Virtual Wholesaling: How to Wholesale Properties in Any Market From Afar

by | BiggerPockets.com

If you’re you seeing these trends occurring in your market, you need this guide to virtual wholesaling:

  • 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

If you are witnessing these trends, then it is strongly evident that you are in a seller’s market, and deal flow will begin to decrease. This will quickly increase your marketing budget and decrease your ROI. So the question then is how to strategically prepare or pivot for such instances. This quick beginner’s guide to virtual wholesaling should help you out tremendously.

The reason why I decided to focus on this topic is because many markets are seller’s markets or soon will be. I am definitely in a seller’s market being in Phoenix. Just two years ago, we were seeing response rates on direct mail anywhere from 1-2%. Lately, it has dropped considerably. Those that I speak with are happy to receive a .5% response rate. I also remember that it took around 22 leads to secure a deal, and now it’s closer to 38 leads. This will quickly increase cost and decrease returns. So what are many wholesalers doing, you ask? We are exploring other markets to secure deals. Real estate is cyclical, and you have to be able to pivot in order to stay relevant and secure good deals. This is done by virtual wholesaling.

Related: 7 Tasks Wholesalers Can Easily Outsource to Virtual Assistants

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What is Virtual Wholesaling?

Virtual wholesaling is the concept of traditional wholesaling, but you are in a different market. This strategy is normally not for the beginner, but it is not impossible. There are a lot of moving pieces you need to put together in order to successfully facilitate a transaction. I believe the key tools needed to be successful at virtual wholesaling are excellent conversational skills, great networking abilities, and finally the capability to put all documentation in order.

private-money-meeting

My Virtual Wholesaling Experience

I speak from experience; I am currently working another market, my hometown of Chicago. I am familiar with virtual wholesaling because I have done numerous deals in Chicago while sitting in my home in Phoenix. Yes, that is correct—from my home in Phoenix. Currently, as I am writing this article, I have one property set to close today in Phoenix and one set to close in Chicago, along with two others in Chicago under contract.

So how did this come about?

It occurred literally by accident. About a year ago, I was so elated with the success I was having in Phoenix, I began posting some of my success stories and testimonials on Facebook. Since a lot of my Facebook friends were from home, they begin asking if I could buy their houses. I didn’t think much of it because I was focused on the Phoenix market. However, a close friend of the family wanted out of a house she inherited, and as a courtesy, I begin to work on the project. I was a little timid at first because this was a close friend of the family (business and family normally don’t mix), I’ve never virtually wholesaled 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 put things together. How hard could it be, I thought. So I began building my virtual team.

Virtual Wholesaling Title Company

The title company I use in Phoenix is a national title company, so I knew I could use them. I contacted my escrow agent, and she connected with an agent in Chicago. Everything was going smooth; I had the property under contract. The title company was in place, but 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.

So this was my first road block. I remained positive and figured it was to be expected. I need to find an attorney.

Virtual Wholesaling Attorney

I spoke with the title agent in Chicago and he 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. This includes that in the Chicago, you have to have a water certificate pulled when closing. I thought that was strange, but after being enlightened, I knew what to look for. 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.

free-mentor

Related: 3 Ways to Find Comps When Determining ARV for Your Wholesaling Deal

Virtual Wholesaling Partners

Everything was in place, but the biggest piece missing was the buyer. I knew the deal was solid—it was a slam dunk with tons of equity. The house was in a great neighborhood, and the price was already solidified. I seriously had to find a buyer or everything I’d done would be in vain, and I would not be able to help this close friend.

Drawing on my experience with doing deals in Phoenix, I used the internet to get the deal out. I posted the property on Zillow and Craigslist. I joined the Chicago Facebook group of wholesalers and investors. I did everything to get this deal out to find a buyer. I did not find a buyer; I found someone better. I found a JV partner. We spoke, and he informed me he had a very solid buyer’s list and he would move the property. We agreed upon a 65%/35% split, with me securing 65%, and signed the JV agreement. We were in business.

I have to admit, the tenant made the transaction easier as well because the tenant was in place for this transaction. I did not have to have boots on the ground. However, since this transaction, I have found my boots-on-the-ground guy (my best friend). He was very interested in learning real estate, and we agreed that he would receive 12% 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.

Conclusion

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 .5% response rate in Phoenix. Virtual wholesaling is available to any wholesaler, but you have to build your team first. 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. I am very active in Chicago, not only doing virtual wholesaling but increasing my rental portfolio as well. I am currently exploring flipping in Chicago as well.

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.

About Author

Marcus Maloney

Marcus Maloney G+ is the Executive Officer of Equity Realty & Investments as well as 3rd Generation Management & Holding LLC, both are family owned and operated real estate investment firms. The firms' goal is to provide affordable solutions in real estate while providing exceptional opportunities for community redevelopment for the residents of Phoenix, Arizona and Chicago, Illinois. You can follow Marcus on Twitter

16 Comments

  1. Great article. In my research, I can’t seem to find a ton detail on how to actually wholesale. Do you have any suggestions on where to find motivated sellers from afar? Is there ever a point where you have to actually go to the city or can you do everything virtually? What mid west cities would you suggest is a good starting point? Thank you

    • Marcus Maloney

      Bailey,

      I did go to Chicago just to meet the Attorney face to face so we could get a feel for each other. However it was not needed. You can find leads at listsource.com, rebogateway, and experian. There are other places as well. You will need to know what you demographic is going to be before pulling list. St. Louis, Kansas City, Milwaukee these are all good cities. I suggest if you haven’t done a deal to start in you own backyard first. You can get more info about wholesaling at equityrealestateblog.com

  2. Paul Merriwether

    You wrote >> I posted the property on Zillow and Craigslist. <> Why marketing homes on social media that you don’t own or just have a contract on is 100% illegal<< It appears you fall in to this category.

    As an ex realtor in CA … as I read your article it sure appears to me you were acting as a real estate agent for hire. A client approached you to sell their property. You took on the task some what reluctant that suggested no license or authority to do so in another state.

    You might want to contact John Cochran The King of Systems at realestateu (dot) com for his upcoming webinar to make sure you're legal. I have no connection to him or his company. I'm only an interested party in real estate transactions and making sure if I were to do any wholesaling with an active license it's legal.

    Wishing you continued success.

    • Marcus Maloney

      Paul,

      Thank you for your input, as a wholesaler the contract was wrote as my company (which is registered with the state) and/or assignee as the buyer. I had equitable interest in the property and did not falsify my credentials as an active agent in that state. We legally marketed the contract for assignment and not the property. Which is completely legal and ethical. Again thank you I could see how someone (not implying you) would need clarity on facilitating a wholesale transaction.

  3. Randy Phillips on

    I’m amused how realtors or ex realtors think they are experts in re law. If you have a contract on a property with a small earnest deposit you have equitable interest. You have the legal right & can advertise that property on any medium and even hold a sign on the corner wearing a gorilla suit.
    Realtors take note… stick with what you do for your chump change and leave us investors alone.
    I have virtually wholesaled several properties so far and will definitely do more. For me it was a simple process, I advertised for bird dogs to find properties. I give them instructions what I’m looking for. I email my contracts and let the buyer use his Title company, the bird dogs will take photos and do the leg work, the last deal my bird dog and I made $3,000 each. It was a junk house with a bad roof that sat empty for many years, inside was completely destroyed by the rain. There was also another wholesaler involved that found it and he made 6K. seller got 6K and we split 6K. Buyer was a local rehab contractor and was happy to get it at 18K
    Of course we tried to get more, but the house was in such bad condition. Everybody walked away happy.

  4. Jessica T.

    Hey there,

    This was very helpful. I live in NYC, but was planning on wholesaling some properties outside of my area due to the high prices and the limited amount of personal capital I have to invest. However, you suggested starting in your own backyard, I’m sure for obvious reasons. What are some suggestions you have for people that live in a high priced area that want to start wholesaling?

    • Marcus Maloney

      Jessica,

      Great question, even with high priced areas the process is still the same. You may have to furnish more earnest money to lock down the deal but remember its all relative because the earnest money is never at risk unless you exceed you inspection period. I have put up no to very little earnest and I have put up 5,000 knowing that I will always receive back what I put.

      I did however learn a great lesson in the beginning. I put up $5000 EM on a 700k house and overlooked my inspection period time by a day and lost $5000. Again this was in the beginning my 2nd deal. I was crushed and almost gave up but through that lesson I learned to focus on my inspection period day. If it seems as if I will not make the deadline I will either get a signed extension from the seller or pull out the contract.

      Also in high market areas why not look a little further out this usually works.

  5. Vernon Miller on

    Great article!
    Love the idea of wholesaling in different areas that could be more productive.
    Really liked Randy Phillips advise , spot on!
    Like the rock band Lynyrd Skynyrd says ‘ don’t ask me no questions and I won’t tell you no lies’

    Equitable interest can be in many legal forms as a realestate investor.

    Again Great article..

  6. Randy Phillips on

    This may be of interest to wholesalers. I received a call and letters from the Ca realtors board demanding I bring in all the hud statements and copies of checks I received. He tells me they got reports of me selling real estate with out a real estate license.
    I explained the term, equitable interest to him, he acted like he never heard of it. I told him how I as an investor was operating legally and he had no jurisdiction over me. He then tells me to show him in the real estate book where it says I can wholesale re w no license. I was getting annoyed. He threatened me with a subpoena and a cease and desist order.
    I told him he would be liable for harassment against an investor acting legally.
    I wrote a complaint to the state board against this guy. I never heard back from any of them.
    Don’t allow realtors to intimidate you. Get out there and make some Money…
    Rando

  7. Fernando Marquez

    I live int he Kansas City area and have done 1 rehab job and 4 wholesale deals.
    I am very interested in wholesaling all over the country yet I really have no idea how to get started in that aspect.
    Can you point me in the right direction?

    thanks

    • Marcus Maloney

      Fernando,

      Virtual wholesaling is using the same techniques as in your home market. The key is to find someone in the market you want to work and generate an agreement with them to assist with acquisitions and possibly disposition. This person is essential when walking the property to get photos and to aide in building rapport with the seller. This person can also help with getting a physical contract signed if needed. Most of the contract signing can be done via technology. You really need to know the state laws, if you close with a title company or with an attorney that is the biggest thing you need to know.

      To find this person you can use BP, and craigslist. It is really good to make sure you coach your seller on their responsibilities and what you and your team will offer. Most people are concerned with their deal being stolen from them but if you truly are looking to do volume you will find the right person that is willing to work with you as long as they know deals will close.

      For disposition its best to work with a local wholesaler that has an extensive buyers list that will be able to move your contract.

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