Wholesaling

19 Replies

I am just getting back into real estate. I am interested in wholesaling to build some capital. Can anyone tell me how I get started? I understand the concept but I have questions about how I find the investors for the property and better yet how do I find these properties to put under contract? 

Thanks!

Hi @Angela Sullivan

What type of property are you interested in wholesaling? I buy and sell a ton of vacant land all over California as a wholesaler. I only buy properties that I can buy with CASH and sell immediately for 2-3 times more. GREAT way to build up capital. And since I paid cash, I can take my time and market properly to sell for even MORE profit. 

Yes, the key is targeting the right area & reaching the motivated sellers. Not hard, not crazy. Can be done on the weekend.

Happy to help!

Jill

Keep in mind that you don't have to always sell the house for cash.  Here's another example of a deal I did:

Just 9 days ago, I got a call from a lady who inherited a property.She was ready to just give it back to the bank because the property needed repairs and she had two sales fall through.She was frustrated and at her wits end!Did I mention that she lives 4 hours away from the property!

I explained that I was not interested in buying the house but I had several ways I could help get it sold quickly.Because I’m not a real estate agent ( and would not take a license if they were giving them away) I needed to get a contract to buy the house to be able to sell it and still make a profit.The contract gave me an equitable interest in the property.It also stated that my plan was to resell the house within 7 days and if I couldn’t I would cancel the contract.

How much money did I put up to get the option?Not a penny! Zero!Zip! Nada!

My option price was $53,500 which was the underlying loan balance.There are only 15 years left on the mortgage.The house is worth $120,000 fixed up.It needs about $7,000 in repairs to be in top-top shape.This is a two story house.It’s a 4 bedroom + office, 2 bath, 2 car oversized garage house on about 1 acre.It also includes a separate 2000sf metal building with an office.It even has a view of a lake from the 2nd floor.

The seller and I agreed that ideally I’d find a cash buyer so the underlying loan would be paid off.She didn’t want to deal with making payments any more.So I arranged for some private lenders to finance the purchase.

But I also explained to her that we’d get a better sales price if we offered seller financing.The seller agreed that for the right buyer with a good down payment, it would be ok to sell with seller financing that wraps the underlying loan.

I ran ads on craigslist that I was having a 1 day open house and the property would be sold to the HIGHEST BIDDER.I also sent out an email to everyone on my buyers list to let them know about the open house.

The offers started coming in right away.I got 7 offers for the property.

The best offer was for $66,000 with $12,500 down.

This is an owner occupant who is thrilled to get the opportunity to buy a house without getting bank financing.

The attorney charged $500 to close which left a $12,000 profit on a house I did now own and did not have any money invested in.

That’s how you make money without risks!

Oh, and did I mention that there will be a nice CASH FLOW every month between the difference in the monthly payment I collect and the monthly payment I make to the underlying lender.

What’s the worst that can happen?The buyer fixes up the house, stops paying me, then I get to sell the house AGAIN for even more.

If you think these kinds of deals don’t exist in your town, think again!Do people die in your town?Sure they do.And I assure you that the last thing the heirs want is to deal with a property they don’t want… especially a house that is far away.

Other things that cause sellers to be motivated – they lose jobs, get sick, get divorced, legal issues, outgrow the house, etc…

Does any of that happen in your town?You bet it does?That’s why I can say these kinds of deals are all around you!

Some of the best deals are when the house just needs a lot of repairs.But guess what, you won’t find many of these in the “nice” neighborhoods.That means that you’ll have to get out of your comfort zone and drive around neighborhoods on the other side of town or in areas where you would not normally go if you want to find opportunity.

Like I said before, you can’t be successful at a real estate business if you’re just sitting at home in front of the TV or the computer.You need to get out there and drive neighborhoods.Knock on doors.Talk to people.You need to learn to do marketing which will get a steady flow of leads coming in to you too.You need to “get the word out” that you’re looking for motivated sellers.The more you do, the more deals you’ll do!

This really can be easy, if you’re willing to devote the time to learn and implement what you learn at CashFlowDepot.com

To Your Success,

Jackie Lange

And here's another example of a wholesale flip WRAP deal that my daughter did:

A few years ago, my then 27 year old daughter closed on a deal and made a total of $16,833

She didn’t have a penny in the deal and she did not go to the bank to get financing.
No credit report was every asked for or presented.

Here’s how she did it . . . and HOW YOU CAN TOO:

She negotiated to buy a run down property from the owner for $97,000 with ZERO interest and $600 per month payments. It is worth about $175,000 fixed up and needed about $10,000 in repairs.

The advantage in ZERO interest is that every time you make a payment the principal balance is reduced by that amount so you can get the house paid off quickly.

My daughter actually made 3 offers to the seller and asked her to pick the one she liked best.The seller picked the highest price offer even though it had zero interest.

I tried to talk my daughter in to keeping the property as a rental or fixing it up and selling it to a retail buyer, but the only kind of real estate deals she has done are wholesale flips so she just wanted to do a quick flip.

If she just wholesaled the property, she could have made $8,000 to $10,000 and got paid one time.

But to give her a taste of what cash flow is like, I finally encourage her to sell the house with seller financing to a rehabber for $106,500.We put a balloon on the note so she’d get payday #2 in about 6 months.

She got $6500 at closing.Remember, she didn’t have a penny in the deal.

Plus she got 6 months of$250 per month cash flow

Then the buyer could not pay us off in 6 months so we offered to extend the loan for 2 more months for an additional $1,000

Finally the buyer closed with their retail buyer and my daughter got another check for about $8700

So, how did she do it?

Well, there was a little help negotiating the deals from Mom.

These kinds of deals are all around you.


If my 27 year old daughter can do this…YOU CAN DO THIS!

Best of Success… and Freedom

Jackie Lange

P.S.Could my daughter’s deal be better?YOU BET!

We could have substituted the collateral.
We could have kept the property as a rental.
We could have negotiated a discount on the seller’s note before payoff.

But, if we made the deal too complicated, my daughter would not feel like she can go out there and do these deals all by herself.

So sometimes it’s better to give up a little profit to help a young person gain a lot of confidence.

All good lessons!

And...

never overlook the opportunity to get an option on a package deal of properties.  I did my first package deal in 1996.  It was 64 mobile homes which I got for $400 each but I only put up $2000 to control all 64 mobile homes before I wholesaled them for $1500 to $8500 during a 2 day Highest Bidder Sale.  

I've done many other package deals where I got 5, 10, 20 as many as 200 wholesale properties from one owner.  

Anytime a landlord wants to wholesale a property, always ALWAYS ask if she/he has anything else they'd like to sell fast.  A tired landlord will usually have 4-20 properties you can wholesale! ( I have a whole system for selling all of them quickly -- it is called a Magic Bus). 

Think bigger...

Don't limit yourself to flipping old run down single family houses.  You can sell just about anything that you can get an option on below market then sell for more money. 

I've sold RVs, multi-million dollar houses, huge ranches, multi-family properties.

Let me simplify this for you.  Use an option contract to give you the option but not the obligation to buy the property.   Then market it, if the deal is good, then buyers will find you. 

Hey Angela, I too am just starting out as an investor and looking to wholesale properties to start my journey. From what I've read, if a deal is truly a deal, you will not have a problem finding buyers. The toughest part is finding that deal. Good luck in your journey!

Originally posted by @Josh Caldwell :

Let me simplify this for you.  Use an option contract to give you the option but not the obligation to buy the property.   Then market it, if the deal is good, then buyers will find you. 

Thank you Josh. Where can I find an option contract? Or is this a document I create on my own?

Originally posted by @Kevin Rodriues :

Hey Angela, I too am just starting out as an investor and looking to wholesale properties to start my journey. From what I've read, if a deal is truly a deal, you will not have a problem finding buyers. The toughest part is finding that deal. Good luck in your journey!

Hi there Kevin. I agree... finding a deal is the toughest part. We can do this though! I wish you all the best!  

An Option contract is simply a purchase contract with a contingency clause that states that something else has to happen before you will close.

For wholesale flips, your contingency is usually that your associate has to inspect and approve the property within 15 days.

It could state that you have to find a staisfactory buyer during a 2 day Highest Bidder Sale or that you need to get financing  (not a good idea for any deal!!!), or that you have to be able to sell for 10-20% more than your contract price, or that you have to secure a tenant before you will close.  

An option can be for a few days, a few weeks or many years.  Either way, you control the property when you have an option.

Sometimes you have to push it to the limit to discover what you do. Challenge yourself! Pushing the limit is a good way to describe The Ranch deal. This story is about an 18,000 acre ranch, DEA agents, new marketing strategies, rattle snakes, small planes, cat litter, big profits, and a REALLY unique adventure


Craziest Option Deal.. The Ranch

I’ve done a lot of Option deals. Most were just ordinary deals. But a few were kind of crazy so I’m sharing some of my craziest Option deals to hopefully (1) inspire you to give Options a try, (2) show you that anything is possible if you just set your mind to it.

Sometimes you have to push it to the limit to discover what you do. Challenge yourself!

With an Option, you can push the limits without taking on any risks… or at least minimize your risks with a properly constructed Option Contract. Your contingent contract spells out the terms and conditions under which you will actually close. But it also has provisions for if you do not close and the worst that can happen is you lose your option consideration. That’s why you want your option consideration to be as low as possible.

Pushing the limit is a good way to describe The Ranch deal.

CB Poynor called to see if I could help sell his 18,000 acre ranch in south Texas, near the Mexico border. This is outlaw country. If you don’t want to be found, this is a good place to go.

There was a 2400sf house, a bunk house with 10 rooms, an air strip and lots of rattle snakes in this area. He owes $365,000 and was behind on his payments. He had just received his notice of default. In Texas, the property is sold on the court house steps 21 days after the Notice of Default.

I did not have much time.


I got an Option contract with $10 consideration and no guarantees that I could do anything on such short notice. If I sold it, we agreed to split the profit 50/50 after all closing costs. I also got an authorization signed so I could contact his mortgage company to verify the pay off and see if we could get more time.

Comps were few and far between for a ranch this size in that area. The best I could figure it was worth about $1,200,000.

I sent out press releases about the property and started getting calls within a week. One guy wanted to build a resort. Ranchers were interested too though I don’t know why because it takes about an acre of land to raise a cow in this dry desert area.

Simultaneously to doing the marketing, I contacted a title company in the county where the property was so I could get a title search to determine if there were any other liens. The title company told me it would be 2 weeks before they could get the title search finished.

I didn’t have two weeks. So I flew from Dallas to the airport closest to the ranch then rented a car to drive 4 hours to the county seat to do my own title search. When I got there, it was noon. They were locking the doors and closing for lunch. So I went to the Dairy Queen, the only restaurant in town, to wait an hour until they opened again. The title search did not reveal any other liens.

While I was at the Records Office at the county court house, I noticed the county Extension office next door. These folks know about every square inch of property in the county. So I asked what they could tell me about CBs ranch. They said CB should be selling the Humate and Bentonite on the property.. that’s where the value is.

What’s that I asked?

Bentonite is what kitty cat little is made of. It has other uses too but that is the primary use. The ranch had an estimated 3 million tons of Bentonite

Humate is used to enrich soil and also used when drilling for oil. It is like a graphite. The ranch had an estimated 4 million tons of Humate.

The extension office said CB had a geological report about it. He never even told me about it. When I got back to Dallas, I met CB to pick up the detailed report about the minerals.

I instantly switched gears to selling the minerals instead of just the ranch.

An internet search revealed several companies who buy these minerals. I found a company in Chicago who buys both. They seemed to be the most interested. They are the leader in the industry and had been in business since the early 1920’s.

I sent a copy of the 120 page geological report to them Next Day delivery. They were very interested but wanted to send their geologist to the ranch to get their own samples and see the property.

We agreed to meet in El Paso Texas 2 days later. It is an 8 hour drive from El Paso to the ranch so I found a pilot who could fly us to the ranch instead. We could use the landing strip on the property.

The pilot showed up in his Jaguar to pick us up. He is a geologist too and has several silver mines in the area.

We drove to the hanger where his plane was. He pulled the 4 place Maul out of the hanger like it was toy. It seemed way too small to hold 4 adults (the pilot’s girlfriend was at the hanger). The pilot walked around the plane to put duct tape over little holes. He said he usually lands where there is no landing strip so rocks hit the plane and cause the holes which will RIP OPEN the plane if he does not cover them with duct tape.

Now, I’m getting nervous about getting in this tiny plane with duct tape holding it together!

What in the world did I get myself in to!

But I decided to suck it up and go for it. I just kept thinking about the profit potential.

We had to fly over a mountain range to get to the ranch. The plane would occasionally just drop when we hit an air pocket in the mountains. I had white knuckles and a knot in my stomach. The geologist from Chicago threw up.

About 15 minutes from the ranch, another plane came up next to us and called our pilot on the radio asking what we were doing. They did not seem to be satisfied with the answer. This was the DEA and I think they suspected us to be drug dealers. Oh great! They told us to stay in the plane when we landed because they would be landing right behind us and wanted to inspect the plane.

Of course, we got the all clear.

CB, the owner, met us at the ranch so we’d have his pick-up truck to get around and he could answer any of their questions about the ranch. He also brought drinks and sandwiches in a cooler.

The geologist pilot and the geologist from Chicago were like two kids in a candy store. They spent 6 hours filling little buckets with samples and talking about minerals, silver and gold.

I’ll spare the details about the rattle snakes in the lignite pits on the property and lots of other places.

After a very long and very HOT day, we all got back in the plane to fly to El Paso. With the cooler evening air, we did not have any sudden drops on the way back. We got in to El Paso just before sundown. After putting the plane in the hanger we all went to a great Mexican food place for dinner and margaritas. I really needed those margaritas after this experience.

A few days later the company in Chicago called to negotiate a deal. I signed a confidentiality agreement with them so I cannot disclose the details or sales price.  It was a six figure ++ payday!

Needless to say, this “pushing it to the limit” experience was all worth it in the end.

Thankfully, most option deals are not like this. But it does show you that Options can be used to “control” just about anything until you find a buyer.

Originally posted by @Josh Caldwell :

@Angela Sullivan

  it has be state specific, so you can either get one from someone in your state but more likely you will have to talk to a local real estate attorney to get an option contract that is legal in your state. 

 Perfect Josh! I do have am agent. I will reach out to him. Thanks again!

Originally posted by @Jackie Lange :

Sometimes you have to push it to the limit to discover what you do. Challenge yourself! Pushing the limit is a good way to describe The Ranch deal. This story is about an 18,000 acre ranch, DEA agents, new marketing strategies, rattle snakes, small planes, cat litter, big profits, and a REALLY unique adventure


Craziest Option Deal.. The Ranch

I’ve done a lot of Option deals. Most were just ordinary deals. But a few were kind of crazy so I’m sharing some of my craziest Option deals to hopefully (1) inspire you to give Options a try, (2) show you that anything is possible if you just set your mind to it.

Sometimes you have to push it to the limit to discover what you do. Challenge yourself!

With an Option, you can push the limits without taking on any risks… or at least minimize your risks with a properly constructed Option Contract. Your contingent contract spells out the terms and conditions under which you will actually close. But it also has provisions for if you do not close and the worst that can happen is you lose your option consideration. That’s why you want your option consideration to be as low as possible.

Pushing the limit is a good way to describe The Ranch deal.

CB Poynor called to see if I could help sell his 18,000 acre ranch in south Texas, near the Mexico border. This is outlaw country. If you don’t want to be found, this is a good place to go.

There was a 2400sf house, a bunk house with 10 rooms, an air strip and lots of rattle snakes in this area. He owes $365,000 and was behind on his payments. He had just received his notice of default. In Texas, the property is sold on the court house steps 21 days after the Notice of Default.

I did not have much time.


I got an Option contract with $10 consideration and no guarantees that I could do anything on such short notice. If I sold it, we agreed to split the profit 50/50 after all closing costs. I also got an authorization signed so I could contact his mortgage company to verify the pay off and see if we could get more time.

Comps were few and far between for a ranch this size in that area. The best I could figure it was worth about $1,200,000.

I sent out press releases about the property and started getting calls within a week. One guy wanted to build a resort. Ranchers were interested too though I don’t know why because it takes about an acre of land to raise a cow in this dry desert area.

Simultaneously to doing the marketing, I contacted a title company in the county where the property was so I could get a title search to determine if there were any other liens. The title company told me it would be 2 weeks before they could get the title search finished.

I didn’t have two weeks. So I flew from Dallas to the airport closest to the ranch then rented a car to drive 4 hours to the county seat to do my own title search. When I got there, it was noon. They were locking the doors and closing for lunch. So I went to the Dairy Queen, the only restaurant in town, to wait an hour until they opened again. The title search did not reveal any other liens.

While I was at the Records Office at the county court house, I noticed the county Extension office next door. These folks know about every square inch of property in the county. So I asked what they could tell me about CBs ranch. They said CB should be selling the Humate and Bentonite on the property.. that’s where the value is.

What’s that I asked?

Bentonite is what kitty cat little is made of. It has other uses too but that is the primary use. The ranch had an estimated 3 million tons of Bentonite

Humate is used to enrich soil and also used when drilling for oil. It is like a graphite. The ranch had an estimated 4 million tons of Humate.

The extension office said CB had a geological report about it. He never even told me about it. When I got back to Dallas, I met CB to pick up the detailed report about the minerals.

I instantly switched gears to selling the minerals instead of just the ranch.

An internet search revealed several companies who buy these minerals. I found a company in Chicago who buys both. They seemed to be the most interested. They are the leader in the industry and had been in business since the early 1920’s.

I sent a copy of the 120 page geological report to them Next Day delivery. They were very interested but wanted to send their geologist to the ranch to get their own samples and see the property.

We agreed to meet in El Paso Texas 2 days later. It is an 8 hour drive from El Paso to the ranch so I found a pilot who could fly us to the ranch instead. We could use the landing strip on the property.

The pilot showed up in his Jaguar to pick us up. He is a geologist too and has several silver mines in the area.

We drove to the hanger where his plane was. He pulled the 4 place Maul out of the hanger like it was toy. It seemed way too small to hold 4 adults (the pilot’s girlfriend was at the hanger). The pilot walked around the plane to put duct tape over little holes. He said he usually lands where there is no landing strip so rocks hit the plane and cause the holes which will RIP OPEN the plane if he does not cover them with duct tape.

Now, I’m getting nervous about getting in this tiny plane with duct tape holding it together!

What in the world did I get myself in to!

But I decided to suck it up and go for it. I just kept thinking about the profit potential.

We had to fly over a mountain range to get to the ranch. The plane would occasionally just drop when we hit an air pocket in the mountains. I had white knuckles and a knot in my stomach. The geologist from Chicago threw up.

About 15 minutes from the ranch, another plane came up next to us and called our pilot on the radio asking what we were doing. They did not seem to be satisfied with the answer. This was the DEA and I think they suspected us to be drug dealers. Oh great! They told us to stay in the plane when we landed because they would be landing right behind us and wanted to inspect the plane.

Of course, we got the all clear.

CB, the owner, met us at the ranch so we’d have his pick-up truck to get around and he could answer any of their questions about the ranch. He also brought drinks and sandwiches in a cooler.

The geologist pilot and the geologist from Chicago were like two kids in a candy store. They spent 6 hours filling little buckets with samples and talking about minerals, silver and gold.

I’ll spare the details about the rattle snakes in the lignite pits on the property and lots of other places.

After a very long and very HOT day, we all got back in the plane to fly to El Paso. With the cooler evening air, we did not have any sudden drops on the way back. We got in to El Paso just before sundown. After putting the plane in the hanger we all went to a great Mexican food place for dinner and margaritas. I really needed those margaritas after this experience.

A few days later the company in Chicago called to negotiate a deal. I signed a confidentiality agreement with them so I cannot disclose the details or sales price.  It was a six figure ++ payday!

Needless to say, this “pushing it to the limit” experience was all worth it in the end.

Thankfully, most option deals are not like this. But it does show you that Options can be used to “control” just about anything until you find a buyer.

 This is an awesome story. It's been somewhat overwhelming for me as a new investor but I am feeling a breath of fresh air now. Very helpful. Thanks! 

An option contract is one way to do basically the same thing as wholesaling, but typically in wholesaling you are executing a Purchase Agreement with the seller and an Assignment Agreement with the cash buyer.  Personally, when someone calls me over to buy their house, I do NOT want to try to explain that I want an OPTION on their house.  They'll say - gee thanks, but I have several other investors coming over and perhaps they can actually buy the house.  Nope, I  BUY the house with a purchase agreement.

Next, don't believe the old saying about "Just get a deal and the cash buyers will find you."  I sincerely believe people who say that are not wholesalers and have probably never tried to execute both sides of a wholesale deal.  You need to do some homework and reach out to REAL CASH BUYERS so you can quickly engage with them the moment you get a deal under contract.  Without cash buyers lined up, it's likely you will simply lose the deal after all that hard work to find it.  Other options, when you don't have a lot of buyers on your list, are sites such as MyHousesDeals.com where you can post your deal.  

If you send me a colleague request here in BiggerPockets and include your email address, I'll send you our 3-video Wholesale Accelerator course (free) complete with sample purchase and assignment agreements in Word docs.  (Only education, no marketing B.S., open to anyone in BP who sends me a colleague req. w/ email address).  I like to give my BP friends the knowledge that other people try to sell you.  ;-)

@ Jackie Lange, in your first example, u mention you got $12000 and get the difference in payments from the wrap, what did the seller get? And did you have to put the house in a trust to avoid the due on sale clause or since the contract was assignable, you did not have to worry about the due on sale clause?

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