The definition of Real estate wholesaling:
You can skip this paragraph if you already know what it is, but for those of you who don't it can be defined as the action of contracting with a home seller (you should find a good deal), you then market whatever you found to a buyer and assign the contract to him keeping the difference between the contracted price with seller and the amount paid by the buyer.
The advantage with real estate wholesaling is that you don't need to invest a dime on a property, you only contract with the seller but it's actually the buyer you found who pays the price and you keep the difference(10 000$ in the picture above)
But how am i going to find a motivated seller who wants to get rid of his house at a discount? This is what i'm going to be covering in the next parts!
Building a list of cash buyers:
What you can do is perform a search on google : "cash buyers your city" "house flippers your city" are two keywords you can use, many websites will pop up, well visit them and look for phone numbers and call them, explain to them that you are a wholesaler working on off market deals and ask them if they would be interested on you making them aware when you've got one, of course they cannot say no and this is how you can build a list of cash buyers(this is not the only method)
One further thing you can do is ask them what they like to buy and where exactly, their answer will allow to gather more information about the marketplace and the opportunistic areas
Looking for a deal:
In the real life:
Find signs of distress and uncaring:
Well if you have any free time you can go out(by foot or using your car if you have one) and start looking for homes that show signs of uncaring and distress, and what are those signs you might be asking yourselves? Here is list of signs you can look for:
-Grass is long(overgrown vegetation)
-Home is not painted since a long time
-The home surrounding is not organized
-Overfill of mails and newspapers
-Not constantly maintained
-The roof, windows, doors and walls are in bad condition
-Code enforcement signs(usually found on the front door or window)
Other ways of looking for a good deal in the real life:
There are other techniques that can be used to find potential sellers but they require upfront capital, one of these is getting bandit signs put up in the street, or buying mail lists to which you will send letters and flyers, another interesting method is looking for recently inherited properties and divorce cases... in the probate court documents
Online:
There are some real estate sites where you could find motivated sellers and distressed houses for sale, what you will need to to is visit them, here is a list of 4 most popular ones:
-FSBO
And then operate a search in the location you want using keywords to narrow your results to the most relevant ones, here are some of the good keywords you can use:
-Motivated seller
-Distressed property
-Distressed property
-Must sell
-Estate sale
-Sold as is
-Sold as is
-Fixer upper... and so on
Among the results you will have, choose the best ones based on price, location, home condition, situation of the seller, neighborhood recent sales and their closed prices, similar houses recent closed prices
What to do after you found the property?
Contact the seller and ask him:
If you found a good house, call the owner for additional information, some of the good questions you can ask to know how much is he motivated to sell are:
-What’s your ideal date for closing?
-How quickly would you like to sell your property?
-Why are you interested in selling your property right now?
-How quickly would you like to sell your property?
-Why are you interested in selling your property right now?
-What plans do you have if your property does not sell?
If the answers confirm that he is in a hard situation and in need of money, he will most likely accept low prices, but if the answers show completely the opposite, it will be harder to convince him to sell for a low price, but it's always worth trying.
Get an idea about the ARV(After Repair Value) of the house:
If the property you found is showing signs of distress and the owner is in a hard situation you can then start investigating the price, more exactly you will have to calculate the after repair value of the property as shown below:ARV = (Property’s Purchase Price) + (Value of Renovations)
Estimate the current value of the house:
I recommend estimating the value of the property with the help of professional appraiser if you know one, another interesting way of doing it is by looking at similar listings on Zillow and their prices, when using this second method you will have to respect some criteria as shown below:
-Close locations
-Almost Same structures
-Almost Same conditions
Remember you always want to look for homes that are priced way less than their actual current value to make some profit.
Estimate the repair costs of the house:
Again you will have to ask an expert in field who can give you his feedback, or you can do it yourself by making a list of the material you think the investor would need to repair the house and how much this would cost.
But why do I need to have an idea about the ARV of the house? Because it will help you determine your potential profit and will allow to be better qualified to negotiate the price with the investor in case he is exaggerating the renovations cost
Real estate flippers aim in general for at least 10 to 15% profit margins so make sure that the profit of the investor is in that range or more
If it's the case and the seller accepts your offer, you can then put the property under contract
Make an offer to the seller:
Now that you finished all the tasks above, you will have to call the seller or meet with him to discuss the price, here is a formula you can use:
The price you are going to offer + your profit + repair costs + the profit of the investor = ARV
If it's the case and the seller accepts your offer, you can then put the property under contract
The contract part:
There are in general two type of closing you can do assignment contract and the double close, let me explain how each one of them works:
Assignment contract:
You will have to put the property under an assignment contract then assign it to the cash buyer who will close the deal, so only one transaction will be made with only one contract. In this type of closing the wholesaler will have to disclose what he'is buying and selling the property for, so i recommend using this method when profit is less than 8 000$ or in case you don't want the cash buyer to know the money you are making
Double Close:
You will have to close the deal yourself with the seller this means going through the closing process and paying any related fees, once this task done you will have to close as soon as possible a second deal with the cash buyer (you can take your time but you will have to pay the seller), so 2 transactions will take place with 2 contracts and neither the cash buyer nor the seller will find out the profit you are making. This method can be used when profit is greater than 8 000$ or when you want to keep the money you're making private.
Conclusion:
In this blog post i showed the different steps to follow in order to wholesale real estate, I explained clearly and thoroughly what you need to do on each step giving along the way extra tips and methods you will be using. If you don't understand a point or have some questions leave a comment and I will be pleased to answer
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