If this is the first episode on real estate investing wholesaling you have come across, I highly suggest going back 5 episodes and starting with the introduction to wholesaling. This is the last part of the mini-series where I can tie up any loose strings about closing deals, automation, and the like.
A Note on Automation
Why is automation so important? Because I buy from other wholesalers and I know what it’s like to specifically tell a wholesaler I am looking for “single family home in only these zipcodes” and then they go on to send me emails everyday of multi-family homes in completely different states. That wholesaler lost a customer because they are taking up my time with useless emails. I am unsubscribing. I don’t care how many other people have success with them.
- If enough people using Gmail, Yahoo, Outlook etc. no longer open your emails or unsubscribe from them, the email server will automatically start sending you (the wholesaler’s email address) to the junk or spam folder–for all your clients who use that email server.
- Extra tip: if you added someone to your email list and they didn’t have any preferences or haven’t been added to a specific group, add a little survey at the bottom asking them if they like what you have been sending or if they would like to see something else. They can then add in their preferences and you can put them in the group they belong to. Even those who are already in a specific category should be given the option to change what they want to see from you. That way, in case they change their investing strategy, they can fix it in a minute instead of contacting you or going to a different wholesaler.
There is a difference between an assignment and a wholesale. Most people want to lump them into the same group, however, different states have totally different legalities for them. You need to know the difference so you aren’t going down a path to legal ramifications.
- An assignment: In Ohio, where I live, an assignment is a contract to purchase something, anything and I sell the contract to someone else.
- Wholesale: you purchase an asset at price A and sell it to the buyer at price B. This is no different than a bulk store buying a giant case of water from Dasani and then turning around and selling it to their consumers for a higher price.
- Most wholesales are as-is, you don’t mess with the property as the wholesaler.
- If you want to wholesale as your real estate investing venture, but don’t have the money necessary to double-close, you can use a transactional lender. They will let you borrow the money to buy the asset and then wholesale it within a specific amount of time. The transactional lender will get their money back after the buyer purchases the property and then they get a fee, the minimum fee I tend to see if $2,000.00 and can go up to 1.5%, whichever is higher.
- Your other option is to use a private lender. The rules and fees are completely different. They tend to be a little better of an option for financing a wholesale than the transactional lenders.
- If you are still not sure about the difference between wholesale and assignment, check out my episode here.
More Tips and Tricks
- We talked about doing deals in your self directed retirement accounts. As a wholesaler, you can use a private lender’s retirement account to do a deal, which is a big help for them and you.
- You also have the ability to do wholesale deals in your own self-directed IRA. A truly self-directed IRA allows you to invest in anything, businesses or stocks or real estate. You will have people say they have self-directed IRAs but then pass you a list of 20 things you can choose from for your money. That is not self-directed.
- Whether or not you are in real estate investing, you should have a Roth IRA. I repeat, everyone who exists in America, a beginner in investing, your Aunt Martha in Kentucky, should have a Roth IRA.
- You can only contribute $5500 a year to any IRA. But, here’s the thing, you want to leverage your acccount, not contribute to it.
- When I do a contract assignment, I put it in my IRA and do the deal there. All the money comes from the account and all fees that I make goes into the Roth IRA as a gain. You can have as many gains in an IRA as you want. You could do a deal and get 10k from it and it is your right to put all of it in the account.
This is the end of the real estate wholesale mini-series. I have given you all the information you need to really start doing wholesaling. It is up to you to do the work, but I am more than happy to answer any questions you might have. Wholesaling can help you get some great cashflow in the beginning and you can use real estate investing to grow your wealth! Don’t let the opportunity pass you by.
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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