What does it take to become a master at wholesaling real estate you might ask? That’s a good question.
The difficulty in wholesaling lies in the fact that in order to make money you must find outstanding deals. You must be able to find better deals than the house flippers and the buy and hold guys. Why? Because you get paid to find the deals for the other types of investors. Not only must you get the price low enough for the investor to fix it up, sell/rent it, and still make a profit. But you also have to get the price low enough so that you come away with a profit.
How do you do that? How do you get deals that good with all kinds of competition from other investors? It is really quite simple. You must have a set of skills that the other investors are most likely lacking.
A wholesaler must have good “marketing skills” to be able to find those deals before anyone else does. Other investors might be using straight foreward tactics like looking on the MLS for REOs or driving for dollars. Whereas a wholesaler might have a whole bag of tricks up his sleeve. A wholesaler might have some automation for the MLS like BirdDogBot. He might have a whole army full of bird dogs out driving for dollars looking for leads for him.
Just like wholesalers in any other industry, they are the middle man who gets the product at a rock bottom price. Wholesalers have all the connections. They deploy tactics to find the best deals. Then once they find a deal they lock it up under contract and sell the contract to an investor. The investor he sells to might not be very good at finding deals. Maybe they just want to delegate that to a wholesaler so that they can focus on the other aspects of real estate investing.
Wholesalers have a very specific skill set. Not only are wholesalers excellent at marketing. They also must be good at analyzing deals and negotiating.
Although there are buy and hold investors that buy off of wholesalers, the majority of the customers I would say are house flippers. Good Wholesalers know the all the expenses that go into a fix and flip. They know the Maximum Offer formula and know how to calculate each piece of that formula.
ARV – Flippers profit – Fixed Costs – Rehab Costs – Your Wholesale profit = MO
The most challenging piece of the formula is rehab costs. The biggest complaint about wholesalers is that they are terrible at estimating rehab costs. If you can get good at estimating rehab costs then you will be a lot more successful as a wholesaler.
A lot of wholesalers try to make up for their lack of skills in estimating rehab cost with their negotiating skills. You do not want to be one of those wholesalers though because you will lose all credability as a trustworthy wholesaler. If investors don’t trust you, they won’t buy deals from you.
Wholesalers need to know negotiating tactics so that they can get properties at rock bottom prices. Understanding people and how you can fix they’re problems will take you a long way as a wholesaler.
To sum it all up, a wholesaler must possess or develop these 3 skills in order to be a sucessful wholesaler in the long-term. Marketing, analyzing, and negotiating skills are so valuable in real estate wholesaling.