Not everyone can start and run a successful real estate wholesaling business. The business demands a lot in terms of patience, time, and commitment. It is important to enter the business knowing that success won’t come easy; you will need to pay the price. Since you will be dealing with clients, you will also need to have excellent marketing and communication skills.
Perhaps the first key to success in property wholesaling is locating the right property. Distressed property owners who want to sell their property as quickly as possible are the best prospects. Those kinds of properties are definitely attractive to investors as they fetch huge profits, especially if they are located in desirable areas and have desirable amenities. Before making an offer for any property, you will want to know the level of repair needed so that you can factor it in the offer.
Knowing how to make an offer is crucial in wholesaling. If you’re making an offer that is too low, potential sellers may get scared. On the other hand, making a too high offer will reduce the profitability of your business.
When it comes to real estate wholesaling, distressed properties are no doubt the best as it is possible to sale them under the market value. Distressed properties are those properties whose owners want to sell quickly or those under foreclosure. As a real estate wholesaler, getting a distressed property enables you to sell it at a far much higher value than what you bought it for. Another reason why wholesaling real estate is so appealing is the fact that it has low capital requirements. Typically, real estate wholesalers, especially starters, use free or inexpensive ways of locating distressed properties. Seasoned wholesalers, on the other hand, tend to use sources such as online real estate websites, real estate investment groups, real estate wholesale groups, and even property finders, in locating distressed properties for wholesale.
The internet is a great source of distressed properties, but you will need to know the best sites to check. Of course, you don’t want to waste your time browsing a site only to meet property owners who are not motivated to sell. Some of the most reliable sites where motivated sellers can be found include HomesByOwner.com, FSBO, and Craigslist. These sites are easy to use as each offers a search bar where you can type a keyword that you’re searching for. Keywords are a great way of conducting searches as they make it possible to narrow down the search. Some commonly used keywords in searching for distressed properties include distressed property, fixer upper, motivated seller, estate sale, must sell, and sold as is.
Real Estate Investment Groups and Wholesale Groups
Real estate investment groups and real estate wholesale groups give real estate wholesalers the opportunity to network. These groups bring together real estate investors, real estate professionals, appraisers, contractors, title companies, real estate agents, and other people who have an interest in real estate. Here, meeting lead sources, mentors, and even partners won’t come as a surprise.
Hiring a property finder is just another popular yet affordable way of locating a distressed property for wholesale. A property finder is a person or organization that specializes in finding properties that are up for sale; so, they are experts in the game. Whether it means cold calling, moving door to door, or scouring neighborhoods, a property finder will use every means possible to locate distressed properties.
One good thing with property finders is that you don’t need to pay them upfront. Instead, they will do the work first and demand payment when you will be purchasing the property. It is little wonder this people are sometimes called bird dogs. They save wholesalers a great deal of time, which can be utilized elsewhere, including connecting with other real estate investors and finding property buyers.
While locating a suitable real estate property for wholesale is a milestone, it is quite another thing to convince the owner to sign a contract with you. Having the property owner sign the contract is important because it gives you confidence to go ahead and sell the property at a profit.
Approaching the Owner
You will need to book an appointment with the property owner so that you can have good time to discuss about the business, and you will want to go about this in a delicate way. Remember, as a wholesaler, you may not be a traditional real estate professional; hence, gaining the trust of the property owner will play an integral role in moving forward. You will need to keep time for the meeting and be courteous and professional.
Negotiating the Deal
When negotiating with the property owner, it is important to discuss the benefits the owner will get if they sold the property to you. You could focus on things like ensuring that the property owner does not default on the mortgage they are servicing. You may also want to focus on how you will handle processes such as appraisal, inspection, and the contract drafting. Show the property owner that you’re going to take care of these processes so that they won’t have to go through the trouble. Most owners prefer not to incur any upfront costs. If there are any repairs that need to be done on the property, it is important to let the owner know that they will be taken care of since the cost of any repairs will justify your offer to the property owner.
Signing the Contract
Getting the home owner to sign your contract will give you the all-clear to go ahead and wholesale the property based on the contract terms. You could involve a real estate agent or a local attorney in drafting the contract (though most wholesalers do it on their own).
In most cases, property wholesalers tell owners that the buyer is their partner. This is meant to prevent the owner from knowing that the wholesaler is reselling the property at a profit. Although there is no crime in so doing, it is not recommended as it looks deceitful.
Mistakes are part of life, and we all know that, but some mistakes can be very costly. A mistake on your property could mean spending money and time pursuing tenants or even dealing with lawsuits filed against yourself. Here are five property management mistakes you must avoid to cushion yourself against these headaches.
Failure to Appoint a Property Manager
Property managers are the masters in the game. They understand every aspect of property management, right from vacancy marketing to drafting tenancy agreements to maintenance. They also know how to handle tenants professionally – it is uncommon to find a property manager engaging in a heated altercation with tenants. Unfortunately, many landlords decide to manage their property on their own for fear of paying a property manager. With a property manager, you will likely get everything right from the word go.
Forming Friendship with Tenants
While friendship is important, it can ruin your business. What will you do if your tenant-cum-friend requests for a time extension for paying rent because he had a funeral just the other day? Your relationship with tenants should be purely professional and courteous.
Failure to Screen Tenants Properly
You have built some nice rental apartments, but they have been vacant for six months now. A potential tenant comes knocking and you’re quick to rent out. Wait a minute, you could be wrong. You don’t have to be desperate for tenants as this could lead into getting a bad deal. You will need to vet the tenant thoroughly to ensure they have the ability to pay rent. What is the point of renting out to someone who cannot pay rent?
Property managers are human beings, and as such, they have their own limitations. In fact, there is no guarantee that you will get a property manager who will be a perfect fit for your property. However, there are certain qualities that a good property manager must embody. Here some of them:
Forget about educational knowledge learned in class; experience is perhaps the most important attribute to look at when hiring a property manager. You can know the property manager’s level of experience by looking at the number of properties they have previously managed and the number of years they have been in the business. An experienced property manager will have local real estate regulations and laws at their fingertips.
It doesn’t matter how experienced a property manager is, their job can turn stressful at times, just like any other job. Just imagine how stressful it can get dealing with unruly tenants and behind-the-schedule contractors! This is where the manager’s patience will be put to test.
Exceptional Communication Skills
A property manager deals with different people, including tenants, investors, landlords, etc. As such, proper communication skills is very important.
Other important qualities for a property manager include tech savvy, ingenuity, professionalism, and organizational skills.
Being a real estate agent means wearing many hats. You need good selling and communication skills, and you have to be a people person, on the least. Now these are obvious hats any real estate agent wears. However, there is one hat that may not be as obvious, yet it is very important: marketing. Yes, you don’t need a masters degree in marketing, but you will need to be on the grips with what marketing entails if you must succeed in your business as a real estate agent. Most agents tend to fare well with mentorship and online resources, such as this article, but they still make certain mistakes, which should be avoided at all cost.
Failure to Use Social Media
Social media does not exist only for purposes of sharing videos and photos of your vacations or for uploading some funny memes. It is a platform for almost everything, precious leads included. You can start social media pages for your real estate marketing that could turn your followers into a solid lead generator for your business.
Use of Self-Made Website
Professionalism is key when it comes to marketing real estate. A Self-made website could limit your lead generation, especially if you don’t have certain technical expertise; most self-made websites have very slim changes of ranking high in search engines. As such, it is important that you hire an expert to complete the job for you.
Poorly Described Listings
Do you know that the language you use to describe your listings has the power to attract prospective buyers or at least keep them interested? Unfortunately, most agents ignore this important aspect. If you don’t provide a proper description of your listing, you may be losing out on lots of leads. Be thorough in your description and give every important detail about the property you’re listing.
Technology has brought a lot of welcome drama in the real estate realm, just as it has done to other realms. While there are those who have complained of bold-faced unfairness, lead theft, and even fraud perpetuated by third-party listing sites, the majority of players in real estate claim that these sites are not all bad. With the right strategy, real estate agents can sell even more homes and generate quality leads thanks to these websites. Those who use third-party sites for listing and are satisfied have cited the following advantages:
More Exposure to Buyers
Third-party sites enable you to reach a wider audience than you would do without them. The sites have millions of visitors every month, and the bulk of these visitors are real estate investors or home buyers.
Most third-party listing sites allows real estate agents or property owners to list properties free of charge. Who does not like free things?
Find Buyers Quickly
With the internet having almost everything anyone would want in this world; it is the go-to for many buyers. Hence, listing websites helps to get buyers faster.
Do you desire to dive into real estate business but don’t have finances to back your desire? If your answer is yes, then property wholesaling could be a perfect fit for you. Wholesaling will also suit you if you have an eye for distressed real estate properties, you are a people person, and possess skills for negotiation. Yes, it takes a lot of time to establish yourself in the market as a wholesaler, but if you do it right, then overwhelming rewards would be waiting for you. If you’re passionate about real estate and have good communication skills, you may also be the right person to open wholesaling business.
To start a successful property wholesaling business, you will need to undertake some research, which will be helpful in locating real estate experts and groups that can offer you valuable advice on how to go about the business. Additionally, you will need to invest time in locating distressed properties and get to grips with real estate wholesaling contracts. Lastly, you will want to find motivated sellers.
Compared to other areas of real estate, wholesaling requires less initial capital. The business does not require you to have a minimum educational requirement or a real estate license either.
Once you get into the business of wholesaling, it won’t take long before you realize if it fits you or not. The business requires a lot of commitment when it comes to finding sellers and buyers, and it involves lots of grey areas. Once you have a couple of deals on your profile, you be will have opened the gates for more business. Experience will give you confidence to work even harder and succeed in the business.