In order to become a pro at wholesaling, you need to learn the tricks of the trade. A few clever tips can get you on the right track.
Real estate usually revolves around long term buying and holding or house flipping but wholesaling is often overlooked. Wholesaling is simply finding property and putting it under a contract so that you can find a buyer to close in your place.
The 5 Steps to Successful Wholesaling
Wholesaling is less risky than house flipping and can be a great option for people who do not have expendable income yet. These five clever tips should help you get with wholesaling.
1. Don’t Give Up On A Rejected Offer
Price negotiation is never easy.
It can be quite challenging especially when you are trying to make sure your price doesn’t exceed your maximum allowable offer, meets the seller’s needs and ensuring the offer is more appealing than what other bidders have.
It would make sense to forget about the deal if the seller’s asking price is way higher than your maximum allowable offer, right? Not really. You can walk away but not necessarily forget about the deal. You can check back with the seller after a few weeks. If the house hasn’t been sold, they might be willing to negotiate it further down.
2. Make Sure Your Buyer Has Good Intentions
The good thing about being a wholesaler is that you do not have to use your own money. This means that you have to find a buyer who is honest and will not back out of a deal at the last minute due to financial problems. Some buyers also have a reputation for taking advantage of wholesalers. Some buyers intentionally tell all sellers the same thing. They then end up choosing a house they like best and leave everyone else hanging. Thankfully, there are a few ways that you can avoid being taken advantage of.
Ask a buyer to show you proof of funds. A proof of funds letter should be enough to show you that they indeed have money to purchase the property and if they do not provide it even after asking several times, then you should move on to another buyer.
Ask for a deposit upfront. This will show that the buyer is committed to purchasing the property and is not just leading you on. The deposit is usually around 2-3% of the buying price.
3. Create A Back Up Plan.
Even if you get a deposit or a proof of funds letter, you deal might still fail so it’s good to have a backup plan just in case.
Even though wholesaling does not require you to invest your own money, it wouldn’t hurt to have your own funds just in case. This way, you can purchase the property yourself rather than relying on one buyer. Alternatively, if you do not have money to invest, you should have a substitute buyer that you can reach out to if a deal falls through.
4. Network As Much As You Can
The more buyers you have on your list the better because you will always have a buyer to fall back on in case a deal falls through with one buyer.
The best way to build your list of buyers is to constantly network and meet new investors. Attending REIA meetings is a good place to meet potential investors.
You can even approach your family members, co-workers, friends and even the people you go to church with; don’t overlook anyone. You might just be surprised by the kind of people who are interested in real estate.
5. Know What Your Buyers’ Needs Are
You need to determine what your buyers consider as good property rather than what you perceive it to be. The best way to find this out is to communicate with your buyers and find out what they are looking for.
You might think that a family style house would be ideal but since a buyer knows a college is being built nearby, they might want a smaller house that they can rent out to college kids. Whichever the case, make sure that you do not force the buyer into something they do not want.
With these clever tips you can make wholesaling to be a lucrative form of real estate investing. Do you have any more tips that you use when wholesaling? Share your opinions by leaving a comment below.