In this article, I am going to discuss a quick way to make money in Real Estate that requires little money and can be highly profitable. Wholesaling Real Estate is the highest dollar per hour activity that I have found in Real Estate.
I will explain why and some of the pitfalls to avoid…
– Wholesaling is getting a contract on a property for cheap, marking it up a little bit, and then selling it for cheap to an investor by assigning your contract to them. There are many ways to do wholesaling but that is the most basic form of it.
– Wholesaling is similar to brokerage (or being a Realtor) with the main difference being the licensing requirements. A wholesaler is not regulated by the government in the same way that a Realtor is. They still have to follow the law, but they have ultimate control of the process and report to no one.
– This is the same thing as Wal-Mart does, eBay business owners do, auto dealers do, and most businesses have some component of this in their business model. Realtors tend to work on the retail side of the business and have a goal to sell each property for the highest price possible for their client who is paying them a commission. Wholesalers have a goal to buy properties as cheap as possible and offer it for an attractive price to a cash investor.
– In order to buy properties for a big discount, the wholesaler must get REALLY good at marketing. This means they will have to become experts at sending out mailings, advertising in newspapers, internet marketing, networking, socializing, talking, and any other way imaginable to get leads coming into their business.
– Then, they get good at handling those leads. They talk with property owners on the phone and weed out the bad leads. They meet with owners who are motivated to sell. Do not confuse motivated with desperate. This is the part where Real Estate investors get a bad reputation: Sometimes, people are so desperate that an investor preys on them and takes advantage of the situation and rips them off. This is not wholesaling, this is scamming. A real wholesaler discloses everything. They tell the owner that they make their living by getting a discount on the property in exchange for a quick, cash closing so that they can move on with their life now rather than wait 6 months for a Realtor to sell it and pay 10% in closing costs.
– Wholesaling does not require much money at all. You do not personally need to have the cash to buy the property. The person that you are selling/assigning the contract to has the cash. The only thing you will need money for is marketing. You can actually do this for free. There are many ways to wholesale a property and never, ever spend a dime. The higher your budget, the more leverage you can put in place which ultimately means that you will close deals sooner and will require less of your own time.
– Cost to get started: Free, if you are very good at googling. If you want quick results, you should have at least $2,000 available and upwards of $10,000 depending on how much you want to hire out vs. do yourself.
– How much time will it take to start making money: Usually between 1 month and 3 months if you are aggressive and work smart.
– Income Potential: Unlimited. The guy who taught me how to wholesale makes $2,500,000 per year and has a few employees.
I know quite a few wholesalers who are not real aggressive and still make over $100,000 per year.
I have heard of wholesalers who work with commercial properties that make $1,000,000 + per deal. Imagine doing that 10 times per year!
I have also met dozens of investors who got all fired up about this business model and never made any money. Similar to the brokerage idea, it depends on why you are doing it, and how motivated you are.
This business model takes a lot of guts to get started because you will be making low offers and you may fear rejection. Once you do that 10 times, it is a piece of cake and once you close a deal and the reality kicks in that you actually did that homeowner a good service, you will feel proud about your business and the sky is the limit.