A forum discussion that I came across about working with wholesalers recently caught my eye. This person was saying something to the effect that they wanted to go around the wholesaler and work directly with the seller. I can tell you that doing that with the wholesalers I know, would guarantee that you would be off their list — forever!

Why in the world would someone think it would be OK to “steal” that lead from the wholesaler? Do they really think it’s OK to make their own deal with the seller, and then tell the wholesaler to figure out how to get paid?

If you are new to real estate investing it might help you to understand the process, and also to understand the rehabbers and landlords that buy from wholesalers do so for a reason.

The Process of Getting Wholesale Deals

I can only speak from my experience, but those leads don’t just “appear”.  Each month I spend a considerable amount of time and money to get the phone to ring. I have ongoing direct mail campaigns and use various other methods to get leads. Continuous direct mail campaigns done correctly can be costly, and for every lead that ultimately turns into a deal, there are many more that don’t.

What this means is that the wholesaler has to talk to a lot of people and look at a lot of houses to get one deal. This takes a lot of time, and it takes a lot of work.  Everyone is familiar with the formula used by real estate investors to buy houses. The wholesaler has to buy the property below that threshold in order for it to be a good deal for their investor buyer and for them to make money too. They have to build their fee into this equation when making the offer.

The Gold Is In Your Buyers List

Now that I have finally found a deal that I know will be profitable for the folks on my buyer’s list it’s time to get in touch with them; with my “A list”.

I can tell you that I not only appreciate them, but I cherish these folks!  I’m thrilled that they “want to be on my list”. When they see my name come up on their caller ID, I want them to be excited to see what I have for them.  In this business, your reputation is everything — you live or die by the way you run your business. It is important for me to be known as the person that has good deals. It’s no good for me to make money if they can’t make money too.

Why Work With a Wholesaler?

The answer is simple. Because they have good deals that they can pass on to you! These are deals that you didn’t have to spend your time and money on marketing to find. 

Most rehabbers and landlords I know are always on the lookout for a good deal. If they run across one, they snap it up. Some folks hang out on the MLS. Others drive around and knock on doors. Whatever methods they are using, I can guarantee you that they don’t have a formal marketing plan they follow. These folks don’t want to do marketing. They just want to rehab, build their rental portfolio, or . . . you fill in the blanks.  They are thrilled to have someone bring them good deals they didn’t have to look for.

In the same way that I nurture my relationship with those folks on my buyers list, I can tell you that they reciprocate. They do what they say they are going to do. Always!  I never have to worry about these folks doing something unethical. That’s why they are on my “A list”. You see, this is a two way street that is designed so that everyone can make money — a lot of money over time. This also goes back to the proven theory that real estate investors that build good teams make more money than the “lone rangers” that try to outsmart the system.

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

Why Should Your Work with Real Estate Wholesalers?

I get a lot of emails and phone calls from newbie wholesalers who are looking to do their first deal (and very few that are actually experienced). Most of the time, they want to run a deal past me that is too thin or for some other reason just doesn’t fit my style of investing.

But, every once in a while, I get a pitch from a wholesaler that just blows me away! Here is a recent example of that…

I received the following email from a wholesaler in my area (the “deal” was also posted on one of the BiggerPockets forums, btw):

I have a great investment home in [CITY REMOVED] that needs minor repairs..
Here are the details:

[ADDRESS REMOVED]
3/2
asking -51,000
est repairs- 5000
ARV-90000

Thanks and let me know if you’re interested
[SIGNATURE REMOVED]

As I normally do when I get an email like this, I jumped on the MLS to see if the property was listed. About 80% of the time, the wholesaler is trying to sell me a property right off the MLS which, if it’s in my area, I’ve likely already seen, and if I was interested, likely already put an offer on.

Generally, the wholesaler has the property under contract for about $5-10K under the list price on the MLS, and is trying to sell it to me for a couple thousand dollar profit to himself, still below the MLS list price. But this one was different…

Here is my email response which should provide some details:

Hi [NAME REMOVED],

Here is some feedback on this deal:

- First, I have access to the MLS and originally viewed this property back in November. I know that it’s listed for $28,600, so you probably have it under contract for about $23K (or maybe even less). At your sale price of $51K, you’d be making about $30K in profit. While I’m always happy for wholesalers to make a decent profit, this is a little ridiculous, and basically tells me that you’re not looking to build a relationship with buyers, but instead are just looking for one big payday.

- Second, even if your numbers were accurate ($51K purchase, $15K rehab, $90K ARV), it’s not a good deal. The typical investor would spend $10-12K in fixed costs (commissions, fees, concessions, holding costs, etc) on this deal, so the all-in cost would be about $78K. At $90K sale price, the profit would be about $12K. I don’t know many investors who would buy a deal where the maximum upside is $12K.

- I have no idea where you got your ARV. If you do a search for comps within 1 mile and going back 8 months, you find exactly one property that has sold for more than $90K, and that one isn’t a great comp. My guess is that even if a rehabber could get this particular property under contract for $90K or more, he couldn’t get it appraised for that much in that location.

- In terms of your rehab estimate, for a property to sell in that area in this market ([CITY REMOVED] is a REALLY tough market these days), you’d need to do a full remodel of the house. Given what I remember of it, my estimate was $45-50K in rehab work. With that level of rehab, you could probably get the property under contract for between $100-105K, but again, it would be hard to get an appraisal for that much.

Given all that, I’m obviously not interested in this deal, but hopefully my feedback was useful for when you deal with other investors who may approach you for more information…

Btw, if you want a chance to move this property to an investor, I would recommend trying to sell it for at-most $30K. But, keep in mind that it’s been listed on the MLS for 3 months, so any serious investor would likely have found it by now. Your very best bet to sell this house would be if you got it under contract well below the list price, and could offer it to an investor for *LESS* than what it’s listed on the MLS for. At least in this way, investors would see you adding some value…

Thanks,
J

Photo: Gene Hunt

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

Newbie Wholesalers: READ THIS!

As a real estate wholesaler, your success largely depends upon being able to find an end buyer for your deals once you have them under contract.  As I mentioned in my article last week, if you have a wholesale deal that you’re having a hard time finding an end buyer for, the problem can usually be fixed by either 1) lowering the price, or 2) doing a better job of marketing the property.

Sometimes, however, even though you’ve done a great job of marketing the deal and the price seems to be in line with the recent comparable sales, it still won’t sell.  If you find yourself in a similar situation it may be because of one or more of the following reasons- all which can have a negative impact on the marketability of your deal:

• Location, location, location: If your deal is located on a busy street, across from the neighborhood liquor store, or right next door to a cemetery or the railroad tracks, chances are you’re going to have a much harder time getting rid of it.  This is something that you need to take into consideration when you’re running your numbers and formulating your offer.  While it may seem like a great deal on paper, if the property is in a crappy location it’s going to decrease your chances of finding an end buyer for it.

• Major repairs: While there are some rehabbers who have no problem tackling major projects, keep in mind that your pool of buyers will be much smaller if the rehab needed for your deal is an enormous undertaking.  Just to give you an example- in my market (Tampa, FL), sinkholes are a common occurrence, and even though you can score some huge discounts on sinkhole properties, the number of investors who are willing to take on that type of project is very small.

• Funky or chopped up floor plans:  Unfortunately, not every homeowner has the sense to hire a competent professional to do their remodeling for them, and instead elect to take matters into their own hands.  The results, while often comical, can result in major problems when it comes time to resell the property.  If, for example, you have to walk through four bedrooms to get to the one bathroom in the house, or if the kitchen has been relocated to the master bedroom (I’ve actually witnessed this), you’re going to have a much more difficult time finding an end buyer to take down the deal.

While there are many factors that can have a negative impact on your ability to get your wholesale deal sold, the three I mentioned above are definitely worth keeping in mind the next time you are considering putting a property under contact!

Photo: jscreationzs

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

Why is Your Wholesale Deal Not Selling? (Part 2)

Last week I got an email from a beginning wholesaler asking me for advice. He told me he was considering doing deals virtually in another market because there were “no buyers” in his. He had recently put three properties under contract with the intent of wholesaling them to end buyers, but ended up backing out of all three contracts because he could not find buyers for any of them.

Unfortunately this is not the first time that I’ve heard of this problem, and while it might seem like a great idea to pack up shop and move your operation to another location in search of greener pastures, the truth is that the problem is most likely not because of a lack of buyers. In fact, I’d be willing to bet that if your wholesale deals are not selling it’s because of one of the following two reasons:

The price is too high

While this might seem obvious to some, it is a factor that is overlooked by many new wholesalers. While I’ll admit that I’ve seen some properties that I don’t think I could move even if I was giving them away, in most instances you can get rid of a property quickly by simply lowering the price. How far you will need to lower it will depend on what the active investors in your market are willing to pay, and this is something that should be learned before you start putting properties under contract.

If you find yourself in a situation where your deal is not selling, make sure to use it to your advantage by asking the investors who are passing on the deal why they are not interested.  Find out how low the price would have to be to make the deal attractive to them and keep that in mind the next time around.

No one Knows About Your Deal

If your property is priced right and it’s not selling, chances are, you haven’t done a good job of getting the word out about it. Once you get a deal under contract, your job as a wholesaler is to market the living crap out of it!  If you’re serious about getting it sold, you should be doing everything on the following list (at the minimum) to find an end buyer:

*Send the deal to your buyers list (if you have one)
*Put ads up on the online classified sites every day
*Place signs around the property
*Pass out flyers at any REIA meetings in your area
*Contact other wholesalers about the deal to see if they will help you market it
*Call every For Rent sign in the area and see if the landlords would be interested in your deal

If after doing all of the above you still haven’t found an end buyer, chances are that it’s priced too high!

If you’re having trouble selling deals in your own market, you might want to consider what I’ve written above before you jump ship and relocate.  Keep in mind that there are investors buying property in every market, and you may just have to tweak your approach a little bit in order to get your deals sold!

Photo: Salvatore Vuono

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

Why is Your Wholesale Deal Not Selling?

It’s always been true, but since the correction the calls I get from those specializing in ‘quick turn’ projects, whether flipping or wholesaling, have more than doubled. The calls are predictable, usually coming within a few days after publishing a post about what their retirement will look like, given their long term M.O. — and that retirement ain’t part of a pretty picture. After their first reaction, usually anywhere from mild irritation to big time anger, denial often sets in. It’s after a few days of pondering the substance of the post that they settle down and call.

First, let’s define who they are, and the M.O. in question.

• They’re full time turn and burn types — and they’re good at it.
• They use profits to grow the business — now doing many homes at once.
• Their lifestyle has risen appreciably in response to their rising income.
• They’ve systematized their operation — boosting income yet again.
• Long term is defined as holding for a year so as to pay cap gains rates.
• They’ve earned their reputation as real pros, experts in what they do.

The age range of those calling is roughly 45-60. The older they are, the more you can hear the rising fear in their voice. Take a 53 year old guy who’s simply gettin’ tired of the toll it takes from him both physically and emotionally. Sure, he’s not doin’ much of the physically demanding labor now, but he’s still pitchin’ in almost daily. Combine this with all the day-to-day tasks a very successful rehabber/flipper/wholesaler must do, and you can easily understand why a 50-something guy/gal would begin to resemble the horse who’s been ridden hard and put away wet.

The #1 source of the rising bile in their throats is the realization that their acquired lifestyle is now their biggest problem. Their home really is their castle. They travel a lot, go on pricey weekend getaways, drive expensive debt laden cars/trucks, and maybe even have a nice boat or RV or both. Life is good.

‘Till it’s not.

The problem, of course, is a sorta good news/bad news joke. The good news? They’re rockin’ at what they do. The bad news? They MUST continue doin’ it ’till they drop, cuz they have zero, zilch, zip, nada that will do anything for them in terms of even a semi-viable retirement income.

In essence, as one of them put it so well, “I’ve become a very highly paid slave who must work or be financially ruined. I’m on a treadmill to the emergency room.” He was 52 when he said that, and a year later was diagnosed with very high blood pressure.

Sometimes I can help, sometimes I can’t. It depends upon how leveraged their lifestyle really is. I’ve concluded these guys aren’t exceptions, but the rule. I have no idea if that’s correct or not. I do know this though — their number is legion.

So, what to do?

If you’re under 45 or so, you should be able to add another basket to your portfolio — long term investment properties. Whether these props are local rehabs you’ve done personally, or you just found solid deals elsewhere, it’s imperative you start — now. In 15-20 years you’ll be able to retire with an enviable income. If you execute strategies I’ve outlined in previous posts, it’ll be even better.

If you’re in your late 50′s or over 60, you may or may not have a real problem. Last year two such men had to tell their wives that going back to work for a few years was the only way they’d be able to create a more or less job free retirement. Women who’ve been enjoying life without having to go to work, generally don’t receive this news, um, well.

Some of the turn ‘n burn contributors on this site have addressed this topic with sage advice. They set the example by having a stand-alone portfolio of ‘keepers’ — properties which will provide for them in retirement. You should listen to them carefully. They have seen the future without long term investments, and discovered the light at the end of the tunnel was a freight train comin’ their way.

Secure a long term real estate investment expert. It’s far to late to be gettin’ advice from those who’re merely a few chapters ahead of you in the book. Think you can do it yourself? Really? Maybe — but ask yourself THE question.

How much is a solid, reliable income worth to you in retirement?

Go ahead, take your time, no pressure.

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

Why Many Wildly Successful Flippers and Wholesalers Will Face Bleak Retirements

As a real estate wholesaler, one of the the quickest and easiest ways to put cash in your pocket is by networking with other wholesalers in your market and partnering up on deals.  In my city there are more wholesalers than you can shake a stick at, but instead of looking at them as my competition, I see nothing but opportunity!

Just yesterday I was able to wrap up a deal that I am partnering on with another wholesaler.  I have about 3 hours of work in this deal, zero risk, and will end up making a quick 3k for my efforts!

Here’s how the deal went down:

Monday morning I got an email from one of the wholesalers whose buyers list I am on.  He had several new deals available, one of which was in a neighborhood where I have done quite a bit of business over the last few years. I recognized right away that this was a pretty good deal, and figured I could probably sell it to one of the buyers on my list without too much effort.  I called the wholesaler up and asked him if he could do any better on the price (he was asking 35k for it). He said he would take 32k net.

Monday afternoon I signed an option agreement with the wholesaler which gave me the right to purchase the property for 32k, and then I immediately began marketing the deal to the buyers on my list.  I also put a few ads up on Craigslist, and made 20 signs to place in the neighborhood where the house was located.

Yesterday afternoon I got a call from an investor who saw one of my signs.  I gave him the property address and he ended up calling me back within the hour and making an offer of 33k (I was marketing the deal for 36k).  I told him 35k was the best that I could do, and after a few minutes of back-and-forth negotiations, he finally agreed to pay 35k for the property.

After executing a purchase contract with the wholesaler for 32k, I then met up with the investor and signed an assignment of contract agreement with him for my fee of 3k, and also collected a 2k deposit. The deal is scheduled to close this coming Monday.

While this isn’t a homerun payday by any means, I’m still pleased to be putting a few grand in my pocket in exchange for a few hours of my time!

Photo: Refracted Moments ™

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

How I Made 3k in 3 Days Using OPD (Other People’s Deals)

Last week, my blog post discussed my method for determining the maximum purchase price you can offer for a property that you plan to rehab/resell or wholesale. In the formula I presented, I referred to “Fixed Costs” and I mentioned that I know my Fixed Costs to be about $17,000 on a typical project.

I wanted talk about how I calculated my typical Fixed Costs, and also give new investors an idea of what they should be thinking about when they try to calculate their Fixed Costs number.

Fixed Costs are compromised of the various fees, commissions, and costs associated with all parts the investment project (outside of the actual rehab costs). You may have heard the term “Holding Costs,” which generally applies to things like: Mortgage Payments, Utility Payments, Insurance, etc. These are costs you incur during the rehab portion of the project. Fixed Costs include Holding Costs, but also extend to the costs incurred during the other phases of the project: Purchase and Sale.

That said, I break Fixed Costs down into the following three categories:

1. Purchase Costs
2. Holding Costs
3. Selling Costs

And then each of these categories can be broken down in more detailed expense line-items. Below I’ll discuss the most common Fixed Costs I run into, and approximately what I spend on them for a typical project…

Purchase Costs

Purchase Costs refer to those fixed expenses that contribute to the purchase of a property. For my projects, Purchase Costs can specifically be broken down as follows:

• Inspection Costs: In general, I have an inspection for each of my properties prior to purchase (at least I did when I first started rehabbing). I use the same inspector for every inspection, and for the most part he charges about $400 for a full inspection of a typical property.
• Closing Costs: Each purchase comes with a fixed set of closing costs paid by the buyer. In Georgia, and for REO purchases, this generally includes a title search, attorney fees, courier fees, recording fees, state taxes, document review fees, etc. Basically, all those ridiculously inflated costs charged by the closing attorney to ensure clear title and recording of the new deed. Across all my purchases, these costs generally come in around $1000.
• Lender Fees: For the most part, I use the same lender to finance each property purchase. The lender charges a set of up-front fees to fund the loan, including a Loan Origination Fee, appraisal, underwriting fee, flood certification, document preparation fee, processing, fee, credit report fee, etc. (again, all those ridiculous and inflated fees that contribute to the lender’s bottom line). While every investor and every lender will have a specific sets of fees — and while these fees are somewhat tied to the purchase price of the property — for a typical acquisition I do, these Lender Fees total around $2000 per property.

You may find you have other recurring Purchase Costs, such as Appraisal Fees, Survey Costs, Bird-Dog Fees, etc. If so, add those into your Purchase Costs.

Holding Costs

Holding Costs refer to those expenses that add up between the time I acquire the property and the time I sell the property. For my projects, Holding Costs can specifically be broken down as follows:

• Mortgage Payments: On a typical project, my monthly mortgage payment will be about $500. And a typical project — from purchase to sale — will generally run between 4-6 months. So, during that time, I’ll generally make about $2500 worth of mortgage payments to my lender to keep the property.
• Property Taxes: On the properties I purchase, the typical yearly property taxes are on the order of $1400. Again, if I hold the property for 4-6 months, this will average out to about $600 in property taxes per project.
• Utilities: While performing rehabs, I like to ensure that all utilities (electricity, water and gas) are turned on. This is both for the convenience of my contractors as well as to help diagnose any issues with the property. Because the seasons in Georgia tend towards extreme temperatures, I’ve found that my utilities in my properties generally run about $200 per month for the duration of the project. Again, over 4-6 months, this averages about $1000 per project in utility costs.
• Insurance: Typical insurance costs for my properties is about $350-400 per year. On average, I pay about $200 in insurance costs for each project.

Again, you very well may run into additional Holding Costs, depending upon how you do your flips. For example, you may have costs for: Lawn Mowing, Rental Income, etc.

Selling Costs

Selling Costs refer to those fees and commissions that must be paid in order for me to sell a property. Again, different investors will use different marketing mechanism to sell their houses, so selling costs for each investor may be quite different. For my projects, Selling Costs can be broken down as follows:

• Commissions: Because my wife is our real estate agent, we save about half of the commissions we would otherwise incur when selling a property. That said, if our buyer has their own agent — they generally do — we must pay about 3% of the purchase price to that agent at the sale. A typical property of ours sells at about $120K, so that 3% comes out to about $3600 paid to the buyer’s agent at the sale of our property. Add to that the fees my wife pays to her broker, and the total commissions average about $3900 per property sale.
• Closing Costs: In this market, most buyers ask the seller to pay some or all of their closing costs. On our sales, we’ve been asked to pay anywhere from $2000 to $6000 in closing costs for the buyer. On average, we’re asked to pay about $4000 in buyer closing costs, and because it is a buyer’s market, we generally agree to it.
• Home Warranty: Most first-time home buyers (the type we cater to) request that the seller purchase a home warranty as a condition of the sale. We always expect to do this (and almost always have), and this adds about $500 to the cost of the sale for us.
• Termite Letter: In addition to the home warranty, many buyers (and/or their lenders) require us to provide a proof of termite inspection at the sale. This generally runs somewhere just below $100.
• MLS Fees: Because my wife is our agent, she is required to pay a fee to the local MLS for listing the property. This generally runs about $100.

Depending on how you sell your properties, you may have more or fewer expenses associated with the process. For example, while I don’t calculate it as part of our Fixed Costs, we generally receive about $5000 in commissions (between the purchase and the sale of the property), which goes right to our bottom line. It wouldn’t be unreasonable to subtract $5K from our Selling Costs (and therefore from our total Fixed Costs), though we prefer to account for this elsewhere in our analysis.

You may also have expenses associated with: Direct Marketing, Partnership Payments, Bonuses, etc. If so, add those into your Fixed Costs.

As you can see above, buying, holding and selling a property can cost a lot of money in fixed fees. Let’s see how these add up on a typical project of mine:

And there you have it — it costs me about $16,500 in commissions and fees just buy, hold and sell a property (which I round up to $17K to make my calculations easier and to have a margin of error). Many investors ignore these costs when calculating their potential profit on a deal; but, consider that if you plan to earn about $15K on a typical project, these costs can actually mean the difference between earning your desired profit and losing money!

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

Calculating Fixed Costs on a Rehab, Flip or Wholesale Real Estate Deal

The question I get most often from new investors looking to break into flipping or wholesaling is, “How do I determine the maximum purchase price I should pay when trying to buy a property I plan to rehab or wholesale?”

Most investors have some quantitative analysis technique they use for determining their maximum purchase price (MPP). Some use analysis techniques that require spreadsheets and/or complex formulas; other don’t use any formulas, but just go off a gut feeling they may have for the property or the location.

While I’m certainly not a fan of the “gut feeling” method, I’m also not a huge fan of the complex analysis method either. While this may surprise some people (especially those that know my tendency to sit in front of large spreadsheets for hours on end), one of the main goals of my financial analysis is to be able to do it in my head in less than 10 seconds while standing in the property I’m considering. Certainly the whole analysis can’t be done in 10 seconds, but most of it can be.

And no, this isn’t a post about the “70% Rule.” For those not familiar with it, the 70% Rule basically states that MPP should be 70% of what you can resell the property for (the ARV) minus any necessary repair costs; it’s probably the most common rule used by novice investors (and many experienced investors) to determine MPP. While the 70% Rule — and many other common rules for determining MPP — are certainly worth knowing and understanding, in my opinion they lack the accuracy (and often the precision) necessary to ensure you’re really getting a good deal.

The formula I use and that I discuss below is tremendously simple and straightforward; in fact, many of you will keep reading and think to yourself, “This is obvious!” And while it *is* obvious to anyone who has done even a few deals, for new investors it can often provide an “a-ha” moment that really clarifies what it means to analyze a real estate deal.

So, without any further ado, here’s my formula for detemining the maximum price I will pay for a property I plan to flip…if you’re a rehabber, pay attention, and if you’re a wholesaler, keep in mind that this is a formula your buyers may very well be using themselves:

MPP = Sales Price – Fixed Costs – Desired Profit – Rehab Costs, where

Sales Price equals the conservative estimate of what I can sell the property for (not necessarily the price I’ll list it for!).

Fixed Costs equal all the costs, fees, and commissions that I can expect to pay during the project.

Desired Profit is the minimum amount of money I want to make off the project when it’s complete.

Rehab Costs are the material and labor costs required to rehab the property into resale condition.

As an example, let’s say that I have a property I’m considering purchasing. I believe I can easily resell it in rehabbed condition for $100,000. Additionally, I know my fixed costs to be about $17,000, my desired minimum profit is $15,000, and I’ve estimated the rehab costs to be about $18,000.

In this case, my maximum purchase price is:

MPP = $100,000 – $17,000 – $15,000 – $18,000

MPP = $50,000

So, if I can purchase this property for $50K or less, I’ll jump on the deal.

Now that I’ve provided this formula and the basis for it, the follow-up questions I generally get from most new investors is, “So, how do I determine the Sales Price, the Fixed Costs, and the Rehab Costs?”

All three numbers are tremendously important to the application of this formula, so I will discuss how to accurately determine those other numbers in my future blog posts…

Photo: Horia Varlan

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

Determining Maximum Purchase Price (MPP)

Last week I put a property under contract with the intent of wholesaling it to one of the investors on my buyers list. Unfortunately, the guy I had in mind for the property ended up passing on the deal, and so did everyone else on my list.

I started to sweat a little bit, but knew that I had a good deal on my hands and just needed to do some Ninja marketing to find an end buyer. My goal was to get the property sold within 7 days, which I ended up doing. Following was the marketing strategy that I implemented, which resulted in a signed contract as of yesterday which will put a quick 4k in my pocket.

Signs Around the Property: Signs are my #1 source of leads for buyers, so I immediately placed handwritten signs in the neighborhood where the property was located. I put the signs out early Saturday morning, and my phone rang off the hook all day. (Note: Code enforcement in your city may prohibit you from placing signs in certain areas, so be sure to check with them first to find out what the rules are).

Contact Landlords in the area: While I was driving around Saturday morning, I jotted down the phone numbers from every single For Rent sign that I saw in the neighborhood, then once I returned home, I called the landlords and asked them if they were looking to pick up any more rentals in the area.  I also did some research on my county’s Section 8 website to see which landlords had properties for rent in the zip code where my deal was located, and then contacted all of them as well.

Online Research:  By searching through the Property Appraiser website for my county, it is easy to find out who the active investors are in any given neighborhood.  I look for private investors or LLCs who own more than one property in the area where my house is located, as there is a good chance that they might be interested in buying another.

When I did my search, I found ten investors who owned multiple properties in the area.  I then did some internet detective work (thank you, Lord Google!),  and was able to get phone numbers for 6 out of the ten investors!  I contacted all 6 of them and sent out letters to the remaining 4.

Not only did I get the property under contract shortly after I put these strategies to work (the buyer came as a result of one of my signs, btw), but I was also able to add several more investors to my buyers list as a result of my efforts.

This isn’t the first time I’ve used these strategies to find buyers for my wholesale deals, and it definitely won’t be the last.  Give them a shot next time you need a buyer for one of your deals- you won’t be disappointed!

Photo: Salvatore Vuono

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

How to Sell Your Wholesale Real Estate Deals in 7 Days or Less

Last week I received an email from a newbie real estate wholesaler who was extremely frustrated and looking for some advice.  He explained to me that he had been studying up on real estate wholesaling for about 6 months, and had finally decided to take the plunge, get out of his comfort zone, and start taking action.

His plan was to market for motivated sellers using “We Buy Houses” bandit signs, as well as send out a direct mail piece to a targeted list (absentee owners). A month had passed, and while there were a few leads that had come in, all of the sellers were either asking too much for their properties, or had little to no equity.  Despite putting out over 100 signs and mailing over 500 letters, he was not able to put a deal together, and was ready to throw the towel in and walk away.

I’ve heard many similar stories over the last few years from aspiring investors and wholesalers who are struggling to get their businesses off the ground.  Hearing these stories always brings back memories of when I was just getting started as a wholesaler, and how difficult it was to stay motivated after working my tail off to get a deal, and then running into dead end after dead end.

Month after month went by, and even though I was giving it everything I had (financially and otherwise), I couldn’t seem to land a deal to save my life.  I put out over 1000 We Buy Houses signs (no exaggeration), talked to hundreds of sellers, made hundreds of offers, sent out thousands of mailers, and still- no deals. I literally busted my butt for the better part of a year, and didn’t have anything to show for it except an ulcer and a few premature gray hairs.  It was incredibly difficult, and I don’t know of too many people who would have kept going, but I did.

I kept going because I had made up my mind once and for all that I was finished working for other people, and I was going to make this happen come hell or high water.  There was no turning back, and there were no other options for me.  I wanted success so badly that there was nothing or no one that was going to stand in my way, and so I just kept forging ahead with dogged persistence until I finally closed a deal.

That was over three years ago, and I haven’t looked back since.

Like the struggling wholesaler who sent me the email, I know there are many of you out there who are frustrated because you haven’t landed a deal yet.  I’ve been there, too, and I can tell you from experience that if you want it bad enough, and you are willing to do whatever it takes to achieve success, that anything is possible.  If I can do it- so can you!

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

Wholesalers: How Bad Do You Want It?

I recently received an email from an aspiring real estate wholesaler asking me if I could explain to him the steps involved when wholesaling a property.  It occurred to me that there were probably many others out there with the same question, so in today’s post, I will be walking you through a wholesale deal from beginning to end.

Step #1: Market for a Motivated Seller

Behind every great real estate deal is a motivated seller, and your job as a wholesaler is to get your marketing message in front of as many of those sellers as possible.  This can be done via direct mail, internet marketing, door knocking, bandit signs, or whichever marketing method best fits your time and budget constraints.  If you’re light on cash, there are still a number of ways to get the word out that you are a real estate problem solver- some of which I mention in this article.

Step #2: Negotiate a Great Deal

Now that your phone is ringing from the marketing you’ve been doing, it’s time to start talking to sellers and negotiating.  Being that you are the middle man (or woman) in the deal, you need to be sure to negotiate your price low enough to leave room for your wholesale fee, while still including enough profit to make the deal attractive to your end buyer.

Step #3: Put the Property Under Contract

Once you and the seller come to an agreement on price and terms, it’s time to write up a purchase and sale agreement that will need to be signed by both parties (you and the seller).  Once you have an executed contract, you will want to get a copy to your title company ASAP so they can begin title work.  Many times there are liens and/or judgments that pop up and can potentially kill your deal, so you want to check title right away to make sure there are no last minute surprises.

Step #4: Start Marketing for an End Buyer

Once you have the property under contract, you need to start marketing for an end buyer.  Call or email all of the investors on your buyers list and let them know about your new deal.  Put ads up on free online classified sites like Craigslist.org.  Place handwritten signs in and around the neighborhood where the property is located.  Attend any and all local REIA meetings and pass out fliers with info about your property.  Contact other wholesalers in your market and ask them if they know of any buyers who would be interested.  You want to do everything you can to get your deal in front of as many eyes as possible.

Step #5: Assign Purchase Contract to End Buyer and Collect a Deposit

Once you’ve found an end buyer and agreed on a purchase price, you will need to assign your contract over to them by executing an assignment of contract agreement.  An assignment agreement is a simple one page document (the one that I use is, anyway), which states that you are assigning your interest in the original purchase contract over to your end buyer for X amount (your assignment fee).  So, for example, if your original contract with the seller was for $100,000, and you found an end buyer for $110,000, you would fill out an assignment agreement stating that you were assigning all of your rights in the original contract over to your end buyer for the amount of $10,000.

Make sure to collect a deposit from your end buyer once the assignment agreement is executed (I always get $2,000), and then fax or email a copy of the agreement to your title company.

Step #6: Get Paid

Now the hard part is over and it’s time to get paid!

On the day of closing the seller and the end buyer will show up to sign all of the documents, and the end buyer will bring funds for the purchase of the property, plus your assignment fee.  Once everything has been signed and the money has been collected for the purchase, the title company will cut you a check for your fee.

Rinse and Repeat!

I hope that clarifies the mechanics of a wholesaling real estate deal for all of you who have been wondering.  If you have any further questions, please feel free to leave them below and I will be happy to answer!

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

Wholesaling Real Estate Step by Step

Wholesaling houses is a great way to make quick cash in real estate with very little risk or upfront investment. Like any other money-making niche in the real estate arena, there is a learning curve that you will need to work through if you want to become a successful wholesaler.  Following are three pitfalls that many wholesalers make while working through the learning curve, and that you should avoid at all costs.

• Jumping in Without Studying the Market First

If you’re serious about becoming a successful wholesaler, you absolutely need to take the time to study your market and find out what a deal is before you go out and start putting properties under contract.  Many people want to skip over this step because it can be quite time consuming, and as a result, end up with properties under contract that they are not able to find buyers for.  Do yourself a huge favor and commit to spending as much time as is necessary studying your market and determining what constitutes a good deal.  Doing this will take you more time and effort upfront, but will pay off huge dividends when you hit the streets and start making offers.

• Information Overload

While it is certainly necessary to get a proper education before you jump in and start taking action, many beginners get caught up in a vicious cycle: buying course after course and never actually putting the information to use.  Once you get the basics of wholesaling down pat (and after you have done your market research), it is imperative that you start taking the information that you’ve learned and putting it to good use.  We all know that there is a never-ending stream of real estate education products hitting the market, and you don’t want to get caught up in the cycle of buying each and every one of them in search of the magic pill.

• Taking Advice From The Wrong People

If you want to become a successful wholesaler you should be getting your advice from and modeling yourself after other successful wholesalers.  Ignore everyone else.  Many beginners make the mistake of approaching Realtors, mortgage brokers, or other real estate professionals and asking them for advice about wholesaling.  This usually leads to a conversation that ends with the wholesaler being told that what they are trying to do is illegal.  Save yourself the headache, and get your advice from wholesalers who are out there doing deals and cashing checks.

So there you have it, folks- three pitfalls to avoid if you’re just getting started as a wholesaler.  Now it’s time to get out there and start making things happen!

Good luck, and Happy Wholesaling!

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

Three Pitfalls to Avoid When Getting Started as a Wholesaler