Wholesaling real estate can be a great part-time activity. You can easily make another $25k-$50k per year. It’s relatively simple, but you have to work it hard.

In a nutshell, you put houses under contract for less than 70% of their retail value and then sell the contract to investors/renovators at 70%. They then sell or rent the house on the retail market.

You can make money without ever owning the house and without needing money or good credit.

Here are a few definitions you’ll need to know before we get started:

MLS = Multiple-listing service. This is the database that real estate agents use to list houses. Investigate how you can gain access to yourself. There’s always away. At the very least, you’ll need a friendly real estate agent person to help you. There is a ton of information in the MLS that will be invaluable.

ARV = After-repair value. This is the retail value of a home after it has received any needed repairs.

Comps = Comparables. These are the sales prices of nearby houses that are similar in size and quality. You can get these from your local real estate agent. You can also find the information from the local government, depending on your state. In some states, the information is only available on the MLS.

Now let’s move on to the good stuff.
Find Your Buyers First
Ideally, you’re going to spend your time finding the properties and not spend your time trying to sell them. The best way to accomplish this is to find your buyers first. You will frequently hear that if you have a great deal, it’s easy to sell it. That’s not always true!

Try these ideas to compile a buyers list before you start making offers:

Find buyers on the MLS who have paid cash. Call your friendly realtor and ask them for a list of houses that have been bought in the last 2 months for cash. From those listings, it’s a simple matter to find the buyers.

Check out the county clerk’s office or the local tax records. It will depend on your state, but there is a simple way to find these folks if you ask.
Once you’ve found them, give them a call and say, “Hi, I’m a real estate wholesaler. I was wondering if you’re actively buying properties.” Then ask what types of properties they’re looking for. Get their phone number and email address – you’ll need it later.
Run a fake ad. This is a common tactic. Put an ad on www.craigslist.org that says something like this: 3 bdrm / 2 bath. 50 cents on the dollar. Must sell. Cash only. Nice house.

The types of investors that you’re looking for will call so fast your head will spin. Let them know that the house already sold but you’ll let them know the next time you have something. Get their name, phone, and email.
Call ‘houses for rent’ ads. The owners of these rental houses are perfect buyers for your properties. Call the ads and ask them if they are looking for houses to buy. Again, find out what they want and get their phone and email address.

Contact title companies. Title companies know everyone. While they might not be willing to give you names, they will certainly pass on your name to the appropriate people.
Join the local real estate club. Every city has at least one. Join and talk to people. Find out who actively buys or rehabs and then get in contact with them.
Now you have 5 ways to find buyers. Keep in mind that you only really need 1 or 2 good buyers, though it never hurts to have more.

When you have a property to sell, shoot-off an email with all the relevant details of the property (bcc everyone). With a good buyers list, you should be able to sell a property in a few days, at most.
Don’t be bashful about approaching these people. When you approach the right people, they will be overjoyed that you found them.

Finding the Properties & Sellers
The types of properties you’re going to be looking for will depend on your buyers. You just go out and find whatever it is they want. Typically though, the most common properties will be from 50% of the median home price to the median home price in your area.

So if your median home price is $120,000, you’ll be looking at properties that would sell (in good shape) for $60k to $100k.

Keep in mind that what you’re really looking for are the right owners. These are owners that are either forced to sell or owners that just desperately want to get rid of a property.

These owners could be:

In serious financial difficulty. Some people need to sell immediately and really need your help.
Out of state owners. Sometimes people move out of state and leave a home behind. Owning the home becomes too expensive or too much hassle. They may have inherited the house and just want it out of their lives.
Disgruntled landlords. Some landlords just want out and they want out today.

The trick is to find these owners. Here are few ideas:


Hang bandit signs in suitable neighborhoods. These are the type of signs we’re talking about: dirtcheapsigns.com/yard_signs. All you need is a sign that says “We Buy Houses” and your phone number. Hang them up on telephone poles or mount them on stakes.

Run ads on craigslist.org. Run an ad stating that you buy houses for cash and can close quickly. Keep running it over and over.

Call, email, and/or send a postcard to local realtors and attorneys. Again, let them know that you can close quickly for cash. Offer a finder’s fee.
Look at bankruptcy and foreclosure filings. Contact these folks and make an offer on their house.
Find owners of abandoned properties. Every time you see an abandoned property, track down the owners and ask them if they’d like to sell. A great person to ask is the local mail carrier for that neighborhood. They see all the houses and know who isn’t getting any mail. Offer some money for leads that pan out.

Negotiate
Usually, you don’t have to do a lot of negotiating, just to stick to your numbers. Keep in mind that you want to have your first offer rejected. If they say ‘yes,’ you’ll always wonder how low they would’ve been willing to go! You’ll need to find comps to determine the market value of the house.

Repair values can be determined by getting some free estimates from contractors.

Your highest offer should be: (65% × ARV) – repairs.

So a house that is worth $120k in great shape, but needs $10k in repairs would have a high offer of $68,000. That’s 0.65 × $120,000 = $78,000 – $10,000 = $68,000.

Your starting offer should be no more than: (50% × ARV) – repairs. In our example, that would be $50,000.

You might be asking yourself, “Who in the world is going to sell me their house for half-price?” The answer is: not many people, but there will be some. You just have to keep asking. You won’t really understand until you do your first deal. 

The right owner will be so happy for your help that they are likely to be crying while they are thanking you. Then you’ll understand.


Close & Sell

Once you have an offer accepted, you need to get really busy:

Immediately start selling the house. Take pictures, get the comps together, and send off an email to all your buyers with all the details they need.
Immediately contact a title company to start the title work. If there is a problem with the property, you want to find out ASAP.
Get your money! Ideally, you’ll ‘assign’ the contract to your buyer. This simply means that you assign all your rights in that contract to your buyer. In exchange for that assignment, your buyer gives you money.
Typically, you should get the difference between the contract price and (70% x ARV) – repairs. Investors should be willing to give you 70%. So the better price you negotiate, the more money you’re going to make.
To clarify, a house worth $100k ARV that needs no repairs, should earn you $10k if you got it under contract for $60k. $100k x 70% = $70k. 70k-60k=10k. Understand that you’re not likely to get paid until closing. Most investors won’t give you the money unless everything works out, which is fair.

Repeat!

Keys to Success

Realize that it’s a numbers game. You will get told ‘no’ a lot. It’s not unheard of for a beginner to have to make 100 offers or more to get one ‘yes’. 

In time, you’ll learn which homes and owners are more likely to result in a signed contract. Don’t let all the rejection get you down. Someone will be happy to sell his house to you.
Never stop marketing. Each day, try to do something to market your business. This type of investing is almost entirely a marketing business. Never forget that.

Get the proper forms. There are tons of legal forms available online. You also should be able to get forms from your real estate investing club. Depending on your state, an attorney might be a good idea.

Conclusion

Being a real estate wholesaler is tough, but doable. Investigate the details on your own.

There are a lot of great articles online that can fill in the gaps but don’t get too carried away reading and learning. The part that makes you money is taking action.

Stick to your numbers and you can’t go wrong.

Good luck!

If you want to find out more, reach out to us at http://www.LesliePurdy.com or call (321) 209-INFO 4636.

About Leslie Purdy

Leslie Purdy
is a third-generation real estate investor with a lifetime of experience. Leslie and her husband have actively been repairing, rehabbing, and working in real estate for more than 40 years. They are seasoned investors who have made it through all the ups and downs of the real estate market and grown their net worth exponentially.

If you want to find out more, reach out to us at http://www.LesliePurdy.com or call (321) 209-INFO 4636.

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