Take The Guess Work Out Of Your Purchases
by Lou Castillo

We have become very concerned by the number of readers writing to us asking how to determine which are the wholesalers(*) that can be trusted. Why are we concerned? Because when we dig a little deeper, we realize that they are buying properties based solely on the recommendation of the wholesaler. They’re guessing which ones to trust, and which houses to buy. That’s a dangerous way to do business.

Are we saying that most wholesalers will take advantage of you? Of course not. We believe in wholesaling. We wholesale many deals ourselves every year. Frankly, the majority of wholesalers are honest, and try to provide data that is as accurate as possible. The problem is twofold: first, wholesalers are sales people and present deals in the best light possible. The buyers still need to do their due diligence to make sure the deal works for them. Second, wholesalers can only provide what the average renovator may incur as expenses. Your individual, specific expenses in any given deal may be higher or may be lower. It also depends on what exit strategy you’re planning. That’s why two investors can analyze the same deal, and one decide that it works great, and the other decide there’s no profit. Both views may be correct since everyone’s individual costs vary.

When you purchase any property, you have to calculate your own specific costs to determine if it is a good deal for you. It could be a great deal for many investors, but not for you. Only you can make that determination. Conversely, other people may have to pass on a deal that you, because you may have better resources available, will jump on the opportunity. You also have to evaluate the After Repaired Value yourself. We still hear buyers talking about getting an appraisal to determine the value. An appraisal is a tool for the lender – not for the investor. Appraisals are an art, not a science. We could bring three appraisers to a property, and get three different values.

Therefore, it’s up to you to do your homework and figure out the right value. The question is: “What will this house sell for when the rehab is complete?” You obviously do not want to use as a comp the one home that sold significantly higher than all of the others. But by the same token, don’t use the lowest values either – you’ll never buy a house. We use the highest price cluster of similar homes we find in the area as our comps. This is the most realistic version of what you can expect in the marketplace. We do not under-value the property making it impossible to buy deals; nor do we over-value the property potentially resulting in no profit.

Use the information the wholesaler provides you as a guide to determine which deals to pursue, but then do your own due diligence. Determine your own specific costs, and determine your own property values. Don’t guess whose numbers are correct. In the long run, you’ll be much more successful as an investor.

(*) Wholesalers are investors who market extensively to attract motivated sellers, get the property under contract, then sell the deal to other investors who will fix up the property and re-sell to owner-occupants.

Bio:

Lou has been successfully investing in real estate since the early ‘90’s, and is now sharing his vast experience with investors around the country. Lou’s students are earning tens of thousands of dollars monthly on their deals using his system. Unlike many of the speakers and mentors in real estate, Lou has both an undergraduate and a Master's Degree in Business and Marketing, and for 12 years he worked managing a 50 million dollar business for American Express.

He was on his way up the corporate ladder until he recognized that real estate offered a greater opportunity for financial freedom, and for the lifestyle he desired. Using his powerful formulas Lou was able to retire from his corporate job at age 37 and follow his passion - his first love - which is investing in real estate.

Lou has developed proven systems that create massive wealth through real estate investing. His unique approach with students is to focus on implementation of techniques rather than the theory. He teaches the “how” of this business – not just the “what”.

He has authored more than 7 books and courses about investing. His latest development ‘Online Real Estate Empire' has been helping investors around the country achieve financial freedom through real estate.