How much do you need to start a real estate wholesaling business?
Is a real estate wholesaling business really the ultimate in lean startups, or are there hidden expenses that might cost more than you think?
The Bootstrapped Real Estate Startup
Technically, individuals can get started in wholesaling houses with little to no money down, and don’t have to have a formal company. This can make wholesaling even more affordable and faster to get started in than becoming a Realtor.
Yes, you’ll need to put in some sweat equity, and you won’t want to dive in head first unless you have invested in your real estate education, but you don’t need a fancy office, commercial printers, and other burdensome overhead or startup costs. In fact, if you can start out by hitting the street to find deals, and network in person to find buyers for your deals, you can potentially start pocketing big paychecks with a virtually non-existing marketing budget.
Warren Buffett and his mentor Benjamin Graham are famous for their motto; “investment is best when it is most businesslike.” This quote certainly applies to real estate investing, and it doesn’t just apply to being analytical, and taking the emotions out of investing. Warren Buffett wouldn’t be as famous and wealthy as he is today if he hadn’t formalized his investing juggernaut Berkshire Hathaway. There are many benefits to forming an actual real estate wholesaling business versus just being a lone wolf flipping properties in your own name. They include:
- Reducing liability
- Tax breaks
- Scaling your real estate investing
- Automation
- Building additional value in a business and brand
- Ease of succession
This can all add up to very significant additional income and wealth building gains. Often from simply doing what you are already doing, just under the umbrella of a business.
So how much does is cost to start a property wholesaling business?
Real Estate Business Startup Costs
Launching a real estate wholesaling company can bring additional costs. Specifically this means startup costs. Some of these maybe static regardless of how big you will go. Others will vary depending on scale out of the gate. And others will depend on the vendors and quality of services you choose.
Some of these costs may include:
- Incorporation
- Logos and branding materials
- Business mailing address
- Accounting help
- A real estate company website
- Business phone line
- A real business plan
This doesn’t have to be dramatically expensive. The more you can do yourself, the more you’ll save. For example; writing your own business plan, filing an LLC online, logo creation, etc. It is important to recognize when to get help. You can also turn to your real estate coach to help review these items.
Real Estate Marketing
For those that do plan to go bigger, it is essential to have a real estate marketing plan. In fact, you should have one of these even if you only plan to tackle one wholesale deal at a time, or a handful of flips a year. There are a huge range of marketing options available. Most work. Some work better than others. Some are better suited for those starting out than others. Some of these options to consider may include:
- Direct mail
- Cold calling
- Driving for dollars
- Email marketing
- Social media
- Real estate blogging
- Press releases
- Online real estate classified ads
- Pay-per-click advertising
- Print magazine advertising
Real estate wholesalers can accomplish a lot with very little if they work smart, and are diligent about maximizing leads. If they aren’t careful, they’ll blow their budgets, and be let scrambling for deals to make ends meet. Key to success here is maintaining a good marketing mix, accurately forecasting closing ratios and cost per lead, as well as knowing when to seek expert help. When starting out, it is important to create a marketing budget that you can stick to for several months consistently. Don’t start and stop every time you find a deal. You have to be constantly filling the pipeline for later.
An important caveat here is to make sure marketing isn’t the only thing in your ongoing budget. Some investors have made this mistake. They’ll be like; if I make $15,000 per deal, and save $5,000 for marketing, then I can spend $10,000 on toys for myself. What about saving for emergencies and growing the business?
Summary
Getting into real estate wholesaling really doesn’t have to cost much beyond investing in your real estate education. However, those that are serious should seriously consider organizing a business. This can be a lean startup, but make sure you budget accurately and thoroughly so you aren’t caught short.
