wholesaling

[Lesley Govan]

Hi,

I'm a newbie and wondering if I find a good wholesale deal and I don't have any buyers lined up to buy my deal, where do I find them? 

Thanks

Lesley

[Johnny Kang]

Here's my 2 cents on this topic. 

I started getting in to real estate investing a little over a year ago (around March 2014). I only heard about "wholesaling" around June 2014. I knew it was working for others, but was apprehensive about taking action myself, due to something called "FEAR."

And I had lots of it. (i.e. what if I spend money on yellow letters, which aren't exactly cheap and don't find any motivated sellers. or even if I do find motivated sellers, how would I know how much to offer so I can make a profit? And even if I did offer the right amount, how do I go about finding buyers?) The more I thought about it, the more questions it raised and my insecurities got stronger and stronger. Sound familiar? :) This is something everyone with an entrepreneurial spirit MUST and WILL go through, whatever business venture they're starting.   

I picked out 3 podcasts to listen to about wholesaling and decided to just jump in (you can go to iTunes and do a search; Of course BP has one. Sean Terry's "Flip to Freedom" is good. and "The No Limits Real Estate Podcast".), and I listen to almost all the episodes, in the car, on the train, walking, eating - until I felt like I got the general picture.

I got some data leads from List Source on Absentee Owners who had equity and ordered about 1800 letters from Yellowletter.com, which cost me about $2300. I started getting calls 2 days after sending out the letters.  

I received about 50~60 calls. Went to see a few properties, but met 1 really motivated seller who wanted to take the proceeds from the sale and buy a better house. At this point, I still didn't really know how to run comps, or even know which websites I can go to get accurate information (I started out using Zillow.com whichI still use, but now in conjunction with Propertyshark.com, where they have detailed info on properties in NYC).

Luckily for me 2 of my partners are people that have been in the real estate industry for over 20 years each. And this is the main point I want to make. 

I met my first partner, Ellen when I was still in finance, looking for office space for myself and found out she was a real estate investor, just renting out desk space in her office. I kept in touch with her because real estate was something I was interested in, but I knew to really learn how to invest, you had to start working with someone "in the game" side-by-side on a daily basis to learn anything of value, and to learn quickly. And the quickest way I know on learning something new is by doing it. (my other partner is a licensed commercial appraiser of 20 years, someone Ellen's known for about 15 years and has done deals with in the past) 

Long story short, because I had kept in touch with her, one day when her previous partner in a different business (securitization/mortgage auditing) lied to her about something, she asked if I'd be willing to work with her. I didn't ask "what will be my cut?; how much am I going to make?, etc. I just said "yes!"

That was 3 years ago (when she was still in the auditing business), but because it was related to mortgages, foreclosures, short sales, I learned a TON, by DOING, day in and day out for 2 years. Did I make much money? No. We made about $140,000 in those 2 years, but everything pretty much went out in expenses. (mortgage auditing was something new to her as well, in case you were wondering why, if she had so much experience we didn't make much). :)

October of 2014 was when we decided to let our auditing business taper off and put our focus on real estate.  1 month after sending out those initial 1800 letters, we had a deal under contract, my partner already had a buyer, since she was in the industry and I saw her put the whole deal together from A-Z (what clauses the contract should have, who writes up the contract, which title company to use, coordinating the tenants' move with an actual moving company she knows, what was going to take place at the closing table, etc.). We made $16,500 on that deal wholesaling. 

Since then we've had more deals we closed on, making us $23,200; $23,700, and $122,000. That's right, $122,000!!! and we have 3~4 deals in the pipe line which we should be going to contract next month, family vacation, graduation parties etc.  

My main point is, you'll get the most out of your efforts by working with people who've already been investing for some time (doesn't have to be 20 years), and know their stuff where you can work in their environment that'll help you learn-by-doing, with not only specific information, but more importantly, those little nuances that you can't learn from a book, or just by meeting someone at a networking meeting (and I go to those as well). 

The other important area I want to address is; even if you're starting out as a wholesaler, don't have the mentality that you're a "wholesaler". I never once looked at myself as a wholesaler. I've always looked at myself as an investor, of which wholesaling is just one of the strategies I'm using. I've only been at this for a little over a year, but I'm already looking at $5,000,000~$20,000,000 multi-unit apartment complexes. I never looked at myself as a "wholesaler", first because my partners aren't. Second, if the way you think about yourself is as an investor, you're going to think like they do. Analyze deals the way they do. Run the numbers the way they do. 

The last thing a professional investor wants to hear from a wholesaler is "Great Deal! Because the Asking Price is 'X' and the ARV is 'Y.'" If that's pretty much the only thing you're going by and you're not running #s (i.e. rehab cost) like an investor would, you are flying blind. You have to look up every property that comes up as a comparable property to your subject property and really dissected why one property sold for less or why another similar property sold for much more? Have you been involved in an actual rehab, where you were buying materials to know exactly how much things should cost and how much time it should take? I guarantee you these investors have. (you can volunteer to go work for a contractor for FREE. Why not? I did. or at the very least apply for a job with a contractor) The only way to know if something's a "Great Deal" is by immersing yourself with things you know investors learned and to run numbers like they do.

Hope this helped some people. Happy investing. :)

Johnny