myEmpirePROQuestion: “Do I Need Money To Wholesale?”
I think it’s very important that we understand what wholesale is first.
Wholesale is a real estate investing strategy.
Wholesale traditionally is a type of trade.
In trading you have wholesale and you have retail.
Retail is essentially when you go to a regular market and you pay full price, the retail price of some kind of product.
In real estate it’s the same thing.
You go to an agent.
Most of the houses that are listed on the MLS or Multiple Distance System with an agent,
…most of those properties are listed at the retail price.
But here’s the problem with that, as an investor, if you’re trying to invest in real estate,
…there’s nothing wrong with paying full price but you’re gonna have to pay down the property, like you may get a full price, mortgage on it.
You have to pay down before you can start.
So basically, you’re investing time.
You’re gonna have to invest time along with the fact that you invested the retail price of it.
But the truth is that you can actually come into the property.
You can buy it a lot cheaper.
Which means you have what we call an “in built equity”.
Meaning the property is worth $400,000, you were able to pay $200,000 for the property.
How?
Well, that’s what we cover here.
How do you find such properties?
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That’s the idea, instead of going to the retail market, you go to the wholesale market.
So you’ve seen that in groceries right?
You go to a farmers market, you get better pricing because somehow in the chain of trading, they’re closer to the source of those products.
They are closer to the farm that’s why they call it Farmers Market.
So you get to pay a cheaper price for it.
It’s the same thing with real estate.
So, in real estate, there’s something called wholesale which means you scout and find properties that are cheaper than the regular market.
It is a strategy.
Basically, a property is worth $400,000.
You were able to find it for $200,000 and you don’t even have to buy it,
…you can literally lock it up under contract and flip it to an end buyer, and basically, they’ll pay you for helping them find the deal.
That’s how wholesaling works.
So you find a property, you lock it up under contract for a certain price point, that’s significantly lower.
We’re looking at something 65% of the retail price or lower, and then you have to adjust it for the repair estimate if it needs work.
So, in order to find such deals, essentially you wanna make sure that you’re gonna have to have other ways to add value to the situation.
What I mean by adding value to the situation,
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…a person in their right mind is not going to sell you a $500,000 dollar property.
They’re not going to sell that to use for $250,000.
Why would they sell you a property that’s worth $500,000, why would they sell it to you for $250,000?
There’s gotta be something wrong somewhere, right?
A lot of times, it could be the property.
The property needs a lot of work and you don’t have the time and they don’t want to deal with it.
This is where people that say, “Hey, they lose their property to investors”.
That’s where they’re wrong.
Nobody loses their property.
They don’t want the property because it needs work, they don’t want to deal with that.
So that’s how you bring value to that person.
The person doesn’t want the property.
You show up, you lock it up under contract, you help them get rid of the property and you make some money in between.
As a matter of fact, you can actually keep the property for yourself because remember you are purchasing this property at a discounted price.
You have In Built Equity.
You’re buying the property, you put in $50,000 worth of work, so you purchase it for $250,000, you put in $50,000 worth of work.
Now, your total cost is about $300,000.
Property still worth $500,000.
Now, In Built Equity, you now have $200,000 worth of equity in the property starting from the beginning of the ownership of the property.
All right, now that will be you buying, fixing to hold.
But a wholesaler will lock it up under contract and simply sell the right of the contract to a person that will actually exercise the contract.
That’s what wholesaling is, that’s what this is all about.
So, do I need money to wholesale?
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Let’s look at the process here.
Do you need money to wholesale?
The answer is yes.
But, do you need money to buy the property?
No.
If you just pay attention to what I just said, you could literally lock it up under contract.
It’s just a piece of paper and you can sell the right to that contract using what they call an Assignment Contract.
That’s something we covered extensively on this channel, you can search for “Wholesaling 101 – Ola Tux Abitogun”,
…there’s a seven-video series that will come up for free.
Where I go into a little bit more details about that.
But do I need money to wholesale?
Not particularly to buy a property, but this is about marketing.
So in order to market, you need a few tools here and there.
And if you’re gonna do it the right way, you may choose.
You may say, “Hey, I need a coach. I need a mentor” and that can cost money.
But as far as buying properties by itself, no, it doesn’t have to cost you anything.
It can cost your time.
So if you have time and you have the luxury of time,
…which usually means you may not have a lot of money,
You may be able to partner with a person that has money and find deals for them, and then you’re making money in real estate.
Does that make sense?
So it’s either you have time or you have money.
That takes me to the second question.
How much do you need to start wholesaling?
It’s a tricky question.
Here’s what I want to tell you,
If you can’t prepare to have somewhere at least $300 per month for marketing and to pay for the tools necessary,
…you don’t have any business actually trying to build a business.
Because at the end of the day, this is a real business.
This is a real business like everything else.
It costs money, it costs time, it costs energy and it costs a skill set.
I mean, look at the books I wrote,
Can you imagine how much time it took me to put books together.
I tell people you have to read these books 10 to 15 times.
You have to be able to teach it in your sleep.
Do you think that’s beans?
I don’t know if that’s a saying in America, but that means “do you think that’s a joke?”
That’s not a joke and I’m not the one that will come here and tell you like “you don’t need nothing. You could just drive around town”.
Well, that cost money.
That costs gas money plus it’s a lot more expensive when you do the math,
…grand scheme of things, it’s a lot more expensive driving around town for dollars.
It’s gonna cost you more in your time, if you value your time and it’s gonna cost you more in money, too.
Just keep that in mind.