Want to invest in real estate with no financial risk and no money or credit? Wholesaling houses is a popular choice. I personally think wholesaling can be a challenging way to get started, but the fact that you can get started in real estate investing without any barrier of entry makes wholesaling an attractive option. If you can get good at this side of the business, you will be success with anything you want to do. The reason I say that is finding deals is what makes a wholesaler successful. If you can get good at finding deals, you have unlimited potential.
Once you find a deal, you need to understand how to sell it to make your profit. Here are four ways you can structure your wholesale properties.
Contract Assignment: This is the easiest, but comes with some risks if not done correctly. It is also somewhat restrictive as bank owned properties will prevent this. This works well when you negotiate your deals directly with the seller. The way this works is you will get a house under contract and then you will assign your rights in the contract to another buyer for a fee. That new buyer will take on the rights and responsibilities in the contract and will close in your place. It is best to get your fee paid up front, but it is very common to get your fee when your buyer buys the house. Here are a few things to keep in mind when assigning contracts.
Be sure that you always disclose to your seller that you are or may assign the agreement to another buyer for a fee. I suggest you actually put this in the contract. Sellers should be OK with this if you are transparent that you are an investor who buys houses for a profit before you start to negotiate.
I would get money from your money that is at least enough to cover any earnest money you put up with your seller. That way if your buyer defaults on the agreement you at least cover your costs. Always try to get the entire fee paid when you assign the contract.
I like this way the best because it is easy to do on your end, it is easy for the buyer and the buyer’s lender, and it is the cheapest way to go.
Double Close: This just means that you actually buy the house and then resell it. There are several ways to do this, but the most common is to buy and sell in the same day or within a day. Typically, you will need to bring in financing to get your closing done with the seller, which is why this is my least preferred method to wholesale. Also, because you have two closings you will have two sets of closing costs, so it is the most expensive way too. With that said, some wholesalers prefer this method because they do not have to disclose to the seller their intent to resell and they can both keep their deal with the seller and their deal with their buyer private. It is believed by some that this is a good way to protect your profits. The information will all become public record at some point, but that is well after the closing.
This is the method you will use by default if you do not do your contract on the front end correctly, so we do see double closing frequently.
Flip the Entity: This has become the most common way to wholesale in my market. Most, if not all, the successful wholesalers will use this strategy. Especially when wholesaling foreclosures where contract assignments are forbidden.
The way this works is the wholesaler will set up a separate entity, like an LLC or a Trust, and put that entity as the buyer of the house to be wholesaled. They will then sell the entity itself for a fee. The benefit with using this strategy is that actual contract on the house does not change. Since the buyer of the house is the entity, there are no issues with any regulation or assignment restrictions. The downside is it could be more work because of the extra step to set up the entity, and there could be additional fees to register the entity with the state. The risk for the buyer is whenever you buy a company you are buying all of it. So, if the entity was used in another transaction and owes money to anyone, the new buyer could be on the hook. Knowing this, the best way to do this transaction is with a brand-new entity used for this one purpose.
Relationship Close: I don’t know if there is an actual name for this method. In fact, it is rarely seen. What I mean by relationship close is that you have such a strong relationship with a buyer that you write offers in the buyer’s name. For this to work, you should be a licensed agent and preview houses for your buyer. You would need to understand their criteria and only offer on houses they will want to buy. I have a client that works this way. He has an agent write his offers and the agent/wholesaler gets paid a commission with each successful closing. They do 2 to 3 deals a month with this strategy. My client just signs contracts without looking at them at this point and trusts what the wholesaler is putting together solid offers. There is always an inspection clause protecting the buyer and the agent, but more than 9 out of 10 houses that go under contract close. That is because the agent/wholesaler knows the business and knows what this buyer will buy.
I would stay away from this method, especially if you are just starting out. A lot can go wrong. I wanted to mention it because it is one of the 4 ways that I see people wholesale. If you are just getting started I would focus on contract assignments and then flipping the entity.
“Pain don’t hurt” or so says Dalton in the movie Road House. I loved that movie and I love that quote. The truth is pain does hurt, but the temporary and manageable hurt creates success!
I had the most amazing experience last year at the Denver and Minnesota Success Summits. For those of you that I was lucky enough to present to, you know that over time I have focused my energy on teaching skills, techniques, and strategies to help you get rich in real estate. I gave my first presentation to a live audience in 2006, and have since taught thousands of investors how to make money. I have written countless articles, reports, and a book. I love getting notes in the mail, emails, or people approaching me telling me how I helped change their life. Someone told me that my book helped them make an additional $50,000 this past year alone. You can probably tell that I have a passion and am driven to help people reach their goals, and now I understand that I was missing a very important piece to this mission. Most people need more than skills, techniques and strategies. Many can acquire all the information they need to make a fortune and still be broke. What most people need is the understanding of what it actually takes to be successful.
At this year’s Success Summits, I tried something new. I tried to breakdown the fear that prevents us from taking action and tried to give techniques on how to move forward past the fear. I had a lot of fun with the presentation, but it also pulled a lot of emotion out of me and the audience. Multiple people told me I touched them, and it was the exact presentation they needed to hear as the try to jump start their investing. I think one of the reasons I had several people approach me in tears is because they know they have not been taking action, to avoid pain, and all that has created in their life is more pain. That is a hard thing for someone to realize. My guess is people left that presentation being hard on themselves. That is not the point. The point is, now they understand what was holding them back so that they can implement strategies to propel themselves forward. The past is the past, and serves only as an educator for the greatness that is about to come.
If you attended the presentation, you learned that our decisions are based on one of two driving forces. Pursuit of pleasure or the avoidance of pain. We talked about pain being a stronger force, and can easily dominate our decision making. The thought of experiencing pain, even if it is not physical, is scary; which is where the fear that stops us stems.
What is important to understand is that pain supports us. Success is developed by experiencing pain. If you look back through time, you will see that all successful people had to endure pain before the triumph, and that all people experiences what could be considered large amounts of pain. No one is immune to this fact. What makes successful people successful is they can embrace it and learn from it. I also believe that once you start to embrace psychological pain, and are able to reflect on it, you will have no choice but to grow and become more and more successful. Things that scare most of us, like being embarrassed, or being rejected, are things that make us stronger, smarter, and better equipped to succeed.
As we move through the year I will write more articles on the subject of busting through fear in hopes that more of you will start to implement the real estate skills, techniques and strategies that we teach. For now, I want you to understand the reason you make the decisions you make. I want you to understand that the fear is based on your attempt to avoid pain, so you can peel back the fear and focus on what the actual results of your decision. Obviously, you can mess up and create pain through failure, disappointment, and rejection, but none of that is that bad. In fact, it is necessary. Focusing on the pleasure you will get from doing the things you are afraid of will help move you forward. And you never know, if you try something… it just might work.
1. Get Educated
No matter where you live, you need to take pre-licensing courses. Thereby, state requirements differ significantly. For this, contact your real estate commission for your state requirements for licensing. Few real estate agencies have particular education requirements, so you may have to opt for an additional course after being recruited on with a company.
2. Pick a Brokerage
A real estate brokerage is a firm or office for which the brokers and real estate agents work. You need to contact the broker before going graduation for your training courses. Brokers have three years additional real estate training and can advise you better when it comes to the working in this domain, as well as selling and listing homes.
3. Obtain License
Real estate licenses need the passing of the national and state exams. Also, you may have to give the criminal background check. Between the courses, licenses and exam fees for the real estate salesperson, you can expect to pay $200 (although rates may vary from state to state).
4. Make budget
While becoming a real estate agent is not too low cost, it is cheaper than entering many professions. The startup costs are between $1,500-2,000.
5. Make the Real Estate Agent/ Realtor decision
To use the title’ realtor,’ you must join the National Association of Realtors (NAR). It is done by selecting a well-qualified brokerage and also attending some meetings designated by your local chapter.
6. Make your Referral/ Client Portfolio
The excellent way to create your portfolio is two-fold, i.e., get a mentor and utilize your network. Pick a mentor in the real estate firm who guides you towards the seller/buyer contacts and splits commission. Ask your friends and family members for the references of people whom you are considering for selling or buying a home. It also helps to start networking well.
Becoming a real estate agent is same as starting a tiny business. Even though you will work within the brokerage of well set real estate agents or realtors, you need a startup fund for the business expenditure and to cover the few months of personal expenses while you create your clients base.
There are many factors that lead a real estate consultant to success.
The challenges of the profession are many. The ability to adapt is the most important characteristics for those who want to have good results in real estate mediation. However, there are routines that can help you.
Here are 5 habits of successful estate agents. Follow them, and improve your results.
A successful real estate broker considers the calendar “an absolute law”.
Your time is precious and should be harnessed with maximum efficiency. So, schedule all the actions you have to do during the day, or throughout the week. Follow the calendar to the letter. If you only have 30 minutes to visit, use only this time alone.
Planning your work will help you do more, since you do not waste a second thinking “what do I have to do now? / there’s something important I have to do, but I’m not reminded … “.
Successful people accomplish what is planned for the day. There is no way to procrastinate.
A successful estate agent is available to the client
Put yourself in the shoes of your client. If I sent an email, or called, would you like to wait two days for an answer? In that time frame how many other agents would you have contacted?
Nowadays, leads do not expect too much from contacts. Whoever is the first to respond will do the business.
Can your client only visit a house on the weekend? Adjust your work plan to respond to the request. It will be an appreciated effort that will yield a business and future recommendations.
A successful real estate consultant explains all the steps in the process
Most people are not aware of all the work that exists until they are presented with a list of suggested properties. Explain to the client what the selection process is and why you think a property is ideal.
During negotiations, maintain a regular communication channel. Do not leave your client in the dark. It is important for him to know in what state the proposal is.
Communicating is essential if you are selling a client’s property. Keep it up to date with the proposals you receive, the strategy you take and the hours you invest in the sale. Get your work noticed.
Technology is one of the best allies of a successful real estate agent
A well-built platform, can help you boost your business. The promotion of a property is almost nil if you do not use social networks, if you do not work with one, real estate portal, etc. You will have to use the necessary technologies to maximize your results.
An individual management of all the tools available would consume you a lot of time. So if you want to succeed, invest in a CRM that fits your needs.
A real estate broker invests, constantly, in training.
Your schedule is fulfilled, and it is normal that you do not have the opportunity to be updated with all the new techniques and tools for the real estate industry. Take a few hours each month to study. Read ebooks, blogs, and if you can attend an event for real estate agents, do so. It is the best option to listen to experts whose profession is to discover how to improve the performance of those who work in real estate brokerage.
There are multiple options available when it comes to choosing a real estate agent. But there are some common mistakes made while making the choice. A wrong selection of a property agent makes the client suffer financially and leads to inordinate delays.
Exercise caution and avoid the common mistakes in choosing a real estate agent for representation.
Follow Track Record
A property agent often makes tall claims of wide experience in the real estate market. He projects a rosy picture of dealing with all kind of market segments. Do not make the mistake of believing what the property agent says. Look closely at the inventory he has sold in the past one year. Follow the properties he has listed and the corresponding sales figures. Selling 25 properties in a year sounds impressive while pitching for a new client. Try to know the number of listings he made in the last year. Selling 25 properties out of 100 listings is no big deal. Choose the property agent who has a higher percentage of sales.
Do not end up with a property agent who flatters the client and creates an impression of serving him well. Be realistic in assessing the worth of the property in the area. A clever agent tries tricks to win trust and gets hired for the job.He overvalues the property and it remains unsold for months. After frustration sets in, the real estate agent urges the client to slash the quoted price. Some buyers interpret this as a signal of distress. They offer less than what the property is worth.This is a common mistake people make while picking up the right property agent. It is sad that those agents who overvalue the property are considered well-wishers. Clients regret this later.
Choosing friend as agent
While hiring a property agent, the client wants to work with a person he knows – for better coordination and trust. When a person mixes his personal contacts and brings them in the professional domain, he cannot enforce a disciplined approach or seek clarifications if things do not progress well. Small mistakes are expected to be overlooked. The property agent takes a lot of things for granted and does not put in an adequate amount of hard work to meet the expectations of his client friend. When a property agent hired from his friend circle fails to get the best price, there is bitterness in the relationship. In the search for the right property agent, do not settle for options from the personal contacts.
Make it a point to check the background of the property agent. It is a professional arrangement and the client should not make any concession or overlook the key aspects of consideration. Seek references and contacts of his previous clients and review them accordingly. Search online with his full name and find out any negative remarks about his performance. Find out from his clients if they would like to recommend him.
A client should opt for a reputed property agent with a flawless record.Dealing with a reputed name makes things a lot easier.Buyers also trust such agents.Their behaviour and style of conducting the deal are superior.Their language is courteous as they know how to deal with educated and respected people. Sometimes their reputation clicks the deal. They are fast, reliable and cost-effective. These are some factors every client should bear in mind when he hopes to hire the right property agent. But unfortunately, he ends up with disappointment when he does not pay attention to these vital aspects while making the choice.