Investors: DON’T Begin by Wholesaling. Take One of These 7 Paths Instead.

57

Is wholesaling the perfect way to get started in real estate investing? Can you easily get started by using none of your own money yet still earn a profit and learn the business?

As you know from the title, I don’t think so. Wholesaling is not the best way to get started for 99% of new investors.

Some BP members argue that you shouldn’t begin with wholesaling because it has legal issues (here are some interesting articles from Bill Gulley). 

But wholesaling as a model for beginners falls apart even before that. It’s simply not an easy business model to successfully execute. 

Legitimate wholesaling requires strong sales skills, some cash for marketing, a solid list of investor buyers, a team of attorneys and closing agents, and a big chunk of free time to start hustling.

Most beginners can’t check all of those criteria off their list, at least right away.

But this article isn’t about bad news for beginners. Instead it’s about positive alternatives!

investing-options

I was a beginner 13 years ago. I began my sprint up the mountain with big dreams, energy, and $1,000 bucks in the bank. So I can truly appreciate those of you eager to begin but not sure how best to get started.  

The first thing to figure out is what you REALLY need as a beginner. I would argue you are missing some or all of these:

  1. Experience
  2. Confidence
  3. Cash reserves in the bank
  4. Connections with a network
  5. Specific knowledge and expertise in areas like deal analysis, market valuation, rehab and construction, finding good deals, and real estate laws/contracts

It may take you three months to fill these gaps. It may take two years. It depends upon your situation.

The rest of this article will explore seven alternative paths to wholesaling that will fill those gaps and help you safely and relatively quickly get started as a real estate investor.

Look at these paths as part-time (or full-time) apprenticeship jobs. In some cases you won’t actually be investing in real estate. But you will be investing in yourself (and making money along the way) so that you build expertise that will command profits as you truly move into the core of real estate investing.

Here are my 7 suggested paths.

How to Invest in Real Estate While Working a Full-Time Job

Many investors think that they need to quit their job to get started in real estate. Not true! Many investors successfully build large portfolios over the years while enjoying the stability of their full-time job. If that’s something you are interested in, then this investor’s story of how he built a real estate business while keeping his 9-5 might be helpful.

Click Here For Your Free eBook!

7 Strategies to Break into Your Real Estate Niche of Choice

1. Hack Your Residence Before Becoming a Landlord

This is the strategy I recommend for getting started in rental properties more than any other. I used house hacking to live with positive cash flow in a quadraplex during the early years of my real estate investing.  

BP celebrity Brandon Turner did the same thing, and he wrote a great article about how to do it.

“House hacking” means that you buy a residence, either a house or a small multi-unit building like a duplex, triplex, or quadraplex. Then you rent out either spare bedrooms or extra units.

The rent from your tenants can often pay for your mortgage, taxes, insurance, and more. This means you are getting PAID to live in your home. Pretty amazing!

This arrangement also allows you to learn the rental business with minimal risk. As a beginner, you are bound to make mistakes, but living on site will allow you to minimize the impact of those mistakes as you learn.  

Related: An FHA-Financed Duplex is an Ideal First Investment Property: Here’s Why

I also love that you can lock down long-term, low-interest financing while you live there, and then a couple of years later, you can move and keep the building as a solid rental.

rental-markets-2015

2. Live In Your First Flip

Like house hacking for rentals, live in flips allow you to safely learn the business of fixing and flipping houses.

The strategy works like this.

You find a house that can be purchased well below the full potential value. This usually means the house needs repairs, upgrades, or some improvement (like adding a bathroom, finishing a basement, etc.) in order to reach its full value.

The idea is to buy the house, move in and then carefully do the needed improvements. If you’re like me, you’ll hire everything out and just shop frugally to save on materials. But handy people can save money and learn by doing repairs themselves.

In either case, after two years the home can be resold for a profit. And this is where you benefit from one of the most profitable laws in the tax code.

Because you’ve lived in the property for at least two years, you can make $250,000 as an individual or $500,000 as a couple TAX-FREE.  

This is a pretty good deal, isn’t it? You learn the fix and flip business. You make a profit on your residence. And you pay zero taxes on your gain.

This is why so many people choose this method as their preferred path to get started in real estate investing.

fix-and-flip-tips

3. Learn Your Resale Market as a Buyer’s Agent

Fixing and flipping houses is a competitive game. To win, you need a competitive edge over others trying to do the same thing.

I have found that one of the most important competitive edges is an intimate knowledge of the buyers who ultimately purchase and live in the houses you flip.

The tastes and preferences of buyers are very particular. Color patterns, styles, layouts, amenities, preferred schools, and neighborhoods all change constantly over time.

Agents who help buyers find houses get to know these preferences better than anyone else.

So, if you are new to an area or new to the business of fixing and flipping houses, you could benefit immensely from a short or long stint as a buyer’s agent in your target location.

In my popular BP article “How to Quit Your Job and Invest Full Time in Real Estate,” I recommended getting your real estate license for a number of reasons like access to a broker as a mentor, access to the MLS, and the ability to earn side referral commissions.

If you’ve already obtained your license (it’s not hard in most states), you can then shop for a brokerage that gets a lot of buyer leads in your area. Volunteer to be on desk duty or to service buyer leads for other busy agents.  

If you are a quick study and add a lot of value to your colleagues, you can quickly build up a steady stream of buyer clients that will put some money in your pocket and help you learn the retail real estate business.

productivity-tips

4. Use Master Leasing to Earn Cash Flow While You Learn

Master leasing is not used by many investors, but it’s an outstanding way to get into rental properties without large down payments or the risk of financing.

Master leasing means that you agree to lease a property from an owner, and in your lease you are allowed to sublease the property to your own tenants (called sub-tenants).  Your master lease could be for a few years or for many years.

This arrangement is beneficial to you because you can earn a profit on the difference between the rent you collect and the rent that you pay to the owner.

The arrangement can also be beneficial to the owner because they get a consistent income from you without dealing with maintenance calls, vacancy losses, and turnover hassles.

Two BP articles give helpful explanations of the strategy:

Master leasing is a lot like a partnership with the owner because you divide up obligations and benefits. For example, you could negotiate that the owner pays for repairs and improvements costing over a certain amount. You may also negotiate to get an option to purchase the property so that if you improve the rent roll and the property, you can benefit by increasing your potential equity.

This technique will require some upfront education about landlord-tenant laws and about master lease contracts. You’ll also want to consult with a good local real estate attorney to draft a desirable master lease. But you would have these start-up tasks with any rental property, and this technique eliminates many of the other financing challenges of getting started as a rental property investor.

hard-money

5. Become an Expert On Finding Tenants as a Leasing Agent

You’ve probably detected a theme so far. I’m dividing up the entire real estate investing business into pieces, and then I’m getting you started by specializing in one small piece of the whole.

Well here’s another slice — leasing.

Just like my example of becoming a buyer’s agent to gain a competitive advantage as a flipper, you can do the same thing to gain a competitive advantage as a landlord. You do this by becoming a leasing agent.

A leasing agent earns a commission, sometimes equal to a half or one month of rent, in exchange for finding a tenant for a landlord. You will need a property manager or real estate license in order to earn this commission. This job will require a lot of running around and talking on the phone, but it can be done with low overhead and on a part-time basis.

Along with making a little bit of money, becoming a leasing agent will give you a keen sense of which properties are most attractive to the good tenants and which tenants are the best for a landlord. This skill will be invaluable as you begin owning, managing, and then training others to manage your properties.

Related: The 6 Most Common Mistakes New Investors Make (Including Thinking It’s Easy!)

To get started, you will want to find landlords who manage their own properties but need help with the time and effort required to list, show, and get applications on vacant rentals. These people aren’t as hard to find as you may think.

BP author Elizabeth Faircloth wrote a very helpful article called “Every Landlord Should Hire a Leasing Agent: Here’s Why.” Read that to get more of the nitty gritty details of this strategy.

1031-exchange-rules

6. Specialize in Deal Finding As a Bird Dog

Finding good deals can be difficult as a beginner, but it’s one of the most important skills to learn as a real estate investor. My own story began by learning this skill as a real estate bird dog.

A real estate bird dog is different than a wholesaler in that the bird dog does not put properties under contract to buy. Like a real bird dog who simply points to birds in a bush for its owner, a real estate bird dog sniffs out good deals, brings them to an experienced investor, and then earns a referral commission once the deal is bought.

Like the buyer’s agent and leasing agent, you’ll probably need a license to do this legally.

I got started by sniffing out deals for my father, who at the time was purchasing rental and fix-and-flip houses near Atlanta in my hometown of Newnan, Georgia.

I was studying intensely, but there were many investing concepts I did not know yet. And as a recent college grad, I had zero business experience.

So my arrangement was helpful because I could focus on a very narrow objective — to market and prospect for interesting deals, talk with the owner or agent, and let my father decide the actual offer.  

I was released from the responsibility of the many other necessary components of real estate, like contracts, financing, bookkeeping, property management, rehabbing, and reselling. But I was able to observe and learn all of those components as I followed the deals through the funnel.

As wonderful as this strategy was for me, the difficult part for you may be convincing an experienced real estate investor to take the time to let you apprentice with them. I had my father, who perhaps had ulterior motives for helping me.

While I did find him 12 deals in my one year with him (most but not all made money), I did not have to prove myself up front. 

So, unless you’re already close with an experienced investor, you will need to do a good job of selling the assets you have, like free time, energy, enthusiasm, being coachable, and being a self-starter.  

Perhaps you can start on a trial basis. Perhaps you can also do some other odd jobs for that investor. Perhaps you can study their business from a distance, find some obvious needs, and make a proposal that costs none of their money up front. 

Whatever you do, place that investor’s needs first and show him or her that you won’t waste their time.

work-with-wholesalers

7. Get Your Hands Dirty With Rehabs as a Project Manager

The final option to get started as a real estate investor helps you learn about the construction and rehab part of the business. Unless you are already a contractor or builder, the remodeling process can be intimidating as a beginner, even if you’re handy.

How do you learn the costs of labor and materials? How do you learn the flow of a rehab project? How do you learn the dozens of tricks needed to manage people, stay under budget, and complete a job on time?

You could read about it in books, like J Scott’s The Book on Estimating Rehab Costs, which I highly recommend. But the best education is simply doing it.

A project manager position is basically someone who oversees all of the different subcontractors of a job, coordinates schedules, manages materials, and keeps a job running smoothly.

Some higher volume flippers and builders like to use project managers and pay them a flat fee for their time. While construction experience is nice, sometimes the best project managers are the young, energetic, and eager-to-learn people who can pick up on the experienced flipper’s system.

Flipper Mike LaCava wrote a good BP article explaining “How to Flip Houses Using Project Managers.”

Related: House Flipping: 5 Vital Tips for Success (Based on My Mistakes!)

If you think you’d be interested in that type of job, put a plan together and seek out experienced flippers in the BP Forums or in the local networking groups in your area.

rehab-project-steps

How Do You Eat an Elephant?

Eating an elephant (if you actually liked that kind of thing!) would be overwhelming. It’s just too big.

The solution, of course, is to take one bite at a time.

Starting out in real estate investing (or any professional field) poses the same challenges. You must walk before you run. You must apprentice before you become an expert. You must slice the bigger project into a lot of smaller pieces.

The ideas and solutions in this article are just specific suggestions that aim to help you reduce the overwhelming prospect of learning and getting started as a real estate investor.

Whatever you choose to do, the point is to break the big goal into pieces and then to get in motion. Find a niche you like and get started.

Understanding the words in an article is theory. It’s actually the easy part! The real challenge is to practice what you learn.

Best of luck as you get started (or restarted) in your real estate investing!  

What do you think about the paths to beginning in real estate investing that I’ve offered here? Are there others that I forgot? How did you get started as a real estate investor? Or if you’re just starting, what challenges are you struggling with? 

Let’s start a conversation. Be sure to leave a comment below!

About Author

Chad Carson is a full time real estate entrepreneur. He also writes at coachcarson.com, where he shares ideas for how to win with real estate and money so that you can live a better life. For practical advice each week — join his free newsletter.

57 Comments

  1. Randy Phillips on

    I liked your article and the options you presented. I gotta disagree with you though. I’ve been wholesaling RE for a bit over 3 years now. I luv it bcuz no license is required, & very little money required, I got my first few deals with no earnest deposits and running “I Buy Houses” ads for free on Craig’s List. I didn’t have great negotiation skills and several times when I cudnt sell a house I wud go back to seller and renegotiate an even lower price. It don’t take long to lean values and basic skills. I also luv how there is no risk, I’ve never put more than $10 down for an earnest deposit. I also never had a buyers list, at first anyways. If I had a good deal and listed it on Craig’s List the buyers came out of the woodwork and wala, a buyers list was formed.
    Of course now I do spend a good chunk of change on marketing but then the quantity of deals increases.
    I did do a rehab and it was a 3 month ordeal and I broke even. Not for me thanks.
    The thing with wholesaling is you gotta look at hundreds of deals to find a few. Most beginners get discouraged with all the work and time it takes. Now that I got a few systems in place, it is much easier than working a 9-5. I recruit bird dogs and pay girls to write my post cards to absentee owners.
    Sounds crazy but I spend only 10 hours or so a week working. The really crazy part is last year of 2015 I made 3 times more money than I ever have in my life. It’s just 2 weeks into 2016 & I just nailed my first deal.
    For me wholesaling has been the best thing I ever discovered. For a newbie with no money and no credit but with a lot of desire and focus I recommend Real Estate Wholesaling.
    Let’s make some Money…..
    Rando

    • Chad Carson

      Hey Randy, I appreciate your comment and your perspective. I’m not disagreeing that wholesaling isn’t beneficial for some, like you. I’m just saying it’s not for most people.

      Wholesaling is a pure sales business selling an expensive service (seller gives up equity in exchange for a quick, cash sale). I think the proposition of buying someone’s house at a discount takes much more skill than presenting to list someone’s house, to be their buyer’s agent, lease a rental, or the other options I presented here. Yes, it doesn’t require a lot of cash for earnest money, but those other options I gave are also cheap to get into up front. But wholesaling successfully and consistently does require abilities and guts and thick skin that many people don’t have, at least as a rookie. Even going back to renegotiate with sellers like you did wasn’t a typical rookie move.

      I’m not discounting your success or that for some wholesaling is a great path. In fact, I’m saying your 3 years of success is pretty awesome. My observations are that it’s just not typical. For every 1 of you there are a bunch floundering around.

      Instead I say get moving on something with higher likelihood of success that also makes money and teaches you something about real estate. Move into other avenues, like flipping, wholesaling, and rentals later.

      In the end, everyone has to make their own choice. I just want to give newbies some alternatives to get started that aren’t talked about as much as wholesaling.

    • Roberto Escapita Jr

      Hello Randy!
      I got to say I loved the way you described simply because that is what I thought wholesaling really was about. I’m just starting out, read beginners guide and I feel wholesaling is calling my name. Would love to talk more about wholesaling.
      Very Respectfully, Robert.

    • Lisa Bryant

      Hi, Randy! Great response and wonderful testimony. My interest is wholesaling. It is good to hear about your experience. It seems here on BP, from some of the posts on wholesaling, that I’ve read seem to be an area for some as a do not touch. However, I am more encouraged, because I know it just affirms the direction I am to continue to take. I hope you will continue to do great deals.

      Learn, Apply, Produce!

      Lisa

  2. Joshua D.

    Thanks chad, an article like this needed to be written. Seems like every day there a 100 new wanna be “wholesalers” and very few looking at other options. I agree wholesaling should not be the default option if your new and have no money. There are other better options that will fit most people.

    • Chad Carson

      Hey Robert, good for you that you’re reading and getting educated. It can been tough deciding which route to take in the jungle of REI. Be honest about your personal strengths and weaknesses, and then choose something that you can get excited about. Then get started. You’re bound to make mistakes and change your mind along the way. That’s cool. But there is something magical about getting in motion.

  3. Terry Martin-Back

    I am an organizer of an REI group and I agree with this blog. I thinks it’s great when I see a “Wholesaler” get out there with little or no money and make deals happen, they are the minority. I have seen so many people get caught up in the “Wholesale coaching”, after attending one of those free workshops which cost them thousands of dollars. I just witnessed a senior couple dive deep into their credit cards to get that “Wholesale training” but barely have enough cash to pay rent. To me, they are victims, not investors. Randy, I love your story, I encourage you to get your real estate license because what you are doing is what agents are supposed to be doing and with your skills, you could put additional zeros on those checks at the end of the deal. I started out as a flipper, it has lead both my wife and I into owning several corporations; our own brokerage with agents, a construction company my son manages and property management. I encourage readers to write your goals down and look at them every day. Work for the future not the moment and put some cash away to start buying high profit flips and those rental properties that will pay you in the future when you can retire at a young age.

    • Ricardo Cortes

      Yes this article is great, I keep going back and forth wether to start in wholesaling, or flip for my first deal. Though I find it ecourging to see that it is possible to get into REI with wholesaling.

      Terry I like you advice to ‘ work for the future no moment’ I recently read one of Brandon’s blogs, where he wrote down his ultimate goal, then sub goals to get to his ultimate goal.

  4. Dana Ambs

    I can’t agree with this list more! So many “investors” leave money on the table by not renting out rooms and not masterleasing. I trudged through a few years of being a leasing agent, buyer’s agent, and project manager. It was a ton of work and very little, unstable income at first (hence renting rooms at a premium for income). But through hard work, frugal living, and using the strategies in this article, I have built a thriving business, flipped several homes, own a few homes, and am developing a 30 unit neighborhood all with no personal debt. The funny thing is, is that only now am I wholeselling…now that I know the worth of a specific area, have confidence, and a network. It was slow going, but I avoided debt, bad partnerships, and get-rich-quick scams by living by the valuable strategies the author presents here.

    • Chad Carson

      Awesome, Dana. I love reading your story about using several of these paths to grow your own investing experience. And now you’re wholesaling. Exactly my point.

      You make a really good point about putting in the work and living frugally. The “autopilot” and “4-hour workweek” style business models people are sold are deceiving. I’ve seen the inside of those, and the reality is that those business owners have worked their tails off to get to that point. There are no short cuts. You’ve always got to pay the price in some way before it turns more passive.

      And even successful cash flow businesses can be roller coasters. So living frugally well into the success of your business is a competitive advantage that can allow you to outlast others who make a lot and spend it all.

      Really appreciate your perspective! Best of luck.

  5. Jessie N.

    Nice article. As a newbie, I totally agree that wholesaling is not for me, it’s actually quite hard I think which require lots of selling and negotiations. I am working on house hacking now with a duplex and find its a great way to start for a newbie.

  6. margaret smith on

    Chad-
    Best article I have EVER seen giving exact, practical advice as to good choices for starting out as a total newbie without cash to burn. I will definitely print this out to give to the new wanna-be investors who so often ask for my advice, and want me to be their dedicated mentor. Really, it does seem the new folks come out of expensive classes with the advice to “build your team”- and that includes finding a real mentor. Those of us in the business are maxed out and unable to simply take on students for the fun of it, and you allude to this here, thankfully. Students have no clue about the commitment it would take to bring someone in to the business. Much as I would like to help, unless you are my kid or we have a special relationship already… you gotta find your own way in the end.

    Thanks to Randy too, for giving us a positive run-down on the possibilities for a newbie to start with wholesaling. Between the two experienced investors, there are several fab ideas for how to get started here.

    • Chad Carson

      Margaret,
      Thanks for the big compliment and for sharing your own perspective! I agree that newbies have a challenge because many of the people they need to be their mentor are not the ones who have time. Yet it’s critical to have them – especially the local ones with on the ground knowledge. I hope some of these 7 paths, like a leasing agent, buyer’s agent, birddog, and project manager, are also ways they can connect with experienced investors by adding value to them.

  7. Linval T.

    Chad – Great post outlining the options beyond wholesaling. As you very well know wholesaling is not a one size fits all solution, so, your options are well advised.

    With wholesaling there are challenges, let alone frustrations with newbies in grasping this REI niche.

    Thanks for taking the time to think through and offering alternate solutions to a sizeable sector of the BP community who are gradually disappearing because of the complexity of the wholesaling niche and the overhanging question at times regarding its legitimacy/legality.

    • Chad Carson

      Hey Linval, I like the way you put it. Wholesaling is not a “one-size-fits-all” type of thing. It’s one of many options, including the 7 I outlined here. But people have to match their own situation and talents with the right path. I appreciate you reading and sharing your thoughts.

  8. Brian Gibbons

    What do you think about the paths to beginning in real estate investing that I’ve offered here?
    Are there others that I forgot?
    How did you get started as a real estate investor?
    Or if you’re just starting, what challenges are you struggling with?
    “““““““““““““““““““““`
    Chad first off you are a great writer, clear and helpful.

    I can only assume an excellent and patient coach!

    Here is my point of view:

    Take 2 different markets, Los Angeles, CA, where I live, an expensive starter home market, and Pittsburg PA, an inexpensive starter home market.

    Creative financing is easier in cheaper markets, like PA, OH, FL, SC, etc. Many nice houses are $50 – $100K.

    NYC, CA, MD, VA, NJ, MA, all are $400K plus in nice areas.

    Main Point: Creative financing works better with cheaper houses.

    Say $50K FMV, rent $700
    vs $500K FMV, rent $1800

    You have more opportunities for success with pretty houses, low equity, because they cash flow.

    Look at PITI vs RENT

    $50K FMV, PITI say $296, rent $700,
    $504 positive

    $500K FMV, PITI say $2359 rent $1800
    $559 negative

    Wow!

    “““““““““`
    Main Point:
    1. Learn sub2, lease option assignments, lease option sandwiches, wrap around mortgages – aitds, land contracts.
    2. Market for private lender loans, learn these terms: custodian, prohibited transaction, disqualified person.
    3. Here is a story:

    A few years ago, Bill ran out of money to do his deals.

    He was in a hot market and he didn’t want to miss out.

    What he did next changed his life.

    He found a great house that he could buy for $25,000, all cash.
    It needed about $5,000 in repairs.

    Bill went to some friends and relatives and borrowed money from their IRAs to purchase the house.

    He paid them 15% interest ($2,250) for the six months it took to finish the rehab and then resell the house.

    He sold the house for $52,000.

    After paying back his investors, he had a net profit of $19,750!

    Let’s look at the ledger…

    Bill started with $0 House sold $52,000
    House cost $25,000 Loan ($30,000)
    Repair $5,000 Interest owed ($2,250)
    “““““““““““““““““““““““““““““`
    Total amount borrowed $30,000
    Bill finished with $19,750

    Bill’s friends were so pleased with their returns that he had no trouble getting more money.
    Now he has access to more than $600,000 in his own “private bank.”

    “““““““““““““““““““““““““““““`
    Main Point: Get Joint Venture Partners

    Ask Doctors:

    “Hey “Doc”,
    I am spending alot of money on marketing finding houses that need rehab work, would you consider partnering with me if I could get you a return over 15% ?”

    Doc says, “Maybe, how does that work?”

    You say,
    “Well my bank wont lend me any more money for rehabs, so I thought I would find some 50 – 50 Business Partners. I find them, fix them, and resell them, you help fund them, you back me financially, Once they are sold, you get your funding back,
    we split the profits,
    usually a deal take 3 – 6 months, from start to finish.”
    “Oh and by the way, you can use your IRA money if you want” (wink)

    So to summarize, as a real estate entrepreneur, finding a problem, offering several solutions for home sellers, you can make good money in REI.

    But you need a full tool box,

    Do not be a 1 Trick Pony,
    Be a Transaction Engineer.

    Thanks Chad!

    Best wishes for success in 2016!

    • Chad Carson

      Hey Brian,
      Wow – that was an action packed, content-filled comment. Thanks for feedback and for sharing!

      I think we’re on the same page about the value of creative financing. Love all of that you’ve shared. Creative financing was certainly the x-factor in my own growth as an investor. But at least in my case, the JV and private lending was the 2nd rung up the ladder. The first was being a bird dog. I was so brand new and green that I needed an apprentice period before I could feel confident to put those deals together with the doctor or other JV partner. But after 12-months, I was, and I did.

      So I think all of your advice is spot on, and focusing on that creative financing toolbox is a worthy area of study.

      Brian, have you had examples of people getting started jumping straight to JV deals as you’ve talked about?

      • Brian Gibbons

        Chad, I teach what’s called a JV with the seller

        Say you have a $200,000 house with $20,000 of work , I call it a minor rehab.

        Minor rehabs are terrible wholesale deals, The seller never agrees to the offer

        In this example take 70% of the after repair value minus the repairs, that comes in at $120,000, if you’re taking Wholesaling fee of $5000, now that’s $105,000 net to seller.

        Very minor rehabs are rehabs gone bad with do-it-yourself owners or old folks with grandma’s kitchen that’s 40 years old

        Many times this minor rehab is an expired listing with an agent, so I talked to the expired listing sellers and I show them basically two different situations.

        I show them on one side of a legal pad

        70% of ARV minus repairs
        on the other side I show them a joint venture with me

        How I figure out the cost of the joint venture
        I’ll take the costs to sell this case it’s $20,000,
        and I’ll take the cost rehab which is $20,000, and then
        private lender interest which is $2000, and lastly
        is a joint venture fee of $10,000 to me

        The result is a note in first position to the seller for $148,000,
        Second position is the private lender loan for $20,000 plus $2000 in interest

        The steps are,
        buy it with SellerFinancing with a private note and mortgage or deed of trust,
        fix it with Private Funding money,
        list for sale at 200,000,
        pay the cost to sell 20,000,
        Pay the first and second off,
        walk with $10,000.

        I have even had the seller call we buy houses wholesaler and get the crappy hundred $20,000 or less offer and showing them that I can get them 148,000 🙂

  9. Randy Phillips on

    I was never told how difficult Wholesaling cud be, I only read about the big checks and smoking a cigar on a tropical island with brown skinned beauties fanning me with palm leaves haha. Seriously, several times going 4-5 months with deals falling thru at the last minute and living on pinto beans was when I thought about throwing in the towel. I’ve experienced dishonest buyers and homeowners and other wholesalers and soon learned to get everything in writing. But sometimes I wud be amazed when a profitable deal wud just fall in my lap.
    My biggest revelation is learning that knowing how to wholesale and having the logistics down was only 10%
    The real challenge was staying motivated, I read many books on mind training, how to overcome the lows, the numerous disappointments and failures while still going at it relentlessly.
    Looking back now, I believe the driving force was, I was desperate, I had to make it work and I somehow knew I could do it. I remember thinking, I wud give it 3 years and if I couldn’t make it work then I wud find something else.
    Also I realize I need others to make it all work, I need my bird dogs, my other wholesaling buddies, the buyers I’ve become friends with and I believe what gets me more deals is I have listening skills.
    I luv listening to the sellers stories about their lives and what happened for their property to get in this distressed situation. Quite a few times sellers started crying. Not that I wud take advantage of that, if fact it has probably made me pay more than I shud have.
    Wholesaling has worked for me because I’m persistent and focused, and closing on a deal is fun and exciting and of course profitable. When the seller is happy, the buyer is happy and My finders and I are happy, it’s a great feeling.
    In the few years I’ve been doing it, I have noticed quite a few other wholesalers that have come and gone.
    My advice to newbie wholesalers… Never give up.. get ready for the emotional ride of your life & have fun.
    Rando

  10. Paul Howells

    Thanks for the article. I love anything that could help a beginner like myself get started, and this is a great addition to my arsenal. I’m trying to compare the pros and cons of house hacking vs. living in my first flip. I’d eventually like to be involved with both (I like the idea of passive income from rentals, as well as the pride and satisfaction that would come from using my own two hands to fix up a flip), but how do I decide which would be best to start with?

    • Chad Carson

      Thanks for commenting, Paul. It’s not an easy decision between house-hacking and live in flips, but I think a lot depends upon:

      1. Your market. Certain neighborhoods will be better suited for flips than house hacking
      2. Your financial needs – if you need more fire power from cash chunks, a live-in flip might be best. If you’re earning a lot of money but just need growth – getting your first rental with a house-hack is a good start.

      Best of luck!

  11. David Reyes

    Thank you for your commitment to help new investors like me

    There is a phrase that I like to hear and to say that said
    “Do not say I cant instead how can I ?”
    This phrase gives you power the power to choose

    it is true that not all were born for wholesaling and is not a MUST for beginners but I have to point out the good reasons to consider wholesale

    This are my reason to consider wholesale
    1. Gives you the push you need to learn more and more for differents niches and strategies, you have to know the math behind either rental or flip to make wholesale so is a good tool for “self-investment”
    2. Gives you the cash you may need to keep up in your track if not too much like a flip it still bein nice to grt paid while you learn
    3. Once learned can be used for our selves to find very good deals

    Now as I said before the power to choose is the must and better power thst you can have for my self I have being househacking with out knowing it
    I live in my property yet I had the idea to build 2 different units behind my property so I can rent them out whilr living in it. One is already rented whilre thr other one is keep under construction. House hacking is as easy as having to be paid for living in your own home I LOVE IT

    I loved your info, I liked it all I totally going to save this for self use and help other people
    Congratulations

    best wishes !!!

    • Vince Mayer

      If you have a thousand dollars in the bank, you can’t do any of the things you mentioned except bird dog and get a RE license.Bird dogging is a great idea for someone new. You’ll learn a lot from the pros you’re bird dogging for. It will also build some cash for wholesaling.

      Wholesaling isn’t easy but can be lucrative. You’ll have to work at it but you have to work at anything to be successful. There are many ways to get buyers and sellers that are free. The real hurdle to overcome is getting comps. It’s worth getting your license just for that and if I had a thousand in the bank, that’s what I’d do and then work my behind off bird dogging to build up my bank account.

    • Chad Carson

      Thanks for adding your perspective, David. Choice is the key word you said. We all have to compare the options, weigh each paths strengths and weaknesses, and make a choice. My goal was just to expand choices beyond simply wholesaling for beginners.

      Love your house hacking story building additional units on your lot. That’s a great angle. Best of luck!

  12. Vince Mayer

    VINCE MAYER on JANUARY 17, 2016 3:50 PM
    If you have a thousand dollars in the bank, you can’t do any of the things you mentioned except bird dog and get a RE license.Bird dogging is a great idea for someone new. You’ll learn a lot from the pros you’re bird dogging for. It will also build some cash for wholesaling.

    Wholesaling isn’t easy but can be lucrative. You’ll have to work at it but you have to work at anything to be successful. There are many ways to get buyers and sellers that are free. The real hurdle to overcome is getting comps. It’s worth getting your license just for that and if I had a thousand in the bank, that’s what I’d do and then work my behind off bird dogging to build up my bank account.

    forgive me if this is a double post.

    • Chad Carson

      You’re right. None of these paths are easy. I do think some will be better suited for certain individuals than others.

      I would argue that all of them could be started with a small amount of money with some elbow-grease and some creativity.

  13. Great point in #7 on gaining experience as a project manager. It can be frustrating looking at deals from wholesalers who have little experience in determining what it will take to renovate a house. Without this knowledge, how can they determine a fair price for any project beyond the paint-and-carpet rehab?

    Working as a project manager on even a couple of houses would be a great education for a new wholesaler. And it doesn’t require any capital! Just time.

    Thanks for the article!

  14. Mark Gould

    Chad,

    Reading your blog answered my question: How to get started being a newbie in REI. I wasn’t up to wanting to wholesale because of the money it was needed for marketing. Two of your ideas presented, residence hacking (renting out rooms in your residence), and being a bird dog sound the best to me in my particular situation.

    • Chad Carson

      Great Mark! I’m glad some of the ideas resonated. Most importantly, you see them as something you can move forward on. That forward momentum as a beginner is key. Get started on something reasonably safe where you can learn and make some money. Good luck!

  15. Randy Phillips on

    What amazes me is the people around me that are unwilling to even try. They see me driving nice vehicles, wearing nice clothes and enjoying a much better life. And all because I’ve learned how to wholesale Real Estate. I started with no money and no vehicle. In 3 years I am so thankful that I can take a book, learn some simple skills and put it to work.
    Once you make 6 months salary from flipping a junk house you know you can never go back to working some low level grunt job.
    I have family members and friends that are still struggling financially, I have tried to get them involved, but instead I get back ground chatter & noise of how I must be doing something illegal.
    I see now how a little knowledge, strong desire and focus, perseverance and the right attitude is everything.
    If you have those, you will probably succeed in any endeavor.
    Now cut the excuses & let’s make some money….
    Rando

  16. Kelly Rastatter

    I am a professional, experienced project manager. I have worked in other industries such as finance, 3rd party logistics, information technology, warehousing, etc. I want to start investing but understand the advantage to hands-on learning. How do you go about finding an investor who needs a project manager/assistant? Most I see here are looking for a GC but calling it a PM. Big difference.

    • Randy Phillips

      Many of us need an assistant like yourself to help with phone calls and keeping track of bids and managing everything. Not many want to pay a professional 15-20 buks an hour. Makes more sense to get a virtual assistant at a fraction of the cost.
      I suggest you use those skills to start investing, start by getting an education, read books, talk to other investors, try wholesaling.
      If you have your sights set to just be an assistant, You may want to re-evaluate your mind set.

    • Chad Carson

      Hi Kelly,
      A project manager for an experienced investor isn’t something they’d normally advertise or perhaps even know they need.

      I’d start by doing a heavy dose of networking at local meetups, REIA clubs, etc. I’d also get out in the field and drop by rehab projects. Try to find the investors actually doing projects, and get to know them.

      It might not be an easy sell cold, when someone doesn’t know you. But if they see you’re for real and have experience, you can make them a no-lose proposition. Something like “I’ll do the first deal for free. I won’t waste your time. If you like what I’m doing, we’ll do another where you pay me.” Just see how it goes and try to create your own opportunity. And be open to other variations of opportunities than just a project manager as you go out and meet people.

      Hope that helps.

  17. Angela deBorja

    Great information Chad. And all the comments and responses were super helpful as well! I am in the phase of debating between wholesaling and finding a partner/funding for a first flip. The idea of a bird dog sounds up my alley as well, but not sure if I am ready for getting my license as I think I have read there a lot of other fees associated with keeping the license active.

    • Chad Carson

      Thanks for commenting, Angela. There are pluses and minuses to every choice. I got my license, and I think most of the cost was up front in my state of South Carolina. I am not a Realtor or member of the MLS, so my renewal fees are minimal. But being an agent in this way does allow me to legally get referral fees. Others get referral fees without a license, and in most states that’s not legal. Good luck with your first steps!

  18. Ben Wendt

    Thanks for the article. It was a great insight into other strategies used to get into the game. I also appreciate the comments here that provide additional insight and anecdotal evidence of strategies. Hearing the success stories is really encouraging as well. Thanks for your time in writing this!

  19. Perry Apawu

    I really like the idea of the live and flip. My wife and I just moved to Florida and its been pretty hard trying to convince her about house hacking in a multi family but the live in flip may be just the idea we need to get started.

  20. Great article Chad! I completely understand your point here. I don’t believe most people starting out understand the level of commitment, drive and desire it takes to operate a successful wholesaling business. I think it’s fair to say it requires an uncommon level of commitment,drive and desire. Often times, when first starting out in the business, survival was the drive that kept me going. Basically if I didn’t bring deals together I’d be eating bologna sandwiches and ramen noodles or my bills weren’t going to be paid. Fortunately and unfortunately I didn’t have a safety net of family or friends to fall back on to rescue me if times got tough. It was either sink or swim and it’s tough to teach that kiND of “survival drive”, especially when it’s not authentic. This article offers people some options to place themselves in a better position to succeed rather than relying solely on “survival drive” to get where you want to be. Cause let’s face it, “survival drive” is an uncommon trait whether people want to admit it or not. All in all, very well written article

Leave A Reply

Pair a profile with your post!

Create a Free Account

Or,


Log In Here

css.php