How to Wholesale Real Estate In 12 Simple Steps
Ever wanted to know how to wholesale real estate? We give you 12 steps to real estate wholesaling success here.
For many people who want to get started flipping houses, real estate wholesaling is a great first step to get started - especially if money is tight.
Although there are many ways to flip real estate with no money of your own, there's lots of people who want to get started investing in real estate quickly, without having to raise an capital on their own.
This is where real estate wholesaling may be a really good fit for many people interested in getting into real estate investing.
The definition of real estate wholesaling is simply "the entering of a contractual agreement with another party for the purpose of purchasing property, and then assigning your interest in that contract to another investor for compensation".
Sounds simple? There's a few things you'll need to know about before you get into it. But first let's talk about why real estate wholesaling may be right for you.
The Advantages of Real Estate Wholesaling
The advantages of real estate wholesaling are several, here's a list of just a few:
- No money or little money is needed to close a deal
- You don't need a license, anyone can do it
- Wholesaling does not take a lot of time and offers the ability to make a nice profit
- Wholesaling has less risk than rehabbing
- You will build relationships with other investors and buyers and allow for repetitive business transactions
- Contractors are not necessary as the home or property is being sold in "as is" condition
- Wholesalers are selling to investors so dealing with retail buyers is not necessary
- Real Estate agents are often not necessary
- Wholesaling is a fast way to create a positive cash flow
So as you can see, there are several benefits to learning how to wholesale real estate. The next question is the process to actually do it.
How to Wholesale Real Estate: The 12 Step Process
When learning how to wholesale real estate, there are a number of basic steps you need to take, here is an overview of the most important ones:
- Fielding Calls & Talking to Sellers
- Information gathering & determining comps
- Inspecting the property & estimating repairs
- Getting it under contract
- Take it to your team
- Identify a buyer
- Assignment of Contract
- Control everything!
- Go to settlement & cash your check
- Rinse and repeat!
The most important part of your real estate wholesaling business is getting it going. You need to market to find deals; if you do not find deals you will not have a business. Your marketing plan should consist of a combination of broadcasting, social media and networking, and require consistent amounts of volume.
If you expect to send out one mailing of 100 pieces a month and you don't network and let people know what you do, don't expect to get a lot of deals. You need to tell everyone what you do. You need to network, network and network.
2. Fielding calls
As you start to get responses from your marketing materials you will need a way to capture and analyze those responses. Once you capture them, you will need to qualify them. By tracking how you received those responses, ie: e-mail, bandit signs, direct mail, telephone and social media.
3. Gathering information
You need to analyze all the information you have on the subject property. You need to determine how much the property is worth (ARV). The best way to do that is to get comparable sales from a local realtor to confirm the value. This is part of your building your power team. What else do you need to know about the property? Book and Page, Lot Size, Liens, Zoning and pretty much anything and everything else about it!
4. Inspect the property
There will be a good well of knowledge that you will need to gain before you truly understand how to evaluate the renovation on a property. As a wholesaler you do not have to give an exact number. Your job is to get the best estimate in the ballpark so that your numbers make sense and you can justify it to the renovator that you are trying to sell it to. For newer investors, you should consider hiring a local inspector to educate yourself on how they inspect properties per deal. Let me remind you and inspectors job is to scare you from buying the property.
You may have heard saying, a good deal is not found a good deal is made. Very seldom are you going to get a call with someone wants to sell their property at 70% the after repair value (ARV) minus the repair cost. Most sellers want to get top dollar for their home. It is up to you as the wholesaler to get the best possible price you can and create a win win situation for both you and the seller. As a wholesaler you solve problems.
Being a good negotiator is not only a skill but it is a science. As you become better at negotiating, your deals also become better.
6. Get it under contract
Once you and the seller agreed to a deal, you need to have them sign a contract. You will need to educate yourself on the legalities of real estate transactions and the legal paperwork. You will need to know entity structuring as well as purchase and sales contracts, and what to do with them when they are signed.
7. Introduce to your wholesaling team
Now have a deal, you have to take it to your team. The legal paperwork should go to your attorney; our attorneys do all the heavy lifting for us such as title reports and closing the deal.
8. Identify a buyer
Once you have it under control or under contract and you know you have a great deal you need to advertise that deal. There aren't many ways to go about this, calling renovator's that you meet in your local networking groups. Post it online using outlets such as craigslist. Look for renovators who want to buy this property from you to become landlords or simply flip the house retail for more profits.
9. Assignment of contract
Once you come to an agreement with the buyer you simply transfer your rights and responsibilities in your contract to the buyer. This is simply done through an assignment of contract. There aren't many different ways to assign the contract, we will teach you some of the tricks we've used to prevent title issues.
10. Be in control of everything
This is the most important step, controlling everything. You really want to be in control at the end especially coming into a closing and especially with the buyer and seller. You want to be controlling everything. Being a professional and you will lose fewer deals and perform far better on all the deals in your portfolio.
11. Closing and cashing your check
The closing is also known as the settlement. You go to the closing you sign all the appropriate documents and you cash your check. One thing I find very helpful is asking your seller for testimonial. I use my testimonials to put in my evidence manual or on my about us page on my website.
12. Rinse and Repeat!
How to Wholesale Real Estate: Conclusion
With all the interest in house flipping, real estate wholesaling is becoming more and more popular. Its only natural. Although the real estate deals are a bit more hard to come by right now, there is still plenty of money to make wholesaling real estate.
All you have to do is get started and take the first step.