Monday, May 11, 2015

Wholesaling 101

Congratulations to those investors who have signed up to do the 30-day Challenges sponsored by the Real Estate Association of Puget Sound. I have been meeting with a number of these novice real estate investors and coaching them on how to get started.

Many of them are interested in wholesaling real estate. "Wholesaling" simply means to buy low and sell low. Wholesalers typically find distressed or otherwise undervalued properties, and sell them to another investor who will fix up the property or add value before offering it for sale to an end-buyer at market price. In order for this to work, the investor who is doing work on the property must be able to purchase the property at a low enough price to make a profit after they have completed their work.

Wholesalers make a modest amount of money by finding properties, and getting them under contract for the rehab investor.

Many new wholesalers are still confused about how and where to start, and many, without a solid background in real estate, are nervous about talking to Sellers.

I do not recommend that they start with Sellers. Instead, I recommend that they talk to buyers - the investors that will pay cash quickly to purchase a good wholesale deal. These buyers are easy to find - they are members of your local real estate investment association.

How easy is it to identify these buyers? Simple. Just go through your association's membership directory and start calling. You are now taking orders for the types of properties for which you should be searching.

Here are a list of questions for your buyer prospects:
  • Do you buy properties from wholesalers? What types of properties do you buy? What is your criteria for these properties? Where? What price range?

  • If I found a property that meets your criteria, should I contact you?

  • Are you a cash buyer? How much money would you have to put down on a property? How many deals can you handle a month/year?

  • How quickly could you come up with the funds?

Now, armed with your buyer information, doesn't this make it much easier and safer to speak with sellers?
Hello, Mr and Ms Seller. I have several buyers who are interested in purchasing properties like yours - would you consider selling? 

And for those of you doing the 30-day Challenge, be sure to identify a challenge that you can control. You may or may not be able to get a property under contract in 30-days for example, as that requires a willing seller. But you certainly can control how many phone calls you will make every day to sellers, for example. You have total control there.

Do the behaviors that lead to success in real estate investing, and you will eventually be successful.

Happy Investing!

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