Wholesale real estate is a great way to make money. The problem is that everyone calls themselves a wholesaler, and yet they don’t know anything about wholesale. They do it badly and often illegally.
When you learn to do it right, you can make a lot of money as a wholesaler without the need for money, credit, or prior real estate experience.
Below are some of the many mistakes you want to avoid:
Waiting too long to start: There is no better time than now. Dont wait. If you start today and work hard, you could earn a lot of extra income; possibly enough to change your life. But it all starts with you taking action NOW.
Not being properly trained or not having a plan: As an investor buying property from other wholesalers, there is nothing more frustrating for me than getting a wholesale property from someone who has no idea what they are doing. Once I bookmark them, I never open another email from them. Your reputation is everything; don’t blow it by lack of training.
I mean take action and go for it, but after you know what you’re doing. Do not start or run any business without being educated enough to do so. Once you know what you’re doing, it’s much easier to prepare and implement the right plan.
Letting your real estate business run your life: Many investors start their real estate business and think they have to do it all. At first, you want to be a part of every aspect of your business to learn it, but as soon as you can, getting help is highly beneficial. This will allow you to break free and do what you do best, earning you a lot more money if you had tried to do it all yourself. It also allows you to have more time to enjoy life. Using outsourced help from countries like India or the Philippines is very affordable.
If you set up your business correctly and hire people to help you, eventually your business will run like a properly oiled machine. Deals will come in, deals will go out, and you’ll make money in between; all without you being involved in every aspect.
Selling real estate wholesale without being a principle in the transaction: Many send the wholesale deal without realizing that what they are doing is illegal. You must be early in the real estate transaction before you can offer it for sale. Otherwise, you are breaking the law and committing fraud.
Not figuring out what your buyers want to buy: One of the most important things you can do is build a buyers list. These are the people who will buy your deals in bulk. But they will only buy from you IF you give them what they want. So ask them what they want and then go find it.
Not doing proper due diligence to verify that this is a deal – I cannot stress enough how important this is; you must learn to analyze the deal. A good wholesaler has done all the necessary work to verify that the property he is presenting is profitable. This involves knowing your market, getting the After Repair Value (ARV), and having a good idea of what repairs are needed. Eventually you will want to be able to present a good estimate for the repairs. As buyers see that you have done the proper due diligence and that they can trust what you send them, your reputation will spread and others will line up to buy from you.
Just use a few tactics to find sellers – there are many ways to find leads and good properties. The best thing you can do is incorporate them all. The wider the net, the better your chances of finding those deals.
Some of these tactics include: posting ads online and in your local newspaper, using bandit signs, adding a magnetic sign to your car, handing out flyers, creating a nice website, using property finders, driving around neighborhoods, and looking for ugly houses or empty, direct mail campaigns, etc.
Talk not listen: If you can learn to become a great listener, you’ll get great deals. Don’t talk, listen. If the salesperson stops talking, ask a question. When he answers a question, ask him to “tell me more.” You want to create an atmosphere that allows them to talk. Allowing them to talk is beneficial in several ways. They will like you and they will make the deal with you because you let them talk, you will find out a lot more about the property and you will find out what they need or what problem you can solve for them and then solve it. .
Looking at every house that comes your way: You need to shortlist each deal to verify that it’s worth taking the time to pursue. Most of the ones that come your way will be a waste of time and it’s best to find out right away. Talk to the owner on the phone and fill out a property information sheet that will give you enough detail so you can evaluate the property and make sure it’s worth viewing.
Forgetting to check the title to make sure you’re dealing with the owner(s) of the property – Before you go into a home, you want to check the title and verify that the person you’re talking to is the title owner . There is a lot of fraud going on. If there are two owners on the title, you’ll want to make sure both people are there for your meeting because you’ll both have to agree to the deal and sign contracts.
Not putting together a complete package correctly for your investor buyers: The wholesale package includes all the details needed for your buyer to decide if they are interested. You must have a reputation for submitting accurate information with verifiable details, not guesswork.
- Show photos of your property in question with all the important details: address, beds, bathrooms, square footage. ft., garage, pool, lot size, purchase price, etc.
- Show After Repair Value (ARV) comps sold with addresses.
- List repairs with pictures. If you can accurately estimate the repair costs, include them.
- Show the numbers, including the estimated profit.
Not using a disclaimer – When you ship your package, you should add a disclaimer at the bottom that says the buyer is responsible for their own due diligence. The package includes ARV and expense estimates based on the information you’ve viewed. It should be made very clear that this information is not guaranteed in any way and that each buyer is responsible for making their own decision based on their own due diligence, not yours.
Getting Personally Involved: No matter how nice the house or the people, don’t get personally involved. Look at the numbers and let them tell you if it’s a good deal or not:
Not using contingencies or using the wrong ones – When you write a contract, there are contingencies you should use to protect yourself and allow you to cancel the agreement if necessary. Your attorney can help you decide what contingencies to add.
Being distracted by the “Shiny Object” – I see this happen all the time. An investor educates himself and starts working on a strategy only to decide that he could get rich faster by doing something else. Don’t let this happen. Wholesale is a great strategy to start with and you will make money if you learn to do it right and spend time building a proper wholesale business. As you become a successful wholesaler, it is very easy to also become a rehabber where you will buy, repair and sell these properties yourself.
Wholesale is not a get rich quick scheme. It takes work, dedication and perseverance, but it will be worth it. If you want to start wholesale, you need to educate yourself properly. One of my favorite quotes is “Education doesn’t cost, it pays.” When you’re educated and do the work necessary to build a business, you’ll make money much faster with fewer mistakes and frustration.
On the other hand, if you go out without the proper education, you will make very expensive mistakes that will cost you far more than any product, and you will most likely end up quitting in frustration. Don’t let this happen.
You are going to pay for your education either way; you just have to decide how.
I wish you much success in building wealth through real estate!
Copyright © 2010 / Michael Gier & MHVProperties.com
