Wholesaling Properties: 7 Costly Mistakes of Newbie Investors

How did you first learn about the business of wholesaling real estate? Did you read a book? Or hear it on a 2AM infomercial? Or perhaps you know someone in the business. No matter how you learned about it, you quickly caught on that there was money to be made in the business. You may have seen incredible examples of people who found bargain properties, purchased them for pennies on the dollar, turned around and made a nifty profit.

Of course all that is true. Wholesaling properties is a lucrative business, but there are a number of pitfalls and dangers to be aware of. Remember the old saying "To be forewarned is to be forearmed." The highway to real estate fortunes is littered with well-intentioned people those who did not heed good advice. Let that not be said of you. Here are seven of the most common newbie mistakes to avoid.

1. No Cash Reserve

To jump into real estate investing with no cash reserves is pretty much a ticket to quick failure. I know - you've listened to all the infomercials and heard the gurus say "no money down," "you need no cash," and similar amazing claims. It sounds great, but the truth is you will have to have access to some cash. This may be your great credit (and your credit cards), it may be a partner who has cash reserves, it may be someone who believes in you who is willing to invest in your business. Somehow, some way, there must be available cash. Think about it - you can't even buy a stack of bandit signs if you have no cash.

2. Lack of Knowledge and Expertise

Some people love to learn and soak up knowledge and instruction. Others feel that taking time to study (seminars, teaching CDs, books, webinars, etc.) is a waste of time. "Who needs it? I just want to jump in and get rolling." Can that person become successful? Perhaps. But the chances are slim. Do you want your car tuned up by someone who has never been trained? Not me. There is so much good instruction available, it would be foolish not to take advantage of it. Whatever knowledge and training you can acquire - your future clients will thank you for it.

3. Failure to Market

In order to succeed in real estate investing you will need sellers who want to sell and buyers who want to buy. The only way you can find these people is by marketing. Yes, you can hire bird dogs (people to scour neighborhoods to find properties for you), but that is not all sufficient. The lack of a marketing plan and a marketing budget is a mistake that can be fatal to your new business. You must let people know you are in business, and you must let them know what you can do for them.

4. Ignoring the Internet

Closely related to marketing is the use of the Internet. In this day and age, there is no excuse for not taking advantage of all that is available on the Net. You can find simple do-it-yourself website programs with which you can set up a website and feature your properties. Learn about such things as email campaigns and autoresponders. Use free ad services such as CraigsList. Much of what is offered on the Internet is free for the taking. Not using these tools leaves a gaping hole in your marketing plan.

5. Paying Too Much

Another mistake that often puts newbies out of the game is the lack of ability to make a clear price analysis. This is an art that is learned over time. If you are flipping to a rehabber, you must factor in such items as repairs and holding costs. Failure to understand how to price will equal out to slim or no profits. No profits means no business.

6. Falling in Love with the Property

If you latch on to a beautiful piece of real estate, it's difficult to keep emotions at bay. But that is the key to becoming a good investor. Emotions must not play a part in the decision making. If they do, it's likely that unwise decisions will be made. The best advice is to hold all properties at arm's length and remain as objective as possible.

7. Doing Nothing

Procrastination is a demon that will not only kill your enthusiasm; it will kill your entire business. If it is to become your source of income, treat it like a real business and not some hobby you've picked up. If you have determined that you want to make money in the real estate game, you must set up a work plan and follow it. If you do nothing - believe me, nothing is what will happen.

Conclusion

If you are new to the world of real estate and real estate investing, you will have enough of a learning curve without adding to your headaches. Any and all of the mistakes listed above can be easily avoided. Let these be seven headaches you will eliminate at the outset. Consider yourself forewarned!