Wholesale Investing

[Curt Davis]

I have been seeing many posts come up all over the place from people who think that to get into real estate they will just go ahead and start out in wholesale investing. Now thats all good BUT, everyone makes it out to be the easiest thing with no risk at all. I am a experienced investor and I have sold many homes and to many others doing what we do may seem easy. There are so many things that you need to know before you take on this type of career. I could write a book on this topic but for those of you who always ask " how do I do this ", well, I am going to give you a few suggestions. You dont have to do what I say or even agree.

1. You should have good credit
2. You should have some liquid cash
3. Never back out of a deal b/c you could not sell it.
4. Always plan on closing every deal, you will burn relationships if you do.

This mostly pertains to buying foreclosures from the bank.

[Ryan Webber]

Banks won't allow assignable contracts in any markets, so as Curt shared you will need to double close.

In reference to Curt's first post about wholesaling, I would be one of the people who disagrees.

1. You do NOT need good credit.

Your credit matters very little if you are doing straight wholesaling. Getting a loan isn't necessary, and normally a pre-approval letter from a hard money lender will suffice. Now with REO's some banks are requiring you to apply for a loan with their mortgage company to even make an offer on the property, but that's not very common. Your strongest wholesale deals will not come as REO's, though. You can make much better margins dealing with motivated sellers directly, and they don't care about your credit.

2. You do NOT need much cash.

The only money you need is whatever your marketing plan is, and if you don't have much cash then your plan needs to mostly be time intensive marketing rather than cash intensive. Now if you are making offers on listed properties, whether they are REO's or homeowners with agents, then, yes, you will need earnest money, but, again, the best wholesale deals you are going to find are buying directly from sellers, and motivated sellers don't care about earnest money.

3. As a beginning wholesaler, my advice is to never actually BUY a property.

If wholesaling is your game and your first starting out, I would recommend backing out of the contract using a contingency rather than going through and buying the property. I say this because there's a 90% chance that you think its a good deal but its not really a good deal. It takes experience to learn what a good deal really is, and my experience is that new investors think something is a really good deal when most of the time it isn't. Now I would also advise a new wholesaler to begin to build the capability to close on properties themselves, so that as they begin to gain some experience in learning what is and isn't a deal that they will have the capability to actually buy the property if they need to. Until you have that experience, YOU are your own worst enemy, and not buying property in the beginning will most likely save you a lot of money.

4. Burning a bridge with ANYONE is not a good idea in business, but the long term effects of backing out on a contract with a motivated seller will probably not amount to much against your reputation.

The thing is that motivated sellers are not return customers. Not that I would recommend doing it generally, I WOULD recommend backing out over buying a house when you are first starting out. Now if we are talking about dealing with a bank with an REO, then absolutely, burning the bridge can have long term effects on your business.

The thing about wholesaling is that WHEN STRUCTURED PROPERLY, you can have little or no risk exposure and still be able to make a fair amount of money from it. It IS the easiest way to get started if you don't have much cash or if you have bad credit.

In my opinion as an experienced wholesaler who has also sold many homes, wholesaling is a good way for the new investor to break into the business.

Is it easy? Is anything in life that is truly worthwhile easy? You know to be honest its really not that hard. Just like anything else there is a learning curve and until you've reached the apex of the curve its a lot of work, but once you round the top it gets a whole lot easier. Doing what you need to do becomes like second nature. Its just about figuring out what you need to do and doing it. Is that hard? Is that easy? I guess it depends on what you make it.