This week we are going to be talking about inspections and rehabs for wholesaling. When you wholesale real estate, it can be a passive version of real estate investing and a form of cashflow. It takes a lot of work and a lot of the same things you do in wholesaling are things you will do in buy and hold rentals, flipping, lending etc.

If you, for some reason or another, are just joining us in the podcast, I can do a quick recap. Wholesaling is, simply put, buying real estate property at price A and selling it at price B. The wholesaler gets the difference. Wholesaling is legal in all 50 states, as long as you are doing it right! A quick call to a real estate lawyer (which most people will not charge you for) can put your mind at ease if you are questioning the legality.

Listen to the episode here

Why Inspections?

You have to know that the real estate property you sell has to come within a specific range for it to be a good deal. If the property needs $20k worth of repairs and adding that to the price of what you sold it for makes it a bad deal, you need to know to either not buy it yourself or that finding a buyer will be difficult.

  • You can ask the seller of the house how much work they think the house will need to be rent ready, however, if the seller has no background in construction or rehabbing houses, it doesn’t matter what they say because it is a guess and probably wrong.
    • You can still ask the seller about what they think the property needs, but you need to spot check them.
  • Spot Checks:
    • Before you even contact the seller, you should have already looked up three comparable construction properties in the same area and looked at their rent rate.
      • This will let you know how much the property is worth, what kind of renovations would be necessary, and what the market rent is.
    • Once you get into the seller’s property, it would probably be best to have a contractor with you to go through it.
      • The contractor may not want to waste their time, but if you explain to the contractor that you plan on making a business out of real estate they might be more willing to do the walkthrough. You can also let the contractor know that, even if you don’t buy the property, you will leave the estimates with the seller and a strong recommendation that whoever buys the property uses that contractor for the rehab.

You might be wondering if all the research and inspections are really worth it. They are! One of the best selling points you can give to a potential buyer is all the work you did for the deal. Show them the inspections, the estimates, the rent, how everything works together for the deal. That will make you more than worth your fee. It’s the difference between you and every other real estate wholesaler out there.

Do you always need a contractor to do a walkthrough?

No. The answer is that you, as the wholesaler, will not always need the contractor. Once you set up what you consider a light, medium, and heavy rehab, you will be able to kind of eyeball the estimates yourself. If you don’t want to pay an inspection fee, you have the ability to know how much a light rehab generally costs because you have seen 50 light rehab estimates and problems by now.

  • You need to keep all your data from all the properties you wholesale or do any real estate investing with.
    • Write down each part you had to buy and the price. And then label each property as a light, medium, or heavy rehab.
    • You will need to do at least 10-20 of each category to get a good average to use in your calculations for future deals.

Therefore…

All this to say: find a contractor you know and trust to help teach you what to look for during a walkthrough. Have an ongoing relationship with them so you can get your property rehabbing done when you would like it to be. Inspections can help you decide if the deal is good enough to find a buyer for and how much you can expect your wholesaling fee to be. Inspections are very important!

Don’t Forget!

If you love the returns of real estate investing, but don’t want to deal with any people, you have the option to be the bank. You can be part of a trust or a fund. Right now, I have a fund set up for accredited investors with over $5 million in assets. The fund has preferred interest and 70% profit sharing. Visit me at investwithdrmatt.com to find out if you have the opportunity to invest with us.

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