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The Beginner’s Guide to Wholesale Real Estate [2021 Edition]

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In this lesson, we will explain and break down wholesale real estate for a complete beginner and top 3 mistakes I made that you must avoid.

This is precisely for wholesale real estate in the United States but with a laptop and an internet connection,

you can wholesale USA real estate from anywhere in the world.

As a person who launched back in 2005, it’s very easy for me to get tempted in using big words and vocabulary.

But I promise to make this all about you so that you can make a solid foundation that you can build on top of.

Build the Right Foundation for a Wholesale Real Estate Business.

In fact, what I have noticed a whole lot on these wholesale streets are people who stumbled into the business and started cold-calling homeowners without the proper foundation.

First of all, cold calling is dead and I will tell you a bit more about that in a few minutes.

But let me remind you of what the scriptures said in Matthew Chapter 7 Verses 24B – 27

B)a wise man who built his house on the rock.

25 And the rain fell, and the floods came, and the winds blew and beat on that house, but it did not fall, because it had been founded on the rock.

26 And everyone who hears these words of mine and does not do them will be like (C)a foolish man who built his house on the sand.

27 And the rain fell, and the floods came, and the winds blew and beat against that house, and it fell, and great was the fall of it.”

To be very honest with you, I was one of those types of beginners and my hope is that you take this lesson to heart and avoid my mistakes.

How the 2008 Wind & Flood Blew, Beat Against & Wiped Away my $3 Million Wholesale Real Estate Business

I had very quick success right out of the gate when I launched my business in 2005.

Even though it took a whole year for me to close my first deal… I paid $3,000 for a course around December 2004.

And I closed the first deal in December 2005 making a net profit of $10,000.

Why Did it Take a Whole ONE YEAR to close my first Wholesale Real Estate Deal?

PREVIOUS POST: 5 Stages of Wholesaling Pre-Foreclosures [The Definite Guide for 2021]

Let’s blame it a little on the fact that I was also finishing my masters degree in Engineering Management that same year.

In the next lesson, I will share the story of how an anticipated $20,000 net profit became $10,000

…and how you can also avoid that same mistake.

Within my first 24 months, I raked in a whopping $3,058,000 (million) in revenue of which I kept a whole lot of that money.

Then the 2008 recession, wind and flood came and wiped everything away.

It would be easier for me to blame it on the damn Feds and the Banks that allowed the existence of subprime loans in the first place.

But also with that same attitude, I would miss some very important lessons to take away and wouldn’t have been able to share them with you right now.

The market crash that happened in 2008 will happen again but here is the worst part; it will happen in a different form because the blindspots are always shifting.

How do you build a foundation that prepares you for inevitable market-crash and still make money… in any market?

All you have to do is avoid these 3 mistakes that I and most beginners make.

Then you will be all set and more importantly, positioned to capitalize on any market; bullish or bearish.

I will share the 3 mistakes in a second but first…

What is Wholesale Real Estate?

Wholesale Real Estate is the art and science of marketing to find deeply discounted properties,

Locking them up by writing up and executing purchase contract for them,

And finally selling or “assigning” the equitable rights to purchase the property to an end cash buyer investor in exchange for an assignment fee.

Wholesale Real Estate Broken Down & Explained in Details

As I just mentioned, your target is to find a deeply discounted property. So the next natural question is… 

“How deep does the discount need to be?”

As a wholesale real estate professional, you cannot afford to offer more than 65% of what the property would sell for in today’s market if it was all fixed up.

In addition to that, most people in their right mind will not give away a house that needs no repairs at such a steep discount;

the deal estimate will adjust for and pay for the repairs.

So the houses you will find will typically need some repairs; usually, there is some type of stress associated with the ownership of the property.

The property has failed to be an asset and it’s more of a liability and that creates the opportunity for you to add value to the property owner’s life.

The Simple Math & 5 Steps of Wholesale Real Estate

TRENDING: 7 “DON’TS” & Wholesaling Real Estate for Dummies 📍

So for example,

Step 1 – We pulled DATA of vacant homes in pre-foreclosures from:

www.EmpireBIGData.com

Step 2 – We sorted the list and initiated CONTACT with 100 property owners.

Step 3 – A LEAD was generated when the owner of 123 Main Street expressed interest in selling with an asking price of $105,000.

Step 4 – We need to write and execute a CONTRACT with an offer so we used a free tool at

www.DealEstimator.com

…to calculate a maximum allowable offer (MAO).

After Repair Value (ARV) = $200,000

Initial Maximum Allowable Offer

= 65% x $200,000 = $130,000

After a consultation call with the owner, we found that…

Estimated Cost of Repair = $31,000

So we adjusted the maximum allowable offer.

Final Maximum Allowable Offer (MAO)

= $130,000 – $31,000 = $99,000

After a 2nd consultation call with the owner to negotiate…

We offered $80,000 and made a case with the amount of repair needed…

for the house to perform competitively on the market since we are investors.

We made a deal at $84,000 and they signed the contract.

Step 5 – We initiated DEAL disposition by going back to

www.EmpireBIGData.com

… and pulled the data of all the cash buyers within the last one year in the same city and county where the property is located.

We then notified all of them without prejudice offering them the deal at an asking price of $109,000.

Here is how we came up with that number.

70% of the After Repair Value which is…

70% x $200,000 = $140,000

Then…

$140,000 – $31,000 = $109,000

3 cash buyer investors called back and one executed an assignment contract within 24 hours at the asking price of $109,000.

We got the contract at $84,000.

So we kept the difference which is:

$109,000 – $84,000

= $25,000 in assignment fees

Our seller is happy to get rid of a liability and our investor is happy to acquire a new project where she can potentially make $60,000 profit.

More importantly, we’ve added to our business relationships and potential referrals in the nearest future;

We rinse and repeat the process.

The 3 Mistakes Most Wholesale Real Estate Beginners Make

It’s very important for you to know the risk involved in making these mistakes.

Many thousands attempt this business daily in every real estate market in the United States and as you’ve probably noticed….

Only a few will close a few deals and many will close one deal out of luck and no more after because they have no systems in place.

Mistake #1 – Get Rich Quick vs Business

I am not going to lie.

You can get rich fairly quickly based on most people’s standards with this business model.

But you will fail if you don’t treat it like a real business as opposed to gambling away with time and not-well-thought-out marketing strategies.

Most people in this digital era do not appreciate unsolicited calls from strangers so there is high likelihood that cold calling will not work for you.

And that’s also partly because our attention span is shorter. 

It’s very likely that you will get frustrated out of that process before you close a deal; so it’s pointless.

This is a real business and not a get rich quick scheme. Real marketing skills must be involved.

Mistake #2 – People vs Properties

Driving for dollars will help you build a list of a few properties that will most likely never become deals as you drive away your life and car breaks.

All marketing strategies work but most humans will not work these gimmicky strategies until it works because it’s the most expensive form of useless data collection.

This business like all businesses is a people’s business and the properties are just the product.

So digital age marketing skills to create effective and efficient campaign outreach will create a stable business system for you.

The guy or gals that closed their first deal out of driving for dollars are less than 1% of people who attempt it.

It’s just a shameful thing to admit that you allowed a guru to talk you into driving around like a chicken with a lost head with no results to show for it.

It’s about marketing effectively and efficiently to people in a trackable and measurable way… we only recommend Smart Real Estate Wholesaling.

Mistake #3 – Marketing vs Legal Practitioner

Most beginners waste too much time with logo and website designs that will never generate a single lead.

Some others waste so much time on trying to set up the right type of LLC because of the excitement of newness.

Don’t make that mistake.

Be excited about motivated and distressed seller leads generation. Be excited about learning marketing.

Conclusion & The Main Lesson

HAVE YOU SEEN THIS: More Video on our YouTube Channel

Marketing is a skill set that you can transfer to any other types of business even if real estate doesn’t work out.

You can do it 100% from home as your job is not to represent the interest of buyers and sellers. 

That’s what licensed agents do and I encourage strategic partnership with them.

In due time, a lead generating website and LLC that protects your business will solve real problems; just not yet. 

Don’t engage in solving non-existing problems.

The first step and first problem to solve now is to find deeply discounted properties…. and may be the first real problem to solve is to learn how to do it properly.

To learn more, go ahead and download my 2 books

SMART REAL ESTATE WHOLESALING and

REAL ESTATE MONEY SECRETS

for free at:

www.SmartRealEstateWholesaling.comFor a quick start guide, go to www.11DaysChallenge.com to set up a lead pipeline in 11 days.

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