Wholesaling - Ins & out's of just starting out?

Question

Hello fellow BP members,

I was curious about the in's and out's of Wholesaling Real Estate. I'm working really hard on saving money and studying for my real estate agent license, but I've read that wholesaling can be a good way to get started because you can get a profit without taking care of the property itself? (Or is this a myth?). I would love to get into wholesaling because I feel like it would be a good starting point for me getting into the REI world. Even if there are any remote wholesaling jobs, I would be up for that.

So my question is:
Does anyone have any advice on how to start wholesaling when you don't have enough capital to invest in your first fix and flip?

Ed Brancheau · Answer

Yes. Wholesaling is a great way to get started and, while you don't need it to get started, earning your real estate license can be really helpful because it can give you authority. I'm working on getting mine as well for this reason.Now, a lot of real estate agents will tell you the wholesaling is illegal when it most certainly not. Even the head lawyer for the National Association of Realtors explains otherwise: https://www.nar.realtor/window...I mention this because you'll get Debbie Downers that you'll need to ignore.Regarding you're main question, all real estate agents are like wholesalers. It's just that they don't put a property under contract.But, most real estate agents don't realize that they can make more money by solely working with real estate investors. Instead, they all want to work with sellers who they think are "easier" to work with than buyers.Think about it this way:Investors are usually not picky. They just look at the numbers.So, as buyers they're not going to have you showing them like 5 houses and asking a bunch of questions. You just have to ask them what they want, find it for them, and then negotiate the deal for them.Sounds like a wholesaler, right?You get paid TWO+* commissions instead of one!The average home in Hudson Valley is like $250K, right?So, you negotiate the sale of the house at 70% of ARV which is $175K.Investors will want you to find them even more deals so they'll, as the buyer, pay you a 6% commission whereas, usually, agents' commissions are paid by the seller. This helps the seller.And since you're representing both the seller and buyer, you get to keep the whole commission which is like getting two commissions!That's like $10.5K (part will go to your broker where you're "hanging your shingle".)Once your investor has fixed the property, guess what, they're going to need an agent to sell the property which is now worth $250K.Who are they going to list it with if they want you to keep getting deals? You, of course!So, that lands you a commission of $15K split two ways (you and the buyer's agent.)So, whereas most agents want the one "Seller Listing" which they'll spend a bunch of time to find and make ONE sale AND have to split with the buyer's agent, you can make $17.5K to their $7.5K!Plus, you'll have an immediate, repeat buyer/seller for every deal you find.Now, you've got about $15K to either invest yourself OR, even better, partner up with your investor and have them show you the ropes while you get an even larger payoff.Because if you take your $15K and go in on another property with an ARV of $250K, at 70% you'll own a 8.5% stake.When you sell the property, your cut will be over $21K (your $15K plus 8.5% of the profit.) You've increase your "commission" by $6K (40%!)You see where this is going?$21K + 40% = $30K (you almost have the 20% ($35K) you'd need to get a hard money lender to work with you individually)$30K + 40% = $41K (you now have enough to do your own deal!)But now you'll find a property, buy it, fix it, and make about $50K in profit.Meanwhile, you're competition is still fighting over for measly $7K commissions.Here's the kicker... you don't have to wait until you get your real estate license... you can wholesale.Now, there is one thing you'll have to watch out for... the urge to work with non-investors just like every other agent out there.Don't!Your niche is investors. And there are only a few of them worth their salt. I'm in San Diego and I've only run into TWO agents that focus on investors. TWO!I bet you'd be the only one in Hudson Valley.

Rachael Alwardt · Answer

I really appreciate this! I'm learning so much from these forums! Thank you so much! Wholesaling seems like the right way to go!

Rachael Alwardt · Answer

@Ed Brancheau I honestly cannot tell you how much I appreciate all of this information. Thank you so much!

David Frandsen · Answer

@Rachael Alwardt I think learning to find the deals is a powerful tool. That is why I myself am getting into wholesaling. You have so many options if you can find the deal. Wholesale it. Flip it. BRRRR it. Heck, you could list it for the seller as an agent.