Co-Wholesaling Real Estate – How to form Joint Venture with other Wholesalers
Wholesaling is a real estate strategy which encompasses 4 individual minor strategies: a) simple wholesaling – also called double closing or back-to-back closing b) assignment c) virtual wholesaling, and d) co-wholesaling.
I always call wholesaling my ATM machine, because it’s the best way to make money fast in real estate. While beginning to learn about the business, you wholesale without needing any of your own money or credit. However one major problem for many investors (especially if you’re just starting out) is finding enough inventory to sell to their database of buyers who are ready and able to purchase those properties. This is where “co-wholesaling” comes into play!
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Why Co-Wholesaling is a WIN-WIN!
I’ve chosen the subject of co-wholesaling, as it’s an oft neglected technique for wholesaling properties by forming a joint venture with other wholesalers. Why do both new and established investors gladly join in this selling practice? Here are three good reasons it works for all the investors involved:
- With co-wholesaling properties, the process goes faster because you can tap into another wholesaler’s buyers list.
- It’s a great way to establish a much larger base of Buyers between you; i.e. everyone benefits.
- Larger inventory of available properties can significantly increase the choices to present to your buyers.
The concept is fairly simple. You would either supply the property or the buyer on each deal; conversely the other wholesaler will bring a buyer for your property or a property for your buyer.
What’s the ROI on Co-Wholesaling?
As far as the compensation goes, your standard co-wholesale agreement is an equal split of the profits between the two of you; i.e. 50/50. The agreement needs to specify the terms and the compensation for each transaction. Make certain to include a non-circumvention or non-compete clause, in order to protect everyone’s interest in the property.
Co-wholesaling is a great way of starting out in the real estate investing business. However the ultimate goal is to not have to depend on other wholesalers for inventory or buyers. Once you start closing on a few of these deals, you should have enough money set aside to take your business to the next level. Begin to market for your own buyers and properties, therefore minimizing the need for joint ventures where you must split the profits.
Creating Co-Wholesaling Joint Ventures
Forming alliances with other wholesalers doesn’t take much work, but you must be diligent in your efforts to establish and maintain them!
Research all local wholesalers and get onto their investor lists. You can do this with a Google search for wholesaler your city; gathering phone numbers from bandit signs in your target area such as ‘we buy houses,’ etc. Also check Internet sites like Craigslist and Backpage with the term: for sale by owner.
Now, just call up the wholesaler, and state: “Hello my name is _________ and I see that you buy and sell houses in and around_______(location). If I bring you a cash buyer, would you be willing to split the profit with me?”
If they say yes, then stay in touch with them and constantly get their freshest inventory to market to your cash buyers. This way you can focus on just building your own buyers’ list (which is the first important step for a beginner wholesaler) and not worry about getting property inventories right away. Learn even more in my Fast Track Wholesaling Online Course.
Co-Wholesaling Advice that Matters!
Choosing the right person to co-wholesale with is an important selection process. You want to make sure you form an alliance with someone you feel you can trust – someone who is ethical.
Also, if they tell you that you’re going to have to add your fee on top of their asking price for the property, in most cases that is not going to work. Why not? Well, since they are already trying to sell the property at that price – and have most likely had it online as such – this means it is probably already priced where it needs to be. If they are not willing to split their profits and work with you on a fair level, then they are not the right wholesalers to work with.
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Best wishes for your success!