Wholesalers, flippers, and sellers. Oh, my. Anyone considering real estate investment (REI) needs to research the various avenues used to create a successful business. Get to know the business from others involved. Talk to agents. Discuss options with lenders, both standard mortgage and hard money. Remember, you are looking at being a business professional, creating profitable deals for the seller, the rehab flipper, or general investor, as well as yourself. Once you are not only certain you want to do this, but are determined and armed with the best advice available, take a look at these 5 Tips for Success as a Wholesaler:
Get Your Name Out There
Let some of the people you’ve consulted with, like the agents, rehab flippers, and especially sellers, know that you are ready to work with them. Work social media as well. There are multiple lists and groups that have contacts and will post your information. Consider Craig’s List to look for houses for sale and post your buying business there.
Review listing services. Some of them are open to the public. Consider also subscribing to an MLS (multiple listing service). MLS has the most up to date information on available property with real-time changes. Use the direct approach and drive through your target neighborhoods looking for signs in yards. Make calls, knock on doors, pass out your cards. This is not a passive business.
Target The Right Property
While you aren’t doing the rehab, you have to take that into consideration when looking at a property. Knowing the value of the property as it stands and what the market will bear once the repairs are made are only part of the numbers needed.
Being able to recognize a property that could be a money pit for the rehab buyer cuts into your profit as well as theirs. Extensive damage to the structure from water or termites is a red flag. Kitchens that need a complete makeover could be tens of thousands of dollars. If the property doesn’t support the work needed and still shows a profit, it’s time to move on to the next option.
Build Your Buyer List
If you did good research before you started your business, there is likely a good basis for your buyers list in your notes. This is another time to hit social media again. Flippers and general investors advertise their availability to buy. Get to know them, make certain they know your name and your target properties. Keep them on your contact lists so that any time you are moving on a property, there are trusted buyers at your back.
This is not a situation to take a chance on a complete unknown. Your profit income is riding on the deal. Due diligence includes researching your ‘business partners.’ Give preference to the known and trusted.
Negotiate The Deal With Your Buyer
This is why you are looking for buyers you know and trust. Negotiating the sale in an equitable way that profits you and the buyer goes much more smoothly with an existing business relationship in play. If you have built a reputation with your buyers, been on-point with your valuations, and fair with your fees, sales move quickly to closing.
Remember, this is a business transaction. While you may even be friendly with the buyer on other occasions, keep the negotiation on a business footing. Now is not the time to let that cookout celebrating the conclusion of your last rehab color the deal currently on the table.
Don’t Take A Deal Just Because It’s High Dollar
It may sound counter-intuitive, but the high dollar deal could be an error. While it may seem like a big money-maker, once you look at all the issues, it could cost you. What’s the financing plan, does it include a standard mortgage? How quickly will you close? Any long delays in closing could leave you holding the property bag beyond anticipated timelines. Now there’s insurance, maintenance, and utilities to factor into the equation.
Taking the smaller cash deal could be the better option. Less holding time, quicker recovery of funds extended to the seller. Being able to conclude the sale in a timely fashion means being able to move on to the next one without losing your momentum.