The DO NOTS of WholesalingPosted on May 2, 2014 by
When getting started in real estate investing and especially Wholesaling, usually everyone is focused on what they need to do. And that is pretty obvious – get educated, put out marketing, talk to sellers and buyers, make offers, negotiate, and close deals. We usually know what we NEED to do. Whether we do it or not is a whole separate issue/article. So let’s set that aside for the moment and what I want to talk about now is what NOT to do when Wholesaling.
I will call these the DON’Ts of Wholesaling.
- Don’t get hung up on the small stuff: I know a lot of people over analyze the situation and think that they need to create the perfect business entity before they get started; LLC or Incorporate?; What’s my cool business name going to be?; I need to design a cool logo for my company; I need to get cool looking business cards before I go to any networking events; I need to get my website up before I send any mailers; ETC. This could slow somebody down for months. The point is, get your marketing out 1st, get calls 1st, make offers 1st, get a deal 1st. Then worry about this small stuff.
- Don’t sign up for ALL of the “Guru’s” courses out there: I know everyone is looking for that Silver Bullet of an idea that is going to get them over the hump and make everything Easy as Pie. But what happens is you start getting too many ideas and techniques in your head and you get the “Shiny Object Syndrome” where you bounce around from technique to technique or are just stuck in Learning Mode or ‘Paralysis by Analysis’ – and you never really get started in full force. Pick a way to do it (there’s not that many) – and just do it. And stay focused. There’s always a new course around the corner. Ignore it. Put your blinders on and keep plugging along.
- Don’t chase a deal if the seller isn’t motivated: I see folks lots of times get hung up on one deal. Just because the person called you back, doesn’t necessarily mean they are motivated. They may WANT to sell, but they don’t HAVE to sell. You really only want to deal with highly motivated sellers. That’s why you need MORE LEADS. Then you don’t get hung up dealing with everyone that calls that isn’t that motivated. You move on to the next lead – because you have a lot to get through, right??
- Don’t leave an appointment without leaving a contract behind: If you go meet a seller at the property and you can’t agree on a price right then and there or they say they want to think about it, be sure to leave a contract behind (with a low offer). Ideally you want to get the deal while you are there, try to always leave with a signed contract. BUT, if for some reason they don’t sign, leave a contract behind. Follow up, or they may even call you eventually and say they are ready.
- Don’t mess with properties on the MLS: There are some exceptions, but in general, your job as a Wholesaler is to provide deep discounted off-market properties to investors. If you find a deep discounted property on the MLS, that’s great, but don’t add a fee on top and send out to your list. Unless you have it under contract for 10-20% less than what it’s on the MLS for, don’t send it out. You’ll get a bad rap for it.
- Don’t over price your deals: This is probably the biggest NO-NO in Wholesaling. If you find a property and get it under contract for 20% below market value and then mark it up 20%, you are providing no value at that point. If you got it under contract for 50% below market value and marked it up 20% you might be OK. Do your best to not let your fee make the deal not such a good deal anymore. Make sure it’s at least 20% below ARV minus repairs.
- Don’t over price other Wholesaler’s deals when co-Wholesaling: This is another big NO-NO for pretty much the same reasons as above. This gets especially tricky when there are more than 2 Wholesalers in the middle of a deal. One person will add their fee, the next guy will add their fee, now is it still a good deal? If a 3rd person gets in the middle and wants to add a fee, now it gets ugly. Make sure it’s still a good deal to the investor and just split the profits, even if you’re only making 1/3 of a normal deal – it’s better than $0 right?
- Don’t think of other Wholesalers as your competition: It’s easy to get caught up in who you think your competition is out there as Wholesalers. You’re in competition with yourself – to do more deals – that’s it. Other Wholesalers out there can be your allies. I’ve partnered with many other Wholesalers on deals where either I had the property and they had the buyer, or I had the buyer and they had the property. Yeah – there’s always shady guys out there so be careful, but become friends with as many other Wholesalers as possible and it will work out good for you.
- Don’t quit your job until you have done 10 Wholesale deals: If you are thinking of going full time as a Wholesaler to pay your bills, take my advice here. Do the 10 deals 1st. By then you will have the knowledge, the skills, the network, the processes, pretty well figured out. Hopefully you will have some nice $$$ in the bank too. Plus you will have momentum going. Do the 10 deals, then decide if you want to go full time – and if you do – you better be committed and work FULL TIME on that business.
- Don’t ever stop Marketing: As I’ve said before, Marketing is the life blood of your Wholesaling business. Without Marketing there are no leads, without leads there are no deals, without deals there is no $$$. You need to have leads coming in ALL the time. And lots of them. Don’t stop marketing for a month because you have a deal or two under contract and you are working on getting them closed. Just put in the time to be sure you have a consistent stream of marketing going out all the time – every week.
Well that is my list of What NOT to Do in Wholesaling. Do what you are supposed to do and avoid what not to do and you will be on your way to success and some nice checks coming in. For more tips, be sure to go to www.HowToWholesaling.com. Thanks and good luck!