Being a professional real estate wholesaler is not simple but not easy. After doing over 100 deals in virtual markets and working with wholesalers, buyers and sellers I learned few important lessons that lead me to write these 10 Commandments of a Great Wholesaler:
- Control the wholesale real estate deal from start to finish
Too many real estate wholesalers think that once they got a deal under contract the deal is done. Far from being true. Getting the property under contract is just the beginning. You need to communicate with the Closing Agent – get to them all the contracts and make sure they order title work, you need to verify that the buyer dropped the Earnest Money Deposit, you need to update the seller that we everything is on schedule, you need to make sure the Closing Agent schedule the signing with both the buyer and the seller and nothing is missing, you need to make sure the Closing Agent has your wiring information and much more. If you do multiple deals a month and you feel overwhelmed, maybe it’s time to delegate this role and hire a Transaction Coordinator to deal with all these details.
- Don’t let real estate Buyers push you around. It’s your deal, your rules. Buyers should play by your rules or don’t play at all.
A lot of buyers are entitled and feel that you work for them. They will treat you like you are their employee and sometimes will treat you disrespectfully. Don’t be this guy. Stand your ground and dictate the terms of the deal. If you have a great deal, you have the leverage and you can set the terms of the deal and require the buyers to play by your terms.
- Don’t count your money before the check or wire in your bank.
When I was just starting out, I did that…When I sold the deal to my buyer I celebrated too early only to find out that there are a lot of liens against the property that I and the seller were not aware of and sure enough there was no equity and roof for profit in the deal. I learned an important lesson. You celebrate only when you get the check or see the wire in your bank!
- Don’t market a deal without a contract.
It’s lame to do that and unfortunately a lot of newbies that don’t have deals get on other wholesalers lists and market their deals. A. it’s a bad business practice that can get you in trouble because you broker a property without a license. B. It’s unprofessional and unethical. It’s not uncommon to see my own deal shopped around by multiple wholesalers at a different price point where every “Daisy Chain Wholesaler” add their fee on top of my initial asking price. There is a better way to do that. You should ask for permission to Joint Venture the deal with the wholesaler and get JV Agreement signed PRIOR to marketing the deal. This way you have a vested interest in the deal and you can legally market the deal/contract.
- DO NOT DAISY CHAIN A DEAL UNLESS YOU HAVE A JV AGREEMENT IN PLACE.
See explanation in #4 above
- Do what you say. Both with the seller and with the buyer
Your integrity and your name is everything in this business. Don’t be the guy that say one thing and do another thing. If you agree to a price with a seller or with a buyer honor it or at least do your very best to do it as I know sometimes unexpected things can happen. Once you do that you will earn the respect from other buyers and they will come back and buy from you other properties and the seller will be happy to refer you to others if you helped them solve their problem.
- Market the contract not the house unless you own the house.
If you assign the deal, you basically selling your interest or the contract you don’t sell the property. So instead of saying that you have a 3 bedroom 2 bath property for sale in 123 Main Street say I’m selling my interest/contract to the property located at 123 Main Street.
- Assigning a contract is only one way to make money as a wholesaler. Sometimes double close and/or wholetail is a better option to maximize your profit as a wholesaler.
When you assign a contract in most cases you have less leverage when you negotiate the deal mainly because you have X amount of days to close/inspection period and the buyer know how much you make (not always). If you close on the deal you have much more control because you are the owner of the property, you have no deadline, and you can list it on the MLS and sell if for a much higher price.
- Don’t be just a wholesaler – be an investor where Wholesaling is just one investment strategy in your toolbox out of many.
Sometimes you can make much more money if you rehab the property and not assigning it. Maybe it’s a great property that you want to keep the property in your portfolio for cash flow. Maybe the numbers on a specific deal don’t work for a wholesaler deal and you can structure a seller financing deal. Wholesaling should be one of many investment strategies in your toolbox.
- Focus on adding value to sellers (solve a problem) and to Buyers (give a great deal and easy process). Reputation is key. If you do that the money will follow…