THE BIG PICTURE
WHOLESALING
The Think RealtyQuick Guide toWholesaling Houses THE TRUTH (AND TACTICS) BEHIND “NO MONEY DOWN”.
by Carole VanSickle Ellis
W
A good lead will have plenty of “room” in the deal for you and the in- dividual who buys the deal from you to make a profit. This means the amount for which you wholesale the property needs to be about 65 percent of the predicted market value. For example, if you are wholesaling a home that will be worth $100,000 after repairs and needs $5,000 in repairs, then your buyer will usually want to pay $60,000 or less for the property. In some markets, this number may be a bit higher. Do not forget to add in your own .fee and the buyer will still have room to make the $5,000 in repairs and hit that 65-percent benchmark, so that would be a good lead. 3 MEET WITH SELLERS AND GET GOOD LEADS UNDER CONTRACT Most wholesalers start with a phone interview, then meet the seller in person to get papers signed and put the property under contract. 4 MARKET THE DEAL Promote your deal to investors. You can email your network of contacts, attend real estate investor association (REIA) meetings and to talk about the deal, put signs up in the yard of the property, or advertise in other ways. 5 SELL THE CONTRACT Once you agree on a price with your buyer, the buyer and seller will close and, at closing, the seller will get the money
about 12 years now and I’ve done more wholesale deals than I can count. I love it because you can start with none of your own money, no credit, and no experi- ence. What you do need is knowledge and the ability to take massive action.”
hen an individual interested in real estate investing hears the
Homes like this one with overgrown yards or other signs of neglected maintenance are often good candidates for wholesale deals. Don't be afraid to write down the address and send a postcard to see if the owner is interested in selling.
words “no money down,” one of two things usually happens. The individual in question either leaps into action, in- vesting plenty of money to learn how to leverage the no-money-down strategy, or they shake their head in disgust and walk away. Both of these approaches are nat- ural ones, but neither is necessarily the right one when it comes to no-money- down real estate, which is simultaneously one of the most popular and most de- rided nicknames for wholesaling. Either response can land a new investor in a world of hurt and missed opportunities. Take an educated, informed approach to the concept, however, and your life could change quite nearly overnight. “I remember my first wholesale deal. In the space of about 60 days (they can happen faster, but remember, this was my very first deal), I navigated calling a seller, getting a property under con- tract, and flipping that contract. When we closed, we made about $44,000 on that deal,” recalled Miami wholesaler and founder of FlipEmpire, Alex Pardo. Pardo left a corporate fast-track position with GE to wholesale houses and, after that first deal, never looked back. “Mak- ing about the same amount of money in two months, doing something I loved and helping someone else, that I would have made in a year doing something that I absolutely hated and working 80 hours a week made the decision easy,” he said. “I’ve been real estate investing for
WHAT YOU NEED TO GET STARTED INWHOLESALING
Pardo, who coaches and mentors a number of wholesalers himself, believes that investors who try wholesaling and fail at it do not do so because they did not have funds or lacked understanding of the process. They simply did not have the time to make it work. “Wholesaling boils down to taking action. I think it should be the foundation for every investor because it is a good way to generate a lot of money that you can then use either to do other types of real estate or to invest in other wealth vehicles,” he said passionately. How- ever, if your lifestyle or mindset will not permit you to take the “massive action” necessary to wholesal- ing, which means mailing out the letters, making the calls, getting the contracts signed, and marketing your deals, then even a thorough understanding of the process will not help you succeed. “I hand-addressed and hand-stamped the first batch of letters I sent out. I fumbled my way through a script from a training to evaluate my leads. I was scared, but I started scheduling appoint-
ANOTE ON DUE DILIGENCE
ments with homeowners. When I needed help, I asked an experienced investor for help and I shared the profits when we finished the deal,” recalled Pardo. “You can wholesale with little or no money, credit, or experience, but you have to be crystal clear about what you want.” • ALEX PARDO’S 3 RULES FOR SUCCESS IN REAL ESTATE 1 Get clarity about what you want from real estate investing and what you are willing to do to get it. 2 Start out wholesaling unless it absolutely does not fit with your vision or current lifestyle. 3 Invest in yourself by working with a coach or mentor.
Money Credit
M any investors assume that since they will never take ownership of a wholesale property, they do not need to do much due diligence. However, a working knowledge of the local market and a passable understanding of the costs associated with contract and construc- tion work on real estate in that market will help you focus on leads that will be attractive to other investors rather than wasting your time on properties that are unlikely to close. You may be quite confi- dent that your buyer will have a very clear idea of how much that property will be worth after all repairs are made, and you will make a better argument for why they should buy it and establish a reputation for credibility by making sure that you are in possession of the same.
Experience Knowledge Ability/Willingness to take Massive Action
KNOWLEDGE IS POWER The problem with the no-money- down promotional tactic to teaching wholesaling is simple: It makes it seem like you are going to get something for free. In reality, even though wholesal- ing does not require you to put much, if any, money into a property, it does require an investment of time and effort on your part. Here is how the wholesal- ing process works: 1 MARKET FOR LEADS Most investors use digital marketing or send out letters or postcards to potentially motivated sellers.
(minus what you charged for the con- tract); you will get your payment, and the buyer will get the deed to the house. As you can see, the process is simple, legal, and highly replicable. In fact,
Learnmore about Alex Pardo, the founder of Miami-based Flip Empire and the host of the popular real estate investing podcast by the same name, at www.flipempire.com.
2 EVALUATE YOUR LEADS FOR POTENTIAL RETURNS
42 | think realty magazine :: january 2018
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