Real Estate Wholesaling.. Get rich quick scheme, or a lot of work?!?

Real Estate Wholesaling.. Get Rich Quick Scheme, or a lot of work?!?

I work with a lot of investors. I have a booth at our local REIA(Real Estate Investors Association), and I am constantly looking for experienced investors looking to buy my properties(yes I wholesale), or newbie investors looking to get their feet wet with private money lending and tutoring.. Point is, I see A LOT of newbies who want to get their feet wet by wholesaling. A lot of these guru’s preach how easy it is to make 5, 10, 50k on a single wholesale deal.. Most guru’s don’t tell you how much work is involved.

Yes, you can make money in wholesaling, but there is a lot of work involved. There is many facets to wholesaling.. It’s not just making lowball offers on houses, and then selling them quick and easily… You are going to need to find sellers(banks/reo properties are easy enough, but there is decent competition there, so don’t depend on these). You will need buyers(Investors who have cash and are ready to go on a moments notice). You will need to know how to be creative and market effectively. Finding sellers and buyers and coming up with the marketing and the marketing itself are all things that are going to take time… Lots of time!!

Let’s run down the main process, as if we already have some buyers(investors) on the line, and we are looking at REO/Bank Owned properties, and since we are in fantasy land, lets say you are a Realtor and can make your own offers(I kid, I kid!)..

On average you will write 20 offers on houses before you will get 1 under contract… So that means you are going to go look at 20 houses(30 minutes a piece), then spend 10-15 minutes a piece writing up offers to submit. Let’s say they all counter offer and it takes you another 15 minutes each to write a counter to their counter, etc So 1 hour per house @ 20 houses = 20 hours per week plus or minus. Add in multiple second or third counter offers and the time limits can go up.

Once you get one under contract it will be time to submit your earnest money and then on to crunch time and getting it sold… You need to be calling all your investors and getting them in to see the house. Once you get one on the hook, you need to get them to give you the wholesale money and get them on the contract. Sounds easy right?

Let’s talk issues….

You don’t have your Realtors license… You have to drag a Realtor to 20 houses a week. You have the Realtor look up comps for your deal. You have the Realtor write up the contracts on 20 houses. You have the Realtor submit and defend all the offers. You have the Realtor submit your earnest monies. You are probably going to have to submit earnest money checks with each offer(don’t worry, they won’t be cashed unless the deal gets accepted). If you can’t close, your Realtor is going to have to fight to get you your earnest money back.

You can’t find a buyer…. Most likely you didn’t get a good enough deal for most investors, or you missed some repairs. You either buy it yourself, or you have to get out of the contract, and get your earnest money back. Be aware that getting your earnest money back might not happen, and in most cases it will take a LONG time to get your money back(2-6 weeks or longer). Your Realtor will be pissed because he/she drug you around to 20 houses, and you couldn’t complete the deal.

You don’t get any offers accepted….. Most likely you are having a problem comp’ing the house, or the repairs. Your offers are coming in way to low, and the bank is just laughing at you.. hehe Your realtor is going to start getting irked at all the work and no payoff.

You find a seller…. You are going to need to spend time with them, hold their hand, explain the process. You may spend 1-2 hours, or more, dealing with a seller to get them to the point of signing a deal with you. Then you are going to have a lot more time holding their hand throughout the process. You plan to hold their hand right?!?! Most people who sell to us are dealing with stressful extenuating circumstances. You need to understand this and help them feel comfortable with their decision. I know this process is about you making money, but you need to understand that you are doing a far better service for the seller. You are helping them offload a burden, in most cases. You may very well have to listen to a 3 hour speech about how the family pet died and it’s been a downward spiral ever since… DEAL WITH IT!!!

20 hours a week to preview and submit offers on bank owned homes to get 1 deal UNDER CONTRACT. Half a 40 hour work week to get 1 deal under contract. Don’t forget the time you will be spending marketing and dealing with buyers and sellers. Don’t forget the time you will be working with your Realtor(if you aren’t one). There is a lot of time involved in wholesaling. Doesn’t stop me, but I don’t have delusions of grandeur. There is no get rich quick scheme in wholesaling… Lots of hard work will pay off in the end..