Wholesaling is a popular real estate strategy, and it’s one that I believe should be in every investor’s toolbox. In its simplest form, wholesaling is buying a property at a deep discount and then selling it to someone for a higher price.
Now you might be wondering, what are the traits of a successful wholesaler and what exactly does someone need to know to be successful at wholesaling?Before we dive into that, let’s talk a little bit about how investors chose their investing strategy.
If you ask a folks how they chose their investing strategy, you will get a lot of different answers. There are lot of things that play into those decisions, but they are often determined by these things: the skills of that particular investor, their interests, their access to capital and their long-term goals with regards to real estate.
Here’s Another Question for you … What’s Your End Game?
Someone that is completely focused on long term wealth and retirement will have rental property. Generally speaking, fix and flip investors stand to make larger profits on a rehab than they would if they wholesaled the property. But we all know that it doesn’t always turn out that way. There is more risk involved when you are a rehabber.
Wholesaling is attractive to just about everyone because you can make big chunks of cash, and you don’t necessarily need good credit or cash to get started. You can use this cash as your source of income, you can pay down your rentals and you can also build a cushion for your rehabbing business if you are a fix and flip rehabber. As you can see, adding the component of wholesaling into any one these business models really doesn’t have a downside.
Think of it this way….
Rentals have their payoff down the road. They give you passive income and are often a major part of a person’s retirement plan. Done properly, rentals provide you with income down the road rather than today. What do I mean by done properly?
What I mean is that none of that rental income goes in your pocket. Your goal is to pay off your rentals. Initially you want to keep some of that money in reserves; maybe 6 to 12 months of that passive income. Then once you have built up a safety net, that’s when you start paying off your rentals. That’s how I would like you to think about rentals. It's future money to fund your life.
Wholesaling and rehabbing on the other hand give you money today, but they do not provide passive income. Both of those strategies require you to get up and do the work day after day. Wholesaling and rehabbing are a job. When it comes to lifestyle, each one of these 3 strategies provide a much different result so that will likely factor into your long-term strategy for your real estate investing business.
7 Traits of a Successful Wholesaler
Here are some things to consider if you want to be successful and make wholesaling your main investing strategy.
- A successful wholesaler needs to get really good at marketing. Their job is to find deals. I’ve never seen a successful wholesaler that wasn’t good at marketing. I will say this; marketing plans look very different from person to person. There is no one right way to do this, but there is a path you need to follow. You need a written marketing plan.
- Wholesalers that are successful over time always have multiple strategies for finding deals. You know that I am a big fan of direct mail, but I am the first person to say that should only be one of your marketing strategies. You should have at least 3 to 5 lead sources at a minimum.
- Successful wholesalers are almost always good at talking to sellers. Most of all, they are good listeners. They have learned the art of conversation is one of the most important skills they need hone. This is true whether they are talking to a motivated seller on the phone or in person when they view the property. If you listen long enough to what a seller has to say, you can learn so many things. You will often discover what their true motivation is for selling the property and details you wouldn’t otherwise know like the basement floods every time there is an extended period of rain.
- Making offers fills some people with terror. One of the biggest problem investors struggle with is having the confidence to look the seller in the eye and make low ball offers. Remember that real estate is a numbers game. You’re going to get a lot of “no’s” before you get a yes. If you have nailed the negotiation process (below), making offers will be a whole lot easier. One tip I have for you is to learn to give sellers an explanation for why the offer “is what it is”. Your job will often involve giving them a much-needed reality check when it comes to the actual value of the property.
- Successful wholesalers are always good at negotiation. You will notice that I didn’t say anything about being born with this skill. For most people, this is something that they struggle with in the beginning then get better at over time. Practice really does make you a better negotiator.
- Selling your wholesale deal involves building a buyer’s list. If you get your offer right so that you really have put together a good deal for your investor buyer, you will have no trouble selling your deal. I can promise you that. My best buyers have always come from my local REIA group. You only need 5 or 6 solid cash buyers to sell all your deals to, and they need to be a mix of rehabbers and landlords.
- Building your network is critical for long term success, so you need to get out there and network. Some people view this as taking time away from their business, but this will build your business faster than almost anything.First of all, you never know when you will run across someone that has a property they need to sell. Networking with other investors is how you will find out who can actually bring cash to the table and get a deal closed in 7 to 10 days. One other benefit of networking is you build your business and your brand by just showing up.
My Final Tip
Don’t fall in love with a property. Real estate really is all about the numbers. Either the numbers make sense or they don’t.
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