I’m not going to lie to you, real estate investing isn’t easy — especially wholesaling. I cant sell you on some simple formula to get started. It has to be a combination of learning enough to be dangerous, being self-driven, and kicking yourself in the butt to take massive action. I’ve easily met with 500+ brand new investors in my career, through my local BP meetup I run and conferences. The #1 thing I hear from the majority of those new investors is this:
“I’m going to start with wholesaling and build enough capital to fix and flip/buy and hold.”
If it’s someone local and we have met over coffee (or a beer — let’s be honest), chances are I will never see them or hear from them again. Maybe I should take out “missing newbie” ads at the grocery store.
“Have you seen this aspiring wholesaler?” No? Me neither. Oh well.
Back to wholesaling not being easy — sure, it’s sold as entry-level and relatively easy, but I got to say that’s mostly hype. Can you do it with less money than other real estate investing strategies? Sure. Is it easier? Nope.
But WHY, Anson, WHY!?
Because wholesalers have to find better deals than the average investor.
It boils down to finding deals and being an expert at it! If you have a fix and flip investor and a wholesaler going after the same deal, the wholesaler would have to buy it for less than the fix and flip guy because that’s where his profit margin is.
So, what should new wholesalers concentrate most on in the beginning?
Well, analyzing their market, then finding deals.
Forget fancy websites, LLC setups, huge buyers lists, and all of the ancillary distractions.
As a wholesaler, you don’t have anything if you don’t have deals!
Let’s just address the first 3 months or so for a new wholesaler.
Analyzing Your Market
Before you find deals to lock up and sell to another investor for a profit, you have to know where investors are buying. A restaurant, instead just cooking random dishes and then trying to sell them to their waiting customers, takes the customer’s specific order and then delivers exactly that. This is what you should be doing when you start out wholesaling.
Related: 5 Compelling Reasons You Should Think Twice Before Wholesaling Properties
This leads me to my favorite market analysis tool a new wholesaler should be using: reverse wholesaling.
This involves networking, getting out there and rubbing elbows with real investors who are actually buying properties in your market. Meet as many investors as you can at your local real estate clubs, BP meetups, meetup.com meetings, etc.
What you do when you meet them is ask them a few simple questions:
- Tell me about your last few deals.
- What are your favorite zip codes/neighborhoods to buy in?
- What is your ideal bedroom/bathroom count in that area/neighborhood?
- How much did you pay for your last project in that area/neighborhood (if you don’t mind)?
- How much was the fix up cost?
- So you are saying if I find a fixer-upper in Huntington Heights that was a 3-bed, 2-bath for around $100,000 that you could repair for $25,000, it would be a deal you might buy? (Basically, sum up all the info you got from the investor here.)
Now you have a ton of info on where, what, and for how much the investor likes to buy, as well as a new buyer for your buyer’s list. Do this enough times, and you should have a good idea what a few dozen investors are buying, and from my experience, much of it overlaps.
One more trick to get a good concentration of cash buyers is:
Ask a friendly real estate agent to do a quick pull on cash sales in the last 3-6 months and email it to you. This data will quickly show which area of town investors are buying in.
Take your reverse wholesaling data and your cash sales data from the agent, and now you know where to go in your market for deals. Start out small — one zip code or 2-3 neighborhoods should be sufficient. You can’t blast out mail in a 30-mile radius when you are a newbie (well, you can, but it won’t be very effective).
You have your areas. Now what?! You have to find motivated sellers in these areas to talk to and eventually lock up the deal under contract. How do you find motivated sellers quickly?
- Driving for dollars: For the areas in town that have both reverse wholesaling data and a large number of cash sales data, nothing beats getting in your car to go find a few dozen potential houses — beat up exteriors, overgrown lawn/landscaping, bad roof, looks vacant (after a year or so in this biz, you just KNOW), etc. Write down the addresses. Driving for dollars works best when you can look up the owner at each address before you mail. Try your county tax records online.
- Buy a high equity absentee list: Whether you are using Listsource.com, your local title company, or one of 100 list sellers, getting your hands on this list is pretty easy.
Between these two sources, you should have enough properties to market to in your target areas to be dangerous.
Any one of these methods will work. Pick one and roll with it — in each case, make sure you state what you are after and a call to action. The general message and call to action should be: “I’m interested in buying your house. Call me at 555-555-5554.” Of course, you SHOULD make it a bit longer and personal, but search BiggerPockets for one of 320,489 ways to message your letters.
- Handwrite your letters.
- Hire someone to handwrite your letters.
- Print out your letters.
- Outsource your mailers (use MarketLikeaWholesaler.com, OpenLetterMarketing.com, or one of 100 mailing services online).
No matter which way you go, make sure you have a little bit of capital in your marketing budget to mail your list at least 6-8 times or once a month for 6-8 months. Don’t be one of those one and done newbie wholesalers, shooting out 2,000 mailers and then giving up. I always advise to mail at LEAST 500 a month, a big enough list to get some calls rolling in and some forward action in your business. Mailing takes time, consistency, and determination. The snowball you start today will get bigger on each mailing; your momentum of success will only build as you stay consistent.
Don’t make me put up missing newbie posters looking for you.
Next week, I’ll talk about newbie wholesaling goals, so stay tuned!
Newbies: Any questions about this process?
Let me know with a comment!