Real estate agent shaking hands with clients
When it comes to real estate investing, I’ve learned through the years that market conditions are essentially in a constant state of disruption. Best practices seem to change regularly, and factors are taken for granted as certainties quickly become ineffective.
This type of disruption is only negative if you look at it that way. Successful investors see this somewhat uncertain climate for what it is: an opportunity waiting to be taken advantage of by those paying attention.
Those who know me know that I am passionate about real estate investing. It's been a game-changer for my career ever since I purchased my first fixer-upper in college, and the connections I've built along the way are priceless. Most people are familiar with the standard real estate investing forms, such as flipping. But there's a whole side of real estate that doesn't get enough attention: wholesale real estate.
I have several friends who have built entire businesses around this investing model. Unlike a more traditional real estate investment, you're not concerned with one other party to negotiate with—you're looking at two. You have to find a seller who will agree to one price and a buyer who will agree to a higher one, and you get to pocket the difference as your profit. That's a bit of an oversimplification of wholesale real estate, but that's more or less it. Here’s what you need to know to get started:
1. Build a Strong Network
Right now, the shift from a seller's market to a buyer's market gives wholesale real estate professionals an advantage. In the early days of the Covid-19 pandemic, record-low interest rates and low inventory in most areas gave sellers a distinct advantage. Those days may be over as interest rates are through the roof. Even modest homes have become out of reach for many.
Finding a buyer in a high-interest market can be incredibly challenging for sellers. Sellers are more likely to work with wholesalers because you’d be addressing one of their major pain points—an inability to reach their target audience. However, you will have difficulty doing that as a wholesaler without the right connections.
To grow your real estate network, consider the following strategies:
- Attend real estate networking events
- Join local investment clubs to connect with like-minded individuals
- Utilize social media platforms for networking and prospecting
- Engage with friends, family, and acquaintances who may offer valuable leads
- Collaborate with real estate agents to access their networks and expertise
- Develop financial profiles for properties of interest
- Leverage social media effectively by creating clear calls to action
A solid network of cash buyers unfazed by interest rate hikes is critical for turning properties during market fluctuations. Getting involved early in the search for these types of connections is challenging but worthwhile for wholesalers.
2. Try Virtual Wholesaling
Another recent trend that can help you master the real estate wholesaling game is virtual wholesaling. This operates on the same principles as traditional real estate wholesaling but with the added advantage of conducting business remotely, eliminating the need to physically inspect properties before securing contracts.
The virtual world's connectivity is practically unparalleled at this point—you could find a perfect wholesale opportunity halfway across the country and handle the deal from start to finish without ever stepping outside your door. The key here is leveraging the right technology.
One of my connections co-founded a real estate investing app called DealMachine that gives virtual wholesalers a distinct advantage. Their platform enables users to gather information about off-market properties and contact homeowners, eliminating the need for conventional skip tracing. By using the right tools, you can quickly identify properties that may be undervalued, allowing you to jump on them before anyone else.
Helpful Tools to Get Started as a Virtual Wholesaler:
- Video Conferencing Tools: Facilitates virtual meetings with clients and partners
- CRM Software: Manages leads, contacts, and deals efficiently
- Real Estate Investing Apps: Provides insights about off-market properties
- Digital Marketing Platforms: Facilitates targeted advertising and lead generation
While technology has enabled real estate investors to explore areas that would otherwise be out of reach, it’s a good idea to get familiar with local real estate wholesaling laws, as they vary from state to state. With the proper tools and research, virtual wholesaling can prove to be an extremely profitable endeavor.
3. Use Location-Based Insights
Finally, it's critical to look beyond the properties and learn as much as possible about the surrounding areas. In the wrong neighborhood, what might look like the best investment opportunity might quickly become the exact opposite.
Pay attention to locations experiencing significant population growth and start asking questions: What are these areas projected to look like one, five, or even ten years later? As you consider the “where,” tap into resources like census data to provide details on areas of opportunity.
Wholesale real estate buyers are typically investors, and investors are always interested in finding deals in up-and-coming neighborhoods. Do your research to help yourself get into a market that will be profitable for both you and the other parties involved. There’s a variety of tools out there that can help you gather information about a particular area.
Helpful Tools to Research Neighborhood Information:
- Real Estate Websites like Zillow or Redfin
- Local Government Websites
- Crime Mapping Tools
- Real Estate Agents and Brokers
- School District Ratings
For your success, wholesale real estate is about that short-term gain. But if you can help a buyer see the long-term prospects, and if that aligns with their strategy, they may be more likely to get on board with what you're trying to offer.
A Unique Way to Invest in Real Estate
When it comes to investing, there’s no one-size-fits-all method, but wholesale real estate holds a lot of promise for new investors. In the face of market fluctuations, wholesaling is a great way for the average person to start investing in real estate with little or no upfront costs. By building a strong network, embracing virtual wholesaling, and using location-based insights, investors can navigate market changes and capitalize on profitable opportunities. Doing thorough research along the way will pave the way for successful investments for years to come.
