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Imagine running a real estate business without actually owning the property or with little to no funding at all. Sounds interesting, right? Wholesale real estate starts with this kind of idea. What more, it’s a way to become proficient in real estate investing while at the same time earning profits. So, if dealing with the purchase process and acquiring financing is not your thing, real estate wholesaling is what you’re finally looking for.
Many real estate investors are now into wholesaling. Although this may seem easy, getting started in this business model can be tricky. For instance, there is various jurisdiction depending on where you live. However, real estate wholesaling is a legal strategy to make money without ever making an offer to buy or put a down payment.
Did you know Houzeo’s Gold Plan provides relevant Federal and State Seller Disclosures?
What is Wholesale Real Estate?
Real estate wholesaling is a business strategy where investors browse for often discounted or distressed property and sell it to a buyer for hefty profits. Typically, the wholesaler contracts the property with an interested buyer at a higher price. That means you’ll do the job of finding a deal, getting under contract with the seller, and keeping the difference as your profit.
Contrary to flipping a home, wholesaling doesn’t need to fix up or even purchase the property. At its core, it only involves a legal contract between the seller and wholesaler.
Wholesale real estate doesn’t involve much risk than house flipping. As a matter of fact, if you have enough market knowledge and negotiation skills, you can succeed in no time.
As a wholesaler, however, you have to take extra precautions when making a deal. For instance, It’s considered against the law to take any fee without a license. In other words, you’re not a broker. So, you need to be cautious about sharing leads to other agents or investors. Consult your attorney for a legal opinion to avoid litigation.
In other words, you’re not a broker. So, you need to be cautious about sharing leads to other agents or investors. Consult your attorney for a legal opinion to avoid litigation.
With zero capital and experience, you need all the help you can get to start right. However, once you’ve mastered, for instance, the art of real estate wholesaling, you’ll earn a solid return on a property.
So, how can you become a successful real estate wholesaler? What ways do you have to follow to reach your whole selling goals? And what does wholesaling involve?
How to Succeed in Wholesale Real Estate?
Generate deals consistently.
It’s hard keeping tabs of high-quality leads that convert into sales. That means keeping your leads coming steadily—every day, week, or month—is a good practice. An ideal wholesaler knows that consistent wholesaling lead generation brings consistent revenue for the business. In other words, what matters most is how you keep it flowing.
To accrue constant deals, know the numbers of your cost per deal first. Understand how much money you’d likely to spend on a single deal. Additionally, use a wholesale real estate calculator to determine your max offers or to estimate ARVs.
Plan thoroughly—the budget and all your marketing campaigns. In that way, you are more prepared and confident about what to do next.
Furthermore, you can use Search Engine Optimization or SEO for your advantage. It’s one of the best lead-generating strategies out there that works like charm. Running ads and sending e-mails is all, but SEO provides real results. On the other hand, by ranking top with your targeted keywords, you can gain more organic traffic to reach your clients.
To give you an idea of how most wholesalers get their deals, here are several ways to find properties.
You can buy properties from the MLS, but it can be quite challenging for you as a wholesaler. They are usually difficult to wholesale because more investors or buyers are already there, waiting to purchase a house. However, if you’re willing to compete in the jungle, you can find ways to quickly get good deals. You just have to negotiate well and sway the owner to contract or sell the house.
Drive for dollars
Driving for dollars, as the term says, means browsing for houses while driving, walking, etc. Some have targeted neighborhoods, vacant or distressed houses, and contact the homeowners through postcards, note, or try knocking on the door to inquire. You have to write down addresses, take pictures, and note other important details about the property. In most cases, it’s a hard tactic to master.
Having a large network of leads from your friends, family, agents, lenders, or contractors, is an advantage. Build your network over time. Follow up deals consistently and make a good rapport with your clients. A simple thank you or return email can make your work more personal and “human”.
One of the most recommended and creative marketing techniques, bandit signs are poster-sized printed signs that are often seen on busy street corners. It’s like a small billboard, a marketing tool, for investors to show they’re interested in marketing to sellers. Since some municipalities don’t permit a sign placement, always ask first or check if you’re not violating any local regulations.
The Internet is the best medium for marketing today. There are real estate online platforms, channels, or even Facebook pages you can use for advertising. Craigslist, Facebook, Instagram, Twitter, Google, you name it, it’s a great source of leads—especially if you have your running website.
Most For Sale By Owner homes for sale can be found on Houzeo, Craigslist, Zillow, and even Facebook. For wholesalers, these are real estate online platforms that can help get the best deals. Some sellers are willing to give a discount on their property to avoid paying a hefty price for real estate commission. It’s a tactic that generates more wholesale opportunities.
Real estate auctions can also help you get properties. However, most auctions required immediate actual cash payments after the auction. So, you need to secure a significant amount of payment or cash in advance before joining one. Since it’s big cash, you have to make sure you can close a home or you’ll lose big.
Increase brand awareness.
Like most other businesses, you need to get the word out there. That means people need to know your business exists. A tide of interested buyers won’t flock you if you just create a website and leave it in the web. Promote yourself to different social media channels, whether these be on Facebook, Twitter, Instagram, Pinterest, LinkedIn, YouTube, and other websites.
Although wholesaling is already a saturated market, find unique ways to stand out from others. Make sure you are there where your potential buyers are. You can’t complete deals all over again if you have limited leads.
Don’t stick with just one platform. In fact, there’s more than one way to find off-market deals that other investors may have overlooked.
Analyze the market.
Get to know many investors as you can. Rub shoulders with several investors in your local area, or attend REI meetings or auctions. See them in person and talk to them about your business or what you can do. The real estate market is a big place.
For the most part, you have to pull your socks up and spend every hour, day, or month to know the ins and outs of the place.
Ask politely. Here are a few key points you may want to know about them.
- About their recent deals.
- The ideal or recommended bedroom or bathroom count in that area.
- The amount they pay for their recent projects in that certain area.
- Zipcodes/neighborhoods they mostly buy-in.
- The cost of home repairs or fix up done.
After gathering essential info, you probably have ample idea of how, what, and where are the investors are buying. Likewise, you now have a new buyer for your list.
Another effective market analysis to know where to find deals is from cash sales data. If you have a real estate agent friend or any related, ask him/her to send a cash sales data in the previous 3 to 6 months. This will provide you in-depth info on where most investors are buying in. Now, you have reliable and real data you can use to get deals.
Learn the math.
How much money do wholesalers make per deal?
Well, it depends. The usual profit varies on the deal, the wholesaler, and other relying factors. That is to say, the wholesaler gets their total money by charging the end buyer a price more than the property under contract. Consequently, it’s the difference between the price of the property under contract for and the final price to the end buyer.
Some wholesalers earn a couple of thousand dollars per deal. While some get $5,000, $10,00, or $20,00 per deal. If you’re lucky to get a million-dollar deal, you can have as much $200,000 in your pocket—and that’s a call for celebration! Understand, however, you can earn more money if you have a chest full of buyers list and buyers who are willing to pay more.
Several wholesalers make a deal without carefully calculating the numbers. In fact, they only send the price, profit figures, fix-up costs, ARV, without considering the closing costs and other miscellaneous financing fees.
Don’t fudge numbers and trick the investors. This is the usual mistake most newbie wholesalers commit. Bad deals are bad—and your reputation is at stake.
Understand the process.
How to Start Wholesale Real Estate?
The overall process of completing a wholesale deal can be difficult but not impossible. In fact, there’s more than one to get deals in wholesale. And once you’ll get familiar with how the process works and what things to prepare, it can be easy and exciting. Here are the steps, one foot after another, to close a deal in wholesaling.
Research and find a property.
Test the waters first. Make some careful research before you commit to any deals. It’s a good idea to see for yourself the home prices, types of properties, or neighborhoods in your area.
Likewise, familiarize the field before finding the right property. Usually, the best wholesale deals are the distressed ones—abandoned, worn-out, or unrepaired houses.
Browse for properties on sites like Craigslist, and “fixer-upper” platforms. Furthermore, you can also find a deal through property auctions, bandit signs, by driving for dollars or using websites like Zillow or Redfin to find prospects for potential deals. These are usually properties, for example, that have been on the market for too long.
Important: Your chosen deal must work best for you and the investor. Otherwise, your initial success won’t be easy.
Work on your buyer list or leads.
After finding what type of deal that suits for you, you have to curate and work on your buyers’ list. A buyers list is simply a list of your prospects for your future wholesale deals. You have to convert these leads to deals.
Building strong leads can pave the way to more reliable networks. This means you are more than ready to move from one deal to the next one. Thus, the best kick-start for becoming a successful real estate wholesaler.
Prepare a financing source.
You still need to find an investor who can fund the purchase contract. That’s why you’ll need at least some initial capital as an earnest money deposit to close on the property. Similarly, you can also start your business with a private or a hard money lender. That is to say, you can get deals as soon as possible by setting aside a budget.
Important: Also, consider preparing funds for your marketing. Proper marketing makes it easy to find more solid leads. To sum up, marketing plays a vital role in the whole selling.
Choose if you want to do double closing or sell the contract.
There are two options to gain profit from a wholesale deal. The first one is to earn money from selling the contract. The second option is to conduct a double closing.
To clarify, the former is a common way to sell a property to the buyer from a seller which does not involve you owning a property. While the latter simply involves taking possession of the property.
In other words, you are responsible for all the costs involved with closing on the property. Moreover, a double closing is only preferable and ideal for buyers who are willing to pay more for a property.
Above all, picking the best strategy still varies on the wholesaling deal agreed.
Adjust and examine what strategy can offer the best outcome for you with the resources you have. Selling several properties can build up substantial leads, buyer-investors that could purchase deals you are offering. You can start small. However, it doesn’t mean starting big isn’t good—actually it’s a lot better in this kind of business.
A Final Note
In a nutshell, real estate wholesaling can be a lucrative business to the hands of a wise and diligent marketer. Go the extra mile. Set realistic and controllable goals. Plan the number of calls, letters sent out, or buyers added per month.
Furthermore, study the market and gain in-depth knowledge before engaging in a deal. Besides, success is not made overnight. Therefore, you have to learn to find great deals by being faithful and consistent with your wholesale real estate goals.
Now, get ready to get deals!
Did you know Houzeo’s Gold Plan provides relevant Federal and State Seller Disclosures?
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Frequently Asked Questions (FAQs)
Real estate wholesaling is one of the best business strategies to get into real estate investing without much money. Most real estate wholesalers browse often distressed or worn-out properties and contracts them with a seller, then finds a buyer to buy it for a higher price. In other words, it only involves a legal contract between the seller and wholesaler—while the wholesaler does most of the finding the deal and getting under contract.
1. Research and find a property. Most of these homes can be found in Zillow, Craigslist, Redfin, FSBO homes for sale, and other social media channels.
2. Work on your buyers’ list for your wholesale deals.
3. Prepare a financing source that can fund the purchase contract.
4. Pick if you want to do double closing or sell the contract. Double closing involves taking ownership of the property while Selling a Contract means to sell the home to the buyer from a seller which doesn’t involve the wholesaler owning a property.
Surprisingly, you don’t need huge money to begin your wholesaling business. But it is vital to prepare an ample budget for your marketing goals. You can also find a business partner to team up and finance you along the way. Although this means you have to split the profit, another dedicated marketer can still help in many ways.
No, there is no special assessment or requirement to begin wholesaling. But you must be the principal buyer in the home deal. Nonetheless, it’s also a good idea to get a real estate license to get great advantages—access to MLS for leads for instance—to ramp up your deals.
Also, you must have a great network of buyers and investors to get ahead of other wholesalers. Extensive knowledge of the market and exemplary negotiation skills can be of huge help when it comes to wholesaling.
Yes, real estate wholesaling is a legal business strategy to get deals and earn money. Several investors have already made a good profit by wholesaling properties. However, you still have to follow the rules or provisions of each state.
As long as you are selling the contract to another buyer and you are the principal buyer in the transaction, it is not illegal. As a wholesaler, you still need to be cautious and don’t ask for any fee or share leads—unless you’re a broker. Ask your attorney for legal advice if you’re in doubt.
Usually, wholesalers earn profit depending on the number of deals they can get and sell. Most of them can make $500 – $10,00 per deal, while others can pocket $20,000 per transaction. And if they’re lucky, they can earn as much as $200,00—especially to those million-dollar deal. As a wholesaler, you just need to find great deals and master the art of wholesaling to increase your profits.
Real estate wholesalers get their profit by charging the end buyer a price more than the property under contract. In short, it’s the total difference between the price of the property under contract for and the final home sales price to the end buyer. So, the higher the gap, the larger the profit.
Yes, real estate wholesaling can be a lucrative business. At the same time, you gain a large pool of networks in the real estate market. However, don’t rush it and get dismayed with the failed deals you can get. Learn the process and acquire more market knowledge so you can kickstart your real estate business in good footing.