steps to wholesaling properties?

7 Replies

trying to do my first Wholesale in Omaha Nebraska to buy more multifamily properties. I know of a distressed property I can get real cheap. I've taken pictures of about 5 different signs that say they buy houses any condition. I just don't know what the next steps are.

Often times the signs that you see are not truly buyers.  They are wholesalers looking for deals.  Still, it may be worthwhile to call the numbers and let them know what you have.  Perhaps you can partner on the deal and split the profits.  

To me, the first and most important step is for you to get that house under control. And, by that, I mean that you need to get it under contract with some sort of purchase contract - maybe with some sort of contingency to get out of the contract should you not be able to find a buyer.

I guess thats the trick to wholesaling. You don't want to market a deal to someone unless you have it under contract. Otherwise, they could just go straight to the seller and cut you out of the deal.

On the other hand, if you can find a decent buyer, they may be willing to commit to you that they will buy it for X and let you negotiate it in the hopes that you bring them more deals in the future.  I know that if someone brought me a really good deal - even if it wasn't under contract yet - I wouldn't try to steal it from them. I'd never get another one from them if I did that.  

But ultimately, you do risk some other wholesaler finding that house and getting the seller to sign their purchase contract. And then you'd be out of luck.  

So, to me, the first thing I'd do is get some sort of "control" of the house - either with some sort of option or purchase contract.....

@Keith Fowler

Hello sir!

I agree 100% with @Mike H. on this one.

You NEED that house under contract BEFORE you do ANYTHING.

It's best to negotiate as long of an "option period" or "review period" (or whatever they may call it in Nebraska) possible that will give you the 100% absolute right to back out of the contract for whatever reason you want. In your case, the only reason you will be backing out is if you cannot find a buyer to assign to. If the house is not listed and you're dealing directly with the seller, negotiating a longer-than-normal option period shouldn't be too big an issue.

The very next thing you need to do is obvious: find a buyer. Here are a couple tips:

1. Throw bandit signs - "Fixer Upper for Sale. Champion Forest. Price $100k. Worth $200k". Be sure to add your number at the bottom. Throw 10-20 of these signs near your property and wait for the calls to pour in. Please check the laws on bandit signs in your area. I don't want you to get in trouble for this in case it is illegal to throw sings in your market so please be careful.

2. Visit your local REI groups - you will find plenty of real investors here.

3. Post info about your house on all forms of social media - be as VAGUE as possible. I say this for many reasons. You don't want anyone going around you, talking to your seller, telling them that you're wholesaling your deal. It happens. 

4. Vet your "investors" - You need to speak with and meet EVERY investor you come to contact with. What are they about? Where does there money come from? How much experience do they have? This is very important. You don't want to wholesale your deal to another wholesaler. Don't waste your time building a "buyers list" full of non-buyers.

Those four things should get you started on marketing your property. Honestly though, you need to be looking for houses to contract, and buyers to sell to ALL the time. Once you build your buyers' list up, you really won't have to worry about that too much anymore.

Hope this all helps! Feel free to contact me if you have anymore questions! I'm here to help.

Thanks,

Van

Van Blackman, Real Estate Agent in Illinois (#475176182)
(713) 301-7630

I think it is good for agents and wholesalers to work together. I've had some good experiences and some not so good experiences dealing with wholesalers. The situation gets tense after the wholesaler markets properties that I already broker and they were not aware so their fee schedule is altered a bit.

@Van Blackman , your advice is really bad, and is exactly what has given Wholesaling such a black eye.

Negotiating a long review period is bush league. You either have someone that will be able to buy it or you do not. Don't lie to the seller in the hopes of making a few bucks. Be upfront with them in your intentions.

@Keith Fowler , if you have the cash to buy the property, then tell the sellers you are a cash buyer. Try to find someone else who wants to buy it if you don't want to own the property, but be prepared to close on it if you can't assign your contract. If you don't have the cash to buy the house, then do not say you are a cash buyer.

And tell the seller exactly what you're doing. Don't use phrases like "I have to get approval from my partner" if you do not have a partner. Your cash buyer is not your partner, unless you have a partnership agreement with them.

Just because you can get a house for cheap doesn't make it a good deal. How distressed is it? Do you know what it's worth now, how much it will cost to rehab it, and what it will be worth when it's fixed up? If not, that's what you should be concentrating on.

The biggest complaints I see about wholesalers is that they underestimate the repair costs and overestimate the ARV. Make sure you're spot on with both, and your wholesaling career will skyrocket.

Mindy Jensen, Real Estate Agent in CO (#FA100049656)

I mean, I feel bad now that I didn't say something sooner but this is the grey to black area that makes everyone in the industry look bad. The gurus that push reverse wholesaling, finding an investor first the deal second, and that seems attractive but is skirts legality at the end of the day you never want your business to do that. 

The numbers are the deal, you make your money on the buy, if the wholesaler doesn't have hard provable numbers for those factors then he probably isn't the wholesaler to go to. Even if you crunch your own numbers, which you should, knowing that your wholesaler is doing the same you can at least ask questions and force them to prove their numbers you shouldn't just discount their numbers entirely, use them to build your number and your data.

Here is the major factor, KNOW YOUR SOURCE, if you wouldn't trust them with your wallet don't trust their deals. If they have the credentials to back their claims and have done a lot of business then their experience should speak for itself, do your research!

Thanks @Mindy Jensen your are a wonderful experienced impartial voice here!

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