Back when I was selling newspaper advertising for a living, I met an ad agency owner named Bill Green. He was a great guy and a big-spending customer, but he was hardly ever in the office. When I asked him where he was spending his time, he explained that he had started investing in real estate some years earlier and was just about ready to sell the ad agency to work as a professional real estate investor full-time.
Naturally, I was interested. I was young, full of ideas and energy, but short on capital. So, I asked him how I could get started in real estate investing, too. He generously took the time to explain how to start a wholesale real estate business. And, that’s just what I did. It’s how I built my professional real estate business from the ground up many years ago. The advice Bill gave is still relevant for up and coming investors, so I’m going to share it with you today.
How to Start a Wholesale Real Estate Business Step-By-Step
Wholesale real estate investing is a real estate investment business model that involves buying a below-market property then quickly selling it to another investor without making repairs or improvements. The potential return is less than a typical fix and flip. Essentially, your piece of the pie amounts to a finder’s fee of sorts. To be effective, though, you need to know a deal from a dud so that you can find an end-buyer.
Not just any distressed property will pencil out to make wholesaling possible—everyone’s needs must be met. The home seller wants out of an “ugly” situation. You want to create good ROI without having to pay for a rehab. The investor you approach with the deal wants a house to repair and sell without doing all the lead generation work. A wholesale deal can be a win all around.
Here’s how to start a wholesale real estate business, one foot after another.
Step 1: Find a Deal
The first step is probably the hardest: Finding a deal where all the stars are aligned is essential to your initial success and your ability to consistently build your business. Your research must be detailed and you will probably “kiss a lot of frogs” before that prince of a deal materializes. Remember, the deal must work for you and for the investor you need to buy your property.
Step 2: Fund Your Purchase Contract
Although you do not need the level of funding required to fully rehab the property you’ve located, you will need some liquid cash as an earnest money deposit to open escrow and purchase money to close on the home. So, whether you use some savings or funds from a self-directed IRA, you’ll need at least some start-up capital. Of course, if it’s a good deal, you can also use a hard money lender so you won’t have your cash tied up for long.
Step 3: Connect With an Investor-buyer
This part sounds easier than it actually is. There are plenty of wanna-be buyers out there, but only a handful have the money in hand to follow through. You don’t have time to wait for them to try to convince a partner to go in on the deal with them or scramble for funds. To reach the right kind of buyer, you need to be able to show that the house has honest value. If it’s a true deal, the right investor-buyer will not have any trouble connecting with a hard money lender themselves to fund the rehab.
Step 4: Build a Network of Wholesale Buyers
Even the most attractive homes, priced well below market, require the interest of an active investor ready to write the check. My best suggestion is to start working on this from the moment you sign on to your first deal. To make a living by starting a wholesale real estate business means being prepared to move from one transaction to the next as quickly as possible.
Step 5: Review and Adjust Your Investment Strategy
I started my career in real estate investing by selling a lot of wholesale properties to build up a substantial enough war chest to buy, fix, and sell other properties for a potential return. My wholesale work paved the way for my ascent to a professional real estate investment business. This could be your path, too, if you keep your eyes open and know when the time is right for you.
As a new investor, it can take a good amount of time and effort to find properties that make a good wholesale purchase and then form a group of potential buyer-investors that buy the deal you initiated. You not only want to start your wholesale real estate business on the right foot—you want to keep it there.
An Easier Way to Start a Wholesale Real Estate Business
It didn’t take me near as long as Bill to build my professional real estate investment business because I found a simple solution. I invested in myself and became a HomeVestor® franchisee. I get a steady stream of qualified leads from the nationally-known and trusted “We Buy Ugly Houses®” marketing campaign. Often, these days, I have more deals than I can actually rehab so I am still involved in wholesaling.
HomeVestors makes this easy with the new DealVestors® platform. When I have a house that I want to wholesale, I simply list it on the DealVestors website—and the investor-buyers connect directly with me.
To get your wholesale real estate business going and growing contact HomeVestors today.
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