{"id":109536,"date":"2019-04-16T14:30:00","date_gmt":"2019-04-16T20:30:00","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=109536"},"modified":"2023-06-20T13:26:04","modified_gmt":"2023-06-20T19:26:04","slug":"wholesale-finding-off-market-deals-first","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/wholesale-finding-off-market-deals-first","title":{"rendered":"Wholesale Hacking: How to Find Monster Off-Market Deals Before Anyone Else"},"content":{"rendered":"

Remember the 3D investor? <\/span><\/p>\n

No, I\u2019m not talking three dimensional. I\u2019m talking the 3D equation\u2014death, divorces, defaults<\/a>\u2014three instances in which an investor sees opportunity. <\/span><\/p>\n

Well, there\u2019s actually a fourth: distress. <\/span><\/p>\n

Distress makes for great opportunity, for wholesalers specifically\u2014especially if you know where to find distress before distress becomes known.<\/span><\/p>\n

Well, there’s a source for that. And no, it’s not bandit signs, brokers, or knocking on doors like a creep. In fact, it\u2019s such an obvious source it leaves you wondering why you never thought of it yourself.\u00a0<\/span><\/p>\n

But let\u2019s backtrack a bit. <\/span><\/p>\n

What Is Wholesaling Real Estate?<\/h2>\n

I know a lot of readers here are intrigued by wholesaling<\/a>, have heard of wholesaling, are curious about it. Heck, they may even have tried their luck at it. <\/span><\/p>\n

What\u2019s not to like, right? <\/span>Invest in real estate without spending a dime. <\/span><\/p>\n

Outside of the appeal it holds in theory, I personally don\u2019t think it\u2019s the best place for someone new to start (for a bunch of reasons).<\/span><\/p>\n

I honestly think it sucks, period. However, sometimes, serendipitously, a wholesaling scenario presents itself.\u00a0<\/span><\/p>\n

Related: <\/strong><\/em>The Ultimate Beginner\u2019s Guide to Real Estate Wholesaling<\/em><\/a><\/p>\n

When Is Wholesaling a Good Idea?<\/h2>\n

Personal feelings aside, I\u2019ve learned (completely and randomly through happenstance) that there is actually a fantastic source for deals that are best left\u2014gasp\u2014wholesaled!<\/span><\/p>\n

In order to find exclusive deals worth even trying to wholesale, you\u2019ve gotta make sure they\u2019re juicy. And to that, you have to have a lead source.<\/span><\/p>\n

And no, those bullshit notes about, “I want to buy your house,” aren\u2019t lead generators\u2014they\u2019re nuisances. <\/span><\/p>\n

I get them all the time at my smaller properties. <\/span>Rather than persuade me to sell, whoever sends these simply annoys me. No one wants unsolicited physical mail (#stoneage).<\/span><\/p>\n

Anyway, the key to juicy exclusive deals isn\u2019t just to get them off-market. You\u2019ve gotta get them before the seller knows they have to sell. <\/span><\/p>\n

Once they talk to a broker, it\u2019s too late. The margins are already getting trimmed.<\/span><\/p>\n

So here’s how you can get them.<\/p>\n

\"wholesalers-tasks\"<\/p>\n

Related: <\/strong><\/em>I (Almost) NEVER Wholesale Real Estate: Here\u2019s Why<\/em><\/a><\/p>\n

Finding Real Estate Wholesale Deals<\/h2>\n

We\u2019ve had really strong deal flow in Q1\u2014probably the best we\u2019ve ever had. <\/span><\/p>\n

Some were unlisted, some bankruptcy sales, some from government. Some were even joint venture offers.<\/span><\/p>\n

Naturally, you can\u2019t\u2014and shouldn\u2019t\u2014jump on every single opportunity. Some you pass on. <\/span><\/p>\n

Some you pass on to a better fit. And some just aren\u2019t in your wheelhouse or within your strategic focus.<\/span><\/p>\n

But sometimes you get no-brainer deals that just make too much sense to not put under contract and immediately sell to someone else. <\/span>I reckon I get around seven of these per month. <\/span><\/p>\n

Here\u2019s a real example that just happened.<\/span><\/p>\n

Recent Real-Life Example<\/h3>\n

My finance guy constantly gets requests for refinancing, funding, whatever. Some deals just aren\u2019t financeable, for whatever reason.<\/span><\/p>\n

If the owner can’t pull money out of the property, guess what liquidation option remains. Yup. Selling the property. <\/span><\/p>\n

In other words, <\/span>you now have a seller that’s extremely motivated. And guess who hears about it way before a broker has a chance to even know what’s happening?<\/span><\/p>\n

Bingo! The same people the lender’s already doing business with.<\/p>\n

Following is a real conversation, verbatim, with myself and my de facto EVP of Capital Markets, who also arranges financing independently. (<\/span>I\u2019ve changed his name for the sake of the story.)<\/span><\/p>\n

\u201cPhilip!\u201d<\/span><\/p>\n

\u201cDamon! What\u2019s up?\u201d<\/span><\/p>\n

\u201cI have this deal in Washington. Can\u2019t get it refinanced. Seller needs to refinance to pay off an existing loan, plus another deal he needs to close by this date.\u201d<\/span><\/p>\n

\u201cWhat is it?\u201d<\/span><\/p>\n

\u201cIt\u2019s a renovated, cash-flowing, single-tenant commercial property. It\u2019s worth $1.3MM at a 6 cap.\u201d<\/span><\/p>\n

\u201cSounds nice, but you know I only really do Jersey and Philly.\u201d<\/span><\/p>\n

\u201cYes, but hear me out, Philip. Seller cannot refinance this deal. We\u2019ve tried everything. He just needs $1MM, then he can clear his mortgage, close this other deal, and walk away with a hundred grand.\u201d<\/span><\/p>\n

\u201cWhat do you wanna do?\u201d<\/span><\/p>\n

\u201cI put it under contract for $1MM. We can sell it for $1.1MM, $1.2MM. It\u2019s still a great deal for an investor. Can you help me?\u201d<\/span><\/p>\n

That\u2019s a $300K spread.<\/span><\/p>\n

The lease? Seven years. <\/span><\/p>\n

Tenant? Investment grade. <\/span><\/p>\n

This ended up going to a buyer at a 7 percent cap rate (around $1.1MM). It took about five texts and an email intro.<\/span><\/p>\n

\"wholesale-buyers-list\"<\/p>\n

How You Can Apply This to You<\/h3>\n

Who\u2019s the closest to potential sellers? Lenders. <\/span><\/p>\n

And no, you don\u2019t have to have a J.P. Morgan VP to feed you deals. Mortgage brokers, solopreneurs, easily accessible people\u2014they\u2019re in the trenches of people asking for cash.<\/span><\/p>\n

You don\u2019t have to be well connected either. They\u2019re all over the place in your area.\u00a0<\/span><\/p>\n

The more I think about it, this is where I\u2019ve gotten the best, most useless deals I can remember. <\/span><\/p>\n

And when I say useless, it\u2019s because they\u2019re so good on paper, but soooo not in my wheelhouse that it\u2019s unfortunate. <\/span><\/p>\n

I get at least two of these calls weekly. Around three to four a month are home run deals. <\/span><\/p>\n

Goes without saying, they\u2019re not sexy Midtown Manhattan office buildings. <\/span><\/p>\n

We\u2019re talking random situations like five self-storage facilities in Iowa cash flowing a strong 8 percent a year or a 12-unit mixed-use in South Carolina. <\/span><\/p>\n

All of them have solid operations, along with some unconducive backstory that makes the dynamic of the deal exist in a vacuum outside the confines of market economics.<\/span><\/p>\n

\u201cI just need to sell for this much so I can buy out my ex-husband for $300K and walk away with $200K myself.\u201d<\/span><\/i><\/p>\n

For us, we\u2019re not set up right now to just jump on random individual deals as they appear. <\/span>Plus, I don\u2019t love the idea of having assets scattered across the country, knowing I\u2019d never go there in person.<\/span><\/p>\n

But if you\u2019re a cash flow investor, part of a smaller investment group, or just someone with a great network, these deals are literally perfect. <\/span><\/p>\n

It\u2019s funny, I never ever expected to write about this. I didn\u2019t realize how big of a potential opportunity this was until I experienced it. <\/span><\/p>\n

(And if I\u2019m not capitalizing on it myself, I thought the very least I could is share these tips.)<\/span><\/p>\n

Based on my experience, the best source of deals can\u2019t possibly come from some silly bandit sign or spammy letters. <\/span>It doesn\u2019t even come from realtors. <\/span><\/p>\n

It comes from the ones who really control the controlling party\u2019s destiny. <\/span>And that\u2019s the lender.\u00a0<\/span><\/p>\n

\"\"<\/p>\n

Does this make sense? Would you like additional pointers or recommendations?<\/em><\/span><\/p>\n

Let me know in the comments!<\/strong><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Remember the 3D investor? I\u2019m talking death, divorces, defaults\u2014three instances in which an investor sees opportunity. Well, there\u2019s actually a fourth: distress. Distress makes for great opportunity, for wholesalers specifically\u2014especially if you know where to find distress before distress becomes known.<\/p>\n","protected":false},"author":105651,"featured_media":107209,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5526],"tags":[],"class_list":["post-109536","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate-wholesaling"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/109536","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/105651"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=109536"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/109536\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/107209"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=109536"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=109536"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=109536"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}