The game has changed, to learn about what I am talking about click here.
If you are serious about investing in real estate in 2013 you need to check out this informational webinar. It covers the three cataclysmic shifts that will make 97% of real estate investors IMPOTENT in 2013. (Hint: its wallstreet and the big banks.) The webinar then shows you how to take advantage of the inevitable change, ignoring this will prevent you from becoming successful in 2013. Watch the video below to learn more.
What is Wholesaling Real Estate?
It is the act of buying a house for cheap and selling it to an investor for a little more money. Wholesaling is also known as Real Estate Flipping, Wholesaling Properties, Flipping Houses. It should be the foundation of any real estate investing business because:
- Learn how cheap you can actually buy a property for
- You become the supplier for more experienced real estate investors, setting you up to learn the business.
- No Risk, if done right
- No money needed, if done right.
Keep reading and you will learn the basics of wholesaling real estate properly.
Wholesaling Real Estate – How To
When wholesaling Real Estate you do not need any money because you are selling the contract before closing on the property. To do this you need to find dirt cheap properties, get them under contract and sell them quickly, before the end of your due diligence period to an end investor who will either rehab and/or rent the property. This is the best strategy of real estate investing for beginners
Step 1: Wholesaling Real Estate – How to Find Wholesale Properties?
There are many ways to find dirt cheap properties.
- REOs (Bank owned properties, Foreclosures)
- Short Sales
- Distressed sellers (Bandit Signs, Pr-foreclosures, Absentee Owners, Probates, Code Violations, Tax Liens and others
- And More…
If you have a connection to a bank or an REO agent, then it would be best to work those connections and find cheap properties. However, if you don’t have these resources – start out by finding people who need to sell their house now and give them some help.
Step 2: Wholesaling Real Estate – Getting Leads to Call you.
I personally think it is better to have motivated sellers call you then for you to chase and call motivated sellers. When a person is asking you to buy their house, you know they have to sell the house and you are in a more powerful position because they are asking you for help.
When first starting out wholesaling real estate the best way to get your phone ringing off the hook would be to set up lots of bandit signs. I think the cheapest bandit signs can be found here, You should purchase 50 to 100 bandit signs.
You should put out 25 to 50 in your desired real estate investing area.
Write on the signs:
We Buy Houses
For Cash – Call NOW!
If you put out 50 of these signs Friday evening or Saturday morning, and your phone will be ringing off the hook.
Some areas look down on this practice – similarly to how they look down on speeding. Thus, I recommend putting a Google voice number on the sign. Get a Google Voice Number
When your phone starts to ring,
- Ask the property owner to tell you about the house.
- You will want to get the address, square footage, bed/bath and the year it was built.
- You will then want to ask them why they want to sell their house.
- If the reason is that they cannot afford the taxes on the property because they inherited the house from their aunt. They have been sitting on the property for over a year because they thought they could get $150,000 for the house… you have just hit the jack pot. Be calm though. Don’t let them know.
- Ask them what is the least amount of money they will take, if you close fast and pay with cash.
- Act shocked at the price. Tell them you don’t think you can pay that much, but you will talk it over with your partner to see what you can do.
- Ask them if they can go any lower before you speak with your partner because it will help you convince him to buy the house.
You have found your first wholesale deal.
Step 3: Finding Cash Buying Investors –When Wholesaling Real Estate
Now comes the interesting part. You will need to find investors for your wholesale deals. The simplest method to find investors, when you just start making money in Real Estate is to call landlords around your subject property.
- Call all the properties for rent in the area from lawn signs and craigslist.
- Introduce yourself. Tell them you are calling because you saw that they had a property for rent at XXX.
- Tell them that you have a property for sale down the street from that address and it is a great deal. If they are interested.
- Ask when they pick up a new property in the area what is their desired return on investment?
- Ask them how much they expect rental properties in that area to return?
- Half of them will be angry, a quarter will say no and another quarter will be interested to see what you have. Get the last quarter’s email and tell them you will send them a a deal they cannot refuse.
Let’s determine how much we can sell the wholesale for. If the landlord wants to get a 20% Return On Investment (ROI) and properties in this area rent for 700/mo.
Take the rent; multiply by 1000; divide that number by the ROI they are looking for. Now you have how much the investor is willing to go all in at.
To keep it simple 20% = 20
As you can see above 700 * 1000 divided by 20 is 35,000
Thus we know that an investor looking to get a 20% ROI on his investment will be willing to pay $35,000 all in to get a wholesale property that will rent for $700.
*(For everyone who thinks this stuff is basic, I know that this method calculates the ROI on 10/mo rather than 12/mo, however this number will give you room for taxes and other costs. Ignore this if you are a new real estate investor)
Step 4: Closing When Wholesaling Real Estate
When wholesaling real estate you will need to have a title company or attorney to do the title work and close the deal. The quickest way to find a title company for wholesaling real estate deals will be to type into Google “investment friendly title companies (city/ state you live in)” look at the pay per click ads on the right and in the pink box on the top. Call them. You will be rejected a couple of times, live with it. If you cannot handle a little failure to get to success you should not begin real estate investing.
Ask the title company
- To speak with a manager because you want to know if this company can handle your needs.
- About their process (if you don’t know what a title company does)
- What they charge and how fast they can close on an all cash deal.
- What percentage of their business is from investors?
- The big question: Do they close on assigned contracts?
If they work with a good percentage of investors and they assign contracts you have found a title company to help you with your real estate wholesaling.
- Use an assignable contract to put the property you found under contract at a 25% – 30% ROI.
- Assign the contract to the landlord you called for 3,000 more than you are paying the property owner. Get a $1000 non-refundable earnest money check. Meaning if they back out of the contract you get to keep the $1000.
- Bring the contract and the assignment clause to your title company; ask them to tell you how much closing costs will be. Generally for a house around 50,000 you can expect $1,000 or less however ask the closing company to confirm.
- Set the date for closing
- Line up your next Wholesaling deal; try to get a $5000 assignment fee this time.
As a real estate investor the best investment you can make will be to invest in your education. This investment is will pay off thousands of times more than any property.
You can find a free webinar on wholesaling real estate here.
For more generic wholesaling Real Estate information