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Real Estate Investing We Buy Houses

What Are The Main Issues With Wholesalers In Real Estate Investing?

What are the main issues with wholesalers in real estate investing? As of today June 13th, 2018 the publishing of this article, the real estate investing industry is experiencing a massive phenomenon. There are more real estate investors then there has ever been in the existence of investing. With the invention of the internet more and more investors are popping up. Unfortunately, many of these investors did not educate themselves correctly. For many newbies, their education consisted of youtube, the internet, and maybe a single seminar promising to make them rich. Real estate investing is not a get rich quick scheme and is a full education comparable to college. Largely, the group of newbie investors is beginning a career in wholesaling because it is the simplest and fastest way of making CASH FAST.

What is Wholesaling?

Wholesaling is when an investor negotiates a contract well below market value due to factors such as disrepair, liens, or judgments and many more. Then the wholesaler assigns his or her contract to another investor for an assignment fee or the wholesaler negotiates a new contract with an investor for more than the value of there own. In theory, wholesaling seems like a very simple process, however, there are many factors such as ARV (after repair value), rehab costs, holding costs, closing costs, sales costs, and the overall marketability of the property to consider.

In Florida specifically, hundreds of investors have received newbie leads from wholesalers who simply are not educated well or lack integrity. Specifically in Southwest Florida here are some of the issues educated investors are experiencing…..

  • Bad Deals In Poor Areas
  • Stating incorrect market analysis information on rents rising or values rising
  • Do Not Have The Correct ARV
  • Estimation of holding costs
  • Did not consider closing costs
  • Evaluation of sales costs
  • Stating the title is clean when there are issues
  • Integrity Issues
  • Do not know how to correctly estimate rehab costs

Education Is Key

A large amount of these problems are stemming from a simple lack of education. The other portion is a lack of integrity, scam artists, and wholesalers working off the greater fool theory. For those who do not know the “greater fool theory” is the belief that there is always someone out there foolish enough or uneducated enough to pay more than what the property is worth. Now that we have covered all the reasons why newbie wholesalers are doing business incorrectly, let’s focus on the resolutions.

How To Wholesale Real Estate? 

How does someone wholesale real estate the right way? If you are serious about the business of Real Estate and have a strong to desire to learn then the number one action a new wholesaler can take is getting educated. Often overlooked education is the most important trait to have as a real estate investor. Without education, we do not have a business. In this day and age education is everywhere, there is a multitude of websites such as biggerpockets.com and many legitimate as well as illegitimate gurus in the industry.

How To Choose?

So, how does one choose?  From my experience listening to what experienced investors have said the best source of education is from legitimate real estate gurus. There are many gurus out there who have done a few deals maybe more and immediately jump into the business of seminars, stay away from these people! Seek out legitimate gurus who multiple experienced investors have vouched for them such as members of your local REIA that you trust. In my opinion, the best teachers are Ron Legrand, David Lindahl, and Jack Shea.

Build Relationships

Furthermore, build relationships they are valuable! A good relationship with an investor who you can learn a lot from is worth more than any fool looking for gold aka the “greater fool theory”. Always do your due diligence, this means pulling good comps, estimating repairs, closing costs, sales costs, and holding costs. Do not present deals to investors without doing all your due diligence. Doing so will destroy any relationship you could have developed.  Once all of these puzzle pieces are in place you will see your business grow exponentially.

For more information or any furthers questions email David@we-buy-home.com

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