I have posted a lot about wholesaling and how I think it should be done on this blog. Many beginners seem attracted to it because it requires the least amount of capital and has very few moving parts. In reality I think this is one of the hardest things a real estate investor can do. You have to compete with people like me and buy the house cheaper than I can, so you can sell it to me and make a profit. It is possible, but I have most of the benefits namely more money and more experience.
Now let me tell you a story about the niche Mary has found (I changed her name as I didn’t tell her I was writing this), she is a real estate agent and small investor. One day I put one of my rentals in the MLS for real estate agents to help me rent it. Not very many people do this, but I figured I would give it a shot.
A week later Mary called me and said she had a tenant she would like to show the property. She showed it, the tenant wanted it and we scheduled a three way meeting. All the paperwork got signed and we had three happy parties: the tenant loved the house; I was satisfied Mary delivered the tenant to me on a silver platter (they saw the property and liked it, they filled out an application, and they had a credit check and had proof of income); and Mary got paid. We have a deal where I pay her between 2.5% and 3% of a one year lease, which is really a bargain (3% of $1,000/month is 12,000 x .03 = $360).
I stopped listing my properties in the MLS, but I still give Mary a list of all my properties and she has helped me rent five or six. After about the third one I figured out what she does. She takes my list and makes two or three signed and posts them near my house (not right beside my sign, but close enough). She then meets the tenants she feels are qualified and does all the paperwork and emails it to me. If I like them we do a meeting and sign paperwork.
Her model is great because there is not very much competition. The start-up costs are minimal (just some signs) and the market is huge. She also gets to make connections with many landlords and learn firsthand what tenants like and don’t like about every property. The work can also easily be done “after hours” if you have a full-time job.
I think someone could easily generate $1,500 to $3,000/month doing this part-time and learning so much along the way. You could very easily always have 20 to 30 signs up and just keep a list of tenants and properties rolling. I know it’s not the most glamorous work but I think the odds of success are astronomically higher then wholesaling.
What do you think?