Making Wholesaling Work In This Market
In the good old days ( 3 years ago) of Wholesaling Real Estate you could market, find a motivated seller, negotiate a good price of 65% of value, then sell that contract for 75% of value and make a quick and easy $10-20k in your pocket. Now, many people are asking, does that work in today’s market?
The answer to that question, along with most real estate questions is “it depends.”
In most markets you’re going to have to be buying better. In my area, Phoenix, in order to make money on wholesale deals investors are having to buy at 45% of the value of the home and selling to rehabbers for 50-55%. In the Charlotte market it’s about the same. In another market that I invest in, you can buy at 50% and sell at 55-60%. So, as with all real estate transactions the rule is: “Know your market and your values.”
Do you have a buyer’s list to wholesale to? Have you cultivated that list? If the wholesale buyers list you’re working with is more than 6 months old – it’s time for a new one. Many people who were buying a year ago are completely out of the business and many of the people who are buying today have changed the terms under which they will buy (see above). Start calling the investors on your list and find out who is still in the game. Use the Internet tools available to you (Twitter, Facebook, Google) and find the new people. Call them up and find out what they’re looking for and at what price are they in at?
Keep in mind that a lot of investors that are out of the game were the ones who were in when it was easy to make money wholesaling. Now, there is a whole new swarm of people getting in in order to take advantage of the down prices and huge discounts. These are the ones who are going to profit and profit BIG over the coming years. If you have to help them and educate them on the business a little along the way, it will probably pay off for you in the long run.
Getting the BIG discounts. Not a day goes by that someone doesn’t say to me, “why on earth would someone sell you their house for 50 cents on the dollar?” The reality is that everyone has different motivations and different circumstances, but it happens every day. We’ve even had people pay us money to take a house off their hands, but that’s for a different article. When you’re talking with sellers who are motivated and are in a difficult situation you have to be understanding and empathetic, but also show them the proof. Show them why you’re offering what you’re offering. What other properties have been selling for in their area. Explain what your intentions are with the house – what work you’re going to do, if any. Show them the area information on dropping values so they can see that every day they don’t make a decision it’s costing them more money. Help solve their real estate problem and there is nothing wrong with making a profit off of that. It’s called a free enterprise system!
About the Author:
Cortney Jones is a veteran real estate investor, performance coach and licensed broker that has been creatively buying and selling real estate since 1992. Cortney is the co-author of The Ultimate Private Money Solution, a comprehensive program which lays out the step-by-step instructions for acquiring all the private money you will ever need to fund your real estate deals.
Cortney and her partner, Mike Moulton, keep real estate investors informed, up to date and educated at, http://www.TheSharpInvestor.com, a blog that educates investors on cutting edge investing techniques that are working in today's market. Mike and Cortney are both actively investing today so they keep their pulse on the market and bring you tips, tricks and techniques to help your investing "stay sharp."
Areas of expertise include: subject-to, wholesaling, wholetailing, rehabs, short sales, foreclosures, pre-foreclosures, lease options, rent to own, systems and processes, marketing and private money.
Download a FREE 48 minute call on finding all the private money you'll ever need for all your real estate deals at: http://www.ultimateprivatemoneysolution.com
Comments (5)
Hey Brian, Thanks for the positive comments. Glad to hear you're "getting serious" and taking action on moving your wholesaling biz forward. Good luck to you! Cortney
Cortney Jones, almost 15 years ago
Good article. I've been looking into wholesaling and am now getting serious about it. This was an informative article. Thanks.
Brian Levredge, almost 15 years ago
Great advice Cortney! Knowing your local values will make or break you.
James Ward, almost 15 years ago
Good point David. There are many markets, or pockets within markets, that are doing just fine. The key to always remember is that you want to buy where people want to live. Look for the areas where people are buying homes - that's what will help you sell quickly. (Good schools are a huge factor in this!)
Cortney Jones, almost 15 years ago
An interesting observation I made when studying the neighborhoods in my city...despite all the doom and gloom about falling values some neighborhoods actually are appreciatring in value even during these difficult economic times. I would say find out which neighborhoods in your city are appreciating in value and make that neighborhood your farm area for investment properties.
David MacGown, almost 15 years ago