I haven't slept in weeks...wholesaling?

Question

Hey, everyone.

I've been deep down the rabbit hole lately and have been up every night geeking out on all things real estate.

My original goal was to purchase a multi-family and later flip to fund more buy and holds, and BRRRR etc. I've come to the conclusion that I'm going to need a little more preparation before I'm ready, so I'm going to wholesale in the meantime.

Here's the rough plan, all feedback is appreciated!

-I've made a website for online presence

-Plan on building a buyers list (Searching cash buyers in Propstream/Reipro/Listsource type programs, and Bigger pockets). OTHER IDEAS?

-Will use automated RVM/text/email service. (Reireply or Reirail). Any experience with these?

-Working on some basic scripting to get me started, for both sellers and buyers, and will fine-tune as I go

-I plan to generate leads several ways, and it will take a lot of time and data to hone-in what works for me. Driving for dollars with deal machine, plan to research probates (clueless as of right now how these work), Run filtered call lists from programs like propstream/reipro, targeting many different situations such as pre-foreclosures, back tax etc. I still have a ton to research and trials here as I go!

-After my first wholesale deal I'll likely invest in targeted direct mailers, a little SEO/pay per click and website management, and the same developer I'm familiar with can build and manage a FB page, write webiste blogs etc.

-Eventually, use Carrot to host a separate website for my buyers where I can list properties under contract, just to streamline my deals for me and my buyers

Questions:

-Some of the Softwares that are available run comps and forecast ARV's, as well as skiptrace all in one. What works best for you?

-I'm searching for a wholesaling friendly attorney for guidance, and make sure I'm using proper contracts. Referrals appreciated! Currently, I have several P&S contracts from the web but not sure about my state-specific laws in Massachusetts.

-It sounds like If I contract a deal and for some reason, I fail to find a buyer, I can back out without consequence, aside from any earnest money?

-What pitfalls should I be aware of?

Thanks for reading guys. Looking forward to some feedback!

Don Konipol · Answer

@Rob Ferdinand

I’m hoping that you understand that “wholesaling” as the term is now used, is a sales job, or maybe a sales oriented business, but definitely not investing.

So, in my experience, here’s the problem.  Wholesaling is all about tying up the right property, at the right price.  It’s a VERY competitive market.  The first step is being able to identify the right property, and the right price.  Takes experience, knowledge, and talent.  So you may be in for a long haul before you make your first dollar.

Second, the really successful wholesalers spend A LOT of money on marketing.  Free web sites, free social media, free publicity doesn’t cut it anymore.  Not with thousands of wholesalers out there.  The successful ones, i.e., the ones that are able to earn a better than minimal hourly return, spend money on ppc, direct mail, building and maintaining an interactive web presence, cold calling, purchase lists, etc.  We’re talking $10,000. + per month.  Yeah, you’re competing with people more knowledgeable, more experienced, and much better capitalized than you are.

Third, being a successful wholesaler is way different than being a successful investor.  Yes, you will pick up some knowledge that you can use for investing when wholesaling, but in general it’s a very inefficient way to gain the minimal investing knowledge you’re likely to get.

Again, in my experience, it is much better as a beginner to get a job with a real estate investment company.  These are not easy to get, and even more difficult if you don’t want to leave your current job.  But, the vast majority of people wanting to “get into real estate investing” who have limited funds and limited knowledge and limited experience, NEVER make an investment of any significance in an investment property.  Because they never even do one wholesale deal, and if they do one or two they never accumulate the cash flow they anticipate from wholesaling, never acquire the knowledge of real estate investing they thought they would, and never accumulate the experience they hoped would be out there.

So, what’s a better way?  Well, it boils down to three choices

1.  Attend classes, either in person or on line specifically geared to the study of real estate.  I’m not speaking about the “guru” courses advertised on late night television, or promoted by pop up ads on real estate sites.  Or even the short courses offered by people on these educational aggregator sites.  Here’s where you find the courses I’m speaking of

A. Legitimate colleges and universities real estate departments or real estate institutes.  These can be credit courses, or ad hoc offerings such as those offered by the Shack Real Estate Institute at NYU, or the investment real estate certificate offered by Harvard Extension University.

B. Courses offered by legitimate real estate organizations, such as CCIM, BOMA, NAR, etc.

C. Courses related to obtaining a real estate license.

2.  Get a job with a REIT, Real Estate Investment Organization, Real Estate Mutual Fund, Real Estate Property Manager, Real Estate Advisor, or Real Estate Data Co.

3.  Get your real estate broker/salesman license and go to work for one of the major commercial brokers.

Any of these will probably allow you to earn more money than “wholesaling”, and will definitely prepare you much quicker, much better, and much more successfully to be a real estate investor.

Lee Ripma · Answer

@Rob Ferdinand

My advice is to do one of these things well and learn how to speak with sellers. It’s great to to use zillion ways to generate leads but you just need one that works, then two that work, etc. Why wholesale? Why not become a legit agent and get listings? There are not a ton of people who want to sell their house/apartment for pennies on the dollar. I do direct marketing and I buy deals for myself as flips or rentals, source deals for clients, and get listings. I so far have had one house that I can actually wholesale. I have it assigned but closing is taking a while due to federal tax liens in excess of the property value and I’m not even sure it will close. The amount of people who want to sell for a “quick cash close” vs a “top dollar sale where buyer has a lender and 45 day close” is 1 to 100 in my sampling so far. Just something to think about. I’m not convinced that wholesaling is actually that great.

Kirk R. · Answer

Sleep more important than money!

Doug Ford · Answer

Rob, I did the same thing. I started this journey three years ago, joined Bigger Pockets and stayed up late every night. It turned out to be a combination of learning a lot, frustration and analysis paralysis. I don't regret all the time I spent on real estate because I used everything I learned to make, what I think, was a good first investment property purchase decision. It's a process like anything else so keep plugging away at it, learn and follow the path of a successful investor. (Read David Greene's BRRRR book) The resources provided here at BP are amazing but not always intuitive so explore every aspect of the website and learn how to use it. Keep plugging potential property deals into the ALL the calculators and really learn how to use and understand ALL the results and terminology. Make contacts here on BP and ask questions. Learn the basics like 1% rule and test potential deals using those guidelines. To become good at this you have to work long and hard like you already are but... don't get over anxious and do a deal just to be doing a deal. There risks even when the numbers work in your favor so set and stick to the tests and calculations you set and a good investment opportunity will show itself.

Last and most important, enjoy what you're doing! Blessings, Doug

Rob Ferdinand · Answer

Thanks for the reply. I understand low conversion rates for wholesaling. If I can get 1 deal from 100 leads than I'll know how many leads I need to find, say 8 deals a month. It's a numbers game like any other sales business. X number of leads will result in X number of sales, averaging $X  per sale etc.

I have no desire to work as an agent.My ultimate goal is to invest is rental properties for cashflow and long term gains, while rehab/flipping. I see huge value in running a humble wholesaling shop as the foundation of the operation. If I can develop the business and build a very small team to get it on auto pilot, I'll have an internal lead machine bringing me deals to flip or rent.

Some may same I'm over ambitious for someone who hasn't done my first deal, and I get it. I just take that as maybe I'm on the right track.

Bola A. · Answer

@Don Konipol Wow! This is extensive and good information. Thank you.

Gia K Towns · Answer

@ Rob Ferdinand

Rob, I would like to know how things worked out for you with wholesaling & which systems you chose.

Rob Ferdinand · Answer

Thanks for the reply. Maybe the sellers aren't out there in numbers, I guess I'll find out! If nothing else it will be a great learning experience and I'll pick up skills along the way that I can apply to another aspect of REI.

Thanks

Lee Ripma · Answer

@Rob Ferdinand

Good for you man. I agree that finding deals is better than selling pretty houses to retail buyers. Just make sure you do one thing well first, then another, then another. The myth of the motivated seller, not that many of them. You’ll see.

Rob Ferdinand · Answer

Thanks for the reply, Doug. Appreciate the motivational words. I've spent the past 3 years building a start up as a small equity partner, but basically an employee. I know this will take tons of work but I'd rather do it for myself than someone else! Thanks again.

I haven't slept in weeks...wholesaling?

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