Welcome!
My name is Brett Snodgrass, and I want to officially welcome you to the Simple Wholesaling Family and congratulate you on reading our first Simple Guide!
If you take the information we teach you in our Simple Guides and actually apply it to your business, you will be well on your way to a 6 figure income and a truly fulfilling life in no time!
In this Simple Guide, you will find everything you’ll need to get started successfully as a real estate wholesaler.
My Story
Before we move on, I first want to share my story and how wholesaling completely changed my life.
I’ve been a real estate investor for over ten years. When I first got started in real estate, I had just graduated college with an early childhood education degree and was substitute teaching. In my first year of substituting, I had only made $10,000.
I was broke!
I hated my job!
I had no purpose in my life whatsoever and quite frankly, I was miserable because I knew the path of a teacher wasn’t the right fit for me.
Since I was making such little money at the time, I had to live out of my parents basement, and in a failed attempt to make something of myself, I decided to start a side business selling bootleg DVD’s on the internet.
I had no idea how illegal it was, and I eventually received a cease and desist letter and was taken to court and sued for everything I had (which wasn’t much at all).
So, instead of taking the career route, I began looking for ways to become an entrepreneur and take control of my time (legally). I began flipping anything I could get my hands on from cars to stereo systems on Ebay.
My search eventually led me to something called real estate investing, and boy, did it end up changing my life forever!
When I first started, I didn’t know anything at all about real estate investing. But I simply decided, “You know what, I’m just going to go ahead and buy a house and see what happens.”
I found this house in Youngstown, Ohio with an asking price of $9,000. At the time I only had $5,000 in my saving account but my father decided to match me, so I took all the savings I had, partnered with my Dad and bought this house for a total of $10,000 including closing costs.
That $10,000 was literally all the money we had to invest, so with no money left, we had no idea of what to do next. So I thought to myself, “What if try I to sell it for a little bit more than what we bought it?”
So we did just that and listed the property for $15,000 and made an incredible $5,000 profit between the two of us.
I was hooked!
I had just made half of my yearly salary in less than one week!
The moment that happened, I remember sitting back and saying, “If I could do this with one house, what if I did this with one hundred houses?”
So that’s where it all started.
I slowly began building up working capital and now 10 years later, I have a team and have scaled it to the point where now, we routinely average $150,000 to $200,000 in any given month.
I don’t tell you these numbers to boast; it’s all to the glory of God. I share these numbers so you can see that this is possible for you and your business as well.
Real estate wholesaling has literally been my ticket to creating the life of my dreams and my prayer is that this Simple Guide will help you get started and encourage you to use real estate wholesaling to do the same in your life.
So, without further ado, let’s get into it!
What is Wholesaling?
When we look up the definition of the word “wholesale,” dictionary.com defines “wholesale” as, “the sale of goods in quantity, as the retailers or jobbers, for resale (opposed to resale).”
So, when you are a person who sells products to businesses (retailers) and not individuals, you are selling them products they can turn around and use to make money, right?
Absolutely!
In short, real estate wholesalers are essentially matchmakers or the “middle-men” between the property and the investor buyer.
Wholesalers buy extremely cheap properties from motivated sellers, and then turn around and sell those properties for a slightly higher cost, but still at a significant discount leaving room for the investor buyer to turn a great profit.
You just get a cheap property and sell it. It’s that simple!
The Three Different Methods of Real Estate Wholesaling
Now that you understand what wholesaling is, let’s dive into the three most common strategies used to wholesale real estate.
1. Assignments
This method is probably the most popular wholesaling strategy because it doesn’t cost you any money out-of-pocket and there’s little to no risk involved.
This strategy consists of getting a property under a purchase agreement between you and a motivated seller, and before you close, you find an investor buyer to sell the contractual rights to for a fee.
Here’s an example. The motivated seller wants $10,000 for their property. You write a purchase agreement with the seller for $10,000. During your “due diligence” period, you turn to your buyer’s list and offer to assign that contract for a fee of $5,000.
The investor buyer purchases the property for $15,000 and boom, you just made $5,000 on a wholesale deal!
Sounds pretty simple, doesn’t it?
Now there are so many amazing benefits when taking advantage of the assignment strategy!
You have very little money into the transaction (if any at all), and you have very little risk because you can normally find a way to back out of the deal if needed.
However, here at Simple Wholesaling we don’t personally like this type of wholesaling for a couple of reasons:
Legal Gray Areas
Depending on your market, there seems to be a lot of grey area legally on whether you can wholesale through assignments without a real estate license, or at all for that matter.
Many argue that you’re essentially acting like a licensed agent because you’re overseeing a transaction between a buyer and a seller for a profit. If you’re marketing a house for sale that isn’t technically yours, you could run into being accused of fraud. If you have your real estate license, then it’s cleaner to do assignments but you still could run into some trouble depending on the laws of your state.
We’re not lawyers nor are we providing legal advice, but there may be a big legal risk here, so if you decide to assign contracts, I strongly suggest sitting down with a real estate attorney in your market and have them write up your purchase agreement and have them advise you on the best way to go about these type of real estate transactions.
It Could Be Considered Dishonest
If you tell a motivated seller by contractual agreement that you’re going to buy their house and someone else purchases the property instead, that can easily make a seller freak out and back out of the deal.
In the same token, if I tell an investor buyer that I have a deal and the motivated seller decides to stop the interaction between us, it’ll destroy my reputation with the buyer and I’d come across as a major flake.
It Can Get Very Complicated!
Our company is called Simple Wholesaling for a reason. We love to keep things as simple as possible.
You lose control because you’re dealing with multiple people and multiple prices.
Are you guys familiar with the daisy chain?
If not, here’s an example of a daisy chain. I get a property under contract. I assign it to Joe, then Joe assigns it to Tom and then Tom assigns the contract to Harry.
We call this a daisy chain because that’s what it is, a big chain that can get very messy, very fast! If something falls through, it breaks the entire chain and everyone involved gets frustrated and upset.
But don’t let this scare you.
Assignments are a fantastic way to wholesale real estate. There are thousands of wholesalers who use assignments as their primary method every single day. If you do it right, you shouldn’t have anything to worry about.
2. The Double Close
The double close method is used when you purchase a property and then sell it to an investor immediately — within minutes!
At closing, you first sign the documents with the motivated seller, and then later in the same day, you meet with the investor buyer and sign the closing documents with them.
The success of double closing ultimately depends on timing and the biggest risk using this method is that you have no control of the transaction!
You’re dependent on the motivated seller and the buyer, and if either pull a no show, things could get hectic and your reputation could suffer.
If done correctly, double closing can be an incredible way to wholesale real estate.
3. The Simple Close
The final way to wholesale real estate, is something we like to call the “Simple Close.”
This is actually what we do at Simple Wholesaling because in my opinion, it gives you the most control over the transaction and is legally the safest and easiest way to wholesale real estate!
In a Simple Close, you simply buy the property from the motivated seller, with your own funds, close on it, then once you fully own the property, you market it and sell it to an investor buyer.
It’s so simple!
I like this strategy mostly because I don’t have to worry about the motivated seller backing out, the investor messing up my loan arrangements if they back out, or the law because I’m simply selling properties that I own.
Now, the downside to this type of wholesaling is that it takes a lot of working capital to function but don’t let this discourage you.
I started with only $5,000 and within a year, I was operating as a full-time wholesaler, so it is definitely possible!
Each type of wholesaling has it’s pros and it’s cons and ultimately, you’ll need to decide which path is right for you.
We will dive deeper into strategies on how to properly assign contracts, the double close and The Simple Close in future Simple Guides.
Now, I know you’re eager to learn how real estate wholesaling companies operate, tune in next week to read about the business model breakdown of wholesaling. Thank you and God bless!
