Want to make it in real estate wholesaling? Watch out for these common mistakes, and avoid them…
Real estate wholesaling continues to be a top investment strategy and business model for 2017. It is regarded as one of the most profitable and simplest real estate investment strategies. One which is easier to get into than others, and which can be scaled as a business, with low risk, and appetizing returns. Of course, there are common blunders which can trip investors up too. Know what they are, and invest smarter.
- Only Bidding on Houses You’d Live In
Investors often fall into the trap of only bidding on homes that they would live in. That can mean ignoring lower priced properties, and even higher-end ones which may appear out of reach. This brings many problems. It means overlooking great investment opportunities, and often failing to resell in a timely manner, or being too picky about the aesthetics of the property. The bottom line is that you are not going to live there. In fact, the numbers are probably a lot better on others homes outside of the scope of this tunnel vision. Remember that it is all about the numbers. Everyone needs a home, and everyone has different tastes and budgets.
- Going too Cheap
You never want to overpay for properties, but you should be wary of going too cheap as well. Buying ugly, cosmetically challenged, and even properties with some structural issues can be profitable. Especially when you are simply wholesaling them, and providing you know what you are getting, and are pricing your offers well. However, in the wake of 2008, listing prices really do not necessarily reflect true value. You might find a home for $1,500, but if it has $20,000 owed in past taxes and fines, and needs $30,000 in repairs, and only has an after-repair value of $30,000, you are already in the negative. Know the real value.
Going too cheap can apply to other areas of the wholesaling business too. You want to be focusing on properties which have a good resale market. People live in all types of properties and neighborhoods, but if there aren’t many buyers for a property that will seriously limit your business. You also want to avoid going to cheap on staff. You typically get what you pay for. Great team members will pay for themselves, and some. Then, while living frugally is smart, don’t forget to treat yourself now and again, and enjoy the rewards.
- Failing to Keep Learning
Things are constantly changing in the real estate market, business, and in real estate marketing. You can’t expect to get to the top, and stay there, unless you are committed to constant learning.
- No Money Down Deals
This is one of the areas of real estate wholesaling where there is the most misinformation. For one; many think no money down real estate deals are too good to be true. That holds many back, who could be making a ton of money and enjoying far richer lives. They are possible. In fact, you can even buy properties and get cash back (get paid) at the closing table for buying them. This is especially true in wholesaling. On the other end of the spectrum, some try too hard to only do no money down deals or to operate without money. It can be done. But there are often little expenses required. Even just gas to get around, and cell phone and internet service. However, you can partner up, or find private lenders, and use their money to operate and fund deals.
- Not Doing Your Due Diligence
Wholesalers may be able to flip virtually any type of property, in any condition. Yet, doing so profitably requires pricing your offers right, and knowing the value of what you are buying. That means knowing if there are any liens attached to the property, what repairs are needed, and any other issues which may impact resale or value.
- Failing to Offer Good Deals
The number one complaint about real estate wholesalers is that they aren’t offering good deals. You aren’t going to get far, for long, if you are bombarding people with terrible deals. You’ve got to offer real value if you want to sell properties, and to keep buyers coming back.
- Long Chains
Another major issue is long chains of people trying to market and broker deals. People will try to market other wholesaler’s properties. Sometimes that ends up being three or four, or more connections deep. Everyone is adding their cut on top, and there can be a lot of confusion over who has the rights to sell it. Instead, go direct and find your own wholesale deals from motivated sellers.
Don’t wait for the market to change, or for your situation to improve. It’s highly unlikely to get better, until you’ve begun taking action and are doing deals. Just get started!