What to do first before starting wholesaling

Question

I am new to the real estate business opportunity and I really want to do it. I want to start out as a reverse wholesaler, can somebody help me on what should I need first to start and how it works? I would like if somebody can show me how to do assignment contract and many more. I live in Charlotte NC.

Thank you all in advance,

Jeff Stephens · Answer

Hi Amer, congrats on taking some first steps to get started.  For reverse wholesaling specifically, there are some books on the topic, such as Reverse Wholesaling by Kent Clothier, which you may want to check out (I have not read it myself).

In my opinion, the bigger and more valuable answer to your question is to step back and look at the bigger picture fundamentals first.  Regardless of your assignment contract documents and whether you're doing wholesaling or reverse wholesaling, it's important to focus on a few of the fundamentals first, because these are the bigger principles that apply regardless of which specific techniques you decide to use:

1) You need to know property values in your market inside and out. If you have a big market, you may want to segment it into smaller sections of town.  But whatever market or submarket you want to work in, you should really know values (prices, prices/ft2, etc.) amazingly well.

2)  You need to know what retail buyers are looking for in your market.  For instance, in my market, people love remodeled old homes from the 1920s and 1930s; there's very little new construction in my market.  While you personally may not be selling to these buyers, your wholesale buyer clients will...and you need to be able to project what their market will want to buy.

3) You need to know who the most active professional buyers are.  Who are the people doing the projects most consistently?

4)  Then, once you know that, you need to get to know these people and understand how they underwrite their deals.  It will be different for each person.  Are they targeting a gross profit/deal?  Are they looking at a percentage return?  How do they finance their deals? What are their favorite types of properties? How much work do they like to have to do (cosmetic projects, or structural renovations)?  There are a lot of questions you'll need to answer for yourself with each of these buyers.

Then, once you know these things, you're ready to begin talking to sellers and seeing if you can find something that would work for one of your buyers.  Without the knowledge above, you won't know if you have a "deal" or not.

My recommended approach--what I call the Thoughtful approach--is very relationship oriented.  While many people recommend building a huge buyers list and treating it like a database, I recommend having a smaller list and knowing those people really well.  That way you can really dial in your understanding of exactly what they are looking for and do repeat business with them, rather than starting over with different people each time.

Feel free to message me directly if you'd like to discuss further.

Joe Villeneuve · Answer

What is a reverse wholesaler?

Here's what you need to learn to be a wholesaler:

1 - Find out where the buyers are.

2 - Find out where the sellers are.

3 - Have enough cash available for all the earnest Money you will need

4 - Have access to a Proof of Funds

Here's what else you need to do to be a good wholesaler:

4 - Learn how to analyze properties.

5 - Learn how to negotiate

6 - Have a partner with the cash to do the earnest money

7 - have a partner (should be the same partner) that has a POF

Caleb Heimsoth · Answer

@Ned Carey. This is up there with the new term “Astro flipping” that I heard the other day

Ned Carey · Answer

That is just Guru bunk.  That is wholesaling. That is what lots of wholesalers have done for years. But gurus have to pretend they are giving you something new or special, so they make up new names for old strategies.

Will Barnard · Answer

Tomorrow I am starting my new career in reverse baseball professional. That is where they pay me my multi-million dollar contract first, then I go and play. Wish me luck.

Reverse wholesaling? What a joke - these gurus will come up with anything to sell you crap you can learn for free with a little hard work and serious dedication. Finding the buyer first and then shopping for the deals is precisely how I have encouraged and educated members here on BP for years, it is nothing new and if you really want to be a "wholesaler", this is exactly how to do it legally. Most people lock up contracts, use escape clauses and low EMD's, then market to some buyers list and if they get lucky, actually close on the deal via an assignment of contract, and get paid. That is illegal in almost every state (and I now believe all states).

When you have your buyer or buyers upfront, you know what they want and what they will pay and more importantly, you don't need to use assignments or publicly market the property, all of which are illegal (brokering without a license). You now have a "partner" and when you find what they are looking for, you lock it up in the name of your new entity (or trust) in which you name your partner buyer as part owner. Then you simply sell your interest in the company/trust at closing for your fee. Too many people doing it wrong and illegally, not to mention leaving sellers high and dry when they back out of the contract because they over paid and could not find a buyer.

Ned Carey · Answer

@Cyd Wedman welcome to BP I see it is your first post.  There are contracts and  many forms in the FilePlace under the tools tab above. However many are not particularly well written. The best place to go is a lawyer

Amer Joknhial · Answer

Thank you Joe.

Reverse Wholesaling is, you find cash buyers first and take their orders, then find deals for them.

Ned Carey · Answer

@Caleb Heimsoth yea I saw a post about Astor flipping recently and tried Google it.  I couldn't find any info without registering. I know it is bogus but I am curious what it is.

Ned Carey · Answer

@Amer Joknhial i don't know what reverse wholesaling is but I know it is just a new name for an old technique.  You need to know how to evaluate deals. That is about understanding the numbers. The next thing you need to know is your marketplace. What level of finishes do renters and home buyers expect. Knowing this helps you  estimate costs.

You learn your market by looking at and evaluating LOTS of deals.

Joe Villeneuve · Answer

Basically, you have to know, and do, everything the end buyer has to do...except actually clost on the property.

What to do first before starting wholesaling

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