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What You Need To Learn To Wholesale Real Estate
The more you learn about real estate, investing, sales, marketing and psychology - and actually implement - the more successful you will be at wholesaling real estate. However, what are the key things you must learn to wholesale real estate profitably?
First, you need to be able to find great deals. This entire process starts with the knowledge of what a good deal actually is.
A deal needs to include one or more of the following criteria:
1. Able to be purchased for significantly below current fair market value, and/or
2. Has great positive cash flow with little or nothing down and/or
3. Has the possibility of owner financing
These usually stem from some type of motivation from the seller. As an aside, the motivation of the seller can be from good news like a job transfer with significantly higher pay to not so good news like a divorce situation. In both good and bad scenarios, you should only make deals where both parties win.
The second thing you must learn, which is just as important, is how to find buyers for your deals. I strongly believe you should be doing this from the very beginning by building your buyers list. A buyers list is nothing more than a list of people who are usually investors, but can also include folks looking for a home to live in. The size and quality of your buyers list can determine your success or failure as a wholesaler because you need people to sell your deals to.
The first two things - finding deals and building a buyers list - are the TWO major areas that you must learn and master as a wholesaler. Practicing, improving and ultimately, mastering these two skills are the foundation that you must work on daily.
In addition to finding deals and building a buyers list, you must also learn how to complete your paperwork to wholesale real estate. This involves learning and understanding your contract to buy (or option agreement if you use that) and your assignment or contract to sell.
Your ability to put deals together and sell houses relies heavily on your ability to negotiate and sell both yourself and the deal. Become a better negotiator and salesperson and you will improve the number of houses you buy, the price you purchase them at, the number of houses you wholesale to a buyer and the price you sell them for. It is that important.
I am tempted to say that you can't wholesale alone, but I will say, at the least, it is almost impossible to do the entire process by yourself. You should have a team of people helping you wholesale, including key dream team members like a real estate agent or broker who can help you find deals, determine value, bring buyers and introduce you to other critical team members. While you are usually not borrowing money yourself to wholesale deals, having a great lender on your team to work with your buyers can make your ability to wholesale a much smoother process. Also, don't forget the importance that a flexible title or closing company can play in your ability to close creatively structured deals.
Finally, you must understand the transaction flow and especially the closing process. Understanding what needs to happen and when in a real estate deal will allow you to fix things before they become an issue and improve the ratio of your deals that actually make it to closing - when you ultimately get paid. A great dream team can help you accomplish this.
Until my next post,
James
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12 comments
Yes, I think you should find an agent for your real estate investing business even if you are doing a ton of marketing to find motivated sellers on your own.
One of things we, as real estate investors, can offer an real estate agent or broker that is helping us pull comps, find any deals in the MLS and allowing us to tap into their network of dream team members is to pass on the motivated sellers that will not work for us buying their houses. Most investors are only buying 1 out of 10 houses that they look at and make offers on. The other 9 of 10 really are retail sellers that need an agent or to sell FSBO.
Refer them to work with your agent (and there is a good and bad way to do this) and your agent should be very motivated to help you in your business.
Hope that helps.
James
what if u need proof of funds
James replies:
If you are talking about the fee for when you submit a deal to our websites, that is paid at closing when we find a buyer.
Tell me more about the details for proof of funds. When we wholesale houses, usually our buyer is funding the deal and they will provide proof of funds for the purchase.
If you are referring to making offers on bank owned or MLS listed properties, I do not recommend that unless you can provide proof of funds or know the strategies for dealing with that. I recommend you deal directly with sellers.
James
James replies:
The part you are having problems with is always the hardest part (for you). If you are stuck on finding buyers (that's the hard part). If you are stuck on finding deals (that's the hard part). If you are stuck selling your houses (that's the hard part).
I do discuss finding deals in detail from the Wholesaler Control Panel.
If you are using the "poor methods" as I discuss in those resources, you are going to need to look at A VERY LARGE number of deals to find great deals. You may want to consider using some of the "lazy methods" instead to decrease the number you need to look at to find decent deals.
Sincerely,
James
James replies:
Every single real estate agent had a first client where they had no prior experience. Every business owner has a first client where they had no prior experience.
You need to build your self confidence to the point where you know you can help them first.
James
James replies:
Sounds like what you are doing is Bird Dogging (not Wholesaling).
There are folks that work at places for minimum wage. Lots of others work similar jobs for many times that. Are the ones working for minimum wage being taken?
There are folks that buy designer clothes and shoes for many multiples of what you could get equally functionally clothes and shoes for at major discount stores. Are the ones paying multiples being taken?
It is only something you can answer.
Sincerely,
James
James replies:
You're going to want to practice and find ways to help. If you don't believe you can help, then this is not the business for you.
Sincerely,
James
P.S. The property will be auctioned in January 2009.
James replies:
You can spend countless hours trying to get this unmotivated person to be motivated, or you can find another deal. I'd find another deal if it was me.
Sincerely,
James
What would be the most satisfactory method of persuading the sell of the benefit of putting the transaction threw this way?
Thank you for your post
Charlene
James replies:
Including costs like that is ALL negotiable.
There are lots of sales presentations and approaches and a lot depends on your style. I recommend reading about some basic salesmanship skills and then we can discuss nuances to this presentation.
Sincerely,
James
P.S. Please do not post your website address on each comment; it is not appropriate here.
Manuel
James replies:
Your welcome for the network.
Yes, being upside is not just for California anymore. While you can try short sales if folks are upside, you'll be less frustrated just working with folks that could make a deal if properly motivated.
Sincerely,
James
value do i take the risk of
putting up earnest money or do i wait till
i have a buyer?
James replies:
Yes, you need to be building your buyers list in advance. I have LOTS of articles about that and practice it myself every day.
If it were me, I would not put up earnest money unless I felt confident I could get the deal done. If I don't feel confident I would tell the seller that I think I may have someone interested on my buyers list and get an agreement without earnest money to contact me list before.
Sincerely,
James
James replies:
No. I sure don't have anything like that. I'd have to think about how I'd do that exactly.
Sincerely,
James