investors happy!
In any business, you are in the lead generation business. That's the most important single task that you should focus on. If you want to become a successful wholesaler, then you need to find discounted properties, and to find discounted properties, you need to talk to a many many people (leads), that will be very daunting, so think about automating your lead generation process.
Once you have an automated process, now you have a steady flow of leads pouring every day, you might need to set up automated phone system and ask them to leave a message. The point is, you better score/rank them, talk to your qualified leads only. If you apply the 80/20 rule, 80% of your deals will come from 20% of your leads. Focus on finding who belongs to the 20% and call that seller.
Remember, you don't want to waste too much of your precious time on a call with a non-motivated seller.
Regarding setting up an LLC, I would set up an LLC only when I secure the first deal, it takes 10 minutes to setup and another 10 minutes to apply for EIN.
Like @Drew Byrd said, you won't receive tax benefits for operating under a single member LLC. You will be taxed as Sole Properioter so it's even worse than being taxed as W2 employe because your LLC will be responsible for the employer's portion of the payroll tax. However, you can deduct business expenses as a Sole Propertior/single member LLC but you can not do that as a W2 employee.
Despite the no tax advantage for single-member LLC, you still need it for at least 3 reasons:
1- Asset Protection, you will protect your personal assets (only if you treat LLC as a business). I heard a bad story about LLC veil pierced because the owner mixed personal with business expenses or treated personal expenses as business expenses. Just google (LLC Veil Piercing) for more information about the topic.
2- Separate business from personal expenses (separate bank account). Your CPA will be happy, and it's easier to track business profit/loss/expenses, etc.
3- You look professional and legit.
You don't need an office or paid employees to become a successful wholesaler. You need to be patient and good with people (buyers and sellers). I know very successful one-man show wholesalers and they are crushing it.
Wow, thank you for putting so much into your response! It was very helpful, and I really appreciate it.
Or you can just Choose to incorporate as an llc a choose the S election...Just syaing. Aas far as getting the swing of the ropes the good sir who said you need a career in the field first lol. Thats totally not true. 20 years old. Running the biz in Fl. In a nutshell, this is be the process I'll recommend you getting a Straightforward good mentor. Nonetheless, if you dont know the process here it is.
You find the seller, (They're motivated of course" and you get the property under contract (hopefully at a great price and rate) ( Typically distressed property ARV x .7 - Repairs - Fee= MOA ((Max Allowable Offer)) ) As soon as you get that seller signature bro. Take that contract ASAP to the Title company or if your a Closing Attorney type of guy then to them. Have them start running title. typically anywhere from 72-96 hours. (3-4 days). Immediately start marketing for your buyer. You want cash now? Demand a "nonrefundable" Earnest money deposit of at least a grand. Tha way even if your buyer backs out and wastes your time you get something out of it. If your double closing. Get your buyer to sign that second P&S agreement or if you're assigning it, have em sign that. Lastly...take that contract as well to the closing agent or attorney. Then pick up your check once titles clear. BOOM not all heroes wear capes. There so much more as well you can get into fix and flipping once you stack your cash ( or if your smart you'll learn how to use OPM "Other peoples money" Grant Cardone on youtube teaches that pretty well. But yeah you can get into that and no longer have to take 10-20k assignment fees. You get later get into Buy and holding Id recommend against using SFR'S for that. Find some Multi-family (5 units or more)
Thanks again all for the info and advice. I absolutely hope to find a mentor here in Reno ASAP. I'm hoping some kind soul at the REI meeting will adopt me. I know the whole idea about needing to "add value" to a mentor in order to not free-load. It's kind of hard to add value when I don't have any experience to offer, but my hope is somenone will allow me to just help (putting up signs whathaveyou) to be helpful, and connect some dots for me in exchange. God bless you guys though for your kind help!