Info On Wholesaling Properties

24 Replies

I am 21 year old college drop out from Baton Rouge, LA and I've been researching the methods of profiting from real estate, specifically wholesaling. Can someone explain to me the detailed steps of completing the process. For example what happens if I can not find a cash buyer but I have a property under contract ? Will I have to come out of pocket ? Also can someone explain the "escrow" when doing wholesaling. 

Originally posted by @Edward Powers :

I've been searching non stop for an answer to my first question and can't seem to get a concrete answer. I'll continue to look, thanks 

 Honestly there is no good answer because if you do have to back out of a deal..   A.  you will typically lose your ernest money.  B.  You could be sued.  The seller might try to make you buy the property.  C.  You will develop the reputation of someone who doesn't close on deals which is the worst thing to be in the acquisition world.  

Personally, if I tell someone that I am buying a house (handshake or contract) I will close on it 100% of the time.  Reputation means a lot.  You will find that buyers and sellers in the investor world run in the same circles and talk to each other.   Word will travel fast.  

Thats why I suggest to get into earning bird dog fees and commissions before attempting to flip a contract.   

@Edward Powers

Don't listen to anyone on here, seriously man. I'm 19, dropped out of college, and am profiting greatly from wholesaling while acting both more ethical and legally than most agents even are.

I'll break it down for you. First step is to NOT get your license.  Second step is to DON'T LISTEN TO PEOPLE THAT DON'T DO WHAT YOU DO. I use my real estate attorney, who is actually familiar with the laws in my jurisdiction not someone halfway across the country that read some BP articles.

I'll give you the concrete answers you are looking for, because I feel your pain in trying to find them. I've said it once and I'll say it many more times, wholesalers are the punching bags on BP and everyone comes in to give their .02 whenever the topic is brought up without knowing a thing about the actual subject.

 I had no one else do that for me. I had to figure it out, man. 

Again, first rule of BP. DON'T LISTEN TO PEOPLE ON HERE UNLESS THEY ARE FAMILIAR AND HAVE EXPERTISE IN YOUR EXACT AREA OF INQUIRY IN YOUR JURISDICTION. If I wanted "pointers" or "advice" I'd call my grandfather up. Seriously. I knew people were making wholesaling work on a massive scale across the US, I had to push through the clutter and get to the real people who gave me the real answers. Looking forward to talking

@Edward Powers , I think getting your real estate license is a terrible idea unless legally compelled to do so in your state.

As to wholesaling there are many paths you can take.  What I have done is:

1. Acted as a "finder" for a hedge fund and signed contracts up in their entity. This was a great way to learn the ropes and utilize their expertise.

2. Start building a list of potential buyers and then start looking for homes for them. Specifically existing wholesalers and other full time RE people in my town

3. Once you know what you're doing then you can start building a brand and a database of investors or other end buyers.

There are many, many other ways to go but my advice to start is to find someone looking to buy homes and offer to work with/for them. Then you have no risk and need no money. Most professionals are time poor so you can bring that to the table and get paid to learn.

If you are acting as "finder" you are acting as an agent.  You should be licensed.  And thats what I said is to start out by bird dogging.  Its the same thing.  

Also, you should definitely listen to other people on here.  When you wholesale someone a deal you are selling it to an end user who will either flip it or hold it and either way they will have a formula or some numbers behind there logic.  If you understand there business model then it will be easier to figure out how to find the deals.  BP has rehabbers, flippers, turnkey providers, finance guys,etc etc..  the more you understand about each niche the easier it is to structure a deal.  

I totally agree with @William Brown . Getting a license is not a necessary component of doing wholesaling. Certain areas do have laws you may want to make sure you adhere to correctly. But to make it simple and generalized, you are a buyer and a principle in the deals. You have the right to purchase as many properties as you want, and if you decide not to buy the property during your contracting term, as long as your contract to purchase states you can assign the contract, you can legally assign your rights of purchasing the property over to another buyer.

As far is your question about "what if you can't find another buyer".

1.) If you know how to run your numbers correctly, and contract to buy the right properties, finding buyers will be the last of your worries. But if you just go out there trying to get properties on contract for any price with any seller who's looking to sell their house, then yes investors will avoid you like the plague if you don't leave them any room for profit.

1.) I have several "out clauses" in my contracts that will allow me to back out of the deal if absolutely necessary

3.) I've never had to put down any earnest money, or put anything in escrow in any of the deals I've wholesaled. It's all about the verbiage of your contract and how you negotiate the deal.

Most agents/ brokers either don't understand wholesaling, or don't like it cause they think it cuts into their potential commissions. I'm truly blessed to not be one of those agents. I've been licensed going on 6 yrs now, and I wish I would have known the knowledge of wholesaling back then because I wouldn't have ever gotten the license. I don't use the license at all now, and being an agent never fit my lifestyle. Over the last couple of years I've controlled over $2.3M worth of real estate using creative strategies like wholesaling, lease options, and seller finance. Been traveling all over southeast Asia for the past 8+ months, and still have a functioning real estate business in the states.

I can't tell you how thankfulI am that I decided to keep going regardless of folks who said it won't, couldn't, shouldn't be done. Especially if those people aren't cranking out wholesale deals themselves month in and month out.

Send me a PM, and I'll walk you through the process step by step, as well as partner with you on deals if you have the work ethic, and just need to be shown the way.

Originally posted by @William Brown :

@Edward Powers

Don't listen to anyone on here, seriously man. I'm 19, dropped out of college, and am profiting greatly from wholesaling while acting both more ethical and legally than most agents even are.

I'll break it down for you. First step is to NOT get your license.  Second step is to DON'T LISTEN TO PEOPLE THAT DON'T DO WHAT YOU DO. I use my real estate attorney, who is actually familiar with the laws in my jurisdiction not someone halfway across the country that read some BP articles.

I'll give you the concrete answers you are looking for, because I feel your pain in trying to find them. I've said it once and I'll say it many more times, wholesalers are the punching bags on BP and everyone comes in to give their .02 whenever the topic is brought up without knowing a thing about the actual subject.

Shoot me a DM, I'll explain both the acquisition and disposition process until you get it, because I had no one else do that for me. I had to figure it out, man. 

Again, first rule of BP. DON'T LISTEN TO PEOPLE ON HERE UNLESS THEY ARE FAMILIAR AND HAVE EXPERTISE IN YOUR EXACT AREA OF INQUIRY IN YOUR JURISDICTION. If I wanted "pointers" or "advice" I'd call my grandfather up. Seriously. I knew people were making wholesaling work on a massive scale across the US, I had to push through the clutter and get to the real people who gave me the real answers. Looking forward to talking

 Well said sir, I am also looking for some of the same information.  Let me know if you would be willing to pass some information to me as well.  Thanks very much.

Originally posted by @Tracy Ellison - Bey :

I totally agree with @William Brown . Getting a license is not a necessary component of doing wholesaling. Certain areas do have laws you may want to make sure you adhere to correctly. But to make it simple and generalized, you are a buyer and a principle in the deals. You have the right to purchase as many properties as you want, and if you decide not to buy the property during your contracting term, as long as your contract to purchase states you can assign the contract, you can legally assign your rights of purchasing the property over to another buyer.

As far is your question about "what if you can't find another buyer".

1.) If you know how to run your numbers correctly, and contract to buy the right properties, finding buyers will be the last of your worries. But if you just go out there trying to get properties on contract for any price with any seller who's looking to sell their house, then yes investors will avoid you like the plague if you don't leave them any room for profit.

1.) I have several "out clauses" in my contracts that will allow me to back out of the deal if absolutely necessary

3.) I've never had to put down any earnest money, or put anything in escrow in any of the deals I've wholesaled. It's all about the verbiage of your contract and how you negotiate the deal.

Most agents/ brokers either don't understand wholesaling, or don't like it cause they think it cuts into their potential commissions. I'm truly blessed to not be one of those agents. I've been licensed going on 6 yrs now, and I wish I would have known the knowledge of wholesaling back then because I wouldn't have ever gotten the license. I don't use the license at all now, and being an agent never fit my lifestyle. Over the last couple of years I've controlled over $2.3M worth of real estate using creative strategies like wholesaling, lease options, and seller finance. Been traveling all over southeast Asia for the past 8+ months, and still have a functioning real estate business in the states.

I can't tell you how thankfulI am that I decided to keep going regardless of folks who said it won't, couldn't, shouldn't be done. Especially if those people aren't cranking out wholesale deals themselves month in and month out.

Send me a PM, and I'll walk you through the process step by step, as well as partner with you on deals if you have the work ethic, and just need to be shown the way.

 I was close to getting my license, then realized I would have to disclose the fact that I am an agent.  I wondered what the broker would think of that.  I would like to be walked through the process as well if you are willing.  I have excellent work ethic, I just need a little more specific information.  Your post is very helpful.  Thanks for your time.

Originally posted by @William Brown :

@Ryan Proffit @Edward Powers @others 

I've been receiving a ton of messages asking about the process, and I am happy to answer them all, check back to this forum post at the end of the day and I will have the entire process written out step by step. :)

 Thanks, I am looking forward to it.

@Edward Powers  @Ryan Proffit @Brandon Kay  @Ricky Fergerson @Johnny Le @Kala Miller

Hey all, I got halfway through writing this post and realized for the time spent, and the fact I want multiple people to see it down the road who come to me with the same general questions on how to get started, where to go, etc, it would be best for it to be someplace that can be easily referenced and found. I will continue writing it and you can expect a link to the blog post on our site tomorrow morning. I also wanted to take more time and go more in depth for you guys, rather than just an overview--so you can expect a complete in depth guide with books, companies, sites, everything I do, all out on the table for you to take back into your own business. What's the catch? Well, there is none. I'm really doing this because I was asking the exact same questions (seriously, go onto my profile, go back and look at my first couple posts!) not too long ago and no one lent a helping hand. "Go study up" Or "go read some guides and find a mentor" didn't help me, and I'm guessing that its not going to help you. I'm not making a buck off this, it is something I've wanted to do for a while, I want to do right, and I want it to be completely free because I couldn't even afford new shoes when I was getting started. 

Link to the blog post coming soon and I hope it will be beneficial/give you guys a solid place to start! I love the wholesaling business model, am a huge proponent of it (as you can probably tell), and like to stick up for people getting started in it that are newbies and are being bullied by the big bad agents and brokers on here. ;)

No prob @Ryan Proffit . Yes the "disclosure" is definitely apart of wearing the double hat of investor/agent. Even my wife has to technically disclose that her husband is an agent while doing deals. Its all worth it at the end of the day when you're willing to do what it takes. This business is simple and only requires 2 perquisites: heart and consistency. Hard to find a "freedom ticket" like it that allows you to quickly go from broke with zero experience to racking in five figure checks from anywhere in the world. That's what makes me so passionate to share the knowledge with others... 

Originally posted by @Tracy Ellison - Bey :

No prob @Ryan Proffit. Yes the "disclosure" is definitely apart of wearing the double hat of investor/agent. Even my wife has to technically disclose that her husband is an agent while doing deals. Its all worth it at the end of the day when you're willing to do what it takes. This business is simple and only requires 2 perquisites: heart and consistency. Hard to find a "freedom ticket" like it that allows you to quickly go from broke with zero experience to racking in five figure checks from anywhere in the world. That's what makes me so passionate to share the knowledge with others... 

 Sir, I am going to send you direct message soon, it's been good talking with you.

@William Brown i appreciate the love your showing us man. With anything comes times and effort to just get your foot in the door. Your willingness to share information with us speaks to the fact there are always people willing to lend a helping  hand and and are just genuinely real. Thanks for sharing and look forward to continue working with you !  

@Ryan Proffit @Edward Powers @Ricky Fergerson

You guys thought I gave up or forgot--no way! We've been slammed building our systems up assigning the properties we put under contract and this has been a project I've been working on a little more. Let me know what you think! I hope it provides value or solves some problem you are facing right now in your own wholesale business. Going to be branching out to social media platforms soon to answer questions and share tips and our mistakes/lessons learned everyday!

Here ya go! 

Link removed; Self promotional in addition to McAffee warning to avoid. 

Originally posted by @William Brown :

@Ryan Proffit @Edward Powers @Ricky Fergerson

You guys thought I gave up or forgot--no way! We've been slammed building our systems up assigning the properties we put under contract and this has been a project I've been working on a little more. Let me know what you think! I hope it provides value or solves some problem you are facing right now in your own wholesale business. Going to be branching out to social media platforms soon to answer questions and share tips and our mistakes/lessons learned everyday!

Here ya go! 

 I wondered! Solid gold brother.  I may have a few small questions but you told me pretty much everything I needed to know.  Thanks a million.

@Brandon Johnson ask and you shall receive.

I know when I started on this path a year and a half ago I would have KILLED for someone to sit down and explain wholesaling from start to finish, but I couldn't find the time or the $20,000 I didn't have to pay a coach. I've been active on Biggerpockets and some other platforms sticking up for wholesalers for quite some time now and have been bombarded with questions and people wanting to have the entire process explained--which is great! So I decided to make it a blog post so it can reach more people--free of charge! Now keep in mind I am a at best mediocre writer, and I dropped out of college for a reason. This post will be difficult for me to write out because I'll have some PTSD of some of the 10+ page papers I had to write but I'm passionate about wholesaling and will put my thoughts to paper.

Here is the shortened version of the entire wholesaling process promised. Of course, there are exceptions to the rules below and every situation will look different at every turn. As long as you stay within the guardrails of this general strategy and consult proper legal and professional advice along the way you will be fine--Again with my post, and I may get flak for saying this, but a lot of people are actually hurting you more than helping by saying that you need to have everything figured out before you get started. Do you think they did--heck no! And further, I guarantee you anyone that tells you that you need to have everything figured out has regrets about not starting investing in their own life earlier.

The multi millionaires that are actually out here crushing it aren't wasting time telling people how NOT to do things--think of how they got started! Its a mindset thing. Figure it out as you go, stay within the legal guardrails so you don't end up in jail, and work your *** off until your goals are materialized. Don't look for the easy way to do things. I'm in love with the business model and all aspects of it.

Now-- onto the meat and potatoes!

I've broken this down into 2 phases, Acquisition and Disposition. And in each I have listed multiple steps, places to go, and especially things NOT to do. Let's get into it.

Acquisition

Finding the deal. Every real estate investment deal starts with the opportunity. I'm not going to preach the same thing every other guru will here. I'm here to tell you and give you info that the minority of real estate investors are doing, not the majority. What you will hear from most people is to market with the following strategies. Bandit Signs, Craigslist ads, Driving for dollars, Cold calling, searching on the MLS, and direct mail. Within these methods 99% of wholesalers live. That is all they know. But guess what--everyone else knows these as well. I probably won't get into them in this post or it would be 100 pages long. Instead, let me introduce you to ringless voicemails. If you don't know what these are yet, you probably are still struggling to find that first deal. Let me be clear--those methods above DO WORK...if you are satisfied with a) either spending 10-15k a month on marketing right away or b) doing 1 -2 deals a month. let me be clearer-- I'm not selling you anything. I don't work for any marketing company, I'm strictly a wholesaler (as this site will tell you). And beyond that, once you utilize RVMS and turn them up you won't have time for any of your other "side hustles". Wholesaling will demand your time and give you fantastic returns on it. I'm not going to post what company I use here because the purpose of this isn't advertising--it's to share knowledge and tricks.

Now what ringless voicemails do is slip in a pre-recorded message from you into a sellers cell phone without ringing their phone. Yes, this is completely legal and is actually much less intrusive and annoying than almost all other marketing methods. No one likes getting 17 yellow letters a week when they inherit a property, and I know this because I see them all on the counters of the houses I walk in when I'm on appointments.

I may make another post solely about ringless voicemails, but that's for another time. Remember that will prospecting it is simply a numbers game. You will hear that over and over again but if you are reading this and you have 57 properties that you drove by and every week attempt to get in touch with the owner on, I've got some bad news for you----you're not going to get a deal. Whatever your marketing strategy is right now, 10x it, 10x it again, then 10x it one more time. Then, and only then will you start to see significant results. Put 10x more bandit signs out. Send 10x more mailers. Make 10x more calls--you get it.

Now I need to be very clear here. While there is no one rule for success in this business, there are definitely multiple rules of failure. One of them is to grow too fast without having the systems in place to keep up with that growth. So if you 1000x your marketing, you need to have really solid systems in place. Set up a CallRail account to take, track and manage inbound calls from your marketing efforts. DITCH GOOGLE VOICE! CallRail is like 30 bucks a month. Then, learn the ins and outs of Podio-- an online CRM. Be diligent and use every single thing they provide, then when you grow out of that get InvestorFuse on podio and use that for your team. You cannot scale your wholesaling business without these.

In our business, Acquisitions end as soon as we have the purchase and sales contract signed with the seller. As soon as it is signed, that property is now in the Dispositions phase.

Dispositions

If acquisitions is the art of find discounted properties, dispositions is the art of selling them. Now, because I am a wholesaler and it's highly likely that if you are reading this you are too, I will primarily be talking about the exit strategy of assigning the contract to and end buyer. However, if you found your way here just looking to learn more, there are many "exits" you can take once you have a property under contract at below market value like fixing and flipping, fixing and holding, or just leaving them as is and adding them to your portfolio, among others.

For a wholesaler, this is what the process looks like and what 99% of questions people have. Here they are in clearly defined steps:

  1. Sign Purchase and Sales agreement with seller at a below market price. I recommend a 30 day closing, 21 day inspection period and a $100-$1000 earnest money deposit. Don't be the guy that puts down $1 as EMD. It's disrespectful. Don't be that guy.
  2. Send the Purchase and Sales agreement (PSA) to your attorney or title company. Send them a check for the earnest money to hold in escrow.
  3. Package all the information that an end buyer would need about your property up into a little presentation and tie a bow on it. This should include:
    1. Pictures of every square inch of the property (I recommend uploading them to dropbox and sharing the link) you should have 50-70 pics.
    2. Accurate and updated comps of the property and an ARV (after repair value). If you don't know how to pull comps, find a way to sit down with an agent and add value to them so they will give you the time of day and access to them. DONT BE A PEST!
    3. An ~ESTIMATED repair cost. If you have no idea read books and ask contractors. On the flip side--don't tell them to the dollar what it will cost. Give a slight overestimate, take notes on what needs to be replaced and make sure to leave enough meat on the bone for them.
    4. A FAIR asking price! You have seen this a 1000 times before, but the 70% rule is a good estimator. You should be asking your investors at the price of ARV * 70% - repairs. That means you need to get it at ARV * .70 - repairs - YOUR fee. Sometimes you'll find deals you will make 30k on. Sometimes you will find deals you'll make 5k on. We've done both. If you ask too much, and gain that reputation, the market will tell you very bluntly and you will be associated with all the other wholesalers that are pushing properties with very little margin. This comes down to knowing your numbers, knowing what properties are selling for in the area, and having a list of actual buyers.
  4. NOW--blast this package out to your buyers list. You all know how to build a buyers list, just do 10x whatever is recommended and you will find some legitimate buyers. Post 10x more craigslist adds, post marketplace ads on biggerpockets, go to REIAS and collect business cards and look for the real players.
    1. To blast, I recommend putting in all the above information into Mailchimp (an email blast and marketing software) then import your cash buyers list to mailchimp as well. As you get more, add them directly into here. Send the blast, know your numbers and there should be no problems. I recommend a list of 100+ to start with unless you have a screaming deal, then probably 50+ is fine. Don't be like me who had to turn off aquisitions for 3 weeks as we sought day and night to find buyers. If it's a deal, they will come. If it's not a deal, you will learn the hard way.
  5. Finally, we require $5,000 non-refundable EMD from our end buyers (who we will assign the contract to) for a couple reasons. #1, it requires them to put some of their own skin in the game and if they back out of the contract you've got 5k to pay off your $100-$1000 EMD to the seller, or work with them to extend the contract so you can find another buyer. SECONDLY, and definitely the most important reason why, is because this 5k acts as a great filter. Too many people in this world just want to suck value. When you've got a really good deal, you will have a lot of other wantrepreneur "wholesalers" trying to act like your end buyer. The easiest way to get them to either shut up or act is to have them put down $5000 of their own money to lock them into purchasing the contract. Unless you've got an INCREDIBLE buyers network, guys, please find your own deals. Unless you have a track record of co-wholesaling success, please please please stop trying to act like the end buyer, putting $300 down and then trying to resell it for more. There is no faster way to drag your name through the dirt.
  6. We are almost there. Once you have had your end buyer put down the 5k EMD (deposited as a cashiers check or wire to your title company or settlement attorney, NOT YOU!) on the property, you ratify the contract with them (you both sign it) and then you send the assignment agreement to your attorney so they can pull title. I don't want to get into what pulling title is here, you can do a quick google search and probably get a much clearer answer. They will pull title to make sure their are no liens or judgements on the property, and will schedule a closing time. Then you pick up your check
  7. I will make another post on this back end process, including all the hurdles and mistakes we have made so far. We have learned a TON and have had many deals nearly completely derailed. Check back soon for a new post--I'm hoping to start posting more and even branch out to more social media platforms to share tips and tricks with you guys everyday.

See you out there!!

Will