The 5 Biggest Wholesaling Real Estate Challenges in Today’s Market
Wholesaling real estate is a newer term of the older well known strategy called “flipping the contract. Unfortunately over the last few years, wholesaling has raised a few questions about the validity or legality of this strategy. As an investor, understanding what wholesaling is really about and how to implement this strategy without breaking any rules or legalities is crucial to being successful at creating a solid business model. In this article, I will go over the 5 biggest wholesaling real estate challenges and how to overcome them.
1. Choosing the Right Area
I hear a lot of investors complaining that the market is saturated.
Combine that fact with property owners who are savvy about market conditions, supply and demand, and you have the perfect environment for failure: a lot of marketing budget and time wasted.
The first step as an investor interested in wholesaling is to choose the right area.
We have seen a real estate investing trend to focus more on small to medium size cities (population 200,000 to 1 million) instead of large metropolitan areas.
2. Supply and Demand Trends
Once you have chosen the area, before jumping into it with both feet, look at the trends in supply and demand.
A couple of things to look into first (using the Multiple Listing Service – MLS – or other online tools:)
- How many days on the market for properties?
- How many cash sales compared to financed sales?
3.Quality of Leads
I always say that the best leads are the ones you create yourself.
Purchasing lists can save time, but the leads are also usually highly targeted by every other investor and the property owners tend to be more frustrated and rude because they are contacted by so many people wanting to purchase their property.
In general public databases, scouting neighborhoods and word of mouth are going to yield better leads than purchased lists.
4. Marketing Process
Wholesaling is a numbers’ game.
You have to run through a lot of leads in order to get to the right deals, but at the same time I expect certain results for so many leads (marketing is all about measuring results.) As a rule of thumb, I want at least 1 contract per 300 leads.
Therefore having a system of running through the leads and data in an organized but effective manner (thoroughly, as to not leave “any stone unturned”) is crucial to generate deals ongoing.
Also keep in mind that people’s perception of how they prefer to be contacted changes over time.
Social distancing, online communication, social media, and so on – how does your target market respond best?
5.Understanding what wholesaling is
As an investor, when you wholesale you are actually selling the contract, not the property. It’s very important that you understand that when you put a property under contract, you become an “owner per contract” and your transaction is about the contract, not the property.
This is where a lot of the confusion comes in and proper disclosures are not made.
You have to write the correct contract with the right disclosures in order to be legal and viable for wholesaling.
Conclusion to Wholesaling Real Estate Challenges
Wholesaling real estate is a great strategy for either a beginner investor with no much capital or a seasoned investor who wants to tap into some fast liquidity.
I call wholesaling my ATM machine.
However understanding the mechanics, the timing of every step and how to overcome the challenges makes the difference between succeeding or failing with wholesaling.
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