Wholesaling vs Traditional Real Estate Investing
August 21, 2009 by admin
Filed under Wholesaling
Traditional Real Estate Investing
Before we get into wholesaling and what that is, let’s talk about traditional, or “old school” real estate investing. Traditional real estate investing involves buying a property and Holding it for long term appreciation and wealth building.
The buy and hold stratagy does still have it’s place within real estate, depending on your business model and it doesn’t hold the attraction the more commercialized wholesale, or flipping has.
Wholesaling
Wholesaling is one of the best ways to break into the real estate field and the quickest way to make potentially quick cash.
Wholesaling provides an opportunity for someone to build a very good income with little money or credit. The requirements to become a successful wholesaler are ambition and specialized knowledge. The more ambition you have, the more money you will make. Of course, ambition alone won’t ensure success. Education, Preparation, and a Plan.
Flipping is the commercial term and subject you see on the tv shows.
A wholesale occurs when a wholesale investor goes into contract to purchase a distressed property below market value and then makes a profit by reselling it for a higher price to a property rehabber/retailer. Key terms here are “below market value”. To become an effective and well paid wholesaler you must locate those properties that can be purchased below market value so you can pass the savings on to your end customer, which is the investor/rehabber or landlord or whoever you will assign the contact to.
The things to remember here is that a wholesaler is not purchasing the property but “assigning” the contract to another investor or end buyer for a wholesaling or assignment fee. The particular assignment fee is determined by you, the wholesaler.
How can you find a property to wholesale?
Marketing is the key here and is a HUGE aspect to attracting motivated sellers. As a wholesaler we want to come in contact with and only speak with property owners who are motivated.
Great deals rarely come knock on your door to find you. They find you when you have a marketing system implemented that is like a funnel to prescreen them for motivation and directs them to then contact you immediately.
Motivated sellers are motivated because they are in financial distress.
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We need to target our marketing to people who are motivated to sell their property and have a NEED to sell vs folks who WANT to sell their home. We don’t want to deal with homeowners who expect to sell their home for full market value.
Some of the ways to market for motivated sellers
If you’re first starting out in real estate investing then it’s imperative that you have a short-term budget to work within so that you’re not forgetting about paying for all the other necessities in life: food, shelter clothing! And your bills
It’s very important to hit your target market, which as a wholesaler is motivated sellers. Keep in mind that one good wholesale deal can net you anywhere from 1000 to 15,000 or more in an assignment fee.
- Attend Your Local REIA meeting in order to network with and see what other active investors are doing.
- Put Up Bandit Signs with your name and phone number on them.
- Send Direct Mail to out of state home owners (a.k.a. landlords).
- Contact For Rent by Owner ads and signs.
- Call For Sale by Owner ads and signs.
- Contact active Property Scouts or Bird-dogs.
- Advertise what you are looking for on the web or in the newspaper.
- Plaster Your “I Buy Houses” Business Cards EVERYWHERE
- Tell at least 10 new people every single day that you’re looking to buy houses. Don’t forget postal workers, exterminators, gas/electric residential meter readers, grocery store clerks, gas station attendants, newspaper delivery people, everyone…
- Team up with a Realtor and have him/her check the Multiple Listing Service for expired listings as well as certain keywords – days on market (long), vacant, estate, preforeclosure, must sell, fixer-upper, closing help, moving, relocated, divorce, etc…
Let me give you some background info on the process of wholesaling
Here’s an example to illustrate how you can make money through wholesaling: Assume a property is valued at $100,000. You get it under contract for $60,000. Then you find another bargain-hunting investor who wants to rehab it and sell or fix it up and rent. You sell it to this person for $70,000. Your profit or “spread” is $10,000 ($70,000 – $60,000 = $10,000!).
How can you find a buyer?
Creating a buyers list is probably THE most important aspect to becoming a successful wholesaler. Locating the properties is one thing but you must have a good source of potential buyers who will purchase the properties you are attempting to wholesale.
Place ads on craigslist
using phrases that attract attention, such as “Great Rehabbing Deal”, “Investor Special”, or “Thousands Below Market Value”.
Joining social networking sites such as Facebook, myspace and twitter
Create a squeeze page. A squeeze page is a webpage that, when the visitor “lands” on it, he is asked to opt-in to some type of list in order to proceed further. On some squeeze pages, your only options are to opt-in or leave
Creating a blog with keyword specific terms and plenty of real estate content to draw traffic. Content is king and delivering high quality content to your blog visitors will get you potential buyers.
Local REIA meeting’s are a good way to find potential buyers
One of the greatest parts of wholesaling real estate is that it’s a way to get quick cash without worrying about your credit score or down payments. As long as you put in the work and have the right professionals on your team, wholesaling is a great way to earn cash in the world of real estate investing!
