Please give any input you have on wholesaling real estate and the best practices/techniques — pros and cons of being a wholesaler.
If possible could you elaborate one or all of the following.
- do you believe that wholesaling is lucrative?
- is it “illegal” and if so how?
- your best practice on creating leads
- best practice on building a buyers list
- are earnest money deposits necessary? Or can you put no money down
Thanks in advance for the responses!
I'm not going to touch on the legal vs. illegal debate, I'd advise to contact a local real estate lawyer for that, but I can give my opinion on the rest
Is wholesaling lucrative?
It can but, no different than any other real estate strategy. 20% of the people will make 80% of the money.
Pick a different methods and hammer those methods. Yellow letters, SEO, click marketing, driving for dollars, agent pocket listings, probate/estates, etc. they all work. Track your leads and follow up regularly.
Meet-ups, dumpster diving and cold calling investors who have purchased in the area.
Are earnest money deposits necessary?
Yes, 100%. You should be putting substantial earnest money down. In my market it's common to put down at least 1%.
As far as do's and don'ts
Do as much as much as you can to learn your market
Learn to accurately comp properties to determine realistic value
Learn to accurately estimate repairs costs. Call plumbers and ask them how much they would charge an investor to fully redo plumbing. Call electricians and ask how much they would charge to re-wire a house and/or replace an electrical panel with a 200A panel. Call tile workers and ask how much do they charge per square foot to install wood look tile, and how much to remove old tile. Etc.
Be professional and courteous
Think of your business long term. Think about establishing long term relationships with buyers and establish trust. A buyer that buys 10 properties a year from you and who makes money will take less convincing the deal will sell itself
Ask for help when you need it
Don't pull comps that are too far away or that are not comparable to the subject property
Don't try to hide anything. Disclose anything you know. Encourage the buyer to investigate if you aren't sure and they aren't sure
Don't hard sell or try to put a buyer in a property that you don't think they will be successful with
Don't get upset with people, even if they are yelling at you. You'll get calls from yellow letters where you'll get cussed out and yelled at for leaving that letter. Kill them with kindness, a simple "Yes sir/ma'am, I apologize, I will remove your address from my mailing list. Have a great day" will do
Don't create a blast list of anyone and everyone. Ask for proof of funds. Make sure that person is ok with what you're doing. If you plan on taking a non-refundable deposit, and that person isn't comfortable with doing business that way, that's ok. No need to send that person properties. The smaller and more precise the list is, the better IMO
Don't be afraid to put yourself out there and network