This week we’re going to be talking about wholesaling. As you know there are three major ways to invest in real estate: house flipping, buy-and-hold (rentals), and wholesaling. For the last several years I’ve primarily been a house flipper, but I recently started doing some rentals and wholesaling. In real estate, I think it’s important to be diversified. I was taught by my mentor to focus one area of real estate before you branch out, and that’s what I’ve done.
So, I’ve recently started wholesaling. Wholesaling is newer to me, but my experience in house flipping is incredibly useful. It’s a different mentality, different mindset, and different pace. This week I’m going to share some of the things I’ve learned about wholesaling: what has worked for me and what hasn’t so far.
The first step in wholesaling, as in house-flipping and buy-and-hold investing, is generating leads. In the past, I have primarily used realtors to find leads. Recently, that has become harder, so I’ve turned to direct marketing. The difference is that, while a house flipper might need to find a house at say 60% of the ARV, a wholesaler will need to find even better deals. If you as a wholesaler want to sell me a house at 60% of the ARV, you will need to buy it for at least 50% or 55% of the ARV.
I have been blown away at the results I’ve been getting from direct mail recently. If you’re not using direct marketing, you really should be. Essentially, you get a list of properties that meet certain criteria, such as houses with absentee owners, and you send them letters. One of the easiest ways to find these houses is to use a service like ListSource. You can then upload your list to a site like Yellow Letters or Click2Mail, chose what you want to send, and have them send everything for you.
Another way to find leads to wholesale is to create your own lead-generating website, using a service like Lead Propeller. Nowadays, when people want anything, they search for it online. If your website comes up in the search results when people are looking to sell their house, that’s a fantastic way to bring in leads. This method is underused by investors, and I think it’s going to explode in the next few years.
Tomorrow, we’re going to talk about how to handle leads once you get them in.