The 6 Most Common Newbie Wholesaling Questions, Answered!

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Welcome to 2017. I’m sure most of us are excited about the new year, along with the new opportunities it will bring. Since it’s already the second week of the year, many already have their goals outlined. This is great. I took a little time over the break to read many of the post from newbies looking to start their career as real estate wholesalers, and I’ve found some recurring questions that often get asked.

6 Most Common Newbie Wholesale Questions: Answered Now

I want to make sure you get off to a great start in 2017 by answering these questions. You will generally find these questions in the forums; however, they either go unanswered or the answers vary tremendously.

First, you maybe asking yourself — is Marcus legitimate enough to answer these questions? To remove any questions about my legitimacy, I will just say this: I’ve been where you are, and I remember the pressure I put on myself to get started. Still, I did not know where to start and who to depend on. I remember the anxiety when asking a question, thinking to myself, “Is this a dumb question? Why is no one willing to help? How can I put all the information I’ve learned from hours of YouTube education into practice?” I remember those feelings like it was yesterday. I am not here to tell you how many deals I’ve done or anything like that because it’s not about me. It’s about getting you started in the right direction.

Now, since we have all the preliminaries completed, let’s get started. Here are the 6 most common newbie wholesaling questions according to my research on BiggerPockets.com. These are in no particular order.

Question #1: Is wholesaling illegal?

This is normally the first hurdle we have to jump. You may think to yourself, this can’t be legal because it sounds too good to be true. To answer the question, YES, it’s legal. Many people question this because they say you are brokering a deal without a license. I am licensed now, but when I got started, I was not licensed. I will discuss the license in a later question.

Wholesaling is legal, but you will need to be strategic in your verbiage on your contracts. Remember, this is not legal advice so you should consult legal counsel yourself. It should be noted on your contract the buyer’s name as ABC Wholesalers and/or Assignee. Also, feel free to have an open discussion about this verbiage with your seller. Keep in mind, you want to do everything in the highest level of integrity. At no point do you want to hide anything from them. Your goal after having a fully executed (signed) contract is to then market your agreement to potential buyers.

If you are unclear about question #1, feel free to ask questions in the comment section. You have to have a clear understanding of this before you can proceed.

hire-a-contractor

Question #2: How do I find a mentor?

This question is asked so often that I believe it goes unanswered in the forums now, so let me help you with this. I’ll answer like this — in the Bible it says, “Ask and you shall receive, seek and you shall find.” Lao Tzu states, “When the student is ready, the teacher will appear.” You will only find a true mentor when you are ready. How do you know when you’re ready? When you’re taking massive action.

Many newbies are looking for mentors, but they are not looking for deals. A true mentor will not acknowledge your request unless you provide some value. You need to ask yourself whether you’ve been consistently driving for dollars (emphasis on consistently), whether you’ve started a small direct mail marketing campaign, whether you’ve put out bandit signs, and whether you’re knocking on doors or cold calling. What are you doing? If you are just trying to learn from YouTube, turn the computer off, beat the streets, and talk to people.

How do you find a mentor? Start taking action on some of the things you’ve learned. I swear to you, once you start doing this, you will find your mentor — or better yet, they will find what they are looking for in you.

Question #3: How do I find motivated sellers?

Reread question #2. I put some great actionable tips you can use to help you find sellers in there. Again, you have to tell everyone you know what you are doing — I know you may be ashamed to tell anyone because you haven’t done a deal yet. So what? You won’t do a deal because a lot of times, you find deals in the most unexpected places.

Here, let me give you an example to prove my point. I had someone refer a newbie to me. They knew I’d been closing transactions and could help sellers. This person gave the newbie my number, and we began to talk. He told me how he spent nearly $30K on one educational seminar, but still didn’t have anyone he could contact to help him navigate his way through a deal. To make a long story short, I asked him, “Who in your circle knows what you are trying to do?” He stated, “Just a few people.” I told him to go back and tell those people he was seriously looking to buy property. He did that — and I’m being honest — his brother said, “Well, why not buy my property? I want to sell it but have not told anyone.” We are under contract right now on both legs of the transaction, and he is finally getting hands-on training.

You find motivated sellers by taking action, by cold calling, starting a direct mail campaign, putting out bandit signs, and calling “for sale by owner” listings. You have to get out there and beat the pavement.

Question #4: What should I say to a seller? (I have no money to buy their house.)

You are absolutely right — you have no money to buy their house, but you will have the money by the end of the inspection period. Stop second guessing yourself. You have to speak to sellers with confidence. A seller can smell rookie fear. Before speaking with the seller, build your confidence. Whatever you need to do to become a bulldog, do it.

When speaking with a seller, you need to do more listening than talking. Ask the necessary questions, such as:

  • Is there any particular reason you’re looking to sell?
  • If everything was perfect, how would you want the sale of your house to go?
  • As a buyer, is there anything I should be concerned about with regard to the house?
  • What are the repairs that are needed?

Always ask open-ended questions and then shut the heck up and let them talk.

Again, you want to find out about the house, but more importantly, you want to find out as much about the situation as possible. What are the motivating factors that drove them to speak with you about selling?

Question #5: How much do I offer for their house?

OK, now this is a science, and it varies from market to market. Most people use the rubric ARV x .70 – Repairs -Wholesale Fee = Max Offer. This is a great starting point, but again, each market is different and some markets are more aggressive, so you can push the envelope a little. Please use that as a starting point.

Normally, the next question is how do I estimate repairs? I discuss that in another post, “Wholesalers: Having Trouble Estimating Rehab Costs? Try This!” When making your offer, be confident. Even though you may be shaking in your boots, kick those boots off and make the offer. Who cares if they don’t accept make the offer? Studies show that only 1% of those you market to respond, and only 1% of those may lead to a deal. So the the numbers are stacked against you regardless.

Question #6: How do I find buyers?

There are two ways to answer this question:

  1. If you have the property under contract, work with a local wholesalers that have experience. You can find them by Googling “sell my house [your city]fast.” They will have a buyers list, and they will be able to handle the disposition for you. It is my experience that finding a buyer is not the issue because as long as you have a nice deal, anyone will either buy it or help you sell it.
  2. Now, if you’re looking to build your buyers list and you do not have any deals, create ghost ads on Craigslist. Also Google your city again with the same verbiage because a lot of cash buyers are trying to find houses like wholesalers. There are also products out there to help find cash buyers. You can review all the real estate sales in a certain area that sold for cash, and there is your cash buyer. Send them a letter letting them know you would like to offer them off-market properties first.

Bonus Question: Should I get a license?

My suggestion is yes, if you are looking to become an investor with longevity, you need to have a license. It opens up other avenues for income. You can do traditional sales and property management, you’ll have access to the MLS, and it provides a level of credibility.

Conclusion

I wanted to write this post because I see these questions go unanswered. Please, if you still do not have your questions answered, feel free to ask. No question is dumb if you don’t know the answer. I’m sure there are many other questions I could have attempted to answer, but again, if you have questions about contracts, assignments, or anything else, please ask.

Any other wholesaling questions?

Ask them below!

About Author

Marcus Maloney

Marcus Maloney G+ is the Executive Officer of Equity Realty & Investments as well as 3rd Generation Management & Holding LLC, both are family owned and operated real estate investment firms. The firms' goal is to provide affordable solutions in real estate while providing exceptional opportunities for community redevelopment for the residents of Phoenix, Arizona and Chicago, Illinois. You can follow Marcus on Twitter

27 Comments

  1. Sam White

    Marcus, for mail campaigns, can you elaborate on where you buy your lists, what date filters you use, and how many letters must be sent to generate workable results.
    My experience in sales tells me 1% rule. 100 letters = 10 call backs = 1 closed deal. But I am not sure if my B2B sales is the same formula.

    • Sam White

      Marcus, for mail campaigns, can you elaborate on where you buy your lists, what data filters you use, and how many letters must be sent to generate workable results.
      My experience in sales tells me 1% rule. 100 letters = 10 call backs = 1 closed deal. But I am not sure if my B2B sales is the same formula.

    • Marcus Maloney

      Sam,

      You are right Sam when it comes to direct mail you will get similar results to B2B sales with your results. However in some markets you may even less than a 1% response rate. It all depends on the market because some are more competitive than others.

      Check out this blog post https://www.biggerpockets.com/renewsblog/direct-mail-wholesaling/ it should help clarify your mailing list concerns. I am doing a small A/B test for the year I am currently doing a 2000/month testing to check my letters and envelopes to see what is pulling the best. I normally do about 6000-8000 pieces a month. If you have additional questions PM me and we can discuss it. Hope this helps

      “Enjoying the Journey”

  2. I’ve been wholesaling RE for about 4+ years now. Some of your suggestions are right on and things I do.
    However, I don’t advise anyone to become a realtor. Dealing with the laws and restrictions and all the BS is not a good way to enjoy your life. I’ve had a lot of bad experiences with know it all realtors that have ruined my deals by telling sellers what I was doing was illegal. Most are know it alls and believe they have the equivalent of Real Estate law degrees because the did a 3 day class and got a re license.
    I also wonder why newbies believe they need a mentor, because they don’t. I got my education by reading a few books and taking action. Wholesaling RE is so easy a monkey could do it.
    Selling my deals to my surprise is the easiest part of wholesaling. If you have an insane deal at 40-60% of ARV a simple ad on Craig’s List will have hoards of investors calling and that’s how I got my cash buyers list.
    I have done a lot of deals and made a ton of money. I get my deals from direct marketing to absentee owners, bandit signs, door knob hangers, partnering with other wholesalers and my favorite, I recruit bird dogs and pay them $2,000
    I actually wrote a book called “Big Buks Junk Houses” It’s on Amazon Kindle. It’s only $2.99
    It is all you need to know how to make some serious money wholesaling Real Estate and change your life.
    Rando

    • Denise Brown-Puryear

      Great article Marcus! But I also agree with RANDY PHILLIPS regarding licensing. I’m a licensed RE Broker in NY and am investing in NC where I now live. I’ve looked at the licensing requirements in NC and find that too much liability is on the realtor. Plus, the realtors that I’ve used to do my 1031 purchases were not as competent or on top of things as I felt they should have been. However, I do find that in NC it is easy to do assignments, wholesaling, etc. as compared to the NY where an attorney is required to close on any deal.

      Which is why I’ve jumped into the wholesaling aspect of investing at this stage of my RE life. Again, thanks for such a clear and simple article without the ego! :c)

      Thanks.

      • Marcus Maloney

        Denise, thanks for your input regarding the license. I know this is a split topic for many wholesalers however I have found it to be a benefit. Many times I speak with sellers and they inform they’ve spoken with other investors that were not licensed and they did not feel doing the deal with them even though they were offering more. It provides a level of credibility and comfort for the skeptical sellers.

        As I stated in response to Randy it also gives you another strategy to close the deal where you can list the property and still gain a commission versus not gaining anything and it becoming a dead lead.

        You are absolutely right there are some horrible Realtors in the industry but you’re normally not working with the Realtors you’re working directly with the sellers. I do know there are times when you do have to work with Realtors and during them times there is a mutual level of respect. Again its up to each individual, I rather have another tool in my tool box. Thanks again for your input.

        “Enjoying the Journey”

    • Marcus Maloney

      Rando, Thanks for reading. The reason why I’m an advocate for getting your license is because it gives you an opportunity to diversify your investment strategy. Yes there is additional rules and guidelines you have to follow but as long as you’re doing everything according to the letter of the law you should not having any issues. It does make a big difference what brokerage you get with. Similar to finding a investor friendly title company this is the same with a brokerage.

      If you have the license you can provide an additional option for the sellers. If they do not accept your offer you can offer to list the property and still gain a commission versus not closing the deal.

      Thanks again for your input. “Enjoying the Journey”

    • Marcus Maloney

      Randy, Thanks for reading. The reason why I’m an advocate for getting your license is because it gives you an opportunity to diversify your investment strategy. Yes there is additional rules and guidelines you have to follow but as long as you’re doing everything according to the letter of the law you should not having any issues. It does make a big difference what brokerage you get with. Similar to finding a investor friendly title company this is the same with a brokerage.

      If you have the license you can provide an additional option for the sellers. If they do not accept your offer you can offer to list the property and still gain a commission versus not closing the deal.

      Thanks again for your input. “Enjoying the Journey”

  3. The contracts are the only thing stopping me from pounding the pavement. I have a contract to purchase I got from myriepro. I have access to assignment contracts threw the software as well. My only concern is are these legal to use in CA? Every one say ask a lawyer. I don’t exactly have the cash to do that.

  4. Alex Montgomery on

    Hello Marcus,

    Great Article! I have many questions as I am just getting started, and am very new to real-estate. I have been doing a lot of research from youtube videos to reading lots of blogs and checking out websites referenced in articles just to see what they look like. I have contacted a couple of listing websites to get a quote on yellow postcards and such.

    1) Before buying a home as is, what does the inspection process look like? Is there one? And how involved do I get to be in that inspection?

    2) How do you go about selling the house before you have to make your first payment on the house? In other words in case you can not find a buyer right away?

    3) How reliable are those “sell fast” websites? any recommendations?

    4) Can I find a wholesale agent at my local realty company?

    Those are just a few questions I have for now. Always looking for someone to talk with to further educate myself in real-estate investing reading blogs and listening to youtube videos only gets you so far. Thank you for any feed back.

    • Marcus Maloney

      Alex great questions,

      1) As a wholesaler the inspection period gives you the opportunity to market the contract you have on the property to find your end buyer. This inspection period is used to inform your seller that you will have your contractor or partners (Cash buyers) come through to view the property to see if they are interested in purchasing it.

      2) Your basically getting the property under contract and then assigning that contract to your end buyer so there isn’t any payments to be made.

      3) Sell fast websites are good for finding other wholesalers to jv agreement. Those sites are good to market for motivated sellers if you are on the first page of google or if your doing google adwords. I’m not following why this is important at this moment especially when getting started.

      4) When wholesaling the name of the game is marketing, using a Realtor is normally not the way you want to go. You need to do some marketing directly to the sellers and cut out the middle man (Realtor)

      Check out this video https://www.youtube.com/watch?v=YG5AAWk78pU

      • Alex Montgomery on

        Thank you Marcus for the timely response and feed back!

        One more question if you do not mind? If you cannot find a buyer for your contract before inspection period is over can you just as easily back out of the contract and suffer no loss? Making it very little risk?

  5. Tiffany Dumond

    Marcus, great reading. I am currently working on my first flip which I hope to have on the market next week. I also want to get into wholesaling because I want to get better deals for myself but also be able to diversify and get income from wholesaling on deals I can’t or don’t want to rehab. I also have gone back and forth on whether or not it makes sense for me to get my real estate license. I took the classes but have not taken the exam yet as I have read that a license can hurt you when wholesaling. My question is, if you are a wholesaler and also a licensed realtor, are you sending out drip campaigns similiar to a wholesaler or are you sending out marketing material as a realtor to get the cash deals you sell to investors? How does your marketing change or play a role since have gotten the license? Or if anyone else has insight on my question….
    Thanks!

    • Marcus Maloney

      As a Realtor you can do the same campaigns as a non-licensed wholesaler. You only need to comply by the laws of a Realtor which you want to do regardless. For marketing you can do drip campaigns you just have to make sure at the bottom of the letter you add that you are a license agent and you need to have legal info such as your brokerage, and all picture insignia.

      This has never stopped me from marketing directly to sellers.

      Hope this helps….. Enjoying the Journey

  6. Jennifer Webster

    Marcus – Very nice article. I’ve been trying to wholesale for about three months now. My focus has been on probate leads, but I’m finding that all of my incoming calls are from people who are just trying to find out how much money they can get from a cash offer. They are actually not motivated enough to sell for my offer price, even though they have a house they need to get rid of. I feel like I’ve wasted a lot of time visiting properties and talking to people with no results. My question is – do you recommend cutting to the chase while on the phone with these folks and letting them know your offer is only going to be in the 30 – 60% of ARV range before going out to meet them and see the property, so as not to waste both their time and yours?

    • Marcus Maloney

      Jennifer,

      I vet the sellers by finding out what they absolutely have to get for the property to get a gauge on what they need. After having a conversation with the seller and getting the dynamics of the situation. I inform them I will do a desktop evaluation and then present them a verbal offer over the phone. I make sure I inform them this is a ballpark and i can sure up my numbers AFTER viewing the property. If you make the ballpark figure (60-70% ARV) and the conversation is still engaging then go view the property. This means they are truly motivated because they know your ballpark offer and still entertaining the offer then this is a hot lead.

      I do not view all the properties only those who I’ve vetted and are entertaining the offer. If they are not interested in the offer I make sure I follow up with them next month

  7. Alex Montgomery on

    Thank you Marcus for the timely response and feed back!

    One more question if you do not mind? If you cannot find a buyer for your contract before inspection period is over can you just as easily back out of the contract and suffer no loss? Making it very little risk?

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