So You Want to Be a Real Estate Investor…Try Wholesaling

This month on The Investor Insights, we’re getting back to basics with real estate investing. Getting started in real estate can be a bit overwhelming, but I’m here to help you through the fear and on to your first deal.

That’s why I’m talking about wholesaling. This is a low-risk; easy way to get your feet wet and to learn how to find deals. That’s where we’ll be focusing a lot – on finding deals. The deal is the secret to making money in investing.

Here are a few tips for getting started as a wholesaler and finding deals.

1. You need a corporation. If you try to become a wholesaler as a sole proprietor, you’re asking for trouble and if you’ve ever read this blog, you’ll know I think running any business as a sole proprietor is a really bad idea. Here’s an article about why this is so important.
2. Understand how wholesaling works. You’re not buying anything. You’re getting a contract on a property and then finding an investor to purchase the property. You’ll assign the contract to the investor (also called a rehabber or flipper) and collect an assignment fee.
3. Adopt a helpful attitude. If you don’t care about the people you’re helping get out of a distressed home situation, you’re not in this for the right reasons. Sure, we’re in this to make money, but if you don’t come across as genuine, it’s going to be hard to gain the trust of even a desperate seller.
4. Understand how to make an offer. All of the money in real estate investing is made on the purchase, not the sale. You have to get the price right to make it worthwhile. In a wholesaling situation, your seller needs to get out of the mortgage or financing situation fast. You need to make some money and the investor will need to make some money on the flip. Getting the offer just right takes a little homework on your part. You need to know the following:
   1. The fair market value – Get some comps from the past 90 days and see what the neighboring properties are selling for.
   2. The seller’s situation. – If you don’t know this, you might as well walk away.
   3. The investor’s percentage of market value. – Investors are in this to make money, so the offer has to be good enough for them to make repairs and a profit. A rehabber can give you his/her percentage of market value.

After you have this information, you’ll be able to craft your wholesale offer. Don’t make an offer on any property unless you have all the numbers straight. Read more on getting the offer just right here.

Stay tuned to The Investor Insights for more tips on becoming a real estate investor through wholesaling this month.