8 Real Estate Wholesaling Mistakes You Should Avoid
Real estate wholesaling is one of the profitable short-term real estate investment choice for many investors. For many people, wholesaling is the best way to get started in your real estate investing career. First of all, the wholesaler gets an unlisted property and makes an offer to the owner. Then the wholesaler determines the cost and the potential profit from the property before looking for a buyer. When he gets a buyer, he assigns the contract to the buyer and makes a profit by closing the wholesaling deal. Though it might sound easy, it has taken some investors down the drain financially.
Here are the costly mistakes to avoid in your real estate wholesaling business.
Being Financially Unprepared For a Real Estate Wholesaling Deal
One of the main reasons that make real estate wholesaling great for new investors is that you don’t necessarily need any money for you to close a deal. You only have to find an investor to buy the contract in your place. However, this doesn’t forego the need to have some money available for an emergency. If you don’t find a buyer for the property you bought from a wholesale deal, you will be required to pay for the property. Remember that you will also have to pay for bandit signs and the marketing techniques you will use.
Not Assembling a List of Potential Buyers In Advance
You need to be able to assign wholesaling contracts at a faster rate for you to be successful in your real estate wholesaling business. Can you easily pinpoint potential clients for your deals? Many wholesalers fail to create a list of potential buyers for your business. Having a buyer’s list in advance allows you to find a buyer for a property within a short period. Otherwise, you may have to negotiate and settle for a lower offer, or even pay for the property from own pocket.
Ignoring the Needs of Your Buyers.
In real estate wholesaling, you may find yourself too much focused on making profits and forget the needs of your buyers. A buyer needs to see possibilities of making profits after spending money on the rehab. To help in this situation, you should think like a buyer even though you’re not the one renovating the property. You may need to lower the price.
Closing the Real Estate Wholesaling Deal without an Inspection
Don’t get excited and settle for the word of the seller that the house doesn’t have significant problems. Ensure the house is inspected to identify the material damage. If you fail to inspect the house, the buyers will and they may not want to buy it.
Paying Too Much
The amount you pay determines the profit you get. Regardless of the state of the property, paying too much will cost you in the long-run. The mistake many wholesalers make is to purchase a property at a price that is higher than the actual amount they can make. You’re bound to making losses if you don’t make payment based on an informed decision.
Underestimating Repair Costs
When you get a house, you should start by finding out whether or not it is worth buying. Let a real estate broker help you get the after repair value and determine if the deal is worth the money. If you underestimate the repair costs, you will diminish your profits since the buyer will most likely make a lower offer.
Bad Market price
Once you’ve agreed with the homeowner on the deal, it is your turn to price the property for profit. If you have an asking price that is too high, you may not get an offer. On the other hand, pricing the property too low can lead to losses from the deal. Remember sure to factor in the repair costs, the property’s ARV, holding and closing costs and any other relevant cots t when determining the asking price for the property.
Poor Marketing
Real estate wholesaling requires proper marketing for you to grow the business. Ensure you market yourself and establish your brand in your area. Let people know what you do.