How did you develop your wholesaling business?

Question

I'm heavily considering a career change to a wholesaler and I wanted to ask you experienced wholesalers, how do you prioritize when starting out?

Do you only look to build a buyer's list at first, or do you simultaneously search for properties as buyers tell you what they're looking for?

Where is your focus in the early stages. How important is it to set-up an LLC, get the proper forms from an accomplished RE lawyer, and figure out a system for determining fees?

Mike Snyder on BP has offered me just a wealth of knowledge (THANKS MIKE!), but I thought I would ask the general BP population as well. In short, I'd love to hear how you developed your business from the ground up and what mistakes or great systems you have implemented.

Ryan Webber · Answer

Will's sharing some very simple but extremely valuable nuggets.

1. LARGE database of REAL buyers with their CRITERIA

Don't find one or two.  Find 50 or 100 or 500.  Its a numbers game.  Usually 10% of your potential buyers list will be serious buyers.

Make sure they are serious buyers.  If they haven't bought many properties yet, then they probably aren't the buyers you are looking for.

Know their criteria.  Don't call a low end rental guy with a high end rehab to retail.  Know your buyers and give them the respect not to waste their time.

2. PROPERLY analyze investments

What is the REALISTIC ARV?  What is the REALISTIC rehab?  How much profit is REALISTICALLY on the table?  What is a REALISTIC cash flow on the rental?  Does it need TOO much work to be appetizing to an investor even if it fits into your 70% of ARV formula?

3.  SUCCESSFULLY market to desperate (I like the term motivated better but desperate is accurate) sellers to achieve GREAT purchase prices.

You are not going to wholesale something unless you are selling it at a GREAT price.  If you can't successfully find motivated or desperate sellers to sell you the house at an even GREATER price then the GREAT price you are selling it at, then you will fail as a wholesaler.  Your whole goal is to buy houses at such cheap prices that most people will think you were lying when you tell them what you bought it for.

You will have to be able to develop a solid marketing plan to find those sellers that are motivated enough and have enough equity to take your stupidly low offers.  They're out there.  The question is how are you going to find them?

You need to become the best deal finder and have the best network in town.  That's what it takes.  Finding deals and building your network.

Ryan Webber · Answer

A POF is a little much, but I absolutely do ask very pointed questions about an investors financing.

I usually start off with some questions like how many deals have they done and how many are they working on right now.  If you have someone who's done one or two then I understand that their financing might be an issue.  If you have someone who owns 20 rentals or does 10 rehabs a year then they probably already have their financing lined up.

I always ask, "Do you have your financing lined up already?"  And then I usually ask who they're working with on their financing.  If they tell me a mortgage broker I know I don't have a serious buyer.  If they tell me a bank then I clarify if they are working through the commercial department or not.  If they aren't working with a commercial loan officer, they aren't a serious buyer.  I always keep it very conversational.  You never want an investor to feel like you are interrogating them, but figuring out how solid their financing is makes the difference between a serious buyer and a tire kicker.

Another great question is, "How fast can you close?"  This will give you insight into their financing and their true experience level.

The thing is that most "investors" are a waste of your time.  As a wholesaler you need to find the heavy hitters.  You are looking for very serious investors that can close as soon as you have title work done.

Be cautious of the "I'm paying cash" answer.  Many investors that utilize hard money say they are paying cash, and so do many wholesalers who are just flipping it someone else.  There are "cash" buyers out there but just be sure to protect yourself by requiring earnest money from any buyers.

James Ward · Answer

Here are a few things I did when I first started.

1)  I went to the Local office where section 8 properties are offered.  I went in and took pictures with my phone of all the OWNERS of the properties.  Then I called everyone and asked if they were still buying.
2) Called almost everyone on my local Builders association.  And asked if they ever bought properties to fix.  Or if they were looking to buy.
3) This one is not as easy if you are not actively marketing for properties.  But I asked some of my leads from my marketing would they mind giving me every mail piece they received about their property. (I offered to give them a $50 gift card to a local resturant when I closed any business from an item they gave me.)

I really hope this helps.  I remember what it was like in the beginning.

My last piece of advice.  And in my opinion this is the best advice you will get from anyone.  DON'T GIVE UP.  It will not be easy, but the rewards are endless.

Will Barnard · Answer

There are 3 main systems/priorities you need to be a successful wholesaler and they are 
1. Having the ability to build a large database of real buyers with their listed criterias
2. Having the ability to properly analize investments, including the market analysis and the financial analysis.
3. Having the ability to successfully market for desperate sellers to achieve great purchase prices.

Will Barnard · Answer

One of the easiest ways to build a quality buyers list is to get closed MLS deals that went all cash. In most cases, they are investors and proof they closed on at least one. Then you can do a title search on their entity or personal name and see if they own any additional properties. That is one way.

If finding buyers via networking events like RE investment clubs, having the ability to sniff out a BS artist is helpful and that really comes with your own knowledge of the game and experience.

I am sure Ryan can chime in with other ideas on how to verify they are real.

Will Barnard · Answer

PS. In case you don't know, Ryan is a top wholesaler and he can be better equipped to get into more fine line details of wholesaling for you.

Will Barnard · Answer

When starting out, one of the things I would have done differently would be to concentrate more on one or two things, rather than a whole bucket of strategies. I wanted to do everything and ended up completeing very little at first. The more I focus on just 1-3 items, the more money I make.
Hope that helps - good luck to you.

Chad Pierce · Answer

Don't forget to set up systems to help you maintain sanity when working the buy and sell side of the business.

As far as marketing, I am a HUGE believer in bandit signs. Not the sexiest part of wholesaling but it definitely gets the phones ringing. Use a company like aweber.com or constantcontact.com to manage your email list. This service is worth it's weight in gold! Good luck and look forward to hearing about your successes.

Sage Jankowitz · Answer

Will and Ryan: Thanks for the help! I'm implementing much of your advice immediately. Will let you guys know how it goes...

How did you develop your wholesaling business?

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