1. Over paying – This common mistake is usually done by those starting out. The reason many over pay is because they lack fundamental real estate knowlege and are itching for their first deal. Over time, most wholesalers will know what their price points should be and knowledge comes from learning and doing.
2. No marketing – A business with no sign, is a sign of no business! Thats a saying from one of my marketing assistants. It does not surprise me that those who struggle the most, have little to no marketing. An active wholesaler will always have at least 1 or 2 marketing strategies going at all times. No marketing = no money. Do we need to explain that further? Moving on…
3. Wasting time – Many wholesalers waste time with non important issues such as SEO, short sales, daisy chain emails, Facebook etc.. The only thing a wholesaler in Chicago needs to do is hit the pavement and get seller and buyer leads. We suggest to all that we teach, to focus on getting a deal done first.
4. Bad rehab estimates – Calculating numbers is how a wholesaler makes their money. Most of the time the rehab numbers are too low. Chicago is a competitive market and rehabers are trying to stand out as much as possible. This means that rehab costs are going up. The best way to learn to to sit down with a contractor and/or buyer and go over their latest deal and get a better idea of their costs. Making time to visit properties with contractors and buyers will cut your learning curve down significantly.
5. Rehab or Flip? When a wholesaler finds a property, they need to identify that property for 1 of 2 types of buyers, landlords or flippers. Once a property is identified as either or, then the rehab costs can be estimated to suit their needs. Many of Chicago south suburbs such as Markham, Dolton, South Holland, etc.. are good for SFR rentals. The rehab difference on a flip vs a rental can be 20K or more for a single family.
6. Bad comps – Wholesalers in Chicago must learn how to get comps before they ever present a property to an investor. Chicago is made up of 60+ different neighborhoods, and each neighborhood has good and bad pockets. Stick to looking at sold properties within 4 -5 blocks, not going over bridges, railroad tracks, and other natural dividers. Comparable property must have same bed/bath count, be 20% range of square footage, and have same exterior. Comparing a single family frame to a brick 2 flat would be a big no-no.
7. Over pricing – Chicago wholesalers over price their deals. Just because some guru had a deal with 20K profit, does not mean you can add 20K to all properties here. In reality, your typical wholesale property will have a spread for 3-6K, sometimes a bit more/less. Use the sold REO’s as your gauge when making offers and pricing.
8. No follow up system – Wholesaling is a business yet many treat it as if it were a side hobby. Set apart a set time each week to follow up on your leads, schedule viewings, and make offers. Block 3 hours of time, once a week, to do this until it becomes a habit.
10. Daisy chain emails -Too many times wholesalers get caught up in the email game. They receive an email from some seller or wholesaler, which has a large number of properties with asking prices on them. Many times these properties are already listed REO’s, and the person who sent you the list does not control any of them. Your best bet is to just ignore them. Getting and wholesaling your own deals is the best way to make money.
11. No car – Yup, having a car is vital. If you do not have one, stop reading, and go get one. That is all.
12. Don’t network – Networking is not necessary, but does open doors. There are many events, groups, seminars, etc. that take place throughout Chicago where wholesalers can meet other business owners and investors. We host a group for investors, contact us for more details.
13. No rapport – This is basic common sense. In order to get properties at a price you need them, a wholesaler must be able to approach others comfortably and build some rapport. This is not learned over night, but can be learned over time. Many sellers are usually cautious when talking to someone over their property. Use questions to get the conversation going, preferably ones with “yes” as an automatic answer. Be able to laugh on the phone and in person, this helps sellers feel at ease and more willing to negotiate. (sidenote: Rapport with OTHER wholesalers too..)
14. Technology know-how – Being able to use technology in all aspects of wholesaling is important. Using google docs for keeping track of calls, google voice for a business line, even efax for sending contracts, all of these tools will make it easy for a wholesaler to get simple things done. Wholesalers do not need these tools per-say, but its a great advantage anytime you can use technology to stay ontop of their game.
15. No contract – Having a written contract with a seller, option or purchase, is very important. If a wholesaler is promoting a property with nothing signed, they are vulnerable to having the sellers back out, change prices, even being cut out of a transaction Wholesalers must learn to use option agreements with sellers that do not want to commit right away.
16. Property style knowledge – Many wholesalers have to get acquainted with Chicago style homes. There are four major styles, Georgian, Bungalow, Ranch, and Cape Cod. There are various other styles, but the typical rehab single family home will be one of these four. We have a video that describes in more detail how to know which is which here: http://bit.ly/hVq7Ck
17. Knowing neighborhood pockets – Pockets are created by natural dividers such as train tracks, bridges, major intersections, and highways. These dividers must be taken into consideration when calculating the ARV of a property.
18. Not considering all costs – When a wholesaler estimates rehab and sends the property to their buyers list, they leave out some important info. Please make room for miscellaneous costs, taxes, realtor fees, and closing costs. I would say 8-9% for miscellaneous costs and 6% of the ARV for realtor costs.
19. No buyers – Many gurus advise to find buyers before they find property. However, instead of finding buyers, many wholesalers just throw up signs wherever and hope that they find a deal thinking that a buyer is soon to come. Talking with investors beforehand helps narrow the search. People call with all kinds of properties, but knowing what you are looking for helps reduce time wasted on non-profitable deals. Find buyers by back tracking sold properties via MLS or public websites.
20. No cash – Being able to put down money for an earnest deposit requires $100 to $1000. Many instances when sellers have attorneys, they are going to require a deposit to accompany the signed contract. Have a title company or attorney hold the check and verify with the sellers attorney of the deposit seals the agreement with the seller and allows wholesaler to get a buyer without worry. No contract is technically legal until a buyer or wholesaler put earnest money as consideration.
21. Persistence – If at first you don’t succeed…. quit? It seems ironic but many wholesalers are not taken serious by investors. The reason being persistence. Many wholesalers get in and get out because they are not successful right away. Anyone that sticks with a program and has the proper guidance, will always crack a deal, no matter what the market says. Stay focused and always positive and success wont be too far away.
