The 5 Steps To Becoming A Pro At Wholesaling!

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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.

Related: 9 Blunders Every Wholesaler Must Avoid (Or Else!)

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.

Related: Networking: The Secret of Successful Real Estate Investing

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.

Conclusion

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.

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About Author

Michael LaCava is a full time real estate investor, house flipping coach and the President of Hold Em Realty located in Wareham, MA. He runs the website House Flipping School to teach new real estate investors how to flip houses and is the author of "How to Flip a House in 5 Simple Steps".

18 Comments

  1. Michael, All valid points and important for a wholesaler. But I think #1 should be “Know what factors comprise a good deal”. I know your #5 somewhat covers that, but if you find a good deal that does not meet one of your buyer’s needs you would still have a very marketable sale. That is what I would consider the biggest failure of many of the wholesalers I have dealt with so far.

    • Good point Walt. Thanks for sharing! I have experienced the same with some wholesalers and find myself explaining to them after they locked the deal up at a price that is too high for any experienced investor that knows the business. I also let them know they shouldn’t just sell it to some new investor that doesn’t quite understand the #’s as well as they should have because it would be wrong and could potentially hurt the investor financially. They usually under estimate repairs or the ARV which you know you have to get as close to right as possible.
      This makes it more difficult for them to go back to the seller and renegotiate. Some have done it successfully and we ended up buying from them so it is worth the effort to help them understand when they are new at wholesaling.

  2. Micheal,

    Networking maybe the best way to become and wholesaler Superman. With 20 or 30 people with capital ready to go is the best feeling in the world. All you have to do is find the deals, and rest is easy. Like you said you must negotiate for a awesome price for the sale to even be completed.

    Antonio Coleman “Signing Off”

  3. Michael –

    You made a really important point in this article; “know what your buyers’ needs are”. You can have great deals, but if they aren’t what your buyers are looking for or they aren’t in the right areas they will be hard to sell. If you can source deals specifically for your buyer’s list and their buying criteria you can build a solid wholesaling business.

    Sharon

  4. Michael,

    I am an investor and licensed real estate broker in Ohio.

    FYI – In Ohio, the department of real estate considers wholesaling as you have described it as an activity that requires a real estate license. The state real estate commission in Ohio is currently going after wholesalers who are doing what you have described and fining them $1000 per incident per day. You should warn your readers to make sure they investigate the laws to make sure they comply. Also, don’t be surprised if they contact you about your post.

    I can send you the bulletin explaining this if you want.

    • Hi Duane
      I am not familiar with this. Ty for sharing.
      Have they enforced this on any wholesalers.
      A lot of these deals would not even be houses people would list with a realtor. I do a ton of business with some great realtors and even recommend them to sellers so I see the value In working with realtors.
      Ty

      • This was in June’s Ohio Division Of Real Estate newsletter.

        BEWARE: Seminars That Teach Unlicensed Real Estate Activity
        The Division’s Enforcement section wants all licensees and the general public to be aware of individuals, groups, training seminars, coaching programs or otherwise, which may be providing instructions on how to circumvent real estate license law. (Please see R.C. 4735.01 for a list of activities which require licensure.)
        Beware of seminars that provide instructions on wholesaling and option purchase contracts. Language included in these schemes include: “tying up the real property,” putting the house in contract until a buyer is found, and placing the home in contract for the purpose of re-selling the property. Despite what is being taught at these seminars, a real estate license is required to engage in these activities.
        The seminar instructors advise attendees that they can place a property in contract or an option to purchase, at which time the attendee can then market and re-sell the property for a profit. The instructors also advise attendees how to bring buyers
        and sellers together through the use of an “assignable contract” for a fee. It is the position of the Division that, pursuant to Ohio law, the aforementioned activities are those for which an Ohio real estate license is required. However, licensure
        requirements or the potential requirement for a license is not conveyed to attendees of these seminars, presentations or coaching programs.
        Pursuant to R.C. 4735.052, the Ohio Real Estate Commission may impose a civil penalty up to $1,000.00 a day for unlicensed activity. Each day a violation occurs or continues is a separate violation. For example, under most circumstances,
        if an individual is involved in unlicensed activity for one month, a civil penalty of $30,000 may be issued.
        You may ask, “I’m a licensed real estate broker (or salesperson), why are you telling me this?” R.C. 4735.18(A) (34) provides that discipline may be imposed on a licensed real estate broker or salesperson for authorizing or permitting a person to act as an agent in the capacity of a broker or salesperson who was not then licensed as a real estate broker or salesperson. Steer clear of any individual, group, organization or otherwise that is promoting unlicensed activity such as what is mentioned above. Be very careful you are not working with a person engaging in unlicensed activity, and if you witness this activity, feel free to notify the Division.

        As you can see, their position is quite clear. And yes, they have enforced this on several wholesalers. They are very serious about this so I just thought you should know. I would guess that there are other states out there who will follow Ohio’s lead on this and go after wholesalers as well. My advice: be careful.

    • When you buy houses
      Do you represent yourself as an investor or a realtor
      This is another area where licensed agents must disclose as well. How do you do it?

      • Both. And yes, we must disclose the fact that we are licensed agents. I simply explain that I am a real estate broker but I am there as an interested buyer. By the way, the fact that I an a broker has never been a problem with a seller.

    • Duane –

      When did it become illegal in any state to for a seller to sell their property to another person, and then for that person to sell it to someone else? I close with an attorney every time so I feel safe saying it isn’t illegal in KY.

      Sharon

      • Sharon,
        The issue is that you don’t own the property yet, you simply have a contract to purchase it. Where the Ohio Division of Real Estate has an issue is when someone never plans on purchasing the real estate. When the goal is to “Get it under contract, then market the property to find a buyer and then assign it for a fee” this is very much like signing a listing contract with a seller, marketing the property for sale and collecting a commission when it is sold – activity that requires a license in every state I know of. My guess is if you call your state department of real estate and explain what you are doing they may tell you that activity requires a real estate license.

        The solution is simply to purchase the property and then resell it with a double close. It ties up capital and is a little more risky as you actually have to take possession of the property but nobody can argue with your right to sell a property you actually own. And, just because you close with an attorney doesn’t protect you at all.

  5. Duane –

    That is what I do; I always double close. I still cannot figure out how the Division of Real Estate has the authority to impose regulations and levy fines on the citizens of Ohio.

    Sharon

  6. In regards to the Ohio wholesaler issues.
    There is a monster thread on BP (Around 160 replies) that talks about this.

    http://www.biggerpockets.com/forums/93/topics/95781-heads-up-ohio-wholesalers

    General feeling is if you buy the property, like a double close, there is no real issue as long as you aren’t loose with your marketing.
    For assignments a little more murky but still seems like you should be okay if you keep your nose clean.

    Really the big issue is what you say you will do and your marketing.
    – Tell a seller you will find a buyer for their house, you are acting as an agent.
    – Ask a buyer what they are looking for and that you will find them a property, you are acting as an agent.
    – Post of Craigslist that you are selling a “3/2 1600sqft cash flow rental for $57,000″ (We’re talking Ohio) and you don’t own it or have any intention to buy it you are acting as an agent.
    In that last one if you put “Selling a P&S contract on a 3/2 1600sqft cash flow rental property for $57,000 inclusive” you can make a stronger argument since that IS what you have and what you are actually selling.

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