Updated: Dec 2, 2021
Working with many investors, and especially many first time investors, I am often asked about wholesaling, off market deals, tax lien sales and foreclosures. So I thought I might take a deep dive and explore these topics in the coming weeks.
Lets start with real estate “wholesale deals”.
What are they? Why is everyone talking about them? Wholesale deals are pretty much a mythical unicorn investing strategy. Let’s talk about why.
What is real estate wholesaling? It is re-assigning real estate contracts. You offer to buy someone’s home for a price and then sell that contract to someone who is willing to pay slightly more.
Wholesale deals do exist out there in the world, but how do you find them? Also, how do you convince someone to sell their house that is worth $600,000 on the open market to you for $550,000 so you can then resell it to someone else for $600,000? It is exactly that easy. You simply have to start making phone calls.
Get a dialer with a database, such as Mojo Sells.- it is about $250/month for a dialer service. You are going to need to make phone calls. More phone calls. Lots of phone calls. Simple- call for about 6-10 hours a day, 5 days a week and ask people if they want to sell you their home. Find that one distressed seller who needs to sell NOW. The goal is to convince them to sell it to you for slightly less than it is worth so you can make more profit. You’re going to need to reach to about 1000 people a week and have maybe 50 real conversations about real estate and it is probably going to take you about 200 real conversations about real estate to find one potential seller.
Phone calls alone isn’t necessarily enough. You may also choose to enlist the assistance of your local escrow company to print labels for mailers for you. Easy! Simply mail letters to a few thousand homeowners and ask them to sell their house to you. You probably want to mail them letters at least 4 or 5 times to get some name recognition.
So you have your letters going out, and you have your phone calls happening, and you find someone who is in distress and needs to sell immediately. All you have to do now is convince them to sell quickly, off-market, to you. You can either come up with all cash for a quick close OR assign the sale to someone else who has the cash, wants to flip the house, and is willing to pay more than you were willing to pay for the house. Sounds easy.
Today, I dug a little deeper, asked around and found wholesaler guru Jonah Korchin. Korchin is a delight to talk to, and I found his number easily with a few google searches (what some people call “research”). I asked him about wholesaling. He has done over a dozen wholesale deals in recent years, he told me. He is now the CEO of Safe Roots Investments. He does not hold a real estate license.
Wholesaling, he said, is about helping people find solutions. He is solving a problem. Stopping a foreclosure, a tax lien, and he assists people in dire situations. He offers a price, and then is able to re-sell a written real estate contract to another buyer for a higher price. What makes a wholesaler appealing to some homeowners is that they have a fear of licensed real estate agents, they are in a rush to sell, they need an VERY quick close, and he can do that. He has a network of investors ready to grab up the property (the contract, really) at a substantial percentage higher than the existing contract price. A wholesaler doesn’t need a license because they aren’t selling real estate, they are only selling contracts.
My biggest question was this: Why is wholesaling such a popular idea amongst novice investors? I initially thought (as did other agents I asked)- that someone is out there selling a get-rich-quick scheme. People are seeing a web ad or an infomercial and they are convinced that wholesaling is a REAL get rich quick scheme. I thought perhaps there are life coaches out there selling real estate wholesaling courses. The answer as to why so many people are interested in wholesaling or think this is the the way to make quick money is instead this: A google search.
What do you want? To make money. How do you find out how to do a thing…. hmmmmm. Idk- google it?
Seriously, though. How do I make money fast. How do I make money. in real estate. How can I Invest in real estate without any money. BAM. What they see: wholesaling.
Wholesaling is a popular *idea* because you don’t need money OR a license. Just pick up the phone and start dialing. Jonah explained to me that while it is that simple, it is super labor intensive, and time is money. For me, when I bought my first property, it was much easier to work a second job, read tons of books on real estate investing and save up enough to buy a house than to spend hundreds of hours chasing a unicorn. I also earned my real estate license in New York State and did leasing to make extra money when I was getting started. Wholesaling sounds like a good idea, and it can be a money maker for someone hard working and dedicated, and I am sure there are some great single opportunities that fall into people’s laps. That aside though, I think for most people there are better ways to make a living.
Next week we are going to talk about tax leins.