Virtual Wholesaling: How to Wholesale Properties in Any Market From Afar
Hot markets can be fabulous for investors—buy and hold owners, for instance, can score a sweet deal selling. But wholesalers may struggle to compete against the tide of eager buyers. Worried? Don't be. Virtual wholesaling may be for you if you're you seeing these trends occurring in your market:
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- Response rates lowering on your direct mail campaigns
- Sellers are not as motivated as they were a year ago
- Sellers stating they are receiving too many marketing pieces.
These trends indicate a seller’s market—which means your deal flow and ROI may decrease and your marketing budget may increase. Our solution: Virtual wholesaling.
What Is Virtual Wholesaling?
Virtual wholesaling is similar to traditional wholesaling—except in a different market. (Note that beginners may be ill-suited for this strategy.) Facilitating a transaction involves manipulating many moving pieces. To succeed, you need excellent conversational skills, great networking abilities, and an organizational mindset.
My Virtual Wholesaling Experience
I speak from experience: While I live in Phoenix, I currently working another market—my hometown of Chicago. As I am writing this article, I have one property set to close today in Phoenix, one set to close in Chicago, and two more in Chicago under contract.
So how did this come about?
It occurred literally by accident. About a year ago, I began posting some of my Phoenix success stories and testimonials on Facebook. A lot of my Facebook friends live in Chicago, and they asked if I could buy their houses. At the time, I was focused exclusively on the Phoenix market.
When a close friend of the family wanted out of an inherited house, I worked on the project as a courtesy. I was timid at first. This was a close family friend, and business and family normally don’t mix. I had never wholesaled virtually, so I had no connections with title agents or attorneys, and I didn’t want to over-promise and under-deliver. She sent me pictures and had confidence in me, so I got to work.
Building My Virtual Wholesaling Team
I faced the fear and began to assemble my team. How hard could it be?, I thought. Here’s who I gathered.
1. Title company
The title company I use in Phoenix is a national title company, so I knew I could use them. First, I contacted my local escrow agent, and she connected with an agent in Chicago. After that, everything went smoothly (for a bit)—I had the property under contract, and the title company was in place.
But different metros have different laws, standards, and regulations. Chicago is different than Phoenix. In Phoenix, the title company does all the title work, but in Chicago, an attorney has to facilitate the transaction.
This was my first road block. I remained positive—but I needed to find an attorney.
The Chicago title agent recommended three attorneys. I interviewed each one and finally decided on who I wanted to use. Boy, did I make the right decision! During our conversation, he explained some key differences between Phoenix and Chicago, which helped me understand the process a lot more. For example, in Chicago, you have to pull a water certificate during closing. After that, we discussed fees and what we both needed to close the transaction. We shook hands, and I immediately sent him the contract and wired the title company the earnest money deposit.
Everything was in place, but the biggest piece missing was the buyer. I knew the deal was solid—a slam dunk with tons of equity. The house was in a great neighborhood, and the price was already solidified. But I seriously had to find a buyer or all my work would be in vain, and I wouldn't be able to help this close friend.
Drawing on my experience with doing deals in Phoenix, I used the internet to market the property. First, I posted ads on Zillow and Craigslist and joined a Chicago Facebook group of wholesalers and investors. But I didn’t find a buyer—I found someone better. A JV partner. After we spoke, I learned he had a very solid buyer’s list. He would move the property. We agreed upon a 65-35 percent split, with me securing 65 percent, and signed the JV agreement. We were in business.
Having an in-place tenant made the transaction easier, too, because I didn’t have to have boots on the ground. However, since this transaction, I have found my boots-on-the-ground guy in Chicago—my best friend. He was very interested in learning real estate, and we agreed that he would receive 12 percent on the profit of every deal. His responsibility is to walk the property, meet with the sellers to take pictures, meet buyers, and secure the contract. He is doing a fabulous job.
I think back on what would’ve happened if I hadn’t overcome my fear and ventured into virtual wholesaling. I would be scrabbling to try and work with a 0.5 percent response rate in Phoenix. The majority of my marketing is to Chicago, and I’m doing more deals there than in Phoenix and doing less work to secure more profits.
What is stopping you from virtual wholesaling? What resources do you think you need to be successful?
I can surely answer those questions for you and many more.