Wholesale real estate investment tips for beginners

 

Wholesale real estate investment has been on the rise lately. The name itself - wholesaling, sounds very confusing. Based on the definition of wholesale, it creates the impression that real estate agents buy large quantities of property and sell them at lower rates. Well, it’s not. Let’s take a look at an example by Investopedia that explains real estate wholesaling:

“Let's say a homeowner has a property he never thought he could sell because it's fairly distressed. The owner may not have enough resources to fix it up himself but continues to live in it, thinking he'd never get a fair price for it. Enter the wholesaler, who approaches the homeowner with an offer. Together, they agree to put the house under contract for $90,000. Using his network of investors, he finds an eager buyer at $100,000. He assigns the contract to this investor, who then has a profitable fixer-upper project. The wholesaler makes a $10,000 profit without ever owning the home.”

Real estate wholesaling is probably one of the most exciting opportunities for agents to make money. It is a risky business but with good and diligent execution, it can deliver good results. 

The advantages of wholesaling real estate 

Besides the quick cash, wholesaling real estate has other very tempting advantages. For example: 

• Fast-entry 

• Simple to learn

• Quick results 

• No cash or credit required

•  Location independent

•  Valuable experience

•  High demand

•  Larger paychecks

• High return on investment

• Ability to work with bird dogs or deal scouts

• No need to list properties

•  No membership charges

•  Volume potential

•  Minimal risk

•  No repairs involved 

So, if you are a real estate agent who is considering getting into real estate wholesaling then keep reading to get some helpful tips that will make this experience run much smoother. 

Tip #1 Always research the market

Reading through all the perks of wholesaling real estate can really “seduce” agents but before any final decisions, it is important to thoroughly research the market. Just like any other market research, you should look for home prices, examine the neighborhoods, their surroundings, and the availability of properties. 

The ultimate goal of your research is to a. Understand if it’s worth the investment, and b. If you were to go for it and try to sell the property, identify key aspects of the sales such as price and marketing strategy. Once your research is complete and you are positive that it is a good opportunity then proceed to the other steps.  

Tip #2 Create a prospective buyers list 

No buyer, no wholesaling - it is that simple. You are the middleman between the buyer and the owner. Unless you are sure that you can find a buyer, don’t get started with the process. So, start by building a list of potential buyers that you believe will be interested in the property. Don’t simply guess, creating a buyers list is not that simple. It requires a lot of networking and a bit of digital marketing knowledge.

Don’t shy away from using social media, emails, and also even direct mail to connect with potential buyers, understand their needs/wants, and use all that information in your marketing strategy. 

Tip #3 Identify all the expenses 

The whole point of real estate wholesale is to get a big commission and you can’t have it without getting the numbers straight. The key is not just finding a property that has a good price, it also needs to have some kind of value (e.g. location) and potential. Keep in mind that buyers will have costs in mind. They will want to assess repairs and other required expenses. Taxes, insurance, utilities, and other costs will also be in their minds. So, be a step ahead and calculate all these before making an offer. The more prepared you are, the higher your chances of profit.

Tip #4 Confirm the financing source

You obviously don’t want your deal to fall through halfway and to avoid inconvenient situations like that make sure that the buyer does have the money. Don’t get excited too quickly and get the seller’s hopes up. Remain professional and confirm that the buyer does have a financing source before you identify them as the final buyer. This will spare you, the seller, and the buyer any additional hassle. 

Tip #5 Find real sellers 

This is the core of wholesale real estate investment - finding property and convincing the owner to sell. Your task is to find motivated owners, who want to sell the property as quickly as possible. Motivated sellers are more likely to go under market value, which gives you an opportunity to find a buyer faster and make a bigger profit. 

So, how do you find sellers? It is not that different from finding clients in general. Here are some things you can try: 

• Networking - knowing the right people in the right places can work miracles, so network with other professionals as much as you can. 

• Cold calling - it’s a rather old-school way of finding clients but it has proven effective many many times, so do give it a try. 

• Connect via social media - you can join community groups, use Facebook, Twitter, Instagram, and LinkedIn to reach out to sellers or advertise your services. 

• Email marketing - if you have a mailing list then make use of it and reach out to people, let them know about you and your services, and most importantly, ask them about their needs. 

• Search online - Zillow and other similar platforms are your best friends. Check them out daily to catch announcements that can be turned into a wholesaling opportunity.

These were all the tips we had for you. Real estate wholesaling is a different approach to selling but after all, it’s selling and you were trained to do it. Combine creativity with strategic thinking, and you will succeed.