Guide To Wholesaling Real Estate 101

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Are you looking to start wholesaling real estate?

We will help you go from ZERO to a success by implementing what’s in this guide.Guide To Wholesaling Real Estate 101

What is Wholesaling?

Wholesaling is connecting a homeowner that NEEDS to sell their home at a discounted price to the right buyer. First, you will negotiate a price that is low enough but still gives the seller what they need. Then, you sell those TERMS to a buyer that is looking for that type of property. You are assigning your contract to the buyer. You get paid by selling the contract to that house.

We will cover seller needs, terms, contracts, and sales; everything to execute a deal correctly and profitably. Wholesaling is a great way to start learning real estate while making money.

Why do most people fail?

Wholesaling is a very low barrier to entry in the real estate investment space.

Many “GURUS” and “Facebook Investors” sell the concept of wholesaling as "you can do this with very little to no money and make $20,000 per month!". This makes it very attractive for A LOT of people.

But, is this true?

Allow us to answer this question with another question. If it were true don’t you think EVERYONE that started in real estate investing would be making $20K/mo?

The short answer to this being true is… HELL NO!

When people are telling you this BS always ask yourself what their interest is in you getting into real estate.

It’s usually one of the following:

  1. They’re trying to sell you coaching and/or training
  2. Get you to work for them for FREE (We’ll cover this later)
  3. They were sold on it. Although they have seen it’s not true if they can convince you it’s true then they feel it wasn’t a huge mistake.

So then, what is the purpose of wholesaling if it’s not to get rich quick with no money and little work?

Understanding the purpose of wholesaling

So, the biggest question is WHY wholesaling. Now, we're sure if you’re reading this, it’s because you probably have an idea of what it is and why you think you want to do it. But, allow us to really show you the TRUE purpose of wholesaling.

Wholesaling to us is like driving an Uber. Uber was created to put some extra cash in your pocket but not really for replacing a job or even as a career. Wholesaling to us is the same.

Wholesaling is a way to monetize on leads you come across from motivated sellers. While it does pay a lot better than Uber, it is very volatile and you can’t really depend or count on always making the same amount of money consistently.

We started our company PRYME Homes through wholesaling. If we would have stayed in that space two things would have happened. One, in order to grow or even sustain it, we would have had to take advantage of new investors by selling properties that were NOT deals and taken advantage of homeowners who perhaps really needed that extra $5,000 to move on. Which is what many large wholesaling companies do. Or two, we would have gone out of business. Wholesaling is a great way to get to start learning real estate. Please note that we say LEARN and not MAKE MONEY.

What you will learn by wholesaling

  • You will learn different strategies on how to make money. You will learn about different types of buyers ( fix and flip, buy and hold, owner finance or retail) and how to structure a deal depending on the type of buyer your working with.
  • Understand the market you’re in. The last thing you want to do is flip or buy a rental in a market that is not currently suited for that.
  • How to build a STRONG and dependable network. The depth and quality of your network are going to determine the success you will achieve in real estate.

The best thing about wholesaling is that you don’t have to risk tens or hundreds of thousands of dollars trying to figure out the market and the right strategy for you to move forward with.

Wholesaling is like like shopping for a car. While you may test drive a few there’s going to be one car that will suit your needs the best.

In real estate, we always say don’t be a jack of all trades; master of none. Stick to one thing first and become the best at it. Then, you can start dabbling in other strategies.

This is why wholesaling is a great way to get you started in the world of real estate investing.

HOW TO GET STARTED

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Now that you’re hopefully clear on what wholesaling is and why people do it, let’s cover the HOW of wholesaling.

Getting started with wholesaling is very challenging for almost everyone so do NOT think it is just you.

Most people struggle because they focus too much on the “what ifs”.

These "what ifs" are the reason many people fall into the Guru traps and end up buying these ridiculous real estate courses for tens of thousands of dollars. These gurus know you’re insecure and scared. They’re offering you knowledge and security in a structured way. Now, we’re not saying there’s anything wrong with this but, we don’t feel it’s necessary if you truly want to learn.

But what about “mentorship/coaching”?

The majority of the gurus out there that offer any type of mentoring/coaching are doing so because they’re not making enough in real estate. Coaching, mentoring, and programs are a very scalable business.

So, it’s easier selling education than doing the work that it takes to become truly successful in real estate alone. The ones that have figured out how to scale their coaching usually have salesmen as their coaches. So, when you call in with an issue all they are doing is regurgitating the training. The worst part is most of the content these gurus are putting out are strategies and tips they may have used decades ago since it has been years since they've done any actual investing. This information won’t work in today's real estate market.

Either way, they can’t really help.

So, if coaching programs that rip you off aren’t the best option then what?

The best way to eliminate all of your “what ifs” is just by jumping in!

Now, if reading this is making you very nervous, relax. We promise you that what we’re going to share with you is going to be things that will always work no matter what economy you’re in or how little you know about real estate and your market.

There are two steps that you must take to eliminate your “What IFs”

Step 1: Learning The language of Wholesaling

The first “What IF” everyone has is "what if I sound like an idiot" or "what if I don't know what to say".

So, the first thing you need to do is learn to speak like a wholesaler, which will set you up for your transition into becoming a full-fledged investor.

How do you do this?

You start listening to every podcast on wholesaling/investing. You need to submerge yourself in real estate. We want you to only read, listen, and watch real estate. This is how you learn a new language. We have journals full of notes we took on everything we learned from reading, watching, and listening to real estate. The reason we say to "only read, listen, and watch real estate" because the goal of this IS NOT to determine now what’s good info or not. The goal is to learn the vocabulary and what everything means. Once you learn the vocabulary then you can start getting the experience to understand whether what you’re consuming is good or not. You do that by going to networking events in your area. Join your local REIA, meet other wholesalers/investors and ask a TON of questions.

That’s it!

We know, you're thinking “what the hell is this?” but the sooner you can get into your head that it is not as hard as you think the sooner you can start actually doing it.

When you go to these events the bulk of the people that you will meet are not doing anything in real estate, even if they say they are. There are usually a handful or real wholesalers that you will want to meet and pick their brains. But, this will take a lot of time on your part and going to as many events as possible(by as possible we mean ALL).

The more events you attend and the more people you meet you will see that your knowledge about real estate grows exponentially. The best part, FOR FREE!

After going to so many events for months you will start realizing who the actual doers are and who isn’t. You will see that from month to month the crowds change a lot. That’s because everyone comes in thinking it’s a get rich quick strategy and when they realize it’s not they stop. This is good for you, less competition.

Like we said before this is not for you to figure out who’s right or who’s full of crap. All you want to do is speak to people, learn the language, and start figuring out who the real players are.

Learning some of the Lingo

So let’s go over the most popular vocabulary you need to learn.

  • ARV(After Repair Value)- this is the most common term used in real estate. This is where all of your numbers and math start with. So, the ARV simply means what the house will be worth once it is in a fully updated state.
  • Comps(Comparables)- Comps are properties similar to your subject property that are fully repaired/updated. These properties give you your ARV. You run COMPs to determine what the house will sell for once it is all fixed up.
  • Repairs- This is self-explanatory except for the fact that this may not mean actual repairs. Here’s what we mean. Sometimes a house does not need “repairs” but it does need to be updated. So, when someone asks you what the repairs are, this doesn’t necessarily mean what’s broken but rather what does the house need to reach it’s ARV.
  • FMV(Fair Market Value)- unlike ARV, FMV is what the value is of the house right now as it sits. This is the value of the home in its current condition.
  • Assignment Fee- This is the money you make when wholesaling a property. Like we mentioned in the beginning when you sell your terms to someone else you are essentially “assigning” your rights to purchase that home to someone else for an Assignment Fee.

Step 2: Networking for success

We’re sure many have heard the saying Your Network = Your Net Worth if you haven’t, now you have. This is what we believe to be the most important thing you will ever learn.

Learning to network correctly is how you will go higher than you could ever believe. Networking, especially when learning to wholesale, is very important because this is hands down the best way to get rid of all of your What IFs. By growing a strong dependable network you will be able to reach out for help whenever you need it. The key to wholesaling is to find houses that other people actually want to buy. The depth of your network will give you this.

The ONLY thing you need to get started is business cards with your Name, Email, Phone Number, and the title of Real Estate Investor. That's it!

Marketing

Direct Mail (DM)

Direct Mail has to be by far the most popular form of lead generation. The reason for this is in the name DIRECT. This form is very popular because it is a way to reach your target directly by sending them a mail piece to their home.

When we first started doing DM marketing we were sending out yellow letters. We would get a yellow legal pad and a red pen and hand-write something along the lines of “My wife and I would love to buy your house at >>address<< for CASH in As-Is conditions”. You will need to test out different messages and mail pieces depending on the level of competition in your market.

Another thing you will need to also test is the lists you mail too.

What is a list?

If you’re going to send out a DM campaign you need a List of addresses to mail it out too. You can start looking for lists like, late mortgage(these are properties that could fall in to foreclosure soon), probates(these are properties where the owner has passed away and usually the family inherits the property and may want to sell it), code violations(these properties are being sent notifications from the city because they may have a few things wrong with them which could mean neglect), high equity(these are homes that show they have high equity so maybe the homeowner maybe thinking of cashing out) foreclosure(people that are about to lose their homes for lack of payments) and many others.

You can get these lists from different places online. One of the big ones is listsource.com.

Door Knocking (DK)

We know you may have gotten really nervous after reading this.

We completely understand!

It’s very scary to go door to door knocking and asking people if they want to sell their homes. But, this is a very successful strategy because not many people are willing to do it.

Now we know we said Direct Mail is great because the mail goes directly to the homeowner well, imagine how effective it is being, face to face with the homeowner!

The best part is that this strategy is 100% FREE!

Now, this may not be necessary depending on where you live and what the competition level is like.

But if it is, here’s how we do it.

Q: Who to door knock?

A: Everyone!

Seriously, if you bought a list or created a list you should be going and knocking on those doors.

3 Things to keep in mind:

1. Appearance- this is so important. People subconsciously decide whether they like you within 1/10th of a second! Dress casual. No flip-flops and no 3 piece suits.

"all it takes is a tenth of a second to form an impression of a stranger" - Janine Willis and Alexander Todorov

2. Stay positive- Always have a smile on your face. This gets very hard to do when you have been rejected for that last 50 houses. But you have to knock every house like it's your first.

3. Time of day- by far the biggest mistake people make when door knocking is, going when people ARE NOT HOME! Don't go door knocking before 5 pm on weekdays. We don't know if this is because they are scared so subconsciously they don't want anyone home. But, in order to get a deal, you need to speak to someone.

Working The Leads

Your phone finally rings! Now, what??

While your initial reaction is to just stare at the phone until it stops ringing, don't!

We know you're scared, nervous, doubting yourself, and think of a million reasons why you probably shouldn't answer the phone. Guess what? They're all wrong!

When you’re starting off you need experience FAST.

Instead of going through scripts and a bunch of questions. If the homeowner is motivated(really wants to sell their house) then set an appointment.

That’s it!

Don’t know what to do at the appointment?

Reach out to a local savvy investor and partner with them on your first deals until you feel comfortable moving further on your own. No need for guru training!

Contract The Lead

If you went to the house and it’s a deal, you now get it under contract using whatever is accepted by your state, attorney, and/or title office.

Again ask the local investor for assistance.

Selling The Deal

Now you reach into your buyers' list, and/or an investor that’s helping you, buyers list, to offer this great deal to them.

Many of your buyers will do their own due diligence but you still need to give them ballpark numbers for them to see if it’s worth it.

Once they agree to the price, you want to get it in writing using an assignment of contract agreement. (title, an investor, or an attorney can help you with this)

Closing The Deal

You still want to keep constant contact with the attorney/title company you’re using to close it and with your seller and buyer. Sometimes things go wrong and you want to make sure you can reach everyone quickly.

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Now What?

This should be more than enough to help get you out there finding deals. If you feel like it's not, you're simply procrastinating.

We know that you want to be able to take a deal from start to finish all by yourself without splitting any profits with anyone else. If you truly feel this way then good luck!

Real estate is a team sport. The sooner you understand this the faster you will reach success.

Keep in mind that while we can't cover every possible scenario we will be releasing an Wholesale Everything: The Intermediate How to Guide 201 and Wholesaling Strategies: The Advance How-To Guide 301.

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