When you are new in the wholesale business, you are sure to have far more questions than answers. And unfortunately, most newbies have no one to turn to for answers. Today, however, we are answering six of the most common questions on the minds of new real estate investors who are wholesaling.
- Is wholesaling illegal? Many potential wholesalers are worried that they are entering a less than legitimate industry because it seems too good to be true. But in this rare case, something that looks too good to be true really is true and legal. Even though you might not have a real estate license, you can make these deals. What you need to do first is consult a lawyer in your area to ensure that you have the correct wording in your contracts to remain on the right side of the law.
- How do I find a mentor? Mentors come in all shapes and sizes. That is to say, that you can find mentors in many places with a variety of information to share. But the one thing that all mentors have in common is that they want to see some effort on your part. No one is going to take you in and provide you with your first deal or two. You need to be out searching for deals while you are looking for a mentor. And as you meet more people and grow your network, your mentor will find you. But you need to be that hard-working wholesaler who has potential, not a lost puppy who is looking for all the answers and a shortcut to success.
- How do I find motivated sellers? Motivated sellers are not going to be sitting on every street corner or holding a big sign to get your attention. You need to be out actively searching for sellers. And that includes cold calling, direct mailings, bandit signs, and calling for sale by owner listings. Motivated sellers are going to be the ones who are eager to listen to your request to purchase their property. They are going to be the ones who see your sign and call you or call you after receiving your mailer. You will sense an eagerness in their voice and know that this is a motivated seller. But you will only find them by casting a broad net and sifting through all of the responses that you receive.
- What should I tell a seller since I have no money to buy their property? You are correct. You will not be buying their house at the moment. But you will have the funds when the inspection period is over. You need to appear confident, even if you are new. If you look scared or do not sound confident when you are speaking about the process, the seller will have no confidence in your abilities.
In addition, it is more vital for you to listen to the seller than it is to talk to him or her. You need to ask some critical questions and then take note of the answers. These questions include:
- Why are you selling this property?
- In the perfect world, what amount of money would you want to get for your property?
- As a buyer, is there anything about the property that should concern me?
- What repairs do you know need to be made around the property?
The answers to these questions will tell you a great deal about the property and the seller and his or her situation. This information is going to be very useful when you are working to close the deal.
5.How much do I offer for the property? There is no exact answer to this question. But there is a very reliable formula that almost every wholesaler uses: AVR x .7 – repairs- wholesale fee = maximum offer. Remember, this is everyone’s starting point. But it is your responsibility to learn your market and to know how that will impact this formula.
6.How do I find buyers? First, if you have a property under contract, work with other wholesalers who have a buyers list. You can locate them by Googling “sell my house in (your city) fast.” If you have a good deal, any of these wholesalers will be happy to work with you. Again, if you are simply looking to build your own buyers list, Google will be your friend. You can also search Craigslist and work with your network to determine who are the qualified buyers in your area.
Having the answers to these common questions will not eliminate all of your concerns or angst when you begin wholesaling. But it should provide you with some reliable guidance as you start to move toward your first deals. The most crucial part is that you dive in and begin searching for a great deal to get your feet wet.