Wholesaling a good place to start?

Question

I have just recently joined the BP community looking for education, information, and networking to help me get going in the RE investing arena.  I currently am working in the transportation/ logistics industry and have no formal experience with real estate.  I have been doing a lot of research on wholesaling/ reverse wholesaling and it seems that a lot of people would advocate starting there, but then again there are also a lot of people who say to NOT start out wholesaling.

I am currently just trying to educate myself as much as possible and see what may be the best fit for me starting out.  I am in the Indianapolis area and would love to wholesale (or at least I believe I would like to), but am just not sure if that would be the right place to start out or not.

Any and all advice or tips to getting started would be greatly appreciated!

*Also, I am looking to get started out part-time since I still have my 9-5 and plan on keeping it for the time being (until I don't need it anymore)

Thanks in advance.

-Michael

Lenzy Ruffin · Answer

@Michael Morgan

Definitely get out in the field and network with people and you can also find out everything you need to know about wholesaling here on BP. As far as property evaluation goes, you'll need to learn the 70% rule (65% in some markets). There's plenty of info on it on BP. I gave a short explanation on another forum thread the other day.

https://www.biggerpockets.com/forums/311/topics/25...

There are other rules/guidelines for evaluating a property depending on what your exit strategy is. The 70% rule is a good for wholesaling or rehabbing. For rental evaluation, check out these posts:

https://www.biggerpockets.com/renewsblog/2013/01/1...

https://www.biggerpockets.com/renewsblog/2010/06/3...

In the beginning, the hardest part of doing the evaluation will be determining what the repair costs are for the various components of a rehab in your market. BP has a book on how to estimate rehab costs, you just have to find out how much each line item costs in your market (how much does it cost to install a toilet in your area, for example).

As far as building capital, check out the BP book on Investing With Low and No Money Down. Again, you have to determine what kind of investing you want to do first, then you can find ways to fund it. Wholesaling is a great way to generate cash once you build a successful wholesaling system, but you have to put out quite a bit of marketing money up front before it starts to result in a deal flow that generates that cash.

There's unlimited info here on BP. Everything you could ever want to know is in here. I know the website can be overwhelming, but it becomes less so the more time you spend on it. I'd suggest starting with the Ultimate Beginner's Guide to figure out what kind of investor you want to be. Then, go through the podcast archive and listen to shows where the guest is someone who is doing what you want to do. From that, you'll end up with all kinds of specific questions that will lead you to search the site for specific things and subscribe to specific forums and set up specific keyword alerts and then the infinite collective wisdom of BP becomes more manageable.

Lenzy Ruffin · Answer

Wholesaling is hard, @Michael Morgan. I wouldn't recommend you start with it. I do recommend you learn how to evaluate property value like a professional wholesaler (a professional...not one of the ones who give wholesalers a bad name by trying to sell overpriced properties), and use that knowledge to pursue other investing avenues like rehab or buy/hold. If you know how to determine the value of a property based on the cost of the repairs needed to bring it to retail condition, then you can let wholesalers do the work to bring you deals and you'll know if it's a true deal or not. Or you could work with an agent to make offers on MLS properties.

Once you learn how to evaluate properties for resale or rental, you can pursue whatever your end goal is. You have to do as @Adrien Chabot suggested and start by defining what that end goal is. Read the BP Ultimate Beginner's Guide to see what your options are. Wholesaling is not a way to get into real estate with no money and it is definitely not passive income. You don't have to start out wholesaling and move on to something else. You can just start with whatever it is you want to end up doing.

That said, if you think you would enjoy the difficult, daily grind of wholesaling (and you can fund it) and the benefits of being the person who turns over stones and finds the best deals are appealing to you, then by all means start with wholesaling. Just know that wholesaling is hard. The only people who tell you it isn't have a system or program to sell you.

Adrien C. · Answer

Michael- welcome to BP. I suggest starting with your end goal in mind and working backwards. As far as real estate- where do you want to be in 5-10yrs. Start there and make a plan of action to accomplish that. If wholesaling will help you reach that goal- educate yourself about it and do it. If it won't help you reach your long term goal- don't waste your time doing it just because some say "it's an entry point to REI." To be successful at it, you need to know the markets, the rehab, the desires of sellers and buyers, and lots more. It's not as easy as they say. You aren't going to knock on a seller's door, have them beg you to buy their house at 50% value, and flip it to an investor 3hrs later making $25K assignment fees. It's a lot of follow-up, lots of sellers who won't go as low as you need it, buyers who fall through or don't like what you are showing them, etc. It's rewarding but it's work.

Michael Morgan · Answer

Account Closed

Hey sorry I am just now seeing your post in here.  I have to admit, and you are right, the free literature touting wholesaling is all over the place and usually with attention grabbing titles to article/webinars/podcasts etc.  After doing further research I am leaning more towards rentals, house hacking in particular.  I think wholesaling would be awesome, but think it is something that may suit me more later on down the road after spending time with rentals and education.

Account Closed · Answer

You are right.  A lot of people are "getting into wholesaling".  A lot of "gurus" say that's the place to start.  It's what the free ebooks promote.  The problem is whoever writes those books has done very little wholesaling themselves, if any. They just talk about it because it is a hot topic and generates enough interest in whatever they are offering in hopes you'll buy it.

If I sound a little negative, it's because I am sick-and-tired of people out there "teaching" wholesaling in "free" materials that have no more business "teaching" it than they do neurosurgery.

Wholesaling is not a hobby.  It's a J O B.  You already have a day job. Do you have time to do two full time jobs, and spend time with your family?

I started out acquiring rentals so I had money coming in while I slept.  I then transitioned into wholesaling, mainly because once I got going, I got more deals than I could handle and had associates asking me to share some of mine with them, and I've had a robust wholesaling business for over 10 years now.

The market for rentals is the strongest it's been since the 1960's, and based on trends, should continue to be strong for the next 10 to 15 years.

If you don't think you can get the capital to do that, consider acting as a bird dog for the dominant wholesaler in your market.  You will learn and earn while you do it.

So based on what I just wrote, where do you think you should start?

Matthew Forbes · Answer

Michael,

I am a new Wholesaler so don't take anything I say with any credibility what so ever.  Yes Wholesaling is hard, no it's not like they say on TV, and yes if you are smart and realistic its a great place to start.  To do it well it demands that you can:

1) Market to motivated sellers and find them.

2) Be able to talk to them, identify their problem and solve it in an equatable way.

3) Truly understand rehab costs and what it would take to pull it off, both from a hard perspective but also a soft perspective (taking in to account financing costs).

4) Understand the market so you can get it sold.

There is lots of stuff I am leaving out, but in my opinion start with the hard stuff!  If you can make it work doing this, you can make it work doing anything else.  It's exactly the reason I chose to start in wholesaling in the first place -It's Hard.

or maybe I'm crazy.

Michael Morgan · Answer

@Lenzy Ruffin

Hey man, you are right, I have some pretty good contacts.  Only thing is I never even really thought about tapping into them until I wrote my previous post.  We're mainly drinking buddies and our kids play sports together, but I think I'd be foolish not to have this conversation with a few of them and just see where it goes.  Thank you so much for all your guidance regarding getting started!  I really appreciate it!

Lenzy Ruffin · Answer

@Michael Morgan

Dude, is that a trick question? You've got a goldmine, man! Not only can they give you the scoop on rehab costs, they can connect you with a variety of other people who you will need on your team to be a successful real estate investor. Those guys will know agents who can help you buy and sell properties. Those agents will know title companies that you can use to do your title work. Those title companies can be a goldmine of information once you start sending work their way. From what I've read on BP, title companies can generate all kinds of data that will be useful to your business once you've established a relationship with them. Just by virtue of what they do, those guys might come across homeowners from time to time who have a house they want to just be done with. You might get a deal flow of some sort just from that.

Read The Millionaire Real Estate Investor by Gary Keller. That might also help you determine what kind of investor you want to be and it will explain the need to build a team to be successful. You are so far ahead of the game if you have people who you can trust in the building trades. It's easy to find out how much a house will be worth after it's fixed up. If you have people who can tell you how much it will cost to fix it up, then you have all the info you need to be a wholesaler or a rehabber.

Your friends might also be able to connect you with experienced investors in your market that they've done work for. You might make two phone calls and find yourself with a local mentor, man. Give it a shot. Figure out what you want to do and then tell all your buddies. It sounds like you have a lot of tools laid out on the table in front of you and don't realize it. Pick those bad boys up and put them to work.

Michael Morgan · Answer

@Lenzy Ruffin

Thank you so much for all of wonderful info!  I'll definitely start listening to the podcasts and try to narrow down which niche I feel will be the best fit for me starting out.  You are right BP is pretty overwhelming when you first get signed up, but there is SO much good info on here it's incredible.

I have several friends who are contractors (general, plumber, carpenter...) and one who actually owns a home building/ remodeling company here in the city, would these be good resources for learning about rehab costs, labor, material costs, etc?

Michael Morgan · Answer

Hey guys, thanks for the quick responses.  I think I need to reevaluate what it is I am trying to do, like you said start with the end goal and work backwards.  I guess I haven't really gotten that deep into it yet.

@Lenzy Ruffin - you made mention of learning how to evaluate property like a professional wholesaler.  Is there any educational material you would suggest or would I be better off maybe trying to hookup with some local wholesalers or flippers and just see if I could shadow them?  I'm not sure, I am very new to all of this and would like to educate myself as much as possible before putting my name on any contracts.

Also... building capital.  This is why I looked at wholesaling in the first place.  I was in no way thinking I was going to go out and make 25k in 3hrs... but that would be nice.  Any suggestions for building capital?  Like I said earlier I'm not sure what the end game is at this point, but I know I would eventually like to have rentals and do some flipping.  Thanks

Wholesaling a good place to start?

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