MODULE 3:Wholesaling 101

Now that we’ve laid some groundwork of essential terms and definitions, we’ll delve into the mechanics of the wholesaling and

“real estate finder’s fee” business.

But before we get into exploring the details of the Real Estate Finder &

Wholesaling business model (which, by the way, is way more profitable and way less work than that of most wholesalers

I’ve noticed) we should begin by first covering the basics of wholesaling for

anyone who may not already be familiar with them.

Don’t expect an exhaustive Real Estate 101 class — that would be way beyond the scope of this training.

But since everyone is at a different level, I want to make sure everyone has their mind wrapped around

some of the key, foundational concepts underlying any real estate wholesaler’s business before we delve

into this wholesaling real estate model.

So think of this section as kind of a beginner’s wholesaling primer. And the

next chapter will amplify this base knowledge into the realm of the day-to-

day business.

What is Flipping Houses? Most of us already understand this, but flipping houses is basically buying a house for one price, then selling the same house

again for another price. And the general idea is to sell it for more than you paid for it, thus realizing a profit.

By now you’ve probably seen the popular TV shows like, “Flip This House”, “Flip

That House”, “Flip Or Flop” and others.

Each of them details (some less accurately than others) the adventures of someone plotting to make a fortune flipping a house — that is, buying, repairing, then reselling a piece of real estate.

Some of those shows leave a lot to be desired in terms of painting an accurate picture of the real world ups and downs of flipping houses, but that’s the nature of what we’ve come to know as “Reality TV”, isn’t it?

An important distinction to make here is that, while technically anything that’s

bought and then resold has been “flipped”, when most people

speak of “flipping houses” they’re often speaking generically of the fix-and-flip

side.

In other words, “flipping houses” has become almost synonymous with what’s been known

for years in real estate investment circles as “rehabbing houses” — which means not only finding a

great deal on a house, but also repairing it to some extent, and usually selling to a RETAIL buyer (and

owner occupant).

This type of flipping can be very, very profitable. But it also tends to take much

more time per deal than wholesaling (usually months rather than days or weeks) and also, typically involves higher risks of

time, capital, etc. than wholesaling.

Make no mistake — there are many investors who make a very good living and have

become multi-millionaires through the fix-and-flip side of this business.

I just prefer the safer, faster-moving wholesaling arena — and I’ll explain exactly why in a moment.

Is Flipping Houses Illegal? I’ll just briefly address this one.

Years ago this question was the big one everyone kept asking — though not nearly so much anymore — thanks to the

popularity of the aforementioned TV shows.

The bottom line is this: NO, flipping houses is NOT illegal in any way, shape, or form. There is absolutely nothing wrong with

buying a home cheap and then selling it for more than what you paid.

If you think about it, technically things are “flipped” all the time. It’s just basic capitalism — the free market exchange of goods and services for valuable

consideration. Our economy depends on it and it’s a normal way of life for all of us.

If I owned a car lot, I would purchase cars at a wholesale price then resell them at a higher retail price — in essence, I

would be “flipping” cars.

And if I owned a sporting goods store, I would be “flipping” everything from soccer shoes to baseball bats to my

customers.

The whole reason it was ever in question in the first place is because a few years ago some unscrupulous investors were

nailed for using fraudulent information in the process of making gobs of money

flipping houses together.

Basically their resale relied on inflated appraisals, fake documents, sales to “straw”

buyers representing original sellers, and “phantom” second loans.

There are cheaters and bad apples in every industry, but the media at the time

quickly labeled these scams as “house flipping schemes”, thus casting a shadow on the term for quite some time. So to put

it simply, just don’t commit fraud.

Just do everything you do with integrity. And rest assured, there is absolutely nothing wrong with buying a house at a discount, then selling the same house for whatever

larger value someone is willing to pay.

If your buyer wants to pay you substantially more than market value, and they have the means to pay you, then it’s their

choice and your profit… plain and simple.

What is Wholesaling? Technically wholesaling is just a certain, specific variety of house flipping.

Being more specific, it’s the business of finding a great deal on a bargain-priced

property, placing it under contract, and then quickly assigning the deal to another buyer (often a landlord or other Investor-Buyer) in

return for a “finder’s fee”, who will then close on the property in your place.

These buyers are typically professional, private investors with cash, credit, expertise, and the ability to buy instantly with cash at the right price. They

actually WANT you the wholesaler to find these deals for them!

You get paid immediately for providing a simple service. Yes, this is simply a “service business.”

Each transaction has only a few steps, which I’ll outline in a minute. There are no products to buy, inventory, handle, or

sell.

And even though “real estate” may sound intimidating, and some of the terminology I have to use here may sound foreign to you, there really is NO SIMPLER WAY OF MAKING SERIOUS MONEY in real estate

than wholesaling houses!

Wholesaling Vs. Fix and Flip: If you think of the “Fix and Flip” or “Rehabbing” side of it as “buy low, sell high”… then the wholesaling side would be “buy low, sell

low”… but still high enough to make a nice, quick profit… and leave some profit for your

investor-buyer or landlord buyer.

However, with the “Fix and Flip” side of the game, you have to worry about repairs,

contractors, hard money, or private money, etc. No need to bother with any of these

things as a “Finder & Wholesaler”.

Let’s look at the anatomy of a Wholesale Flip:

In essence, a typical wholesaling transaction might look something like

this…

1. Joe Wholesaler finds a motivated seller with a distressed property.

2. It’s worth $100,000, and needs about $10,000 in repairs.

3. Joe negotiates a great deal, and puts the house under contract for $50,000.

4. Joe does NOT plan to do any repairs, or go to a closing.

5. Instead Joe calls up his friend Larry Landlord and asks him if he’s interested in buying the house for a total of $60,000 ($10,000 more than Joe’s contract price — Yay, Joe!)

6. Larry checks it out and likes what he sees…“Deal!”

7. Joe then assigns his purchase contract to Larry, in return for an “assignment fee” (finder’s fee) of $10,000.

8. Larry Landlord then steps into Joe’s shoes (metaphorically speaking) and closes on the $50,000 purchase in place of Joe.

9. Everyone wins. The desperate seller got out of their situation, Larry Landlord got a great deal on another rental house he loves, and Joe Wholesaler scored a quick $10,000 “finder’s fee”.

I know I’m using round numbers in this example for simplicity’s sake, but do you see how simple it really is? Some say wholesalers get paid handsomely just for shuffling some paperwork around. I’d say there’s a little more to it than that…

but not much.

I have my own variation of this model — an amplified version I’ll be detailing for you shortly that’s even simpler, easier,

and more profitable in my opinion.

But in its most basic form, this is exactly how most wholesale deals work — and it’s important that you

understand it as a basic foundation to start with.

Where Wholesalers “Fit In”…

Though most in “mainstream” real estate circles don’t seem to recognize it, real

estate wholesaling is a vibrant and important aspect of the real estate

industry as a whole.

Often it’s the wholesalers who are singularly able to find and provide solutions for sellers with distressed properties they no longer want — people who

desperately need out of what seems like a “no win” scenario (or problem) to them.

Wholesalers are actually doing the motivated seller a huge favor by helping them solve an often overwhelming real

estate problem.

Without a wholesaler to help find and move these properties back into the

marketplace, the real estate market would grind to a slow crawl, property values

would fall even more, and bankruptcies would skyrocket to new heights.

Truth be told, wholesalers are the “unsung heroes” of the real estate industry, and provide the very grease that helps

keep the gears of our market turning.

To quote one of my good friends… “Wholesalers are the rock stars of the real estate investing business!” Wholesalers do provide a much needed and valuable

service.

If you think about it, the wholesaling profit model is less of a “real estate”

opportunity and more of a “finder’s fee” opportunity.

Because when it comes down to it you’re really just a “finder” — a middleman

providing a much needed “matchmaking” service to a certain pool of motivated

sellers and buyers.

1. First you find and negotiate a deal with a seller (which I will show you how to do).

2. Then you match your new deal with a qualified buyer who can close fast and pay you a “finder’s fee” for your effort.

3. Everyone wins — viola, you’re a “real estate matchmaker”.

Did you know that some of the highest paid people in the world earn their giant incomes from finder’s fees? It’s true!

They do it as matchmakers and dealmakers, not as buyers or sellers or investors — and certainly not as owners of businesses that enslave them

with stores or offices, employees, overhead, long hours and worry.

Sometimes ridiculously handsome finder’s fees are paid to people who make corporate

mergers and acquisitions happen, find private lenders for borrowers, even buyers for used private aircraft! Oh yeah, and of

course, buyers for discounted real estate!

Advantages of Being a Real Estate Finder and Wholesaler….

There’s a number of big advantages to being a Real Estate Finder and Wholesaler, many of which may already be

apparent to you.

It’s certainly not the only way to make money in real estate, but in my book it’s one of the very best. Here are just a few

reasons why…

Wholesale deals benefit everyone involved. I’ve already touched on this one. But one of the best parts about wholesaling is that each deal is a

win-win-win.

• The seller is happy to quickly unload an unwanted piece of property for a fair price and without having to lift a finger in the process.

•Your buyer is happy because they are getting a great deal on a piece of real estate.

• And you, the wholesaler, are happy because you’re earning a $5,000 to $15,000+ fee for your services (about the average range “finder’s fee” I aim for).

When a deal is done right, there are no losers.

The original seller is happy because he or she was able to get rid of unwanted

property — such as a vacant house that is costing the owner money — without doing

any work to find a buyer.

You can earn great money, with ridiculously low risk. Compare this to any other business you might start.

Most take more time, use your cash or credit, saddle you with inventory, require education, ask you to be a great salesman, and may involve a franchise fee, debt, a store or office, employees, and big headaches.

There’s basically NO RISK in wholesaling, because as a “middleman” or “matchmaker” between a motivated seller and an eager buyer, you never actually put any money down on the property yourself!

In most cases, you should have NO holding costs, NO rehab costs, NO tenant

worries, NO money out of pocket… nothing.

In fact, this system can actually take you from postcard (or CraigsList ad) to profit in less than 30 days!

There’s also insanely high leverage…Once you learn the ropes the profits in

this System, the profits you can earn can be obscene compared to the time and

effort involved.

Seriously, I can mail out a batch of postcards, get dozens of solid leads back, resulting in 1 to 3 great deals.

And having virtual assistants handle almost everything for me, I can make more money in a month than most people do in a year. No, I’m not exaggerating. Yes, this is reality… and it’s truly sweet!

Hopefully, I’ve painted a pretty good picture for you of not only what a Real

Estate Finder & Wholesaler is, but of the potential that lies in store for you when you join the ranks (and I haven’t even touched on the specific version, yet!)

But now I have something brief but important to share about doing this in

today’s real estate market… and frankly the tremendous opportunity that exists right now for you to make huge profits

with “Real Estate Finder’s Fees”.

You may have been ‘sold’ the idea that there’s just no money to be made in real estate right now by the

relentlessly negative media.

We all know bad news sells and the media seems relentless in spinning every story to paint as bleak a picture as possible about the prospect of engaging today’s real estate market in any way.

But they’re VERY wrong… And what they AREN’T telling you could cause you to look in the wrong direction and miss

the great income and steady profits just waiting for you.

Everybody knows there is a nationwide “fire sale” of deeply discounted houses… a growing and giant number of

homeowners eager or even desperate to sell.

The reality is I can’t think of a better way for you to capitalize on today’s market than to get into the Real Estate

Wholesaling arena.

Quickly earning finder’s fees of $5,000 to $15,000+ on each deal you find, without using any money or credit. And just know that despite the doomsday

and popular nay saying, today’s environment is prime time, my friend.

Congratulations, because YOU ARE in the right place at the right time! You’re being handed the chance to participate (and profit) from the single greatest exchange of wealth in a century.

Just ignore the fear mongers of the media, open your eyes and start raking it in.

Trust me, there’s more than enough to go around.

Now… are you ready to see how Real Estate Wholesaling business operates? Well hold onto your hat, friend. We

cover it in Module 4.