Wholesale Real Estate Investing - Step By Step

In wholesale real estate investing, you locate houses below market value and put them under contract to buy. You then sell them at wholesale prices to real estate investors through contract assignment or simultaneous closing, without doing repairs. Your profit is the assignment fee (in contract assignment) or the difference between your selling and buying price less any costs (in simultaneous closing).

Wholesale real estate investing involves 6 steps:

Step 1: Get a good real estate investing website

Why do you need a website for real estate investing?

a) You need a platform to process your leads.

A good website tells your story to a visitor who’s never heard about you. This adds credibility and convinces them to do business with you.

It should be optimized to engage these visitors to take action such as call you, or sign up. When you offer Ebooks with information that is helpful to your visitors (such as motivated sellers), they will sign up and give you their email.

The website should then nurture those that sign up by carefully timed automated email so they warm up to do business with you. Most people need be exposed to your business 5 to 12 times before they can do business with you. A good website should handle this automatically.

When they do submit their property information on your website, you end up getting pre-screened and pre-negotiated deals. This saves you a lot of time, money and effort, and you close more deals.

b) A website attracts leads for you.

A real estate investing website that is well optimized for search engines (SEO) attracts leads for you hands off. This will keep bringing you business indefinitely.

Whenever possible, make sure your SEO targets a local market where you do business. When you rank better than your competitors in your local market, you’ll get more business than everyone else.

Also, optimize for LOCAL search results in the search engines – Google My Business, Bing Local, Apple Local, yellow pages, etc. I’ve written a separate article about this.

This article will guide you on how to choose the best website for real estate investing.

c) A website helps you build a buyers list

A buyers list is a list of real estate investors that buy wholesale properties in your area, preferably with cash. A cash buyer is someone who has the cash to buy the property outright, without having to take a mortgage.

A good website should have the tools necessary to build a buyers list effortlessly. Whenever you have a good deal, you just send it to your list. Most investors sell their properties this way.

Step 2: Identify Cheap Properties

To succeed in wholesale real estate investing, you must have a constant supply of leads. Then you’ll have properties to wholesale.

The best leads are those that are targeted to your local market, e.g. people that are motivated to sell their houses. 

Where do you get these leads?

a) Leads attracted through a good real estate investing website

Today, almost everything starts as a search on the internet. This includes people looking to sell their houses - so they must find you on the internet when they need to sell.

As we have seen above, a website optimized for search engines and local searches will keep bringing you leads indefinitely.

b) Target local people in legal trouble who own real estate

If you are looking for discounted properties, motivated sellers will be your best source of these people.

People who are in legal trouble and own real estate usually happen to be real motivated sellers. For example, people who have inherited properties (probate properties) have a real valuable goldmine looking for cash buyers. People who are going through divorce, bankruptcy, expired listings, etc.

There are lots of super motivated sellers out there who have no idea they can sell their houses to real estate investors. They think they can only sell their house through a real estate agent. When you reach these people you become a savior.

Again, targeting these people happens to be extremely easy. Since this can become a long topic on its own, .

You can also automate most of this process, and have your leads coming like clockwork so you can spend more your time closing your deals.

Between the leads attracted though your website and those people in legal trouble, you should have more than enough leads in your local market. I rarely go beyond these 2 sources as I get more than I can handle.

These two should give you lots of wholesale real estate deals.

Step 3: Secure Financing That Works For You

For most deals, you need very little, if any, money to get started in wholesale real estate investing – usually earnest money, which is around $100 to $500.

In contract assignment, you only need earnest money, so you won’t need financing.

If you’re doing a double closing (simultaneous closing), you’ll probably need some money to do the second closing. Most lenders today do not allow their money to close the first transaction. You therefore need short-term funds for this before you can complete the second transaction.

The most common type of short-term funding is transactional funding. Where do you get this money from?

a) Lenders

There are lots of lenders in the real estate market such as hard money lenders and other non-conventional lenders.

Attend your local real estate meetings and network with other investors to know where they get their money.

A quick search on Google for “transactional funding lenders in Dallas” gives me the following results:

In other words, lenders are not in short supply if you have good deals.

b) Private money

Private money is the cheapest way to finance your transactions. Sometimes these will be individuals who can invest money in your properties. Sometimes they may be companies.

Again, a quick search on Google for “private money lenders in dallas TX” gives me several results including a directory of private lenders. There are also many resources such as this one.

c) Partners

It’s quite easy to find partners especially in your local real estate investors meetings who can put up money on a deal to deal basis.

You agree on the terms. Since they are putting up this money just for a few minutes without any risk, it’s really cheap money.

Step 4: Sign A Contract To Buy The House

Once you locate a motivated seller with a good deal, the next step is to put the house under contract.

Personally, I prefer to use contracts mandated by our state real estate commission. They are more popular to people selling their houses, and people feel more comfortable dealing with you.

If you’re doing contract assignment, you need to put the buyer with “and or assigns“, e.g. “My Company Name and or assigns”.

Without this little clause you will not be able to assign the contract. Some states such as Illinois do not allow assignments any more.

Step 5: Take The Contract To The Title Company

Now it’s time to get the title work done. This is done by a title company or closing attorney, who checks all the liens and acts as the closing agent in the deal, representing the buyer, seller and other parties involved in the real estate transaction – such as mortgage lender. They facilitate closings, issues title commitments and insurance policies and records paperwork.

If you attend your local real estate investor meetings, you’ll find investor friendly title companies.

In my business, I can check the county records online to see most of this information. If all looks good, I let my title company do this job in case something slips between my fingers.

They don’t charge me anything for title work because I close all my deals with them.

Step 6: Identify A Wholesale Real Estate Investor Buyer With Cash

Back to our buyers list – it’s the quickest way of selling wholesale deals. Build this list continuously, and over time, you won’t need anything else to sell your houses.

Which comes first, the buyers list or the property?

I hear most real estate investors say they want to build their buyers list before they can buy their first property. Not having a buyers list should not stop you from buying houses.

I built my first buyers list of about 200 real estate investors on newspaper ads. I never provided a phone number, just a web address that had a squeeze form. To view the full details of my properties they had to provide their name, email and phone number.

Today, you can also advertise in places like Craigslist, Facebook and other online media.

If you attend your local real estate meetings – you’ll build your buyers list pretty fast! Every time I attend one, I come home with a bunch of cards of people who want to join my list.

People that buy properties at courthouse auctions have cash and are usually looking for good deals. Strike up conversations and you’ll build a very valuable list.

Step 7: Sign A Contract To Sell The Property

Once you have identified a buyer for your deal, sign a contract so you can sell the property.

If you’re doing a contract assignment, a simple assignment contract (few paragraphs is enough) is all you need.

In simultaneous closing, you’ll use the same contract you used for buying, only this time you’ll be the seller.

However in this case, it should not contain “and or assigns”.

Your buyer must have verified source of cash. They must close the deal themselves. I collect at least $500 earnest money when I sign a contract with my buyers. This money will be credited to them at closing.

Step 8: Follow Through Until You Close The Deal

Always follow the transaction process until the deal is closed - you only collect your check from the title company when the transaction is completed.

It is therefore in your best interest to make sure you close any loose ends and make sure the deal does not fall between your fingers.

About The Author

Simon Macharia invests in real estate in the Dallas-Fort Worth market. They also offer interactive real estate investing websites that help investors close more deals using less time, money and effort.