Wholesale real estate has been a buzz word in the real estate industry for quite some time.
- It’s a great business venture for beginning investors or those lacking liquid capital.
- It allows them to earn profits in a shorter time frame, get acquainted with the real estate industry
- It provides opportunities for those with limited cash and credit limits.
But how do you join in on this lucrative opportunity? See below for our guide on how to get invested in wholesale real estate.
The Wholesale Real Estate Process
Wholesale real estate is the process of finding a discounted property and assigning the same contract to an end buyer. The majority of these properties are off the market, meaning they haven’t been listed to the public as being for sale. This gives investors the chance to compete with peers rather than competing with homeowners and the general market who will drive up the price. In the end, the wholesaler collects a finder’s fee (commonly 5-10 percent of the total property cost).
In the wholesale business your bread and butter are distressed properties, so finding them is crucial. After locating a property, you, the wholesaler, makes an offer to the owner of the property. Upon agreeing, a title company, contractor, and appraiser are brought on board. This team is responsible for checking the title on the property, assessing repair needs, and making sure the wholesaler is paying a reasonable amount. From there, the estimated repair cost and the After Repair Value (ARV) are totaled and the property is sold to the end buyer.
Locate Distressed Properties
Distressed properties are properties like buildings or houses that either requires a lot of repairs or are owned by people highly motivated to sell. This type of seller includes estate heirs, foreclosures, and absentee owners. Because of these circumstances, the owner is typically looking to sell the property at 10-30 percent below market value, which benefits you. When talking to a seller be honest about your process and what you are doing. This builds rapport and trust, which often leads to a sale. And if the seller is pleased with the way you conduct business, they may send friends and family members your way in the future.
How to Find Motivated Sellers
Because the real estate market can fluctuate, it’s smart to have a strategy in place to make sure motivated sellers are always available to you. This will make sure you’re always generating revenue. If you’re in the beginning stages of the wholesale business, you may have trouble finding motivated sellers. Here are a few ways to find leads:
- Direct mail campaigns: This approach is most successful when targeting absentee owners. They’ll be more eager to sell because they manage properties in different cities, states, or countries, which can be stressful.
- Expired Multiple Listing Service (MLS) posts: When these posts expire, owners often wait a bit before reposting. While waiting for them to repost, reach out.
- Contact local attorneys: They’re the ones more likely to know who is looking to sell and those who are soon to sell their property as a result of situations such as divorce or bankruptcy.
- Cold Calls: Nothing beats the tried and true method of cold calling and we recommend it. It’s more effective than sending an email, which may get lost in their inbox. This way you get to have conversations with the owner and get to know them.
Invest the Time
Know that this real estate investing is a numbers game, and the numbers you need to know are:
- How many calls are you going to make in a day?
- How many emails are you going to send?
- How many business cards are you going to pass out?
- How many offers are you willing to submit?
And the like. Having these numbers in front of you or laid out in your head will help you keep your eyes on the prize and boost the odds of hearing that hard sought after “yes.”
And if investing the time to make cold calls proves difficult, you can enlist our services at Call Motivated Sellers. We’ll take on the task of making the cold calls so you can focus on closing the deals.
Learn the Rules
Before you go on the prowl, check your local and state laws on wholesale real estate. It’s good to know what you’re working with before you begin making deals because depending on where you live, you could run into complications or extra hoops you might have to jump through to properly handle business. In some states, this can even affect your commission.
Do Your Research
It’s important to know the market around you. So, we encourage figuring out what markets you want to be in and knowing them well. Take note of the trends and how much properties go for.
For while you’re at it, don’t just do research on the market, be sure you know everything there is to know about the property you’re trying to sell, too. Knowing all of the details about your market and the property makes your sales pitch that much stronger and irresistible when you’re chatting with owners and buyers.
Networking is Key
Network with other like-minded individuals and build your buyer’s list. Building this list increases the likelihood that you’ll find someone willing to buy your contracted property. These contacts will also come in handy when you require advice about things like the progress of your deals, how to put your best foot forward, or which contractors and appraisers they recommend. The best way to build your list of buyers is to get your name out there. Attend events and make yourself known. Exchange business cards with contractors and other investors and build rapport with those in your market. You’ll never know when you’ll need to reach out.