How to Wholesale Real Estate Step by Step
I don’t know why people are confused these days about the correct order of wholesaling real restate. 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.
How to Do A Wholesale Real Estate Deal [In A Very Particular Order]
FIRST: Generate Leads. It all starts with a good marketing campaign. It;s the life blood of any successful real estate wholesaler. The ability to generate leads is where it all starts.
NEXT: Pre-Screen Sellers. Determine motivation. Ask questions. Listen for motivated seller trigger keywords. Qualify these sellers for your program. EVERY SELLER IS NOT A LEAD.
THEN: Property Inspection. Go see the house! Check the condition. Know what you’re dealing with. Do some due diligence. Check the comps.
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.
THEN (if necessary) : Follow Up. If your seller doesn’t accept your offer(s) the first tim, 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: Get the contract Signed. When you get to this point, it’s all downhill from here.
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 real estate wholesale 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.
THINGS HAVE CHANGED IN THE LAST YEAR
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 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 Wholesale Real Estate
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 Realtors get paid to for, right? Help people buy and sell real estate? 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 “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. Someone who lives and breathes wholesaling has a nice marketing budget, knows how to manage money and has self-discipline 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).
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.
Remembering 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.
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 Real Estate Deal
Our first deal was a concrete block duplex in the ghetto. It was vacant. The seller had inherited the property and sold it to us for $12,000.00. We weren’t sure if we paid too much or not. We kinda just went with our gut, and what we had learned so far about wholesaling. 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).
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 wholesaling had my attention. We continued to do what worked to get that deal, and have been implementing those techniques ever since!
You can do this too. If you have any level of determination or desire to succeed (check out this post on how to measure success) 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.
You should also consider joining the coolest real estate mentor group around! Join the M.O.B. today and have access to several experienced real estate investors and wholesalers who are ready to answer your questions and give you advice to help you through your first deal!
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’s the lists that you can start with:
Delinquent Property Taxes
Quit Claim Deeds
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.
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.
And there you have it. The top 5 questions that I get asked by real estate 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 lets 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!
Stop wasting precious time manually calculating your properties rehab costs, only to mess it all up and pay too much for a house! Start your free trial of Rehab Estimator Tool and get accurate, and instant rehab reports.