Notwithstanding the fact that lower prices are always better, most real estate investors would rather buy where they can rent them out easily. It is therefore necessary to target good neighborhoods for successful wholesale real estate investing. Rehab cost estimate is a necessary part of flipping houses. Most need repairs, and you must take this into consideration when making your offer. The lower my offer, the more my potential profits when I flip to other real estate investors.
The most important part of real estate investing is making an offer. When flipping houses, you must make a profit and still leave a profit for the real estate investor buyer. Obviously, as long as you know the estimated rehab costs and the after repair value after it is fixed up, you will be able to make an offer that both gets accepted and leaves enough cash on the table for both you and the wholesale real estate investor you flip the house to.
Once you have a contract to buy, you must get a wholesale buyer with cash who will fix it and sell, or hold it. You must verify where the money is coming from before flipping your houses.
Hard cash in the bank or line of credit is always preferable. This way, you avoid lending red tape and sell your houses fast. Most importantly, they must produce a sizable nonrefundable earnest money before I can sign a contract. As long as you have a cleared source of cash, you can close your deals in 2 to 3 weeks. Speed and volume will then be easy, making you more profits. Most Wholesalers are lazy! Very few will take the time to make a video walk-through of their property they have under contract. To tell you the truth, most wholesalers never even get properties under contract!
This is NOT wholesaling, this is lazy. Wholesaling take a lot of work, it takes time and effort to find deals and get them under contract. If you are going to be a wholesaler, do it right. Check out an example of our walk-through videos below. Ask yourself these questions to find your target area.
Many new RE Investors do this and end up spending more time than is necessary to find a deal. You, however, will be different from the usual newbie RE Investor. You will focus on one area, your target area, and be the best Wholesale RE Investor in your target area.
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Getting burnt out and quitting is not where we want to end up, so focus. Your target area is usually within a mile radius of where you live. You want to start with where you live because you probably already know the area, the side streets, good areas and bad. Starting where you live as opposed to wherever a deal is will shorten the learning curve and the quicker you learn the sooner you start making some money!
Get a zip code map http: Print the map out and draw a circle around the zip codes you chose. This is your target area, it is in your backyard, you probably already know most of the areas. Now, it is your job to drive those streets and really get to know the area. You want to know the street names, know which areas are good and which areas are bad, know different tracts, etc. Next time you are driving to the grocery store, work, the bank take your time and look around at what the areas are like. Look for old and ugly houses. Take a different route home. Maybe even get lost.
Just get to know your area better than anyone else. Be the ultimate authority when it comes to your target area. What kind of houses are on each block? Is the landscape desert, gravel, rock, grass, large trees, fences? Are they mostly single family homes or are there some duplexes and triplexes? Are there any large apartment buildings near the homes? These are many questions you will need to start asking yourself. Take the time to recognize what you are surrounded by, slow down a bit and take the time to learn where your business will be operating.
This is your business and you need to take it seriously if you want to succeed. You now have a write off for your taxes. I am not a tax advisor or CPA and this book is not intended to render any legal or accounting advice. Please consult a competent professional. Many people will ask me if it is smart to wholesale real estate now instead of rehabbing homes. I can always, and truthfully, answer yes. Wholesaling offers very low risk compared to rehabbing, it also offers a short turn around time compared to rehabbing.
With the volatility of the market right now it could change drastically within the 6 months you are waiting to fix and sell the house. Another reason wholesaling is a good option is because of cash flow. You can have several properties in your pipeline under contract and make quick cash month after month, the wait time is usually weeks instead of months. You have very little risk if you do it right.
We teach how to wholesale using none of yur own credit or money, this takes almost all of the risk away from you, the investor. If you are rehabbing you will almost always run into surprises that you were not able to find during your inspection. This means more money out of your pocket and more time. The problem many new real estate investors face — and some with a little more experience — is self doubt about their ability to put together profitable deals, as well as having numerous questions about when certain techniques would be most appropriate.
We all doubt ourselves at times, it is those that ignore doubt and push forward that succeed. These doubts and questions can easily be alleviated by knowledge, but a lot of real estate investors have trouble applying principles they may have read about or heard about. This is one of the primary areas a good, experienced coach can help increase their base of knowledge and give them the motivation and the direction they need to reach their goals and fulfill their investing dreams.
In order to be effective your coach should have practical, relevant experience in the same kind of real estate investing as those they are coaching. A good coach will be concerned about your development as a real estate investor and will take the steps necessary to ensure that you are well-versed in multiple investing strategies. He or she will share with you accumulated knowledge and advice about how to better market yourself, and provide you with essential real estate investing tips and strategies that you can implement in your own business.
In many cases, a mentor will work one-on-one with you in the field and explain to you why certain strategies may or may not be appropriate in a given situation. In addition, certain strategies can be altered or modified in a way that a less experienced real estate investor might not be aware of, or may not have even considered.
If you want to really ramp up your real estate investing career, you owe it to yourself and your future to thoroughly investigate the idea of working with an experienced mentor to shine a light on the opportunity you have to build a strong investment portfolio and a bright future for you and your family. Sometimes, you may come across a great deal, but even the buyers that are on your buyers list will not pursue the deal.
If this is the case, what can you do to find a buyer pretty quickly without spending a ton of money on marketing the property? Keep in mind that this technique allows you to search for new buyers for the subject property as well as add more cash buyers to your buyers list for future properties and of course results will vary from area to area. Once you enter the property address and hit search, the property details will come up. After clicking on that link a bunch of recent properties that have sold will show up. If the mailing addresses are different than the properties that they have bought, then these are potential cash buyers.
Contact the Potential Cash Buyers — Send the potential cash buyers a letter stating that you have a property for sale within the vicinity of the property that they have recently purchased. Give them a flyer with some information on the property and let them know that you are willing to offer them a great deal on the property. Give them your contact info and website address if you are have a site , and wait for the phone to ring.
Probably the most important thing that you need to remember when you decide to wholesale is, your buyer should get the majority of the profit! This is important because your buyer will be the one to purchase and rehab the property. If you did that, you would be a bird dog, not a wholesaler. Your profit will vary depending on the house, but the better you are at locating properties and putting together offers, the greater your profit will be — while still maintaining an excellent profit for your buyer. There are several things that you can do to ensure a successful and profitable wholesaling business.
We will discuss those now. Whether you decide to make wholesaling your main business or a part of your business, it is a good option for you! Your exit strategy is an extremely important part of your real estate investing business. In fact, it is one of the most important parts. Sometimes investors get excited because they learn how to buy properties, they find them and they have the money lined up to purchase them, and they do, But when they get them, they have no idea what they plan to do with them.
You must know your exit strategy when you buy. What do you plan to do with the property? Knowing this allows you to make all types of decisions, from how much to offer, to what kind of financing to us, and more. It is simply finding a bargain property and passing it on to a bargain hunter. That bargain hunter will be an investor who will either purchase the property to resell it or purchase it to hold it for rental income.
Stay updated via RSS. Email Subscription Enter your email address to subscribe to this blog and receive notifications of new posts by email. Find Us On Facebook. August 16, in real estate investing. To be successful as a real estate investor flipping houses, here are a few tips you must follow. August 10, in Uncategorized. August 9, in Wholesale Deals. Nice property on BIG lot! August 7, in Uncategorized. August 5, in Target Area. Wholesaling provides a quick, low risk advantage to your investing portfolio. August 1, in Wholesale Tips. July 31, in Finding Cash Buyers.
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. 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. Perhaps you can start on a trial basis.
Staci LaBarber (Author of How to Flip It- The WHOLE Story on WHOLESALE Real Estate)
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. The final option to get started as a real estate investor helps you learn about the construction and rehab part of the business. 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? 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. Eating an elephant if you actually liked that kind of thing!
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.
Find a niche you like and get started. Understanding the words in an article is theory. Best of luck as you get started or restarted in your real estate investing! We are republishing this article to help out our newer readers. Are there others that I forgot? How did you get started as a real estate investor? Chad Carson invests in Clemson, South Carolina. He also writes at coachcarson.
For practical advice each week — join his free newsletter at coachcarson. I liked your article and the options you presented. I gotta disagree with you though. I also never had a buyers list, at first anyways. 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 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 I made 3 times more money than I ever have in my life. 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.
Hey Randy, I appreciate your comment and your perspective. Wholesaling is a pure sales business selling an expensive service seller gives up equity in exchange for a quick, cash sale. 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 got to say I loved the way you described simply because that is what I thought wholesaling really was about. Would love to talk more about wholesaling. Great response and wonderful testimony. My interest is wholesaling. It is good to hear about your experience. 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. So it protects your downside while you learn.
I especially like the multi lease concept.
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This has given me another tool to look into. Thanks for reading and commenting. I hope the master leasing is a tool you can use. Thanks chad, an article like this needed to be written. 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. Yeah, that was my motivation for writing this. Too many people chasing the dream that will likely not come true. I want to share some practical alternatives.
Thank you for the knowledge and time for a newbie like myself. It really is a jungle out there in REI, just trying to figure out how I can get started. 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. But there is something magical about getting in motion. I am an organizer of an REI group and I agree with this blog. 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.
Thanks for the confirmation and insight from someone with your experience, Terry. 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. 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. I love reading your story about using several of these paths to grow your own investing experience. You make a really good point about putting in the work and living frugally. There are no short cuts.
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.
Investors: DON’T Begin by Wholesaling. Take One of These 7 Paths Instead.
I am working on house hacking now with a duplex and find its a great way to start for a newbie. Best of luck with your house hack. 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. 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. 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. 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.
Hey Linval, I like the way you put it. But people have to match their own situation and talents with the right path. I appreciate you reading and sharing your thoughts. Learn sub2, lease option assignments, lease option sandwiches, wrap around mortgages — aitds, land contracts. Market for private lender loans, learn these terms: Here is a story:. Bill went to some friends and relatives and borrowed money from their IRAs to purchase the house. Get Joint Venture 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.
So to summarize, as a real estate entrepreneur, finding a problem, offering several solutions for home sellers, you can make good money in REI. Hey Brian, Wow — that was an action packed, content-filled comment. Thanks for feedback and for sharing! 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 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. 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 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 months with deals falling thru at the last minute and living on pinto beans was when I thought about throwing in the towel.
But sometimes I wud be amazed when a profitable deal wud just fall in my lap. 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 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.
My advice to newbie wholesalers… Never give up.. 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. Thanks for commenting, Paul. 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. This are my reason to consider wholesale 1. 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. I loved your info, I liked it all I totally going to save this for self use and help other people Congratulations. Bird dogging is a great idea for someone new. It will also build some cash for wholesaling. There are many ways to get buyers and sellers that are free. The real hurdle to overcome is getting comps. 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. 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. 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. Even a short-term job as a project manager or any of these others would be beneficial. Then you could move onward and upward if you wanted to.
Just what I needed to read today. Reading your blog answered my question: How to get started being a newbie in REI. 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.
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. 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.
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 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. 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. 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 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. Try to find the investors actually doing projects, and get to know them. And be open to other variations of opportunities than just a project manager as you go out and meet people. And all the comments and responses were super helpful as well!