In this post-crash era of real estate, the markets are hotter than they’ve ever been. In a good market, everyone wants to ride the wave. During times like these, it’s difficult to find a reputable wholesaler. So let’s discuss how to be the reputable wholesaler every buyer in your market will be looking to do deals with.
How to Analyze a Real Estate Deal
Deal analysis is one of the best ways to learn real estate investing and it comes down to fundamental comfort in estimating expenses, rents, and cash flow. This guide will give you the knowledge you need to begin analyzing properties with confidence.
Your reputation can be a major advantage or a major disadvantage when wholesaling. No matter how small or large your market is, the real estate community is a very small, intimate group. When doing deals consistently, your name begins to become known, and those who are major players know who to work with and who not to work with. Your reputation as a company or as an individual can push you further along your journey or it can limit your growth.
You may think some things are insignificant, but they could hurt your business’s reputation and image. One thing that can be a challenge at times as a wholesaler is estimating the ARV and the rehab cost. Although these two variables are critical in making the decision on price point, they can be manipulated to show an increased or decreased valuation of a property. I bring this up because in competitive markets, investors try and make their deals look better than what they actually are. This can quickly ruin your reputation, and you will be considered the guy/gal who always overestimates the ARV or underestimates the rehab cost.
Related: 4 Ways to Generate New Wholesaling Leads That Actually Work
I was recently talking with a major buyer of mine, and in the conversation, a person’s name came up and my buyer immediately stated, “I unsubscribed from their email list because they always overvalue their properties.” This is unfortunate, but again, if you gain a bad reputation, you will not be in business long.
It’s important to focus on deal analysis because, as stated previously, it’s easy to get a bad reputation, and this can come from continuous errors in valuing deals. I’ve witnessed newbies especially making this mistake when getting started. I faced this same challenge, but with continuous practice, I was able to get better at it. I didn’t ruin my reputation by sending bad deals to my buyers. Instead, I would have someone more experienced review my numbers. It’s important to have someone to help you along the way.
It’s vital to know the market you are in and what constitutes a good deal. In many competitive markets, finding the traditional deal structure of 70% of ARV – Repair – Fee = Max Offer is difficult to find, so as the market shifts and swings, you have to be cognizant of where your market is and what you can bring to the marketplace. Being uninformed can create huge mistakes when getting properties under contract. I learned this lesson personally, and I talked about it in a prior post, “How a Lack of Confidence in My Real Estate Calculations Just Cost Me $25k.”
Discussing integrity may seem obvious, but some investors view the market through the lens of scarcity. This view point of scarcity (there’s not enough deals) can easily break down a person’s moral compass. What a person never imagined they would do tends to become acceptable in their eyes. By keeping your integrity, you will be able to have and keep a good reputation, you will be able to maintain solid buyers, and you will be able still get deals under contract.
In this increasing real estate industry, there a lot of newbies entering the marketplace because they believe this is the easiest way to make money. They fail to understand there is a natural progression to being a reputable wholesaler. By taking time to develop your reputation, understanding your market, and using integrity in every decision, you will be able to become the go-to wholesaler for your city. There are those that will have brief success by being crafty and underhanded, but they will not have any longevity. So be the wholesaler with the good reputation who can provide good deals to your buyers, and you will see tremendous success.
Wholesalers: Any tips you’d add to this article?
Let me know how you build a great reputation within your market!