Wholesaling Houses: Frequently Asked Questions

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Wholesaling houses is appealing to many beginning investors because it can be done with minimal risk and little to no upfront cash. Following are some of the most frequently asked questions I receive from folks who are looking to jump into the wholesaling arena.

6 Key Wholesaling Frequently Asked Questions

Do I need a lot of money to get started wholesaling?

While it is much easier to get started if you have some cash set aside for marketing expenses, deposits, etc, it is still possible to complete wholesale transactions with little to no upfront cash. When I got started, I was a struggling bartender barely scraping by. I was able to complete my first few wholesale deals by marketing for motivated sellers on a shoe string budget, and only putting down a small deposit when I finally got a property under contract.

Do I need to hire a mentor in order to succeed as a wholesaler?

While I am personally in favor of hiring a competent, experienced, successful mentor to shorten your learning curve, it is definitely not a necessity. There is more than enough information available on the internet for FREE to get you through your first deal. BiggerPockets, for example, has an excellent wholesaling forum where you can go and ask any questions that you may have about the wholesaling process.

Should I build a buyers list before I start looking for deals?

While it is a lot easier to sell your deals if you already have some investors lined up to buy them, this shouldn’t stop you from getting started. In fact, you can be working on building your buyers list while simultaneously looking for deals.  The fact is, if you get a smokin’ deal under contract, even if you don’t have a buyers list in place, you will not have a hard time finding an end buyer for it with just a little bit of marketing.

How many buyers should I have on my buyers list?

When it comes to your buyers list, keep in mind that quality is much more important than quantity. I know of wholesalers who have thousands of names on their buyers list, but the reality is that only a handful of the people on it are actively buying properties. Don’t get hung up on thinking you must have a huge list in order to be successful- the truth is, you only need a handful of active buyers to get the ball rolling.  (To learn three fast, easy ways to build your wholesale buyers list, check out this article).

Do I need to have good credit in order to wholesale houses?

You can wholesale houses whether your credit is good, bad, or downright ugly.  When you are wholesaling, you are simply putting a great deal under contract, and then assigning that contract to an end buyer.   Your credit does not come into play since you will not be obtaining financing on the properties that you are wholesaling.

What do you think is the key ingredient to becoming a successful wholesaler?

If you want to become a successful wholesaler, you’ve got to be willing to hustle!  Deals don’t generally fall out of the sky and into your lap, and if you aren’t willing to take massive action to find those deals and put them under contract- you aren’t going to get very far.   You can buy every wholesaling course known to man, and read every single wholesaling article on the net, but none of that information is going to do you any good unless you get off your behind and TAKE ACTION!

If you have any other questions about wholesaling houses, feel free to leave them in the comments section below, and I will be happy to answer them for you.

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About Author

Formerly a bartender, Steph Davis is now a full time wholesaler in Tampa, FL. If you'd like to get an idea of what it's really like out there in the trenches, head on over to her blog: FlipThisWholesaler.net!

13 Comments

  1. Great post Steph!!

    I think a lot of new wholesalers get hung up on NOT having a buyers list and your pointing that if they do have a great deal, the finding buyers part is easy, is right on the money. Matter of fact, I would put that up as one of the best way to find actual and active buyers is to market an amazing deal and use that to build a buyers list with.

  2. LeJon Ratchford on

    Stephanie this is a great post. Currently I am exercising some of the same principles that you stated in your thread and they work. Great Thread.
    LeJonR

  3. J Habeeb L. Cropps III on

    Do you really care about your neighborhood, what do you do to make a difference?

    I’m a Real Estate investor in Pennsylvania and throughout the United States. I purchase flip and assign contracts. I use various means to advertise the properties I have available. I use blogs, emails,zillow.com,emails,zillow.com,truila,Biggerpockets,myspace and Craigslist just to name a few .
    I recently posted an ad on Craigslist for 19 properties I have under contract in Chester, Pennsylvania and I received what I thought was a disturbing response. Contain within this post is the email response that I’d received and my response. (Email Received)-
    “ Dear Mr. Habeeb,
    I saw your ad on craigslist. Please don’t insult people’s intelligence by selling 10k properties for 50k. I’m sure you are aware that these properties in sun village and highland gardens are the absolute worst areas in Chester. I know you are trying to pass off your head ache to others. Shame on you for posting pictures of the park near sun village but not posting pictures of the 20 drug dealers who live back there”.

    Evan
    (My Response)
    I am not the property’s owner but am selling the properties for the owner. These properties were not purchased for $10K but were between $20,000-$30,000. With $20k-$30K in repairs, (new windows, heating systems, walls and new roofs) they are being sold at a lose.

    Having moved here from Virginia in early September, I had no idea that the area was called Sun Village and Highland Gardens. I consider most neighborhoods in Philadelphia to be infested with drug dealers.

    Why? Because parents are either too busy with their own concerns or too busy to get involved with their children’s lives. Parents and neighbors stand by while their community and the behaviors of these youth go unchecked and unmonitored.

    You say “Shame on you for posting pictures of the park near sun village but not posting pictures of the 20 drug dealers who live back there.” Pictures of the park were taken because they are close to the houses. I was not aware of the drug dealers when these photos were taken.

    If this community is so infested, then shame on you for sitting in such a community just watching things happen unnoticed. What have you done to prevent this behavior? Have you taken pictures of them to show to the police? Have you even reported the activity to the police? While you sit and look out of your window, no improvements can be made by such passive behavior. Have you formed a neighborhood watch program to observe and report these activities? Have you marched throughout the neighborhood in protest?

    Have you contacted the police and asked about putting surveillance cameras in these areas? They are doing that in some areas of Philadelphia. Or are you hiding the actions of our sons, grandsons and nephews? Have you talked to the drug dealers and told them that you do not want drugs in your neighborhood. I have lived in neighborhoods like that and have fought drug dealers. I fear God not drug dealers.

    I am trying to sell the properties in that community. The owner wishes to buy and repair more homes in the community. This will help to house families instead of letting the property become an eyesore or even another drug house. This, along with the new casino close by, will help to improve the community and the property values.

    I don’t blame you but I blame myself for the problems in our communities because I know I cannot look towards others to solve these problems. So yes, I too, am responsible because I know making a difference starts with me.

    Please feel free to contact me if you need help with your drug infestation situation. I have methods that may work.

    J Habeeb L Cropps III
    Nahab Properties, LLC
    [email protected]

  4. Steph,

    I’m glad to see you’re not saying we must or should build our buyers list first. I’ve started seeing posts from newbie wholesalers that say something like, “I have a serious cash buyer. I need a property”. All they are focusing on is getting the buyer. They’re not wholesaling at all. They want us to bird dog for them. My ususal reply to them is, “If we find the property, what does that make us? The bird dog? If we are the wholsesaler, then what are you?”

    It’s one thing to build a buyers list, but you have to be able to find a deal; negotiate a contract; and market a property. Some people just don’t get it.

    Keep up the great work!

    Demos

  5. Hey Steph, I’ve been investing in RE (SFH for long term hold strategy) for just over 2 years. I’ve often come across things about wholesaling, but I’m still a little confused. I’m hoping you can set me clear on a couple easy questions:

    1. I typically put a contract on a property through my RE agent (as I’m not licensed) . I believe that the contract is usually contingent on me getting preapproval from a lending institutions, and then isn’t it also contingent on me securing the funding to close the deal. How is contract for wholesale done? What are the differences between that contract, and the contracts I’ve been accustomed to?

    2. OK, so I found a killer deal (as I often do, but am short funds to get approval), and I’ve got it locked under contract (which I should know how to do after reading answer to 1). What is the next step in re-assigning the contract to someone else? How long do I have to do it? Does the closing date set in my original contract need to be fulfilled? OK OK, I realize I’m new to this, so if you could recommend a good advanced level book, that would be great.

    Thanks for your time,
    Mark

  6. Hi Mark,

    You would use the same contract as you are using now, but then once you find a buyer you would assign that contract to them using an assignment of contract agreement. The assignment agreement basically says that you are assigning all of your rights in the original contract over to your buyer for X amount of dollars. So, for example, if you put the property under contract for 100k and then found a buyer for 110k, you would then assign the contract over to them for 10k using an assignment of contract agreement.

    Make sense?

    I recommend Steve’s Cook’s wholesaling course if you are looking for an in depth explanation of how the process works…

    Hope that helps,
    Steph

    P.S.
    If you try and explain this process to your realtor, he/she will probably tell you that it is illegal.
    .-= Stephani Davis´s last blog ..Hump Day Updates- Brought to you by Chef Steph. Hehe. =-.

    • Thanks again Steph,
      That makes sense. In my neck of the woods, earnest money is typically 1K & I thought the contract had a condition of me obtaining conventional financing…

      I’m guessing that it would be in my best interest to get my RE license rather than have my RE agent writing these contracts for me?
      Also, as far as closing costs go. Am I actually closing this house and then reselling it? Or is the assigned person closing the with the orig seller and I’m simply taking the difference?
      If I’m closing and reselling, then an added expense would be all the fees associated w. closing… I’ll look into Steve’s course. Thanks for the help!!
      Mark

  7. You are able to choose whether or not you want your offer contingent upon you getting financing or whether you are making it a cash offer. Cash offers obviously carry much more weight than those with financing contingencies.

    Are you talking about making offers on REOs? If so, you will not be able to assign your contract, as the banks will have a clause in their addenda that prohibits it. I wrote a series of articles about how to get around the no-assignment clause when dealing with REOs. It starts here:
    http://www.biggerpockets.com/renewsblog/2009/09/10/close-reo-wholesale-deals-part-1-5/

    If you are wholesaling REOs, then yes, there will be two separate closings, and therefore two sets of closing costs. I always pass those on to my end buyer, though, so I only end up paying my share of the fees for the first transaction between me and the bank.

    If you are wholesaling a non-REO or short sale deal, then there will just be one set of closing costs as there will only be one sale taking place.

    As far as getting your license- that’s up to you. I don’t have mine- I just go directly to the listing agents and make my offers that way…

    Hope that helps,
    Steph
    .-= Stephani Davis´s last blog ..Hump Day Updates- Brought to you by Chef Steph. Hehe. =-.

  8. Do you have or know an article that would lay out the process of how you get the contract then assign it to a buyer. What documents do you need or required when wholesaler?

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