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Which Comes First: The Real Estate Deal or the Buyer’s List?

by Sharon Vornholt on October 15, 2012 · 6 comments

  
real estate deal

This question is kind of like another question where people can’t seem to agree on the answer; “Which came first; the chicken or the egg”? Real estate investors all have a different opinion when they are asked whether you should find a deal first or start a buyer’s list and then find a deal.  For me, the answer has always been “the deal.” If you have a great deal, you can always find a buyer for it.

I had someone email me recently that said they had wanted to begin wholesaling houses for a couple of years, but he just couldn’t bring himself to buy that first investment property. He was afraid he wouldn’t be able to sell it. This man had spent a number of years learning the business, but had become paralyzed with fear over this prospect of putting a house under contract that he wouldn’t be able to sell.

If you are just getting started and you find yourself having the same problem, here are 4 tips for you.

1. Know What a Good Deal Looks Like

This is no doubt the hardest part when you are brand new. You almost always pay too much for your first couple of deals. Before you sign on the dotted line, run your potential deal by someone that is an experienced investor. Marginal deals are hard to sell.  If you have any doubt about the numbers or the area where the house is located, just walk away and find another deal. There’s always another one around the corner.

2. Know Where Investors Like to Buy

It won’t do you any good to get a house under contract at a great price if it is in an area where investors don’t like to buy.  Ask experienced rehabbers and landlords where they like to buy. Be sure to find out what types of properties they like, and the price range they prefer. In general, you will be pretty safe in bread and butter neighborhoods; the kinds of neighborhoods for first time homebuyers.  In my area there is a market for more expensive houses, but there are fewer investors in this group.  Buy houses that would work for either a rehab that would be sold to a retail buyer, or a home that would make a great rental and they will always be in demand.

3. Put an Escape Clause in Your Contract

This is vital especially when you are brand new.  Make the deal subject to inspection or partner approval. This is your safety net. It will make it easier for you make offers with confidence.

4. Begin Immediately to Build Your Buyer’s List

There is nothing like having a good buyer’s list to call or email when you have a property you want to sell quickly. It is truly a wholesaler’s secret weapon.  These folks will be loyal repeat buyers if you always have great deals for them, and if you conduct your business with them in an ethical manner 100% of the time.

Implementing these 4 tips will make it easier to make those first offers and get your first few houses under your belt.

Finding a Buyer for Your Deal

There are a number of ways you can quickly find a buyer for the property you have under contract even if you don’t have a buyer’s list.

You can take the deal to your local REIA group where you will find a group of people that are looking for their next house.  At my monthly meeting, we have a table set up for vendors and for folks that want to put out fliers about properties they have to sell. This is usually the first place people head after signing in.

You could list the house on Craigslist. I have sold several properties there, but I would rather much sell to someone at my REIA group; they are usually more experienced investors.  But even if they are brand new, they will almost always be educated to some degree if you find them at this meeting. Most investors are more than willing to help them if they can close the deal.

Concentrate on getting a great deal, and you can be sure you will find a buyer.

Photo: A McLin

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{ 6 comments… read them below or add one }

Dale Osborn October 15, 2012 at 10:22 am

It would probably be best to start a buyer’s list at the same time as finding the deal. As people call on the property you have be sure to capture their information so you can get back to them with the next property. Go so far as to list specifics by their names as to what they are looking for.

When selling the property never forget the power of a sign on the property & the power of word-of-mouth advertising. Let everyone you meet on a daily basis know that you have the property for sale. They may know of someone looking for a property and you are done with that deal and are moving on to the next one.

Reply

Sharon Vornholt October 15, 2012 at 2:16 pm

That’s what you should do Dale. A lot of people can’t seem to make that first offer because they don’t have a buyer’s list. A lot of my good buyers have come from getting them on a list when they didn’t buy that particular property.

Reply

Karen Rittenhouse October 17, 2012 at 7:29 am

Thanks, Sharon.

I constantly preach #1. If you have a good deal, it will sell. Once people know you offer good deals, they will seek you out and you no longer have to look for buyers.

I coach and train investors. I can’t tell you how many times I talk with investors who are whining over problems with a deal. When I look at it, it-is-not-a-deal! So many investors are thrilled to buy and then try to make it a deal when it isn’t.

You can never make money in this business unless you get #1 figured out. Know what a deal looks like – if you’re not sure, run it by a SUCCESSFUL investor. If you can’t make it a deal, move on.

Reply

Sharon Vornholt October 17, 2012 at 9:29 am

Karen -

You nailed it with your #1! This is the hardest part to learn for new investors. You will never make money in this business unless you know what a good deal is.

If you have great deals, they buyers will be there every time. I work with the same buyers over and over and most of them are also members of my REIA group..

One of my investor friends who also happens to be very successful once told me: Good deals rarely just fall in your lap. Most good deals are “created”. This brings us to another hard thing to learn; successful negotiation. Everyone must learn to negotiate.

Reply

Terry October 24, 2012 at 5:04 pm

Those are great tips!

I liked your point about how much easier it is to work with other investors, because they have more experience.

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Sharon Vornholt October 25, 2012 at 4:23 pm

That’s what I have Terry.

Reply

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