Warning Newbies: Stop Wholesaling Now!

Many newbies believe that the best way to crack the real estate industry is to start in wholesaling. This is your warning, newbies: stop wholesaling now. This is the biggest load of crap that the gurus ever told you.

If you have ever had the inkling to to start investing, the first thing you hear is:

“No Money No Problem”

“No Credit No Problem”

“Earn $5,000 in 30 days or less”

If this all sounds familiar raise your hand. Yup, believe me, my hand is raised also. We’ve all heard this car salesman pitch and we were believers; whether you wanted to start with wholesaling or not, you may have been skeptical but you thought: “Wow this is my shot.”

The Reason You Should Stop Wholesaling:

Have you heard the old saying it: “It takes money to make money”? Sure you have, and in wholesaling this mantra is still true. You have to have some capital to get started. In wholesaling, and any part of business, marketing is essential. If no one is aware that you exist how will you get leads? Leads are the name of the game. You will need to have some dollars for marketing. Even if your approach is driving for dollars; have anyone look at the increase in gas prices, you can’t do too much driving if you don’t have fuel. Another approach that is constantly preached is bandit signs. Well, the plastic companies that make the bandit signs have overhead and yup you guessed it; that overhead cost is added to the price the consumer will pay. You will need to have a computer, build a good website, and get business cards…. There are always start up cost for any business, and you want it to be a business. So free is a bunch of malarkey.

“No Credit No Problem.” So False.

No one will listen if you have no credibility in this industry. If you have read my last post about finding a realtor, one thing I touched on is visiting the REIA, and how you will have to build rapport before investors will freely give you information. This sounds like credibility to me. I know its not credit in the traditional sense of borrowing money, but the last time I looked up credit in the dictionary (not exactly a dictionary but the dictionary app) it clearly defines credit as:

Trustworthiness; credibility: a witness of credit, confidence in a purchaser’s ability and intention to pay, displayed by entrusting the buyer with goods or services without immediate payment.

Question: does that sound like “FREE” — Heck NO!

The most difficult thing to build and most important thing in business is branding — what is your brand known for? This lets the consumer know who you are, how much experience you have, and how you can help — you have to have some sort of credibility before anyone takes you seriously. Almost every time I speak to a seller and begin rapport building with them our second conversation begins something like this “well I looked you up on the web and …..” Uh ,hello, that is credibility even if there is no testimonial, they are checking your credentials to see if you have a web presence and if not the seller will not take you seriously.

Which Leads Me to my Next Point..

If you believe wholesaling is the launching pad for a successful investing career, think again. I know you have heard stories of how people got started and instantaneously they were making 6 figures in 6-9 months without needing any money. Believe that if you want to. I am definitely not here to be pessimistic by no means. If you follow me at all, you know that I am very optimistic and believe that nothing is impossible. However, if you know absolutely nothing (and I mean nothing) about Real Estate you will probably fall flat on your face and not be able to recover. I encourage you to start bird-dogging first; I know its not sexy, and sometime you can get frustrated by seeing half or a third of what you could be making go to another investor, but it’s ok! You are just starting out. Remember you are getting paid half in cash and the other half in credibility.

I am a strong advocate for being a bird dog because it gets you everything you need for a great start to a long, sustainable career in real estate.

How so?

You will learn a tremendous amount of information about the industry: market indicators, how to run comps, how to build rapport with investors, how to build rapport with sellers, you will build your team– Escrow Officers, Real Estate Agents, Buyers, and you’ll become knowledgeable about a basic real estate transaction. Bird-dogging puts you in front of the right people all of the time; it provides you with an opportunity and this is all you need – 1 SHOT.

op·por·tu·ni·ty: The option to unite yourself with a favorable outcome (tweet-able)!!

Wholesaling does provide for a higher risk tolerance, as stated prior; but wholesaling can crush your confidence as a newbie and you may not recover and give up. I am a strong advocate for bird-dogging when starting out because there is a less measure of risk and you will be able to build rapport and confidence with other investors in the area. This will provide you a solid foundation when you are ready to launch out into the deep and become independent. There is no problem in finding deals for others, this is a great way to gain the credibility you need when you are ready to do a ton of deals. Keep in mind half of something is much better than all of nothing.

If you are unsure of how to start bird-dogging, my next article will outline the details on how many others are starting this way, including myself.

Take my advice newbies, and stope wholesaling now.

“Enjoying the Journey”

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.