How to Dominate Wholesaling Houses in Your Area - And Some Myth Busting
There will be some wholesaling houses myth-busting in this post as it's something I've been wanting to set straight for a long time. I'm calling out some investors and it's due time.
If you're thinking about getting started flipping houses and are trying to figure out how to get started with little to no working capital, your best bet is getting started with wholesaling.
Even though I've been flipping houses for over 10 years, I still wholesale a lot. It just makes sense. There are a lot of properties out there that don't make sense for me as a rehabber (areas I don't flip in, amount of repairs is more than I'm interested in at the moment, I'm too busy, and the list goes on and on).
Wholesaling should be a part of everybody's investing business.
Here's how to dominate your area wholesaling houses... The way I see it, there are 3 keys to success in wholesaling and they also translate well to success in flipping houses in general.
First, have you joined our private FlippingJunkie facebook group? Come network with us!
1. You Have to Become a Great Marketer
This business (flipping houses, whether it be wholesaling, bird-dogging, fix and flipping, landlord, etc.) requires you to find great deals. In order to find great deals, you need to become a master marketer.
The investors I know that dominate their areas are always focusing on marketing. They're spending most of their time finding great deals.
There are a lot of ways to quickly learn how to become a macho marketer. One is to pick up a book like Guerrilla Marketing in 30 Days by Jay Levinson. What I like about reading books likes Guerrilla Marketing is that you will find ways to do some inexpensive marketing, but you will also (hopefully) see things differently. You should develop the skill of hearing about a form of marketing and being able to translate it to be used for marketing to motivated sellers.
More and more people should find out what other people are doing and not just copy it but stop and try to think of a way to put a new spin on it. Try to come up with something original that other investors aren't doing. Not enough of this is happening and it can result in failure if you are doing the easy marketing and competing with very experienced investors.
Does that make sense? Do you want to compete with investors that have deep pockets and years of experience? If the answer is NO (and it should be), try to spend some time thinking and innovating!
2. Stop Being So Shy
I'm an introvert. Starting this blog put me way outside my comfort zone. But, over time, it became easier and I grew as a person and it's not hard to publish things for the world to see anymore.
Getting out and talking to other investors and motivated sellers is something a lot of new investors consider difficult. I did too.
Don't let it stop you.
People hesitate to do any marketing because they are scared to death about not being able to handle the calls when they come. That's fear will not be conquered until you take some calls.
I was SUPER nervous during my first calls. BUT, I still handled them (not very well mind you - and my wife had to handle the first call) but it seemed to help believe it or not. You see, it is usually a little difficult for sellers to call you and tell you they want to sell their house fast.
When you are a little nervous, you are not likely acting all high-powered and "corporate". This goes a long way in allowing sellers to let their guard down a little so that you can build a great rapport. We've bought a lot of houses from people that received higher offers but just liked us more.
The other half of this one is talking with other investors. For the first half of my house flipping, I kept everything to myself. Every other investor was a competitor and I could only win by being a lone wolf.
I know now that that was stupid.
I've grown tremendously as an investor because of the relationships I've built in my area. You might be tempted to think that I built those relationships because of this blog or my training course or whatever else, but I really forged them when I sent out letters to other investors asking if they wanted me to send them leads and deals at great discounts. I was looking for buyers for my wholesale deals.
Now, I can sell leads and deals to other investors that I used to just throw away and forget about because they didn't fit my house flipping criteria...and they really like that. We now share information and tactics and help each other keep abreast of everything happening in our industry.
Don't wait as long as I did, get out there and talk with other investors and get to know them. Don't just ask them what they are looking for and leave it at that. Ask them how they got started. Ask them about the best deal they ever got. Ask them about the worst deal they ever got. Ask them to meet you for a beer or coffee or coffee and beer. :)
3. Let the Other Guy Make Money
Being a great wholesaler isn't about trying to get every little dollar out of a deal. Of course, you want to make as much as you can, but you also want to look at things long term. The money you 'win' over another investor might cost you a lot more over time.
To better understand this, I'll give you an example:
Let's say I got a house under contract for $50k. It will be worth $100k after it has been fixed up. The repair costs will be about $10k. So, normally house flippers want the property for 70% of after repaired value (ARV), which would be $70k in this case, less repairs. So, they would want to buy this house for no more than $60k ($70k - $10k in repairs).
I have an opportunity to make a quick $10k, as I have it under contract for $50k and can sell it $60k. If you're tempted to stretch the numbers and say the house should sell for $110k and ask other investors to buy it for $70k based on your inflated ARV, you are going to have much harder time finding a buyer and you just might make other investors ignore your future deals (as they will figure you always inflate the numbers). They want deals, they don't want their time wasted.
Offer up great deals and you will find the best buyers. You can still make a lot and it will be A LOT easier to make it.
Most of the time, when I have a wholesale deal, I only need to call one, maybe two people and it's sold. How nice is that?
You then can spend most of your time finding more deals and that is where the money is at!
Wholesaling Houses Myth-Busting
As I mentioned at the beginning of this post, "There are a lot of properties out there that don't make sense for me as a rehabber (area I don't flip in, amount of repairs is more than I'm interested in at the moment, I'm too busy, and the list goes on and on)."
This leads me to something that has been bugging me for a really long time...
Investors That Say Wholesaling is a Bad Place to Start are Being Naive and Narrow-Minded
I've been wanting to say that for some time now. Let me explain.
There are investors that post on real estate investing forums and blog about flipping houses that like to preach that wholesaling houses is a bad way for new investors to start flipping houses.
Here are their main reasons:
- Deals are hard to find, so it doesn't make sense to make a couple grand when you can make 15-20 grand fixing and flipping
- Wholesaling requires you to offer less than your competitors which makes it very difficult to get a deal
- You can't make enough wholesaling to justify the cost of marketing
Let the myth-busting begin...
Myth #1 Busted
Myth: "Deals are hard to find so it doesn't make sense to make a couple grand when you can make 15-20 grand fix and flipping "
Ok...for number 1. Deals can be hard to find for people that haven't honed their marketing skills yet...BUT that goes for any type of investing. It's not like it's only hard to find deals if you are a wholesaler but easy if you are a fix and flipper. Give me a break.
This one also suggests that you only make a couple grand per wholesale deal. Hogwash! We usually make between $8k-$10k per wholesale deal. We've even made $50k on a wholesale deal... TWICE! So don't feed me this garbage that you only make a few thousand dollars.
The other part of this myth is that you will actually make $15-$20k on the fix and flip. Without experience, it's likely you won't make near what you expect. Trust me on this. That also completely ignores the amount of time you have in wholesaling versus fixing and flipping. Personally, I would prefer to spend a total of 2 hours on a deal and make $8,000 than 5 months on a deal and make $20,000. I hope you would also prefer that.
Take that anti-wholesaling punks! lol
Myth #2 Busted
Myth: Wholesaling requires you to offer less than your competitors which makes it very difficult to get a deal
This one is baloney also. This suggests that all investors always buy at the same percentages you do. Which is absolutely false.
Being an investor that has sought out other experienced investors and cash buyers for deals, I can tell you first hand there are a lot of investors out there that have different strategies. Some of those strategies allow them to offer more for certain deals.
Also, this myth completely ignores the fact that there are a lot of deals out there that don't make sense for a fix and flip and therefore, your fix and flip competitors don't even want them!
There are areas where houses simply will not sell retail because banks won't lend on them or there are no qualified buyers wanting to buy there. This is where wholesaling is really awesome because you can buy it dirt cheap and sell to a landlord or other investor that is working some kind of owner financing deals or whatever their investment strategy may be. If you were looking for strictly fix and flip, you wouldn't make any money on those deals.
Myth #3 Busted
Myth: "You can't make enough wholesaling to justify the cost of marketing"
This myth was really already busted in the busting of the first myth. But to expand...
The other reason why wholesaling is so awesome is because it forces you to become a master marketer. You keep track of how much you are spending on your marketing and how much it is costing you to get the leads and deals. This is invaluable for you in the long term as you will always be an efficient marketer.
There are people that want to go out and start dropping $5k-$10k on marketing PER MONTH! I personally do not think it is smart because you become very inefficient and most of it goes to waste. If you start with a small to very small budget (maybe $100 to $500 per month), you will learn how to maximize those dollars (bandit signs anyone?).
There are a lot of stupid myths about wholesaling houses out there from people that either don't know any better, are trying to push some other form of investing on you as the end all, be all, or just invest in one type of investing and see everything through the narrow lens they have created for themselves.
I personally think wholesaling teaches people the fundamentals of finding deals and making deals happen. Once you learn those things, you can dominate.
Thanks for reading,