6 Basic Steps To Begin Wholesaling Real Estate & Get Your First Deal
Updated: Feb 26, 2019
There are several different vehicles that you can use to invest in real estate or profit in real estate. One of your options is the concept of wholesaling real estate.
Wholesaling real estate is a fairly simple concept. You (individual A) with be putting a property under contract from seller (individual B). Once you have this property under contract, you will assign the original contract to an investor- cash buyer (individual C) for a fee.
Wholesaling real estate is an interesting topic because it allows investors the opportunity to try and profit from real estate without needing funds.
However, being successful can be very difficult and can take time to implement.
This business does have the possibility of changing your life and is an important strategy to learn, whether you are first getting started in real estate or have been involved for years.
In order for you to have a chance to succeed in real estate wholesaling, you must have a good understanding of the basic principles and rules on how to execute a plan for this niche.
Steps To Execute A Wholesale Real Estate Deal
1) Marketing - As we talk about all the time, the most important aspect of any successful real estate transaction is the ability to find deeply discounted properties. If you can find deeply discounted properties you will have several different options to profit.
So how exactly do we market to find the deals you are talking about?
Well first off, I want to be clear that creating a backlog of discounted real estate deals is very difficult and it takes time. However with that being said, there are several different tactics that you can use in order to get your first deal or find these discounts. Some of these strategies will be geared more towards outbound techniques and others will more towards the new era of marketing, inbound.
Developing an inbound marketing strategy will take longer to find success but will generate leads for months and years to come.
Having an effective outbound strategy has the possibility to get you a lead faster but this strategy will typically cost you more per lead and some of the tactics require a certain personal traits to implement ( i.e cold calling, door knocking)
Here are some of the marketing techniques you can use to reach your target market:
Content Marketing (vlogs, blogs, podcasts, consultations, ebooks, whitepapers, news releases, infographics)
Online Business Directories
Driving For Dollars
Gorilla Marketing Tactics
Each local area will respond differently to each of these tactics. We suggest that you put together an affordable plan that entails both inbound and outbound strategies and begin testing which marketing efforts are producing results. By creating a plan and testing each option, you will know which areas to double down on and which options to stop putting your money into. If you can master the art of real estate marketing, we have no doubt that you will be successful in this industry.
2) Building A Cash Buyers List - This is the next step in the wholesaling process. We talked about different tactics to obtain deeply discounted properties, now our next move will be to find buyers for these properties.
The concept is simple, we find deeply discounted properties and put them under contract. Then we assign this contract to a cash buyer for a significant mark up.
The ability of a wholesaler to produce a large cash buyers list will separate the successful wholesalers from the unsuccessful wholesalers.
What is a buyers list?
A "buyers list" is basically just a list of real estate investors who are looking for new investment opportunities in a specific area. The larger the list you have, the better odds you will have of being able to move your properties quickly. This list will typically be made up of just their names, phone numbers and email addresses. This list is an ever evolving document that will continue to develop, the longer you are involved in real estate.
So how can we go about building our cash buyers list?
There are several different tactics we can use to try and create a large cash buyers list to assign our properties too. I will go over some of the ways that we have had the most success.
Recent Cash Sales on MLS - If you are not a real estate agent and do not have access to the MLS, then you need to build a relationship with a real estate agent. They will be able to give you a list of all the properties that were purchased in cash in the past months. At this point you can either contact these folks by phone, send them mail or shoot them an email to see if they would be interested in your service.
Call For Rent Signs / Bandit Signs / Internet Search - Here you will be targeting real estate investors and landlords who are marketing or promoting their services. The majority of these folks will also be wholesalers but you will find that some of these folks are cash buyers and would love to sign up to get on your cash buyers list. Call each and every sign that you see or do an online search for "we buy houses CITY" and speak with the investor or owner of the business. Explain to them what you are doing or trying to do and see if they would be interested in the deals that you will be able to bring them.
Create A Landing Page / Web Page- This is more of an inbound strategy where you will be pushing all of your marketing efforts to a specific landing page which will allow your cash buyers to sign up for your wholesaling services. You can use this landing page to push all of your social media, craigslist, PPC or paid social media advertising too. Also optimize this webpage for specific keywords so that it will show up in the search engines if real estate investors are seeking your service.
Craigslist - This free classified ad platform is a good place to find cash real estate investors. There are several different keywords that you can search for in order to bring up potential cash buyers. Once you reach there ad, you can send them an email with a link directing them back to your landing page allowing them to sign up to be on your list.
3) Negotiations - The first step that you will take to prepare for your negotiations is running the numbers on each investment vehicle your cash buyers use. This will give you a number that you will have to purchase the property for in order to make a decent fee and also give your clients/investors a good investment property that is profitable. There are 2 main investment vehicles that your cash buyers will be using. They are rehab and sell along with the buy and hold strategy. Each of your cash buyers will have a set criteria that they use to evaluate their investments.
By running the numbers and knowing your maximum purchase price, you will be more prepared to negotiate and have a better starting point for your deal.
Rehabbing and Selling - This formula is fairly simple and all you really need to do is get a rough estimate. Each investor will use a different contractor and will be able to repair properties for different amounts. The formula to calculate your maximum purchase price for this investment vehicle will be:
ARV - Repair Costs - Holding Costs - Profit = Maximum Purchase Price.
Buy and Hold - As stated, each investor will have different requirements for numbers such as:
Cash on Cash Return
They will also want to know what the operating expenses may be for this specific project, what the repair costs are and how much the property will sell for when it is all fixed up (ARV).
The more accurate numbers that you provide for your investors, the more likely they will continue to purchase from you.
So now you understand what price you need to offer in order to successfully put together a deal. Your next step will be to set up an appointment to go look at the home. At this point you will be able to get a better understanding of the repair costs.
You will also be able to begin the negotiation process. Begin building rapport with the seller as soon as you guys make contact. Find out what interests the seller and build conversation around topics that they are comfortable with.
When you are wholesaling real estate in Syracuse NY, you have to be upfront and honest with every seller that you come in contact with. Make sure you explain to them your intentions and how the process works. You want to make them as comfortable as possible with the transaction and continue to explain how you will help them. This is where listening comes into play. You have to listen and know what your sellers problems are in order to solve them and assist them in the best possible manner.
Throughout your first meeting one of your main goals is to try and build as much trust as possible with the seller. You want to make him feel comfortable with you as a person. In order for them to move forward in this situation, they are going to have to trust you. You want to re enforce that your main goal is to help them through this difficult situation.
4) Put The Property Under Contract
When you find a property that fits your requirements, it is a win for all parties involved and you have buyers lined up looking for investment properties in this area. You need to put the property under contract immediately. Putting a wholesale deal under contract is very similar to putting a property under contract that you intend to purchase, you will just be using some alternative language throughout the contract.
If you are looking for a sample contract, please email us at firstname.lastname@example.org and we will gladly send you over the sample contract that we use.
As with all contracts, we need to protect ourselves from certain aspects of the sale. Here are some differences from a regular purchase contract compared to a wholesale contract:
1) The buyer will be from Your Name / LLC and or assigns to
2) You will include a contingency in the contract that states, if you are unable to assign contract for certain amount of time, you will not obligated to purchase the home.
These are the only differences that we have from our regular purchase contract and our wholesale contract. I am sure some wholesalers do this differently, but this is how my attorneys have advised us to move forward with these legal documents.
So our main goal here is to negotiate our seller to a price that we know will work on our end, works on his end and we can assign the contract to an investor who will also profit on his end. So work your magic and close the deal. Get in a position to close and put the property under contract.
5) Due Diligence - Once you decide that you have a good opportunity and you schedule a meeting to visit the property, you need to begin the due diligence process. This starts with running the numbers and understanding that this a good deal for all parties. However I want to discuss what you need to do when you are actually at the property. You need to get specific data on the property that you will relay to your cash buyers. While you are at the property and after you build rapport with the seller, you will ask him if you can walk the property. At this point, you will:
video tape a walk through of both the inside and outside of the property.
Take as many pictures as possible. Try to get at least 24 good photos of the property.
From this video, you will develop a brief scope of work to give investors an idea of the repair costs
Run the numbers for both rehab and sell along with buy and hold
Calculate the holding costs on the property
Give estimates on the taxes, utilities, insurance and monthly rental income.
The more accurate your information is, the better relationships you will build with your cash buyers and you will have a much easier time selling your properties. All this information that you produce from this due diligence process will be placed on your landing page that you will push your marketing too. This will give your cash buyers a great view of the property and an estimate on there investment.
6) Assign Contract | Collect Non Refundable Deposit - So you have done all of the leg work, now it is time to make your money. You created a landing page and sent out all the information to your cash buyers. The assignment agreement that you will use to sell/assign your property to your cash buyer is a simple one page document.
(if you are looking for a sample assignment contract - email us at email@example.com and we will send you the one we are currently using).
You will realize that in this business there are a lot of fake investors who have good intentions but do not have the ability to purchase your properties. When you find a potential buyer for your property, you need to communicate exactly how the deal will play out.
When you find an interested buyer, here is how you should move forward with the purchase:
Thank you for your interest in the property, if you would like to move forward with the purchase I am going to need a couple things from you.
1) Please sign the attached Assignment Agreement and either fax or scan a copy back over to us by 5:00pm
2) Please send us a check or wire transfer of $ by 5:00pm today.
You need to put deadlines on your offers, so that you force your investors to move forward with your property.
Make them aware that once both of these documents are received, the property will be reserved in the investors name and we will contact (Title Companies) to initiate the closing process.
In regards to the deposit that is required, we try to ask for anywhere from 8-12% of the purchase price as the down payment. This will solidify that this investor is truly serious about purchasing this property, since this is a non refundable deposit. If they are really serious about the purchase, they will have no problem putting down this money.
It will be very tempting to cash this deposit, but I want you to hold on to it until you actually close. There are so many different issues that can arise during a closing.
Wholesaling real estate in Syracuse NY can be a very lucrative business if done right. The key word here is business. You need to treat your efforts like a business if you truly want to succeed. You need to have systems in place for every lead that comes through the door and be able to act on these leads promptly. Wholesaling is great way to make money in real estate but be sure that you consult an attorney before you move forward with this niche. Wholesaling real estate is a common niche choice for many beginners looking to get into real estate, just make sure you educate yourself on the process and take action.
If you have had any success in wholesaling real estate, let us know what techniques you use to find your deals in the comment section below.
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