Friday, February 29, 2008

A wholesaling tip for new real estate investors...

So, let’s take that $200,000 house example… 70% of that would be $140,000… and then subtract repairs and your wholesale fee… let’s call it another $15,000. That means your maximum allowable offer on that property would be around $125,000. So, now here is where I have to ask you if you can get this seller to accept an offer of $125,000 for that property…


If you can get a house that cheap… KEEP IT! Call everyone you know and put together the money to buy that house… that’s the kind of stuff you want to keep… NOT wholesale! This is where so many new investors struggle… because finding a deal like this is not so easy, and when you do find them, you want to keep them. Instead, wholesale the ones that you get at 80% of the value… because there is a buyer for that house somewhere, and if you can get it under contract for $100… why not try to wholesale it?

Here is what I mean by that… if you can get a seller to accept an offer that is about 80% of the value of the house, and you can get it under contract for $10 - $100… then why not stick an ad in the newspaper and put some corrugated for sale signs out by the highway and see if you can get a buyer for it? Everyone has their own perception of what a deal is, and not everyone went to the same seminar you did. There are a lot of people out there that would LOVE to get a house at a 20% discount… and you can make a few thousand dollars for finding it for them.

So here is where I get on my soap box about systems… if you have a SYSTEM in place to find these properties, and get a system in place for building a buyers list, then you can easily create a nice cash cow of a business by wholesaling these. And when you do find the one that fits your MAO formula… KEEP THAT ONE and add it to your inventory.

Let’s do some math… If you can get 20 houses under contract and have $100 tied up in each one to bind the contracts…. You have a total of $2,000 invested. If you are getting $3,000 - $5,000 as an assignment fee on each one that you wholesale, then you only need to get one of them sold to cover you investment… and make a small return. But if you can sell 3 of them… then you are making some money.

Now, CRANK IT UP… load up RealProspect with expired listings and send out your mailings, and get as many as you can under contract at 80% or less of the value… and get your buyers list cranking, then before you know it, you will be getting $5,000 checks a few times a week! Keep tweaking your system to get a higher response rate on your mailings, a higher close rate on your offers, and a higher wholesale rate to your buyers… and that is where you spend your time. And when you get a property at a HUGE discount… keep it, rent it, and slowly build your portfolio of passive rental income so someday you can retire and spend your free time doing whatever it is that you want do with it.

Ok… so that’s my thought for today. They come randomly, and usually after talking to a customer on the phone… so perhaps you got some value out of it.