How to Wholesale Real Estate Step by Step

What is Wholesale Real Estate?

If you’ve just discovered this magic, you may be wondering to yourself “what is wholesale real estate”? It’s not a common phrase that you hear in the news or in general conversations. This article will explain what wholesaling houses means, and how to wholesale houses. 

If being a successful wholesaler is your goal, then rest tonight knowing that you’re not alone!  

Wholesale Real Estate is a specialized method for buying real estate. It involves marketing to find those sellers that are typically in a distressed situation. This means that emotion is motivating them to sell the house, instead of logic or opportunity. These sellers usually need to sell the house fast, and can’t afford to make any repairs. You may also hear other people in the business refer to the process of selling distressed properties. This could indicate that the property is in bad condition, and in need of repairs. 

Lead generation is the lifeline of any real estate wholesaling business. Once you become good at marketing and learning how to craft a message that will convert, you’ll have a career for life. We typically see some commonalities in the sellers that are selling their properties for pennies on the dollar. Some common scenarios are death [Probate], foreclosure, delinquent property taxes, and divorce.

The process of wholesaling real estate involves negotiating a price with the seller that leaves enough room to quickly flip the house for a cash profit. The real estate wholesaler doesn’t do any repairs to the property. Instead, they sell it to a landlord or a rehabber for cash. These are the people that will do the repairs and then have an exit strategy for selling or renting the house.

Step-by-Step Instructions

wholesaling real estate

I don’t know why people are confused these days about the correct order of wholesaling real estate. Oh wait. Yes I do.  People are lazy and want to do as little work as possible and still make big bank.  I get it.  I understand the theory.  There’s a better way to do things. Instead of being lazy, be productive and start outsourcing some of the things that will convert more sellers into leads. Let’s talk about what that might be.

Before I get on my soap box, let me make you aware that I know that there’s more than one way to skin a cat.  I hate that adage, but it’s true.  I know that there are people out there closing deals and making money by just throwing noodles against the wall and hoping that some stick.  Good for you. I hope you can sustain that method for many years to come.

This article is written specifically for real estate wholesalers. For the purpose of focusing on the SELLER side of things, we’ll stick to the process that you should use to get deals under contract. And they ARE in a particular order. If you have ever wanted to learn how to start wholesaling real estate, this blog post is for you. 

How to Do A Wholesale Real Estate Deal 

 

FIRST: The ability to generate quality seller leads is where it all starts. The goal of any marketing campaign is to attract motivated seller leads.  Motivation is what will drive the seller to sell the property at a price below market value. Without TRUE motivation from a seller, you’ll find yourself beating a dead horse. This will cause frustration to the newbie wholesaler, and may even drive you to give up.  Be sure that you’re targeting precisely the right people.

NEXT: Pre-Screen Sellers to determine motivation. Have a series of questions ready to ask your potential sellers. Listen for motivated seller trigger keywords. More often than not, the person responding to your marketing will not be the right person for your program. EVERY SELLER IS NOT A LEAD. 

Without an underlying REASON to sell the house, and a NEED for the money or to get rid of the house, then you’re not going to be able to get a deal of them. It just wont work. No matter how hard you try, and how much you squeeze. It just isn’t going to happen.If you want to shorten the pain of this inevitable problem that all new real estate investors will have, practice your listening skills. Ask the seller WHY they NEED to sell the house.  Listen for their answer. Its single-handedly the most important question that you can ask them, and it’s also the most important answer that you’ll receive. 

THEN: Do your Property Inspection. Make an appointment to go see the house in person.  Walk around the house and check for damage, needed repairs, deferred maintenance. These are the points that will need to be addressed when you’re making your offer to the seller.  if the house is in excellent condition, this probably isn’t your seller. Move on the next lead until you find the right seller. You’ll usually be dealing with distressed properties.

FOLLOWED BY: Make the seller an offer/negotiate. They may negotiate things you don’t want. Read this article to find out what to do when sellers want an earnest deposit.  Once you’ve collected the information that you need, and you’ve seen the house, you can make the seller an intelligent offer.  Make the seller an offer that won’t make you look like an asshole later.

real estate wholesaling contract

THEN (if necessary) : Follow Up.  If your seller doesn’t accept your purchase price offer the first time, then don’t consider them dead. Follow up with every seller that you have made an offer to. Create a strong follow-up funnel that will convert sellers months down the road without any additional marketing dollars being spent.

FINALLY: Secure your position in this transaction by getting the property under contract for the lowest purchase price possible. Use a simple, all-cash as-is purchase and sale agreement.  When you get to this point, it’s all downhill from here. You’ll have some of your first wholesale deals under your belt and can start to duplicate this process over and over again.

real estate wholesaling

 

Once You Have the property under contract, It’s Time to Find a Buyer

 

The process of wholesaling is basically getting a contract signed with a seller to buy their property for below market value. The wholesaler then assigns the contract (or assignment agreement) to a wholesale buyer for a fee. The fee is paid in cash. This investing strategy is the easiest and quickest way to make money in the real estate industry.

Real Estate investors keep a buyer list. This will contain people that pay cash for houses that rehab and retail as well as those that hold the properties as rental properties. Both types of buyers will gobble up your wholesale properties in a hot minute. It’s important to negotiate smart deals with your sellers. Then you can deliver smart deals to your buyers’ list. They will love you for that and will be repeat buyers. 

Can we talk?  Let’s go back to the opening statement of my article.  I said we were going to discuss the correct ORDER in which to do a deal.  Then I went on to mention that people are lazy and don’t want to work.  So take a guess as to which step in the above-mentioned process that people leave out?

If you guessed the Property Inspection, then DING DING DING! You’re correct! Make sure you take your home repair estimator on your inspections!

Now before you get your panties in a bunch (because I know you will), hear me out.  I ran some numbers on my calculator this morning, and based on the number of closed transactions that I’ve done since 1998 (about 700) and the number of leads that I would’ve had to talk to in order to get to that number, I’ve talked to about 38,000 sellers.  I’ve been through the real estate crash of 2008. I’ve watched it recover and change back to a seller’s market (like it is currently).

I LISTEN to what these sellers are saying to me. Listening is why we have 2 ears and 1 mouth.  So we can do less talking and more listening.  And there was a short period of time when the competition was light.  It was easy to get a deal under contract by slinging a noodle on the wall.

How to Explain Wholesaling to a Seller

When I first started in the wholesale real estate business, I was scared to death to tell the sellers that I was going to sell their house for a profit. I would go to every measure to hide the fact. When you’re wholesaling a house, there’s many factors that can reveal the fact that you’re selling the house to someone else.

Let’s review some of the fears that you may face if YOU’RE trying to hide the fact that you’re a wholesale real estate flipper

Real Estate WholesalingFirst, you have to ask the seller for a copy of the key, so you can put a lockbox on the house.  I’d tell them that I need to get my “partners” in the house. Sometimes I’d make them think that I was going to actually rehab the house, and that I needed to let my contractors come in and give me estimates before closing.

When it’s time to start marketing the property, you have to strategically put the signs out where the seller won’t see them.  Sometimes the seller lives close to the property, which will kill your sign campaign altogether.  You won’t be able to put the property address on the sign in fear that they might see it.

If you use Craigslist or other internet methods to sell the house, the seller is sure as SHIT to see their house advertised online.  If they don’t understand what you do, they’ll call you on the phone with major concern as to why their house is listed for sale online. After all, they thought that YOU were going to buy it for all cash.

Then there’s the closing table.  Oh my God! What if they see how much money you make when real estate flipping?  Are they going to say “Forget it” and walk away from the deal?  Are they going to want some of your money because, after all, you did some hard negotiations with them?  These thoughts certainly go through your head on the day of closing, and you’ll chew your nails down to the bone worrying about it until it’s closed.

This is not the way to live!  This causes unwanted stress in your life.  It’s much easier to explain to the seller what you do for a living, so you can rest your head at night.  PLUS, there’s more benefits than not of telling the seller the truth and not trying to hide your wholesale real estate flipping.

So here’s how to explain what you do to a seller:

When you start negotiating with the seller, there’s no point in disclosing your business model yet.  The most important part of this stage is to solve the seller’s problem and negotiate the best deal possible. Make sure that the seller is happy with the offer, and that you’ve created a win-win solution.

Once the purchase price has been finalized, and you start reviewing the closing process with the seller, you can then mention that you work with local investors, and that they’re going to be excited to see that we have a new house in the inventory!  This is a good time to ask the seller if they’d be ok with a lockbox being installed so that your investors can come in and look at the house.  MOST sellers aren’t going to have a problem with it. The only time they resist is if there’s personal property in the house.  So you’ve got the hard part out of the way now.  Wasn’t that easy?

Once you send the contract to the seller for signatures (that’s what I do), they have plenty of time to review the terms of the sale. My contract specifically states that I am going to assign the contract for a profit, and that I will need access to the house to show it to potential buyers.

So in two fail swoops, I’ve explained to the seller what i do, and what I need from them to get this deal done.

Are you still worried about the seller seeing how much money you’re making on the deal? DON’T WORRY! The assignment fee is a charge to the BUYER, so it doesn’t even appear on the seller’s side of the HUD.  When the title company is reviewing the HUD with your seller, they don’t examine the buyer’s side, because they don’t care. They’re only concerned with how much money they’re walking away with at closing.  SO STOP WORRYING.

In the last 23 years of wholesale real estate flipping, I’ve had ONE Seller who was pissed because I was making $4,000.00 on the deal. It was in the beginning of my career, and before I started disclosing to the sellers what I do for a living.  He ended up signing the closing docs and everyone walked away alive.  He was a real dickhead from the start, so I think I would’ve had problems with him no matter what.

So if you’re new to the real estate flipping business, or even if you’re experienced, but you still find yourself making stories up to conceal what you REALLY do for a living, then JUST STOP IT. You don’t have to. BE TOTALLY TRANSPARENT.  Everyone is cool with this.  Trust me.

Property M.O.B.: Your Guide to Flipping Houses For A Living

Property M.O.B. is your #1 partner in the wholesale real estate industry. We specialize in real estate coaching and mentorship. If you want to learn about real estate investing, we are your go-to source for real estate trainers and coaches. Our automated real estate systems are used by hundreds of real estate investors to help with scaling their real estate businesses.  You can hire one of our virtual assistants to help you close more deals. If you have any questions about the real estate wholesale business, contact us today!

 

The whole game has changed recently

 

If your sellers are saying to you “I got 10 other postcards”, or “I have someone else coming to look at it”, or “I have a higher offer than this”, then you might want to take me a little more seriously.

When the sellers start saying this to you, realize that the market is competitive. There are other real estate wholesalers out there trying to get the same deal under contract that you are. They may even offer MORE MONEY that you are willing to offer, because they don’t know what they’re doing.

This is when you have to really start looking at your business from a serious angle.  Realize that if you want to close more deals, then you’re going to have to do something different that these other guys are doing.   You need to present yourself as a serious real estate investor, who has a process.  You need to go see the house (maybe not you but SOMEONE DOES), and make the seller an intelligent offer.

When you talk to a seller for 10 minutes on the phone and then sling an offer out there, how can that be taken seriously? We take it lightly as investors because we deal with houses and offers all day long.  But when we’re talking to a seller, this is serious business. Real property is typically the biggest asset someone can own.   You should present yourself as someone who has taken the time to look at the house, know what you’re dealing with and come up with an offer that makes sense.  This will be more justified for both you AND the seller.

I’ve heard NUMEROUS sellers say to me “Yeah, someone made me an offer, but they didn’t even come out and look at it”. OOH, I LOVE WHEN THEY SAY THAT!  I immediately take advantage of someone else’s stupidity and immediately set an appointment to come look.  Then I use neuro-linguistic programming to let them know that I am a SERIOUS buyer and validate their thought that the other guy must not be.

Also, we have proven this next fact to be TRUE: If you go meet the seller in person and make the offer in person, you will convert more leads into contracts!  Just one more reason to get off your seat and go to the house!

So what makes me an authority on all of this information?  Well, I have kept serious data on my business since 2010, and I’m very aware when changes need to be made by the responses I’m getting from sellers and buyers.  I was the lazy one that was just making offers to sellers over the phone without ever going to see the house.  Was I closing deals? Yes.  But my numbers started to decline once the market started to pick up.  I noticed it immediately. One month went by and I blew it off. Another month of lowered conversion rates, and I took action.

Do You Need a License to flip houses?

It does seem logical that you would need a real estate license to buy and sell real property.  I mean, after all, that’s what real estate agents get paid to do, right?  Help people buy and sell real estate?  

Some states have changed their laws recently and now require a real estate license to do this.  I think that could get confusing to the seller. The role that you’re playing – either an agent or a wholesaler is completely different to a seller.  Personally, I’ve always kept the business models completely separate when it comes to dealing with sellers so they don’t get confused.

Watch this video and find out the truth about the requirements of buying and selling real estate.  Oh! Then leave your thoughts in the comment box – or we’ll send the mob after ya.

 

 

How Much Money Can I Make as a Real Estate Wholesaler?

I’m sure a lot of people wonder how much money they can make as a real estate wholesaler.  There are a lot of  real estate “gurus” out there who make you think that they’re millionaire wholesalers with their fancy websites and “big talk” videos.  While it MIGHT be true for 1% of the wholesaler population, it’s just not a clear or true depiction of the type of money you can make in this business. Not any wholesalers that I’ve ever met, anyway.

Before I share with you what I think is a reasonable yearly income from wholesaling houses, let me first be sure that you understand that different people are going to get different results.  Successful wholesalers who live and breathe this business typically have a nice marketing budget, know how to manage money, and have self-discipline. These guys (and girls) will make significantly more money than someone who can only commit to part-time work or has little money for a marketing budget.

Now on with the show………..

I’m a straight shooter. I don’t want to make you think that you can become financially free during your first year as a real estate wholesaler.  You have to learn the ropes.  There’s definitely a learning curve. There’s a lot of information and formulas to absorb. You’ve gotta grasp the concept before you can turn it up and start cranking deals out. A Coach to help you through scenarios is recommended if you want to get serious and make real money (and sidestep some of the common mistakes that newbies make in the beginning).

Realistically, you can make $25k – $50k your first year.  Unless you’re a super freak. Then you’d probably swing upwards of $100,000.00 in your first 12 months.  You’d have to be really soaking up all of the education that you could while taking action on it all at the same time.  This takes some serious commitment and quite a bit of time (researching comps, values, looking at houses, determining repair costs, trying to figure out how much to offer, analyzing leads, working in marketing campaigns, etc. Check out this blog post on how to find your maximum allowable offer).

After a few years in the business, and you’ve got a few dozen wholesale deals under your belt, you can easily turn this into a $250k – $500k annual income business. By creating systems, using a real estate virtual assistant, and doing what has been proven to work over and over again, it will get easier and easier to make big checks real estate wholesaling.

Related: The Ultimate Guide to Real Estate Marketing to Generate Motivated Seller Leads

The Real Estate Wholesale Contract

There’s at least one hundred versions of a real estate wholesale contract. Investors tend to find one that they like the most and then customize it to their liking, and to fit their wholesaling business model.

The real estate wholesale contract that is offered here is a very simple 2 page “ALL CASH” contract. It has been modified over the years to be a pretty effective and enforceable contract.

NOTE: The real estate wholesale contract below is being offered for you to use as a courtesy ONLY. Do not assume that the Property M.O.B. is offering any legal advice by providing this agreement. Always consult with your attorney for clarification on any legal and binding agreement.

Real Estate Wholesaling Contract

 

While logged into your Google Account, Click the Link Below to open the document. In Google Drive click on File. You can either download the document or Make a Copy for your Google Drive. Then you’re able to edit the document.

 

My First Wholesale Real Estate Deal

People don’t usually ask me about my first deal. I love to tell the story because it was the defining moment when I knew my life would never be the same. Once you start investing in real estate you’ll discover a whole new playing field out there. You may never look at employment or a paycheck the same again.

Dan and I were very determined to make a wholesale deal happen. We powered through some tough times at first, because we both quit our jobs to dedicate 100% of our time to learning this business and making it work.  We both felt that without 100% focus, we may get frustrated and just give it up before the turning point.  Although it got really hard sometimes (financially speaking), we didn’t give up.

We were both 25 years old when we started. We didn’t have a lot of money for marketing, so we did what we could to get the word out.  The best prospects at that time were unsafe structures. The City of Jacksonville readily gave the list away, and we spent countless hours every night (sometimes until the wee hours of the night) cross-referencing this list to get mailing addresses. I’m pretty sure we had dial-up internet, and we were sharing a very old, slow desktop WINDOWS computer.  (YIKES).  Once we had their mailing information, we mailed them a 4 x 6 INDEX CARD (it wasn’t even a postcard) that we printed on our inkjet printer.  We’d set the thing to print and then go to bed. We’d wake up with printed index cards all over the floor in the morning.  Then we’d put stamps on them and mail them out.

When the phone rang at our house, it was time to celebrate!!  We knew when it rang, that it was a seller lead calling. Sometimes we would nearly break our necks to get to the phone.

My first wholesale deal was a vacant concrete block duplex in the ghetto

 

The seller inherited the property and sold it to us for $12,000.00.

We weren’t sure if we paid too much or not. Using what we had learned so far about wholesaling houses, we just went with our gut. We used the contract template from a wholesaling course that we found on eBay.  Our contract was effective for 30 days. Here’s a photo of it from Google Maps. (it didn’t look like this when we did the deal).

Real Estate Wholesaling

Once we got the contract, the seller willingly gave us the key to access to the property.  We ran ads in the newspaper, put out some bandit signs. I don’t even think that Craigslist was around at that time.  It was only on the market for about 10 days before we got an offer on the property for $13,200 by realtors serving the Cape Coral area. We gladly accepted!  The transaction closed 7 days later, and we left with a check for $1,200.00.

It was the easiest and fastest money I had ever made.  It was fast.  Hell, I had to work all month (40 hours a week) to make that kind of money.  It was that moment when I knew that being a wholesaler had my attention.  We continued to do what worked to get that deal, and have been implementing those techniques ever since!

 

You Can Wholesale Real Estate Too!

You can do this too.  If you have any level of determination or desire to succeed at this business, then you can do it.  It’s frustrating at first if you’re limited on funds or time. If you stick with it, though, it will come to fruition. It will pay off if you’re patient.  Learning everything that you need to know won’t happen in one day, or even in one month, but it will happen.

Real estate newbies, you most likely have a giant array of questions about wholesaling houses swirling around in your head right now! Questions that just keep coming back around, and never getting answered. Getting the answers to these questions might be all you need to move forward with your plan to make this business a success for you.

After talking to thousands of newbies over the past 2 decades, I’ve realized that most people get stuck on one of these 5 questions.  So I’m going to wrap everything up in one blog post here and get the answers that you need. 

Look no Further!  HELP IS HERE!!


Top 6 Questions Asked by Real Estate Wholesaling Newbies

 

Question #1: What should I do first?

With all of the information that’s out there, this is definitely a good question. I mean, people will send you off in so many directions with this. it’s NOT like the chicken and the egg. There’s only one correct answer.  START GENERATING MOTIVATED SELLER LEADS

There’s alot to learn! Discover how to become a real estate wholesaler by signing up for Property M.O.B.’s Bad Ass Virtual Coaching Program. This will explain in detail everything that you need to know about getting started, action plans, expectations, and the fundamentals of wholesaling houses. It includes every real estate wholesale contract you need including as assignment contract, affidavit and more!

Question #2: What are the best lists to market to for wholesale real estate?

There’s only a handful of “lists” that we market to as real estate wholesalers.I’ll list them in the next few seconds.  Just know this….NONE of these lists will work if you don’t execute a marketing plan (See question #1).   So here are the lists that you can start with:

  • Probates
  • Divorces
  • Delinquent Property Taxes
  • Quit Claim Deeds
  • Code Violations

Question #3: I’ve been doing this for 2 months already, and haven’t closed a deal, what am I doing wrong?

You’re not giving it enough time!  You’re venturing into a new business. It seems easy when you’re looking at it from the outside, but once you start digging in, you quickly discover that it’s a lot more work than people made it sound.  If you want to succeed at being a real estate wholesaler, then you just have to have faith that it will work, and keep doing it. Follow instructions and Learn how to wholesale from an expert.

Question #4: Can I do this if I don’t have any money?

You can certainly work your ass off driving for dollars, knocking on doors, and making cold calls in order to find those motivated sellers that you need. But that’s not a sustainable business model.  In order to create a real business for yourself with NO MONEY to spare, then you must FULLY understand and accept that it’s going to be a slow process for you.  You will have to be patient, consistent, and diligent.  And when you do close your first couple of deals, scrape 50% off the top to put back into your business/marketing campaigns.

Question #5: How much money can I make as a real estate wholesaler?

As much as you want to make. That’s the most beautiful thing about being in the real estate business. You create your own path.  By creating a business for yourself, you determine just how far you can take it.  The sky is the limit. This post may help you understand what it takes to make wholesaling work for you

Question #6: Can I do virtual wholesaling?

Absolutely! There’s so many tools in place that you can practice virtual wholesaling from anywhere in the world.

And there you have it. The top 6 questions that I get asked by newbies along with my “what you NEED to hear” answers. 

If you can get past the truth in these answers, then you’ll be able to move on to the next set of most popular questions that are asked.  But let’s get past these first.

I want to see everyone succeed that starts their journey as a real estate wholesaler, but the truth is only 5% will.  So be the 5% that makes it through the learning curve and frustration.  After that, the ride is smooth! Once you get the fundamentals down, you can look into real estate automation systems.

4 thoughts on “How to Wholesale Real Estate Step by Step”

  1. wow, what a valuable resource your website is. I’m having fear of putting a house under contract without having a solid buyer, I have potential buyers, but nothing concrete. Any suggestions

    1. Real estate deals fall apart all the time. There is a remedy for what happens if you breach the contract. The seller gets to Keep the Earnest money Deposit. be sure to read the blog post about Earnest money Deposits 🙂

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