Getting Started in Real Estate Investing. Try Wholesaling.

I really enjoyed this article by James Orr. It is a pretty concise breakdown of wholesale investing.

“How should I get started with real estate investing?” The question varies slightly, but the core of it is always the same. And, for a new real estate investor, I think it is an important question to ask.

Years ago, when I began speaking at our local real estate group, I used sit down with each person, usually over lunch, and try to determine their knowledge level of real estate markets, financing techniques, sales skills and other critical knowledge areas before recommending how they should get started investing in real estate.

After doing a dozen of these meetings, it occurred to me that the answer I gave was the same regardless of their experiences, skills and knowledge.

Without fail, I encouraged them to start out wholesaling.

What is wholesaling?

Wholesaling, is finding great real estate deals. Then putting the house under contract and finding another investor or retail buyer to buy the contract to buy the house from you for a profit above what you agreed to pay the seller.

For example, you by at a big discount and sell that discount to someone else for a fee.

Why wholesaling?

I recommend wholesaling to starting real estate investors for several reasons.

First, it is a very low risk way of getting involved in real estate investing. When you put a house under contract, you are putting up as little as $10 and ideally no more than $100. Beyond your time and some marketing expenses, that is all you should have invested in your business when starting out.

Second, it is an exceptionally excellent way to learn your market. As a new investor, you might think that $10,000 below a refinance appraisal value is a good deal on a house. Your market will likely teach you otherwise and better to learn that lesson from trying to pass of this type of deal with only $10 invested in a binder deposit rather than try to sell this house while you are making mortgage, utility, taxes and insurance payments on a house you actually bought.

Third, you will get to know other investors and can learn from them. As a wholesaler, you should be finding what other investors want and are looking for in deals. Some will be helpful and will want to share information and time with you. Many will not; do not take it personally. There are good and bad folks in this industry just like there are good and bad lawyers, doctors and accountants.

Fourth, you can generate quick cash. A challenge common with many real estate investors is cash flow. Learning wholesaling is learning how to generate quick cash. Master the ability to generate quick cash and you have solved a lot of problems.

And finally, you can find great buy and hold deals for your portfolio. Inevitably, as you look for wholesale deals you will find exceptionally good long term buy, rent and hold properties for your own portfolio. I strongly suggest that you do half a dozen or more wholesale deals before you consider buying a long term rental. By then, you should have a much better idea of what a really good deal is than you did on your first day as a real estate investor.

James Orr is a professional real estate investor and marketing expert.

You can subscribe to his real estate e-newsletter and access audio downloads, articles, marketing materials and educational real estate videos at his Real Estate Investing blog.

Article Source: http://EzineArticles.com/?expert=James_Orr

Hello,I’m new to Real Estate investing and I want to know more about wholesaling deals.When you come into agreeance with a seller,do you have to have your contract with you at this time? Are the clauses like the exit clause and assignment clause already put into contract when you go see the property,or do you go to your attorney after you see property to get contracts drawn up? Do you advise the seller that you intend to assign the contract rather than buy the property? At what point do you tell the seller your intentions? These are just a few questions I have about assignment of contract now,but I’m sure I more will arise when I get a response.Thank you.

tdav14,

From my experience, its always best to have your contract ready and prepared before you meet with the seller. And it’s extremely important to include an exit clause in the contract. There are many resources online where example contracts can be found. I found a local attorney, had him draft a “generic” contract which i then modify for each deal. I think it is important to advise the seller of the wholesale assignment. Typically I let the seller know right off the bat my intentions. Its obviously important to chose your words carefully (explain that you are an investor, but you do not need to go into too much detail beyond that point).

Hope this helps.

Thank you so much for your reply calfm.So what you are saying is that the exit clauses and other addendums should be in the contract even before I go see the property,is that right? And is this information hand-written in or professionally typed in?

tdav14,

Yes, include anything you, your agent, or lawyer can think of in the initial contract. My lawyer provided a word .doc that I can alter to add or modify language. This is more to appear professional and avoid the inevitable “what does this say” that typically follows anything I hand write…

Hope this helps.

calfm,

I don’t know if this is possible,but I would love to see a sample of the word .doc contract you have just to get an example of what I should put into mine for my initial assignment deals.Thank you.

Also remember, the contract will have your name and “AND OR ASSIGN”. This must be on the contract. This allows you to assign the contract if you need to.

If you need money to handle the first side of the simultaneous transaction, Wholesaler Commercial Funding can do it!