So many people ask us how to get into real estate investing - for many of them the answer is real estate wholesaling
As we stated here many times before, if youâ€™re interested in how to get into real estate investing and have very little money and a very little experience, real estate wholesaling is a great way to get started.
Real estate wholesaling is a lot like flipping houses, but it differs in the fact that instead of flipping houses, you are flipping contracts instead.
Although my preferred way of investing in real estate is through house flipping â€“ the buy, fix and flip kind, I do have a fairly high tolerance for risk. But if I was just starting out, or maybe even a lot younger than when I first started out, I wouldâ€™ve probably started investing in real estate through wholesaling.
So when people ask me the best way how to get into real estate investing, I first ask them what they are tolerance for risk is and also how much money they personally have to invest.
If the answer is their tolerance for risk is low and they have very little money or hard assets of their own, wholesaling real estate is where I typically recommend them to start.
Although you certainly can flip houses with no money, the traditional house flipping that I do on a regular basis, for some people itâ€™s just not the right way to start out. This is why wholsaling is a very popular way how to get into real estate investing.
The Many Advantages of Real Estate Wholesaling
The actual definition of real estate wholesaling is: the entering a contractual agreement with another party for the purpose of purchasing property and then assigning your interest in that contract to another investor for compensation.
So as you can see, a real estate wholesaler doesnâ€™t even own the property itself; all he or she does is control it to then turn it over to another investor.
You might be thinking if I want to learn how to get into real estate investing, why should I do wholesaling instead of regular house flipping? Itâ€™s a legitimate question, but wholesaling has a number of advantages and benefits as a great way of getting into real estate investing:
- No Money: There is no money or little money is needed to close a deal
- No License: You donâ€™t need a real estate license to do it
- Time Friendly: It doesnâ€™t take a lot of time
- Profit: It gives you the ability to make a nice profit
- Less Risk: Has less risk overall, then the traditional house flipping
- Relationships: You can build relationships with other investors and buyers and allow for repetitive business transactions and easier way into the traditional fix and flip kind of real estate investing
- No Contractors: Since there is no rehab needed, you donâ€™t have to get into any kind of renovations because the home or property is being sold in "as is" condition
- No Retail Buyers: Since wholesalers only â€œsellâ€ to real estate investors, there is no dealing with retail buyers
- No Real Estate Agents: Real estate agents are usually not necessary
- Fast Cash: Itâ€™s a fast way to create some positive cash flow
So with the many benefits of wholesaling, how do you actually acquire these properties to control them and then â€œflipâ€ them to other real estate investors?
It all starts with marketing.
How to Get into Real Estate Investing Starts with Marketing
One of the most important parts of getting into real estate investing through wholesaling is marketing yourself and getting properties to wholesale. If you canâ€™t properly market yourself and get properties to wholesale to traditional house flippers and real estate investors, you simply wonâ€™t be in business very long.
Marketing is not just advertising, itâ€™s really all about effectively communicating to others what it is that you need. There are hundreds of ways to market yourself in the real estate investing and wholesaling business. Newspaper and print ads, websites, radio advertising, television advertising and direct mail are just some of the ways in which to market your real estate wholesaling business.
However, if youâ€™re on a budget, paid advertising might be out of your price range. This is why we recommend self-marketing â€“ as itâ€™s one of the most effective ways to market your business, and it also doesnâ€™t require a tremendous amount of capital.
So how do you self-market your real estate investing business? Here are a few ways to start so that you can begin to get an inventory of properties to wholesale:
- Create an Elevator Pitch: In 30 seconds or less be able to tell people who you meet what exactly you do and what it is thatâ€™s in it for them. A good example of an elevator pitch is: â€œI help homeowners who are in financial difficulty solve their problemsâ€. Another might be: â€œI help people who are behind on their mortgage payments get rid of their properties quickly while preserving their credit ratingâ€. Notice how both of these elevator pitches, donâ€™t say anything about â€œreal estate wholesalingâ€. Thatâ€™s on purpose. You want to create an elevator pitch, so people ask you more. As soon as they do this, you can go into exactly what it is that you do.
- Tell Anyone and Everyone What It Is That You Do: As soon as you get the word out on what you do, let everyone know. At family events, parties, social gatherings, your kid's baseball games, let everyone know what it is that you do. Ask them if they know anyone who you may be able to help. In all these cases and events, use your elevator pitch.
- Network: As weâ€™ve said many times with house flipping, networking groups are a great way for you to market yourself. If you are fixing and flipping, the same networking groups that you would use for real estate wholesaling apply. Join your local Real Estate Investor Association (or REIA), and get out there and meet people. This is by far the most effective way to market yourself. This face-to-face, toe to toe communication with potential real estate investors is the best form of marketing you can do. Other local groups include Business Networking International, Chambers of Commerce, and even using Meetup.com to find local events for real estate investors.
- Grab Peopleâ€™s Attention: Everyone today has a short attention span, which means that you must grab their attention immediately with your pitch. If youâ€™re using a print ad or a postcard or even an email campaign, that first sentence is the most important one. For your elevator pitch, you need to do the same thing. Think about whatâ€™s in it for them always and begin and end with what they care about most.
One of the best forms of marketing is using bandit signs, which we get into below.
How to Use the Good Old Bandit Sign
As a real estate wholesaler, one of the best marketing tools you can use is the tried-and-true bandit sign.
Bandit signs are a small sign that may say something like â€œwe buy houses fast,â€ or â€œsell your house todayâ€. The signs are placed around town with a phone number and call to action.
You have to be careful when wording your bandit signs and not overpromise and under-deliver. So when learning how to get into real estate investing, here are some tips on how to best use bandit signs to market your real estate wholesaling business:
- Be Clear: Say that â€œwe buy housesâ€ or â€œwe buy houses fast for cashâ€, thatâ€™s usually fine. Stay away from saying something like â€œwe stop your foreclosureâ€ or â€œsave your house nowâ€ â€“ when you do these sorts of things, you open yourself up to some potential legal issues and false advertising claims.
- Be Simple: Itâ€™s good to be simple and truthful and state exactly what you do. Just say that â€œwe buy housesâ€ with your phone number or your website underneath it.
- Stand Out: Yellow and black are usually the best colors for the signs. Colors that are opposite on the color wheel are usually the best kinds of signs as they catch attention and catch the eye. A yellow background with black lettering works just fine, and Iâ€™ve seen black background with yellow lettering as well. Black and white colors tend to not to stand out as much. If at all possible, make the colors of your sign fluorescent so it stands out even more.
- Be Wary of Town Ordinances: Many towns hate bandit signs so much so that many have made them illegal. I would highly recommend that you go to your local town hall to find out what the laws and penalties are. If you choose to go around this, which I donâ€™t recommend, your first infraction is usually just a warning. However, donâ€™t go against town hall and if they tell you to take them down, do so as quickly as possible.
- Geo-target Your Market: A really effective way to use bandit signs is to locate an area that has a very high foreclosure rate and hang many of them there. You may also want to look for rundown properties and hang the signs in those neighborhoods as well.
Bandit signs are huge and when you use them, the best calls are from the really successful renovators. Regular house flipping guys donâ€™t see the bandit signs as competition, but more as a lead source. Most house flippers who do the fix and flip type of real estate investing are too busy to market for deals while they are renovating homes, so they depend on wholesalers to give them the leads.
How to Get into Real Estate Investing with Wholesaling Conclusion
With the many benefits of real estate wholesaling, if youâ€™re looking how to get into real estate investing, wholesaling is a great first step. Marketing your business is the very first step in the entire process of real estate wholesaling, but once you get your first property to control and flip to a real estate investor, youâ€™ll realize how quickly you can make money.
Although there are many ways to market your wholesaling business, just using some of these simple techniques here will help you to get on your path to success and help you get your first wholesale deal under your belt. Remember that you canâ€™t wholesale real estate without a property, so marketing your wholesaling business is an extremely important part to learn and refine as a real estate wholesaler.