Lex Levinrad chats with us today about how to get started in wholesaling the 4 areas that new wholesalers need to learn about before they can become successful and confident wholesalers.
Lex explains the benefits to having a partner when you first get started in wholesaling, even if it’s you finding the deals for them.
Mike: Welcome back to the FlipNerd.com REI Classroom, where experts from across the real estate investing industry teach you quick lessons to take your business to the next level. And now, let’s meet today’s expert host.
Lex: Hi, everyone. This is Lex Levinrad with the Distressed Real Estate Institute. And here we’ve got another episode on REI classroom. And what we’re going to be talking this time is about wholesaling and how you can partner with other investors even if you don’t have any money.
Mike: This REI Classroom lesson is sponsored by UglyOpportunities.com.
Lex: The concept of wholesaling is essentially finding a property, getting the property under contract, and then flipping that property to another investor for a profit. The problem that I’ve encountered after training so many students, especially in wholesaling, is that most new real estate investors really lack three things. The first thing that they lack is training and education in understanding how wholesaling comes together. In other words, how do you find a property, find a buyer, flip it to them, and then make money, so that boils down to training.
The second thing that I find is that even if you had that training, your challenge would be, well, how do I find the property? Okay, I understand how wholesaling works, but now how do I go out and look for a property? And that would be like the second phase. And there are many different places that you could look for properties. You can call real estate agents; you can search the MLS if you have access to the MLS. You can look in sites like realtor.com, or zillow.com, or trulia.com, and you can also go on online auction sites like auction.com, and hubzu.com, and hudhomestore.com, and homepath.com.
So there are a lot of different ways to find properties. So those are the two things, understanding how wholesaling works, which comes down to training, and the second thing is how to find the properties.
Now the third thing is, let’s say you did find a property. Let’s say you got a smoking hot deal. You want to flip it to someone. The question is who are you going to flip it to? If you don’t have any buyers, you’re going to have a big challenge on finding someone to flip the property to. And even if you did find somebody to flip it to, how are you going to pay for it? Because you can’t sell a house before you bought it. So if you don’t have enough cash to buy the property, how do you pay for it?
Those four items, primarily, are the difficulties that I see students encountering when they want to start wholesaling. Training and education are very simple. Go to sites like the one you’re on right now, and watch and learn as much as you can. If you have a Real Estate Investors Association meeting in your town, whatever city and state you’re in, go to it. Learn, network with other people.
The other thing is once you understand the semantics of how to put it together, then go out there, and start looking for deals. The more houses you look at, the more realtors you talk to, the more calls you make, the more offers you make, the more houses you’re going to get. Work on putting a buyers list together, and finding buyers, and work on finding someone that can fund your deals. Those are the four components that you need to put together.
And I recommend, especially for beginners, that you do it in a logical sequence. First, learn how it works, then learn how to find the properties, then learn how to fund the deal, put it together, and then learn how to find the buyers. And if you can go through that whole spectrum and do your first deal and make money, then it’ll be a lot easier for you to do your second and your third deal. And who knows? You might just start wholesaling, and just like many students I’ve worked with, you might actually quit your job, and end up wholesaling for a living.
When you’re starting out, as a new investor, the way I started out, for the first two years in this business is that I worked under two guys. And they basically taught me what I know pretty much, at least for the first two years. And I learned a lot of information from them. But what was really key was that I was able to go out, and look for properties for them. Meaning if I found a house, they put their name on the purchase contract, they bought the house, and they put up the money. So I didn’t have to worry about coming up with money. I didn’t have to worry about who to sell a house to.
And I didn’t even have to worry about any legal issues or liability issues because my name wasn’t even on the contract. All I had to do was find a deal for them. Now, if I found a house that they liked, and they decided to buy it, and keep it as a rental property, they would cut me out equity on the deal, typically 25%. If they decided to flip the property, then they would give me 25% of the profit on the flip.
It’s a great way to start out as a new investor, just go out there looking for properties for other people. We have a program in-house called the Partnership Program. You can click on the ‘Partnership Program’ tab on our website if you’re interested in learning more about it. But that’s how we basically train. We teach people how wholesaling works, we teach them how to find deals, and we put a system in place that shows them how if they found a deal, they can market it, and have a buyer purchase their property.
So that’s a great way to start out. If you’re a new investor, it’s a great way to learn, starting out before you start fixing and flipping and doing a whole bunch of other things, just start out by learning how to wholesale. Once again, this is another REI Classroom lesson for you guys. This is Lex Levinrad with the Distressed Real Estate Institute. And I look forward to seeing you guys in some other lessons.
Mike: HomeVestors, the “We Buy Ugly Houses” folks, is a franchise system of hundreds of real estate investors that have purchased over 65,000 houses. If you’d like to learn more about the most powerful real estate investing system in existence, whether you’re a pro looking to take your business to the next level, or whether you have no experience at all but a burning passion to be successful in real estate investing, please visit FlipNerd.com/ugly to learn more.
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