Welcome to Real Estate Investing Mentor Program With Dave Dinkel
As A real estate investing mentor I focus on what works the best to teach my students the fastest way to get into the game.
Who Knew There Were 5 Types of Wholesaling?
Real estate investing takes many forms, including but not limited to, investing in REOs (bank owned properties), short sale purchases, lease options, options, tax deed purchases, tax certificate ownership, using creative financing to control properties, landlording and many other forms of controlling the ownership or income from a property. Every real estate investing mentor should cover all of these topics so that the real estate mentor students understand and can implement as needed.
One of the most powerful, if not the most powerful form of real estate investing is putting a property under contract with a seller, finding a buyer for the property and then doing a double closing or assignment of contract to compete the two transactions. Some states have different requirements about whether you are selling a contract or the actual property but wholesaling can be done, and is done legally, in every state. I start with this as the main basis of my real estate investing mentor program.
The truly spectacular benefit of wholesaling is that investors can generate huge incomes with little money such as a minimal earnest money deposit (“EMD”), or no money what-so-ever. This concept is often hard to grasp by beginning investors but is a main stay of professional investors worldwide. As a real estate investing mentor I use a website that shows numerous “Moneyless” wholesale transactions where the investors made profits of many thousands of dollar ($4,900 to $80,000) with only a small EMD or no money in the transactions, the website is www.TransactionalFundingFL.com .
Wholesaling is the easiest and most beneficial place for new investors to start their careers. This is simply because there are no monetary requirements, no credit requirements and no market risk for wholesale deals done correctly. Most real estate investing mentor programs sell books and tapes where we teach our students to start making offers right out of the gate.
Wholesaling is usually considered the buying and selling of a property below FMV which entails the finding of deals at below-market prices and reselling them often to rehabbers – who sometimes make less money than the wholesaler who purchased the property.
Getting a “good deal” pricewise is the cornerstone of all other types of investing where the buyer can make large sums of money in a very short time, often in one day. If a property is not contracted below market, the investor buyer will have to create equity in the deal typically by rehabbing it. Our real estate investing mentor program shows this as a more advanced strategy after our students are making money wholesaling.
This means that the investor has to purchase the property with cash of his own or a loan, which is where the risk of rehabbing begins. This purchase of the property creates the real fear that many investors have of “Bleeding to Death in a property!” The loss of money can be from underestimating repairs, workmen who do not finish the job timely, cost of hard money, inability to sell the rehabbed property timely, code or permitting problems and a host of other issues that the investors didn’t anticipate.
My most successful real estate investing mentor students learn to be strong wholesalers and pick the very best properties they get to rehab. Even while they are rehabbing, they continue to wholesale to have a cash flow until their rehab(s) can be sold. As a real-life example which is in a video interview I did elsewhere on my site, my real estate investing mentor student completed 51 closings, 36 were wholesale deals, two were kept for income and the other 13 were rehabbed. His net income after all expenses resulted in a net profit of almost $920,000. Had he not done the wholesale deals he could not have completed the rehabs because of cash flow issues. Last year this Student completed 95 closings and in about the same ratio as the year before but doubling his net profit.
What many investors and even pros in the industry do not realize is there are five distinct methods or techniques of wholesaling. Every one of the wholesaling “types” can be extremely profitable but all fit the criteria of no money, no credit requirements and no risk. This is where our real estate investing mentor program has proven to allow so many students to change their lives.
Let’s start with “Traditional Wholesaling” which is what investors know as buying a property at a price below what it can be resold for to another investor, landlord or rehabber. Ideally the investor buyer resells and makes a profit by assigning his contract, selling his contract or doing a double closing.
Typically real estate investing mentors teach investors to make a so-called “perfect offer” by estimating what value an end-buyer would pay for his wholesale deal. This is loosely referred to as the Maximum Allowable Offer or MAO. All this is well and good but in active markets by the time this value is calculated the property may well be sold.
More importantly, this equation is subject to some potential errors including what is ARV and what are the actual repair estimates? A buyer will always do his own estimates of ARV and repairs. One buyer may be able to do the repairs for $10,000 – while another will estimate $50,000 or at least say $50,000 to get the investor to reduce his profit spread.
While it is a common practice by many real estate investors, I suggest a seller never estimate ARV or repairs since an end-buyer could later sue and claim the estimates of ARV and repairs mislead him and as a result he lost money. If you believe you can’t be sued or you are in the right, you may have a surprise one day. This will be when that end-buyer sues you for something outrageously stupid but he still sues you. It may take a while to resolve the issue but you’ll soon discover that the only winners are the attorneys.
For this explanation, let’s say that Traditional Wholesaling is simply getting a property and reselling it to an end-buyer at a profit without doing any rehab what so ever. If you are doing a rehab at all you will be holding the property and you are technically designated as a “Flipper”.
Over a year ago I did a real estate investing seminar on something I thought everyone knew about but I was wrong. I called the seminar “Wholesaling to Wholesalers” which is the second type of wholesaling. I was shocked that after the seminar some of my most successful real estate investing mentor students came up to me and said I had opened a whole new world to them. Two months later one called to tell me he had netted $87,500 that month using Wholesaling to Wholesalers techniques.
He is now one of the most successful real estate investing wholesalers in our area and often sells other Students’ deals that they can’t sell themselves.
The strategy here is to build a strong buyers list and remarket other wholesalers’ deals to your buyers list and, more importantly, to other wholesalers. This technique immediately allows you to have inventory which you’ll need to keep your buyers list alive. Most importantly, your chances of selling a wholesale deal are almost viral as your list gets larger and larger.
You can quickly build your buyers list by finding Realtors® who get constant requests for “deals” from investors who are cash buyers. Realtors® are perceived to be the source of deals that come from the MLS® – any “real deal” will sell in minutes or a couple of days. That is not the case and even most disturbing is that many agents became Realtors® to be able to find their own investor deals. Once they realize that getting real deals is more difficult they just quite being licensed.
One of the greatest ways to be a landlord without ever dealing with tenants and toilets is to “Wholesale Rental Properties” which is the third type of wholesaling. The average landlord lasts about 3.5 years before he goes screaming into the night and becomes a Motivated Seller. You can spot these guys and gals at Eviction Hearings pleading with an un-sympathetic judge about how the tenant destroyed his property. Unfortunately, tenants have more rights than landlords.
In our real estate investing mentor program,we do the opposite; we evaluate a multi-family property using an old formula that I devised to make CAP Rate calculations in 3 seconds or less using only the Gross Monthly Income as a variable. Doesn’t matter about the condition of the property, whether it has tenants or what the tenants are paying. PS – it has nothing to do with Gross Annual Income for the die-hards who do it the complicated way.
We then make an offer to the seller of the property on a CAP rate using a high percentage of income and resell at a lower CAP rate or percentage return to a motivated buyer and usually a new landlord. The profit potential is very predictable at 2.5 to 3.5 years of net income to us as wholesalers and we take this profit away at the closing. These actual gains can be from $30,000 to over $100,000 depending on the number of rental units (doors).
One of the laziest ways to make a ton of money is “Recycling Other Wholesalers’ Deals”. In this take on wholesaling, you build your buyers list as usual but you carefully track every other wholesaler’s deals to see if they close and to see who his buyers are.
You’ll quickly notice that many of the other wholesalers’ deals do not close and it could be as much as 60% failure to close for certain wholesalers. The original seller is now more motivated and likely will take a lower price than he did with the previous wholesaler.
All you need to do is track every wholesaler’s offering lists you can or an assistant can do this for you. When they don’t close you can go after the sellers directly whether the property is listed or not. In fact one real estate investing mentor student recently told me that he was getting 2 – 3 deals a month from a local famous wholesaler who had too many properties on his wholesale list to properly manage them. He called me from a beach in Costa Rica to tell me this because he asked me to fund the deal he had just “recycled.”
The greatest asset an real estate investor has is his buyers list and the sooner you learn this, the better. You can be a monster profit machine simply by building a very powerful buyers list. These are not emails of card swappers at your local REIAs. These are the hardy souls who have purchased properties for cash for wholesaling or flipping and who can easily be found in the public record. By tracking who purchases other wholesaler’s deals you are offered these buyers on a silver platter!
Unfortunately the last wholesale tactic is actually illegal, immoral and pathetic. In the eyes of individuals doing “Back Hat Wholesaling” they believe that the world is a jungle and that stealing deals from unwary investors is common practice. Their strategy is very simple, they join every wholesalers’ list but with only one intent.
As soon as a wholesaler has a new property to put out to his email list, these black hatters immediately rush to the property owner/seller and offer more money that the wholesaler did. They also “trash the other wholesaler’s reputation” and tell the unsuspecting property owner that the contract he signed was invalid. Before the seller knows what happened he is following black hatter’s instructions and cancelling his contract with the other wholesaler.
The seller doesn’t realize that he can’t just “cancel” his original contract but the black hatter herds him to his closing agent and before the original wholesaler realizes it, the seller has closed with the black hatter and he has left the property. This method of theft is estimated to be over One Billion Dollars a year. The ironic part is that many investors didn’t even know that it happened until it was too late.
In summary, some people will say that there is only one type of wholesaling and what I have shown you here are just variations. The fact is that each and every one of the above five examples, is and has been, used by my real estate investing students and thousands of other investors to make a substantial living with no money, no credit and no market risk. Yes, unfortunately even a few on my Students have gone to the dark side and are doing black hat wholesaling.
I wish you limitless success,