Wholesaling: How To Get Started and Some Pitfalls To Be Wary Of

Wholesaling is essentially acting as a middleman between a buyer and seller - selling the property for more than the asking price without ever actually owning the property. Wholesaling relies on a savvy investor being able to spot a good deal and having a reliable network of investors to call on.

 

Many wholesalers do not actually locate the properties they flip themselves; they rely on “bird doggers” - a term referencing hunting dogs pointing out the location and retrieving dead birds that had been shot by the hunter - who scour the web and cruise neighborhoods searching for deals for the investor. Bird doggers find properties that are undervalued and potentially good deals and pass the address and owner information to an investor. The investor then gets in contact with the property owner, negotiates a contract for the property, and sells to another investor. In return for locating the property, the bird dogger receives commission on the deal.

 

Bird dogging is a great way to get a foot in the door of wholesaling by piggybacking a seasoned wholesale investor. Bird doggers can get an idea what to look for in wholesale properties, how to negotiate with owners, and where to look for buyers. A good starting point to look for these mentors are your local REIA Club meetings where investors, buyers, and sellers interact. Attending meetings consistently will build your network of investors.

 

While wholesale investing diminishes some of the risk associated with owning properties, the investor does still have a deposit at risk in the event they cannot find a buyer. But more important than money, the wholesale investor has his name and reputation at risk in the event they renege on the deal. Furthermore, there is usually a time frame that the wholesaler agrees to at the signing of the contract. Most agreements specify a set price for a specific time period, usually within one or two months, whereby the wholesaler can still purchase the home.

 

Overall, wholesaling is a solid way to earn income from real estate investing and carries less risk compared to many other real estate investing methods. Bird dogging is a good way to gain experience before jumping into wholesaling as bird doggers receive a percentage of the sale price and gain valuable experience from observing a more experienced investor.

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