When Wholesaling Houses Should I Build My Buyers List Now Or Later?
This is a guest post from our good friend Danny Johnson from www.FlippingJunkie.com
Many real estate investors feel that wholesaling houses is the best way to get started flipping houses. The main reasons being that wholesaling allows you to get started with very little money, very little risk, and not much experience.
Wholesaling Houses: A Logical First House Flipping Step
Like Mike, I always recommend wholesaling as a logical first step towards getting into the buying, fixing, and selling type of house flipping.
Instead of flipping houses, you are flipping contracts - and although they are different, wholesaling is easier to get into and can generate nice profits that may be able to fund your house flipping business later.
But when you're getting started wholesaling houses, there are two big questions that will come up. The problem is that you'll likely get conflicting answers to them depending on who you talk to:
- When should I build my buyers list - and should I start building my buyers list right away as soon as I get started or not until I have a deal to sell?
Good questions indeed. We address the pros and cons of both of them here.
Answer #1: Wait Until You Have a Deal To Build Your Buyers List
This is the typical answer it seems. The thinking behind this answer is that you don't want to be calling up investors and wasting their time if you don't have a deal yet to sell them.
Most investors will sense that you are a newbie as soon as you start asking all of the typical questions. You know, going down the list of questions that you should ask potential wholesale buyers. These questions are usually something like:
- Do you pay cash?
- Do you close quickly?
- What types of houses do you like?
- What types of houses do you not like?
- What parts of town do you like?
- What parts of town do you not like?
- What level of repairs are you ok with?
- How long have you been investing?
- How many houses do you flip a year?
- Can I call you with deals?
While it's important to know the answers to these questions, they usually just annoy me when someone calls and starts asking them bam-bam-bam, one after the other. My caller level-of-experience meter instantly becomes pegged at 'newbie'.
I don't say this to make it seem like it is bad to be a newbie. We all had to start somewhere. It's just that there is not much thought given to the proper execution of the conversation. You can set yourself apart from the masses of newbie wholesalers by taking the time to handle these calls in a better way.
The reason why many investors say you should wait until you have a deal is so that you can build a solid reputation and be able to get the investors to really take you seriously. They will take take notice and remember you (if you had a truly great deal). And I too, used to share that opinion.
This was mainly because I got sick and tired of people calling me and asking me a million questions. It was annoying because of the way they went about it.
There is a strong temptation to immediately assume that the call is going to be a waste of time because the majority of people starting out will never find a deal. I just didn’t have time for it. I didn't have time to give them a chance to prove me wrong. The odds were against them.
But...I've since realized a flaw in my thinking.
Answer #2: Start Building Your Wholesale Buyers List Now
I’ve come to realize that the problem is not in building the buyers list too early, the problem is in the approach used to build the buyers list.
You start calling and talking to other investors before you find a deal AND have them take you seriously and remember you. It's all about how you approach the calls.
The calls should not be just an obvious asking of questions from a call sheet. If they are handled differently, it makes all the difference in the world.
The purpose of the call should be to start developing relationships. When wholesaling houses, I propose just calling and introducing yourself and being honest about the fact that you are just starting out.
During the conversation you should be able to determine if they are serious buyers and whether they can pay cash. That’s it. The rest should be conversational. And make sure you:
- Get to know them
- Let them get to know you.
- Ask questions about how they got started
- Ask them whether they are doing as well as they had hoped
- Don't treat the call as just another item on your to-do list. Don't treat it as something that is just to be scratched off so that you feel that you've done something
Bottom line is that if your call didn't start building a relationship, it was a waste of time. You may have made the call, but you certainly don't deserve to scratch it off your to-do list, because you didn't really accomplish what you should have.
Building your list immediately has several advantages
There are a lot of advantages gained by starting to build your buyers list right now. Some of these advantages are:
- You will have more people to sell your deals to
- You will be building relationships from the start
- You may find investors that have deals that you can sell
- You have a much better chance at determining who the big players are
- You have a much better chance of finding a buyer in time
- You gain experience in talking with other investors sooner
- You are a lot less stressed when you are not under the gun to find a buyer
- You find out where the serious investors are buying and what they are buying
Now, when a good deal comes along, you could have a good idea of who to call first. If you hadn’t already started building your buyers list, you’d be starting from scratch while under the gun. Once you have a house under contract, you have a certain amount of time to get the deal closed. You don't want to be trying to scramble finding anybody willing to pay just peanuts above what you agreed to pay just to get the deal done in time.
Wholesaling Houses Conclusion
In my recently changed opinion, it is best to go ahead and start building your list now. Just make sure to go about it in a more honest, open, and conversational manner. Make friends and find the best buyers.
Make sure you check out Danny Johnson's blog at http://www.flippingjunkie.com - great stuff here!