One of the most popular ways to get started in real estate is through wholesaling. In a nutshell, wholesaling is the process of finding a deal and passing it along to an end investor. Doing this allows you to stay clear of any risk and not tie up capital for the length of the rehab. While this method offers an ease of entry to the business, it does not guarantee success. Like anything else you do in real estate, there is a fine line between success and failure. You need to have a baseline of knowledge about the process and everything it entails. Without it, you could end up spinning your wheels. Here are a few basic concepts you need to know before you get started in wholesaling:
- You Need To Market To Find Deals. You don’t necessarily need to break the bank when you get started in wholesale, but you do need to have capital on hand to find deals. Wholesale deals are different than the regular rehab deals you may find because there is an extra layer involved. There has to be enough meat on the bone to entice an end investor to buy it from you. For you to make a profit, you need to find deals at a low enough price point that makes sense for everyone. This may require you to spend money on marketing to find deals. You don’t need to roll out a full scale marketing campaign, but deals will not just fall into your lap. Between bandit signs, targeted marketing, and social media exposure, there are a handful of ways to search for properties without breaking the bank. Before you get going, you should accept that you need to spend some money to find deals.
- Networking Is Critical. If you want to be successful in real estate, you need to put yourself out there. Whether you are wholesaling, flipping, or looking for rental properties, you need to increase your local exposure. This is especially critical when it comes to the wholesale side of the business. Good wholesale deals are hard to find. Some of the best ones will be through word of mouth from your personal contacts. Accumulating those contacts takes time and dedication, especially when building a fledging wholesale buyers list. Every local networking meeting or real estate investment club is an opportunity to increase your profile and meet new people. The more people you know in the business, the greater the chances that they may think of you the next time they have a specific deal. You should have business cards ready to hand out at all times. Some of the best contacts you make will often come from informal settings. Field trips for your children’s school, office projects, and even happy hours at your favorite bar can be a chance to talk about real estate. To find good wholesale deals, you need as many different options as possible.
- Know your numbers. A common mistake that most new wholesalers make is not fully knowing and understanding the numbers. Think about the wholesale process for a minute. You need to acquire the property low enough where an end investor still sees potential. Depending on the property, there will most likely be a list of repairs and expenses that is required. If you are not an expert in repairs, you should leave that to a contractor or someone that knows what they are doing. Additionally, there are carrying costs that need to be paid for as long as the property is owned. Taxes, insurance, utilities, and other miscellaneous items will quickly add up after a few months. Finally, you need to have an idea of what comparable homes are going for in the area. Doing work and making improvements is great but it may not yield as large of a price increase as you may think. Even though you may think there is a large profit, after all is said and done, it may not be what your investors are looking for. Before you even make an offer, you need to know the numbers.
- Convert leads to deals. Like anything else you do in real estate, you need to be able to take advantage of opportunities that come your way. Getting leads and talking to homeowners is great, but you need to turn those into deals. You need to dedicate time to learn how to talk to homeowners and what to say when you do. In most cases, they are selling because you can alleviate a problem for them. They are probably going to sell whether it is to you or someone else. How you talk to them, answer their questions, and deal with problems makes all the difference. Having your phone ring off the hook is great, but it doesn’t do you much good if you don’t close deals. Once you do close a deal or two, the process starts to become much easier. Until you get to that point, you need to go through a period of trial and error. It will take a while until you know just the right things to say to a homeowner. There will be an occasional lost lead along the way. After you figure out a routine and a method of converting deals, wholesaling will become that much easier.
Wholesaling is something that anyone new in real estate can do. Before you take a leap of faith, you should spend some time learning the process. Once you do wholesaling, you can quickly jumpstart your real estate business.