If you are looking to get started investing in real estate, then you should be looking at strategies that require a minimal amount of knowledge, capital, and risk.
Frankly, there is no better beginner real estate investment strategy than wholesaling houses.
Wholesaling real estate is the process of finding a distressed contract, getting it under contract, and assigning that contract to a rehabber for an assignment fee.
Some of the benefits of wholesaling include:
I like to say that wholesalers get the “risk-free” profit from the real estate deal and pass on the “risk-full” profits onto someone else who is going to take the title, deal with renovations, deal with any project or contractor ‘surprises’, deal with the market and all the other fun (yet stressful) risks associated with rehabbing houses.
Imagine you’re an experienced and established professional in your field (probably not too big a stretch).
Now, imagine some newbie comes up to you and says “Hey, I’m just getting started. I don’t know anything and I’ve never done anything. Will you help me?“
Not an attractive proposition. Unfortunately, I see this several times at real estate networking events.
Now, imagine going up to an experienced real estate investors and saying “Hey, I don’t have a lot of experience, but I’m out there busting my butt doing marketing and I’ve got a great lead that I’m looking to wholesale. Would you like to help me and buy it from me?“
The truth is this: if you have a good deal, you are an absolute magnet for experienced investors to come to and help!
Wholesaling houses is a great way for you to get that first deal under contract, gain some experience, and earn some quick cash.
Wholesaling real estate is a beginner’s strategy, but it’s a beginner’s strategy from the standpoint of how much capital you need to have. It’s NOT a beginner’s strategy in terms of how much KNOWLEDGE you need to have.
For example, you have to be really good at real estate analysis and due diligence. You’ll need to understand what the After Repair Value of the property is going to be after it’s repaired.
If you start off overestimating how much the property will be worth, then your entire deal falls apart.
You’ll have to understand what it’s worth in its current condition, what repairs will need to be made, and what those costs are.
Once you’ve researched these numbers, you have to be able to reverse engineer the entire cost process so you can determine what you can ultimately get the property under contract for and how much of an assignment fee you can charge.
If you make errors in any of those processes, that error will end up coming out of your assignment fee.
When you think about it, that’s a lot of real estate knowledge that you’ll need to know and understand in order to complete a deal.
Once you understand the analysis part, you’ll have to know how to present an offer to the homeowner and how to negotiate. Asking to buy someone’s house at 50% of market price takes some serious negotiating skills!
If you want to become a wholesaler (and stay a successful wholesaler) who makes consistent money, then this ONE skill will help you…
You have to be really good at the marketing part – and you have to be out there doing MORE marketing.
The truth is this: You’re NOT a wholesaler unless you’re marketing.
You’re only a wholesaler when you have properties available to assign. And you’ll not have any properties if you’re not marketing.
There are over 60 different strategies for marketing real estate. There’s no silver bullet or one plan that works 100% of the time. That’s why you need to know what marketing strategies are out there and implement several of these strategies to have success.
Perhaps the greatest of all experiences you can gain from wholesaling properties is the ability to practice presenting to homeowners.
Believe me, this practice is valuable.
If you take away just 1 tip from this article, let it be this one: perform your presentation in front of as many homeowners as possible
Even if you come across a lead that you think is an unattractive deal – schedule an appointment and make a presentation.
Why? Because when you get in front of a homeowner on a deal where you might be able to make $5k, $10 or even $20k wholesaling a deal… do you want to be ‘practicing‘ then?
Don’t practice on the potential wholesale deals that will make you a boatload of money! Practice on the ones that don’t look good.
If you can put yourself in a position where you have experience overcoming (real estate) objections because you were practicing on less than perfect deals, then you’ll easier close the better deals that will become available to you!
This month, the topic of our local Real Estate Investor Association is How To Get Started Wholesaling Houses.
At this presentation, Club President Shenoah Grove will teach you: