When you're buying investment properties, can you use real estate wholesalers?
Real estate wholesaling is a great way to get house flip deals...
But how about when youâ€™re buying investment properties...should you use a wholesaler, then too?
We've talked about wholesaling so many times here as one of the best ways to find houses to flip.
At House Flipping School, we actually took on a full time wholesaler (as well as a property acquisition manager who does wholesaling) as a way to continue our deal flow for our house flips.
THAT is how important wholesaling is to our house flipping business.
But what about when youâ€™re buying investment properties? Do you still use wholesalers the same way you would if you were doing house flips?
We answer that question here.
Buying Investment Properties with Wholesalers?
In this SNEAK PEEK video below, (I'll save the super-hype for now LOL), John and I tell you one of the many ways in which you can use real estate wholesalers for buy-and-hold investment properties, as well as in traditional fix and flips.
Truth be told... I kinda take over the video and don't let my good friend and House Flipping School wholesaler John Fossetti get in a word edgewise...sorry John!
But regardless of John's silence (there's a first time for everything), we divulge how you can use wholesalers to not only flip houses, but also for buying investment properties as well.
This is precisely the kind of in-depth information and one of the many â€œexit strategiesâ€ I reveal in many of these videos at the new HFS!
A sound exit strategy helps you keep your cash flow positive, as well as minimize any downside risk. It's a bit of an advanced strategy, which is why we get into it more on our new paid site for SERIOUS real estate investors.
John and I will be revealing this kind of real-world money-saving strategies inside the new House Flipping School...as well as tons of other super-detailed, super-informative tactics to get you in the money on each and every real estate investment you do - whether its flipping a house or buying investment properties.
Introducing: The New House Flipping School Video Formats
In the New House Flipping School, we'll be teaching you about buying investment properties and house flipping using three different formats to begin with:
1. The House Flipping School Whiteboard
The whiteboard videos are what youâ€™ve seen so far here at House Flipping School. They may not be super slick â€“ but they give you all the little details you ever wanted to know about various aspects of flipping houses and real estate investing.
Here we (John actually does talk and some of these videos :-)) break down some of my best real estate investments, some of my not so great real estate investments, as well as what I would consider my total flops.
We discuss buying investment properties, fixing and flipping as well as real estate wholesaling in these short 5 to 10 minute videos in front of my trusty whiteboard.
Itâ€™s all there - we hold nothing back. All the numbers and â€œdown and dirtyâ€ details are revealed in plain sight.
In fact, my two producers, Ralph and Ryan, insisted that I drag out my old files (it took me hours to find some of them way - as a few of them were in permanent storage), so that everything we tell you in these videos is 100% accurate â€“ in most cases, right down to the penny.
I honestly donâ€™t know any other real estate investment program that gets into this kind of detailâ€¦which is the reason why we wanted to do it.
2. The House Flipping School Roundtable
These videos are more informal in nature and are where I discuss overall strategies and philosophies on flipping houses, buying investment properties and real estate wholesaling. Some are with Ryan (the handsome devil pictured above on the left) and some are with our wholesaler John Fossetti.
As a novice real estate investor, Ryan is the perfect one to talk to about house flipping and real estate investing from a beginners perspective.
Whereas with John, we get into some pretty high-level strategies for the advanced house flipper and real estate investor.
We discuss the strategies behind all the various ways to make money investing in real estate and give you real world tactics to help you get on your way quickly.
In these roundtable discussions, where we discuss real estate investing strategies, details on how to flip a house as well as all aspects of real estate investing; including mindset, team building, finding and funding real estate deals and so many other important aspects of real estate investing â€“ all of which I wish I had when I first started flipping houses.
3. The House Flipping School Flips in Progress
The really cool thing about real estate investing is that although you can certainly learn a lot from deals youâ€™ve done in, the market is constantly changing.
So we thought it would be really awesome to not only show you what Iâ€™ve done in the past for a lot of my deals â€“ but also to give you a running play-by-play analysis of house flips I have going on right now. For example, I have two deals in Massachusetts that I am now working on - not only that, but I have dozens of other investment properties for my investors that Iâ€™m working on out of state.
In the house flipping school flips in progress videos, weâ€™ll be giving you a blow by blow analysis as these deals take shape. So youâ€™ll see the decisions that I make on a daily basis â€“ the good ones, as well as that ones â€“ so that you can learn right along with me.
Itâ€™s like you'll be looking right over my shoulder in real time, as we update these flips and buy-and-hold investments in real time as they occur. Of course, if you follow me on Twitter or Facebook, you can get some sleep as these deals as they take shape and progress as well.
The House Flipping School Flips in Progress are what I'm REALLY excited about.
Itâ€™s like reality TV on the Internetâ€¦although this house flipping â€œreality TVâ€ isn't staged by some Hollywood producer!
The New House Flipping School - More Meat!
I love meat...red meat, that is. Nothing beats a nice big juicy medium rare steak with a nice glass of Chianti...
So when we did this redesign and new paid site, we wanted TONS of meaty tidbits that will help you make money - and you'll get it.
The question is in what format this "meat" will come. At first, weâ€™ll have everything in videos - as well as the transcripts and the audios if you guys want (one of my producers, says that the only way he would ever watch these on his iPod or iPad or on MP3) â€“ so weâ€™ll figure out what format you folks really want as we progress.
Not only will we have these videos series to start â€“ but will also have all kinds of other cool goodies for you to feast on. Too many to mention at this point, so at first, we'll just keep it simple.
One of them is a super cool House Flipping School Forum - where you'll have immediate access to me and my team. Mmor eon that to come....
And depending on what part of the world you live, it all starts Tuesday, May 7 when we â€œflip the switch" (no pun intended) to set the new House Flipping School live to the world.
So stay tuned for the launch of the New House Flipping Schoolâ€¦
Buying Investment Properties, House Flips and Exit Strategies
Okayâ€¦back to the content.
In this House Flipping School Whiteboard Video, John and I (well, actually just me â€“ as I said, I never let John actually talk in this one) discuss one of my deals and how we used wholesalers to make the deal even sweeter.
But the interesting part of this deal is that we actually did not flip it. Yes, we did use a wholesaler â€“ but we didn't look for the deal with the idea of it being an investment property deal...it just turned out to be one.
Even though this is House Flipping School, we do buy and hold a lot of properties. In fact, in almost everything that I buy with the intention of flipping it, I always think whether or not it's a good buy-and-hold property.
The point is this: be flexible when youâ€™re investing in real estate and always have an exit strategy â€“ if not multiple exit strategies. This is exactly one of the many things we teach you in the New House Flipping School.
Breaking the 70% Ruleâ€¦Again?
Yes, as we mentioned earlier this week, I do break my own rules on occasion. This is even though Iâ€™ve told you 100 times before on this blog and all the other places where we teach real estate investing not to do it.
On this deal, I did break it again.
Knowing WHEN to break the 70% rule is the key to real success in finding real estate deals. But itâ€™s not for the faint of heart.
When youâ€™re buying properties from wholesalers, especially from good wholesalers like John, they need to know your rules just as much is you do. In this case, the wholesaler was paying 75% and not 70% â€“ trying not break my 70% rule. He knew he could not get 80% - so he lowered the price so I could acquire it.
If your wholesaler tells you that the ARV is $200,000 and the cost of repairs are $40,000, and you think you can get the property for $100,000; youâ€™d probably be pretty excited.
But is he being completely honest with you?
What happens when you do the deal and then you find out the hard way that the ARV was really $180,000 and the cost of repairs was actually $60,000.
You just lost money on your first dealâ€¦and you are deep in the hole...
Working With Real Estate Wholesalersâ€¦Beware
The point is this: real estate wholesalers are great sources for house flipping deals - but you must do your due diligence.
So before you take the wholesalerâ€™s word on his ARV and his cost of repairs, here are a few things you should do before you start working with them:
- Ask Around: Talk to some real estate investor friends. Find people at a REIA meeting who have done business with the wholesaler. Check out his background.
- Ask THE Question: When I meet with a wholesaler, I always ask the most important question:
â€œWho are the other investors you worked with?â€
Iâ€™ll the call those investors (many of which I probably know) to make sure the wholesaler has a good reputation.
- Do Your Own Homework: With any real estate wholesaler (including John Fossetti, LOL) I do my own homework to check on verify his ARV against some independent resources. Iâ€™ll surely look up on Trulia, Movoto and Zillow â€“ but most importantly, ask some of my real estate brokers that I know in the area.
- Arbitrary Realtors: I especially like this one. Just pick up the phone and call a random real estate office in the town where the property is. Tell them that your thinking about buying the property. Donâ€™t even tell them what the price from your wholesaler is and simply ask them:
â€œCan you run a CMA? Iâ€™m thinking about buying this property.â€
See what they come up with. If they come up within that price range, then you know the wholesaler's ARV is good.
- Get Your Contractorâ€™s Input: Call your contractor, do a walk-through. At this point of your house flipping career, you likely have a reliable general contractor who you been working with. If you donâ€™t, then get one as soon as you can. Not all wholesalers are going to be 100% accurate with their cost of repairs. Of course, itâ€™s to their advantage to give you a lower number â€“ but many of them will give you numbers that are accurate. Having your contractor give you a number on cost of repairs is much preferable - as its independent and unbiased.
- Split The Difference: Keep in mind that your contractor may actually give you a higher than average cost of repairs. If thatâ€™s the case, with some experience on your part figure out a number between the wholesalers lower number in your contractors. If necessary, call on another contractor to give you another price.
Wholesalers and Buying Investment Property: Conclusion
Any smart wholesaler will know that if you use you a bad number, then you simply wonâ€™t do business with him. But itâ€™s up to you to make sure you do your homework before you enter into a deal with him.
As we state in the video above, there can be a lot of negotiating on the asking price from the wholesaler. Negotiation is really a lesson unto itself â€“ (a subject covered WAY more in the New House Flipping School 🙂 ), but you can certainly use the number from your contractor as well as the numbers from your realtor as proof sources in your negotiations.
You donâ€™t want to try to â€œtrapâ€ the wholesaler in some kind of deception â€“ but letâ€™s not forget here folks, this is business and negotiation is part of business. Although we teach you how to negotiate with wholesalers in the New House Flipping School â€“ but an important point to remember is:
In real estate...EVERYTHING is negotiable!
What do you think? If you've made it this far, leave a comment below and tell me what you think of the videos and anything in this post!