Learn Real Estate Wholesaling – Real Estate Wholesaling Dummies. A little play on words with the last part of that. We did not mean to imply there are real estate wholesaling dummies out there (although there probably are some if they did not do their proper homework). Actually let us change that to Real Estate Wholesaling for Dummies.
What is Real Estate Wholesaling?
So, let’s start with the basics. What is Real Estate Wholesaling? In summary, real estate wholesaling involves and investor either buying a property or getting it under contract with the intention of selling or assigning the wholesale real estate to another buyer for a fee.
Wholesaling Real Estate 101.
Think of it this way, let’s say you find a good deal on a house (more on how later) and gain control of the property by purchasing it or getting it under some other type control via a contract. Let’s assume that you are able to get the home for a price of $100,000.00, maybe with repairs it is worth $180,000.00. You have another investor who you know that wants the home and you make a deal to assign the contract to that investor for a fee of $10,000.00. The investor gets a home worth a potential of $180,000.00 for a total of $110,000.00.
Everybody wins just because you took the time to learn real estate wholesaling. The home owner got a fair value for the home in its current condition. The investor got a home they can repair and then flip for a profit (we assume) and you made $10,000.00 for putting the deal together.
The hard part is actually finding houses to wholesale. More on that later.
Who uses Real Estate Wholesaling?
Well, we have already touched on that. Investors or others wanting to find undervalued homes to purchase.
Listen, the hard part about making money is finding cheap house for sale. As a wholesaler you specialize in finding those houses. You take the time to set up the ‘machine’ that will generate leads for you to follow up on and then offer to other people that are looking for good deals but either do not have the time or knowledge to set up a reoccurring set of leads to develop these deals.
It takes time and a good amount of work to build a successful wholesaling business but once you do THE SKY IS THE LIMIT!
Why would you want to be a Real Estate Wholesaler?
So, if it is so hard why would you want to be a real estate wholesaler focusing on discount homes? There are a couple of reasons.
- It is a good way to generate funds so you can more to other forms of real investing such as flipping or rental properties.
- You learn how to find cheap houses. Finding cheap wholesaling houses is the key to being successful in real estate investing. You can go as far as you want if you can find the best wholesaling deals.
- You might get so good a wholesaling houses that it becomes your primary business. Depending on your area you might be able to just focus on wholesale real estate and never move on to other forms of real estate investing.
How much can you make with a successful real estate wholesaling business?
Once you get the wholesaling system set up you can make an average of $5,000.00 to $10,000.00 per deal. This does depend on the price of the home you are wholesaling and the area. If you are trying to wholesale a $50,000.00 property then you might only make $2,000.00 or so. If you are wholesaling $1,000,000.00 homes you might be able to push your number up to $50,000.00 depending on the overall value of the deal and the potential profit the investor sees in the deal.
We suggest that you are honest with your investor about what you are making. As long as it is not excessive most investors see it as a cost of doing business.
So now the potential hard part. Finding homes to wholesale.
We suggest using all or many of the methods we are going to discuss below. You will do much better if you incorporate as many of the methods as you are comfortable with into your real estate wholesaling strategy.
We also recommend setting up a separate phone number for you wholesaling business. We have used Google Voice for this in the past. But, do it however you feel works for you. Just do not use your personal cell phone number.
In no particular order here are the best ways to find cheap homes to wholesale.
- Multiple Listing Service (MLS). We put this one here because you are probably going to use it anyway. I will tell you it is very hard to find houses you can wholesale on the MLS because it is well picked over by other investors. Plus these owners already have a real estate agent which can make wholesaling difficult.
- Third party software/searches. There are services on the internet which specialize in finding real estate investment deals. These have a variety of features and functions. Some better than others. If you want to know the one we use CLICK HERE.
- Auctions can be a great place to find cheap houses for sale but be careful because there can be some issues in purchasing homes at auction. We are not going to go into that here, just make sure you do your homework. Other issue is you will probably have to buy the property outright and then wholesale it to an investor. This means you will need enough capital (money) to pay the full purchase price up front. Not much chance of using a contract to take control of the property with minimal or no investment on your part.
- Direct Mailings. Pick an area and mail everyone in that area telling them you purchase houses. We call this the shotgun approach and do not recommend it for someone starting out. Most of these letters will go to people with no intention of selling their house, or at least with no intention of selling it at a decent price. You can do this as you grow but it is not recommended starting out.
- Drive, Spot and STOP. You will drive through targeted areas and look for run down or empty houses. If someone is home you can knock on the door and tell them you are a local investor buying houses or you can mail them a letter stating the same thing. If the house is empty you can either leave a card or go to the local courthouse and search the records to find out who owns the home. At lot of this can be done online as well by searching tax records.
- Look for properties for Rent. Many times you can either drive by or look in local advertising for houses investors are trying to rent out. If this investor has only one or two properties you might find they are willing to sell the house just to get out of it. There are lots of disgruntled landlords out there who just want their problem investment gone. This is especially true if they live out of the area.
- Let people know who you are and what you are looking for. Great deals just do not knock on your door, you have to go out and find them. Advertise in newspapers, Craigslist and social media saying you are looking for houses that need repairs or have some sort of damage. Remember, you are looking for CHEAP houses, you have to let people know that.
- This can be hard to do but if you can become friends with a realtor they might steer you toward a lead or to. As a wholesaler if the home buyer already has a realtor this could present some problems if you are trying to get a home under contract, but if you are a cash wholesale buyer this could work for you.
- The hard ones. I am going to put a couple of things in this section. The truth is if you can master these you can be VERY successful but to me they are the hardest because you have to reach out to people when they are going through some sort of hardship.
- Many times when people die, especially older people, there are opportunities to purchase a home that needs work for a very good price because the family just wants to get rid of it.
- If you can get in touch with the person who is the most angry in a divorce you might pick up a home for next to nothing. Not really, but a good deal none the less.
- If you know of people who have been recently laid off you can sometimes take a property off their hands for a fraction of what it is worth because they need to get rid of it fast.
- There are others but I think you see the pattern here. I do not really like to use these but the most successful wholesalers will be able to find these properties through word of mouth, estate lawyers, divorce lawyers, newspapers, etc….
- Bandit Signs. I saved this one for last because this is a good way to find potential homes. You have probably seen the “We Buy Houses Fast” signs at intersections and other strategic areas. I hate these signs but they do work and can give you some great leads over time.
Real Estate Wholesaling Contracts. I am not going to give you a bunch of links for these but you can easily do an internet search and find them yourself. Just make sure they are legal in your area, if you are going to build a business around real estate wholesaling I would strongly suggest
Real Estate Wholesaling Software. Same a above, you can search the internet for this. I would recommend just using a Customer Relationship Manager (CRM) software. There are many good ones out there. The two I have used are zoho.com and pipedrive.com
There is one site I would like to recommend (other than this one) to people interested in Real Estate investing.
I hope my article was helpful.
Please comment and ask questions below.