How to Start Wholesaling Real Estate

The Expert Guide to Find, Assign and Sell a Wholesale Real Estate deal

arrow_downward

Welcome to our guide to real estate wholesaling. We are proud to offer a guide that will give you the information and confidence you need to start your own wholesaling business. We emphasize that this is not a get-rich-quick scheme, but it is a way for you to start your own real estate business without having to put in a lot of your own money.

The majority of people associate the act of wholesaling with the process of buying or selling goods in bulk. In real estate, wholesaling means identifying distressed properties for sale and then bringing those properties to the attention of investors. You are supplying the raw material for the investor, and they are developing a retail product.

What Is Real Estate Wholesaling?

A real estate wholesaler brings together sellers of distressed properties with real estate investors. Distressed properties are:

  • Abandoned for one reason or another
  • In rough shape and need to be sold quickly
  • Owned by someone who can no longer afford the payments and wants to sell the property for just enough to pay off the mortgage to avoid foreclosure

Your primary clients will be:

  • Real estate developers
  • House flippers
  • Landlords looking for inexpensive properties that can be made into rentals for a low investment

Your job is to find deals on distressed properties, negotiate a deal with the owner, get the owner to sign a document that says that either the wholesaler or someone else will buy the property, and then get an investor to buy that property at the price you set. Your selling price to investors includes:

  • Your finder's fee (not a commission)
  • The amount of money the owner wants when the deal is done

With this guide, we will show you how you can get started and what you need to do to succeed. While we want everyone who reads this to be successful, we will tell you that wholesaling is a process of learning the ropes and failing along the way. With hard work and experience, you can become a real estate wholesaler.

How It Really Works

The best way to understand wholesaling is to create a situation that follows the wholesaling process from start to finish. Let's look at a scenario.

Bill owns a home that is in rough shape, and he is four payments behind on his mortgage. He still owes $20,000 on his home loan and all he wants to do is get out of the loan and get a smaller place. Bill gets your phone number from the marketing you have done, and he decides he would rather work with you than a real estate agent because you have a reputation for working quickly.

You agree to visit Bill at his house, and your first thought is that it will cost at least $20,000 to fix the place up for resale. Bill explains his mortgage situation, and the research you had done before you went to Bill's house told you that the retail value of the property is $65,000. If you put a $5,000 finder's fee on the deal, then you figure a flipper could make a $20,000 profit.

You negotiate a purchase and sale document with Bill that says that you have 20 days to find a buyer for the property for a total price of $25,000 (remember that you are not selling the property directly). You put a provision in the contract that states that if you cannot find a buyer in 20 days, then the contract simply expires. This prevents you from being on the hook for any money if you cannot find a buyer.

You and Bill sign the deal, and you set out to find an investor. You call up a flipper you know from your months of networking named Jeff. You tell Jeff about the property and he agrees to go look at it. Jeff likes what he sees and agrees to the $25,000 price. You submit the contract to the title company and the title company finalizes the transaction between Jeff and Bill. When it is over, Bill gets his $20,000, you get your $5,000 finder's fee, and Jeff gets the property.

Why Is Wholesaling Popular?

You may have noticed in our example that you did not put any of your own money towards the sale or purchase of the property. As a wholesaler, your job is to find people interested in the property and help the property owner to facilitate a sale. Your job is not to sell or market the property. When you follow the rules, you are able to navigate transactions that will cost you no money down.

With wholesaling, you do not need to put any money down and you lose nothing if you cannot find an interested buyer for the property. As we mentioned, the contract simply expires if you cannot find a buyer. If you allow too many contracts to expire, then your reputation is going to suffer. But if you work hard and study the busienss, you can become an expert at bringing together buyers and sellers in this low-risk business.

The Basic Concepts Of Wholesaling

In this guide, we will give you all of the information you need on the basics of wholesaling. That information will include:

  • Marketing - How you can get your phone ringing with distressed property owners looking to sell, and how you can find buyers.
  • Approaching the Seller - There is a right way and a wrong way to introduce yourself and your services to a property owner. We will show you both, and tell you why you need to avoid the wrong way.
  • Math and Negotiations - You need to be good with numbers in wholesaling, and you need to know how to use those numbers to put together the right deal.
  • Contracting a Property Owner - There are several nuances to creating wholesaling contracts that you will need to know.
  • Presenting a Deal - We will show you the best ways to find potential buyers and how to present your real estate deal.
  • Assigning the Contract - We will teach you the value of finding a reliable title company and how to have your deal finalized.
  • Legality - We will discuss the topic of legality as it applies to wholesaling, and give you the information you need to discuss your future business with a qualified real estate attorney.

You have taken the first step towards wholesaling by reading our guide. Now we will take you deep inside the world of wholesaling and show you how you can get started right away.

In order to grow your network of sellers with your real estate wholesaling business, you need to find ways to reach out to people who might be interested in your services. As long as you constantly update your information, react to your metrics, and keep gathering new information, you will have sellers to talk to.

There are several ways you can market your business services to an interested target audience, but one of the more effective recurring methods is direct mail marketing. This type of marketing involves generating and mailing physical fliers and data sheets to potential sellers to generate interest in your business.

Why Is Direct Mail Effective?

There are several reasons why successful real estate wholesalers use direct mail. For one thing, a wholesaler who constantly updates their direct mail information will create lists that are filled with people who really want to sell their homes. Direct mail takes the guess work out of marketing and lets you speak directly to your audience.

It can be hard for people who rely on technology to understand the power of paper. When a buyer shows up to a property you are selling with your flier in their hands, then you can understand just how powerful it is to use direct mail. A marketing piece focuses on one message, and on a piece of paper that message is not mixed in with pop-up ads and thousands of other forms of digital marketing.

Quick Tips For Developing Good Direct Mail Campaigns

Designing Your Fliers

Each mailing should have only one message, and that message should be clearly stated throughout the flier. For example, if you are looking for new sellers, then your message would be introducing your services to distressed property owners. On a flier like this, you should avoid putting information about other properties you are selling or anything that distracts from your message.

Call To Action (CTA)

Every marketing piece you create should end with a call to action (CTA). The CTA summarizes your flier's message and encourages your reader to take some sort of specific action. For example, the flier introducing yourself to new potential sellers can end with a CTA that says:

Contact me today by phone or email to discuss how I can help you sell your home fast.

By the time the reader gets to your CTA, they have been given all of the information they need to make a decision. The CTA encourages the reader to act on that decision immediately and take whatever specific action you want them to take.

Examples Of Direct Mailing Pieces

Your direct mailing pieces can be fliers, letters, or postcards. The best way to layout a direct mail letter would be:

  • The first paragraph acts as your headline and tag line. You must grab the reader's attention in these first two sentences and encourage the reader to continue reading.
  • Letters sent to sellers should list the benefits of utilizing your services. For example, you can talk about how fast you sell properties, explain the negotiation process that gets the seller the money they need out of the deal, and your high level of customer service.
  • Your final paragraph is your CTA where you explain what you want the reader to do in response to the information that you have given.

Here are some examples of direct mail postcards and letters that show how you should construct your pieces to make them effective.

Creating Mailing Lists

Creating lists of potential real estate sellers is going to require a lot of work and a lot of regular updating. It is always a good idea to separate your seller lists based on where you got the information to make it easier to go back and update your lists on a regular basis. You can create lists of potential sellers through:

  • Contacting your local banks to talk to someone about getting lists of properties either in foreclosure, or close to going into foreclosure. You will be surprised at how many banks will willingly offer this information.
  • Searching online for any listings of non-owner occupied properties to see if the owners would like to sell their properties.
  • Reading lists of probate proceedings published in your local newspaper that will tell you if a piece of real estate has been recently released to a family member after the death of a loved one.
  • Reading the published lists of bankruptcies in the local newspaper.
  • Using listings in the newspaper titled "Recent Notice of Default" that will tell you which property owners might be sellers because they are getting behind on their mortgages.
  • Going to your local city hall to get lists of property owners who live out-of-state and who may want to sell their local properties. Ask city hall for a grand list of all property owners in your area that will contain all out-of-state owners.
  • Invest in real estate software that will do custom searches online for properties with a certain amount of equity. Sometimes people with a lot of equity in their homes want to sell those homes quickly and collect their equity.
  • Contact the local fire department to see if you can get a list of properties recently damaged by fire. You can also monitor the local fire and police calls in the newspaper each day to find addresses of damaged properties.
  • Go to city hall and ask for a list of properties that have lingering liens or code violations. In many cases, these are distressed properties that owners are anxious to sell.

List Brokers

The Internet is filled with companies that are more than willing to generate custom real estate property lists based on your criteria. Some of the more prominent list brokers online include:

Updating Lists

Mailing lists with old information cause you to waste money on developing direct mail pieces and the postage you need to send them. Old information also ensures that you will never speak directly to someone who could benefit from your business. You need to update your lists frequently and be sure to remove any entries that result in returned mail.

Developing An Effective Campaign

Your direct mail skills are constantly evolving as you learn more about the processes that work, and the processes that don't. For example, try using a handwritten looking font on one mailer and then a professional looking font on the other. Keep track of the responses you get and utilize the approach that gets more responses.

Your direct mail pieces will be in direct competition with other real estate wholesalers, which is why you need to track every result for every mailer and learn from the good and bad results. Perhaps you find that a handwritten looking envelope combined with a professional looking direct mail letter is the most effective combination to get results. Each time you learn something from your previous direct mail campaigns, you need to use that information to improve your next one.

Your Message

What kind of message works best with each audience? You may find that people who own abandoned properties respond better to professional sounding messages, while people on the verge of foreclosure appreciate a more informal approach. You need to make notes of these observations and use them to create messages that work best for each audience.

Costs

You should always be on the lookout for ways to keep your direct mailing costs down. Track your costs and always compare your costs to your returns. You can keep your costs down by constantly updating your lists and looking into possible bulk mail discounts.

If you buy lists from list brokers, then carefully track the results you get with those lists and avoid using brokers that send you a lot of bad addresses. You will also want to make sure that your purchased lists are getting responses that bring in revenue to avoid wasting money on future lists.

MailMerge And Custom Mailings

MailMerge is a program that works directly with Microsoft Excel to help you create custom envelopes and letters for every contact you have. With MailMerge, you can pull fields from Excel and fill in your letter and envelope templates with custom information. Here is a look at how MailMerge works.

Outsourcing

In the end, you can always outsource your direct mail campaigns to a professional organization that specializes in these types of marketing tactics. With a good outsourcing company, you can free yourself up to go out and find more sellers to build up your inventory.

Direct mail is a powerful marketing tool for any real estate wholesaler. When your lists are updated properly and you keep experimenting until you find the right message for each audience, you will start to have the resources you need to grow your business.

Driving for dollars is a real estate wholesaler marketing method that involves finding properties that might not show up on any list you have compiled or purchased. There are many different ways to approach a driving for dollars campaign, and you will eventually develop your own method based on your experience. Some wholesalers prefer driving for dollars over compiling lists from online research, but the successful wholesalers know that they should be using every method available to find properties to represent.

What Is Driving For Dollars?

In this part of the guide, we will only deal with the process of scouting for properties and adding them to your prospect list. All of the marketing that follows driving for dollars will be covered in other sections. Driving for dollars is the process of getting into your car and scouring neighborhoods for properties. It is as simple as that, but there is a lot of preparation work you have to do before you can head out to go hunting.

Driving for dollars is also your chance to mingle with the residents of the neighborhoods you are working in and introduce yourself. This is where your negotiation skills and professional presentation skills come into play. The more approachable and friendly you are, the more information you can get from local residents about distressed properties. Driving for dollars not only helps you add properties to your inventory, but it also helps you expand your referral network.

Getting Started

As with any marketing plan for a real estate wholesaler, driving for dollars is not something you should do randomly. It is important to put together a target list and identify neighborhoods you want to drive through before you go out into the field. You can choose your own criteria for determining which neighborhoods to visit, but some ideas include:

  • Average age of the homes
  • Potential equity in the homes (a neighborhood that has a lot of homes with mortgages that have been in effect for 15 years or more offer more equity)
  • Assessed value of homes (you can get this from researching the local tax records)
  • Crime rates (lower crime rates make it easier to sell homes to investors and flippers)

The problem with driving for dollars without a plan is that you have no idea what kind of properties you are looking at. Your time is valuable, and you want to make sure that you are maximizing your profit potential whenever you are marketing.

What You Will Need

As you pack up to go driving, you should bring with you:

  • A camera (or a smartphone with a camera)
  • Pen and paper to take notes
  • Your business cards to give to neighborhood people you meet
  • Fliers explaining your business to give to neighborhood people
  • Your lists

You will not need to apply for a solicitor's license to go driving for dollars because you are not knocking on any doors.

Some Tips For Finding The Right Times To Drive For Dollars

When you target a neighborhood for driving for dollars, any property within that neighborhood is fair game. But there are little hints you should look for to indicate that a property is either distressed, or the owners are experiencing difficulties that could lead to a distressed property in the near future.

Some of the best tips for identifying potential properties while driving for dollars include:

  • Properties that do not have outdoor decorations for Christmas, or any interior decorations seen through the windows. This could indicate a religious preference, but it could also be the sign of a distressed property.
  • Properties that do not regularly mow their lawns or trim their landscaping.
  • Properties that build up newspapers on the porch that are cleared out once or twice a month.
  • Properties that have garbage accumulating in various spots.
  • Properties that do not put out their garbage on normal collection days.
  • Properties with boarded up windows and/or doors.
  • Properties that have no lights on at night.
  • Properties that do not have vehicles in the driveway during the evening.
  • Properties with ordinance notices attached to the front doors.

The Process

It may take a couple of drives through a target neighborhood before you are ready to go driving for dollars. For example, it may take a couple of weeks of occasionally driving through a neighborhood to identify the properties that do not put their garbage out on collection day. But once you have collected all of the information you need, it is time to go driving for dollars.

As you drive through the neighborhood, you will take pictures of properties you feel could be prospective inventory items. Get very clear pictures of the worst attributes of the properties so that you can make accurate notes when you get back to your office. Use the pen and paper to make note of the addresses you took pictures of, and make notes on the conditions of the properties and the neighborhood in general.

What You Are Looking For

You are looking for distressed properties that either have out-of-state owners, or are owner-occupied. These are the types of properties where you can directly market your services to the owners and get immediate results. Abandoned properties owned by banks require a whole different process for purchasing. You should separate out the bank owned properties and focus on the properties that have owners you can contact.

You can identify the owners of those properties through your county's Central Appraisal District (CAD). Your local CAD is easy to find doing a Google search looking for the CAD in your specific county. The CAD will tell you who owns the property, and it will give you the contact information for out-of-state owners as well. You can use your smartphone to connect with the CAD while you are in the field to avoid wasting time processing bank owned properties, or you can check the CAD when you get to the office and separate the bank owned properties from the rest.

Processing Your Information

Your driving for dollars information should be put on a spreadsheet that is separate from all of your other information to make marketing easier. Whenever you find a property to add to your prospects pool, you should always note how you found that property so that you can send the appropriate type of marketing piece to the property owner.

When you return to your office, you will take all of the addresses you have collected and start creating an owner contact list based on your findings. Be sure to attach your pictures to each list entry to remind yourself of why you included that property on your list in the first place.

Abandoned properties are obvious as to why they are distressed, but the owner-occupied properties you find are going to be a little more difficult to categorize. Your goal is to drive for dollars targeting properties that are not on any pre-foreclosure list you have created, or on any other list that allows you to identify the reason the property is distressed. Driving for dollars prevents these properties from getting away from you, but you will need to use a specific marketing piece to effectively speak to homeowners who currently live in distressed homes.

As you drive for dollars, you might get questioned by local residents who are curious as to what you are doing. These are the people you can talk to about giving you information on other distressed properties in the area, or they might even own a distressed property of their own. Driving for dollars is how you get out into the communities where you work and establish good relationships with the local residents.

Advice On The Best Approach

If you start knocking on the doors of owner-occupied properties in distress, then you could run into solicitation problems. Besides, your purpose of driving for dollars is to identify properties to add to your mailing list. Knocking on doors can derail your efforts quickly instead of helping you to maximize your results.

If a distressed property is owned by a landlord and occupied by tenants, then you do not want to try and leave any information with the tenants. Your focus needs to be on the property owners and not on anyone else. You might actually get yourself in trouble for leaving real estate wholesaling information with a tenant who has no clue their property is distressed.

The best way to maximize your driving for dollars campaign is to always have a plan, and know exactly what you are looking for when you are in the field. Driving for dollars is how you find the properties that are not showing up on any of your lists, and that will help to keep you one step ahead of the competition.

When you decide that wholesaling is what you want to do for a career, you must immediately immerse yourself into what you do if you want to find success. The more people you talk to and the more familiar you become with the area you are working in, the more details you will have to grow your business. When you have a comprehensive understanding of your territory and how things work within that territory, then you are giving yourself a jump on the competition.

Few marketing activities help you to learn everything you want to know about the geographic area you are working in like door knocking. When you utilize door knocking to introduce yourself to the people in the areas where you work, you give yourself a chance to develop a strong bond with the community that can lead in a never-ending source of property referrals. There is much more to door knocking than just going from property to property and introducing yourself. Once you learn how to maximize door knocking, you will see why so many successful wholesalers utilize it on a regular basis.

What Is Door Knocking?

Door knocking is exactly as the name implies; you go door-to-door and introduce yourself to homeowners in a particular neighborhood. You are guided by lists you create of prospective sellers made from your research. You can take door knocking one street at a time, or you can be ambitious and try to cover entire neighborhoods at once. To become truly effective, it is best to knock on a door twice in a year to make sure that your name and business stay as fresh as possible in people's minds.

Why Would I Go Door Knocking?

In general, people who live in neighborhoods hate seeing abandoned properties bring down property values and invite vagabonds to the area. Door knocking is a great way to find out which properties in an area are abandoned, and it also serves several other important functions.

Finding Distressed Properties That Don't Look Distressed

Sometimes it is difficult to tell a book by its cover, and every wholesaler in the area might be walking by a distressed home and not even know it. You might knock on the door of a beautiful home and find out that the owner is three months behind on their mortgage and wants to sell fast. You know this because you found the address while doing research on pre-foreclosures with various banks.

Set Up A Referral Network

Many wholesalers go door knocking with the intent of setting up massive referral networks with the local residents. For example, you might bring a flier along with you that promises to pay each resident $100 for every property they point your way that you wind up finding a buyer for. It costs you nothing to set up a large referral network with local residents, but it can bring you a stream of valuable property referrals. No matter what type of list your prospects come from, they can all become part of your large referral network that brings more leads to your business.

Gain A Reputation As Someone Who Can Help Homeowners

Building up a positive reputation among distressed property owners in the area where you want to sell properties is going to significantly help your business. When you go door knocking and explain to people how you can help distressed homeowners, you will find that people in those neighborhoods go out of their way to recommend you to the homeowners who will need your services.

Real Estate Is A Social Profession

Each knock on a homeowner's door is another chance for you to practice your negotiating and marketing skills. In real estate, you need to be able to think on your feet and establish strong social connections in a short period of time. When you go door knocking, you give yourself a lot of chances to hone your positive attitude and learn how to talk to different types of people.

Getting Ready To Go Knocking

You should never go door knocking without a plan in place and without lists of pre-qualified addresses to visit. You can make lists of landlords, people who own physically distressed properties, and people who have liens on their properties. Door knocking is a great way to enhance the time you spend driving for dollars, as it only helps to expand your contact network.

Always Be Friendly

You will have doors slammed in your face and people saying obscenities to you because some people do not like talking to strangers about real estate wholesaling. You must always maintain a positive and professional attitude, and you should never give any homeowner a reason to call the authorities on you. But, you should also know that you will probably have the authorities called on you at least once while door knocking. A friendly approach and professional demeanor will help you to stay on track and take care of any challenges.

Know The Rules

Some communities require a door-to-door solicitors to have a license with them to legally go door knocking. This is not a big deal, and it is something you can easily take care of at the local city or town hall. If you do have the police called on you, showing them your legal license will usually take care of the problem.

Before you go out door knocking, it is important to know any other rules that your community has for solicitors. Some communities require you to present your solicitor's license at every door, and others require you to dress professional with a badge that clearly identifies your company to homeowners. Your community might have specific days and hours solicitors can knock on doors, and that is a schedule you should always abide by. No matter what some grumpy homeowners may say or do to you, if you follow the rules you will be able to keep on knocking.

Dress Appropriately

Even the wholesalers with the best professional demeanor can find it challenging when their feet hurt or they dressed too warm for the weather. Check out the weather forecast before you go knocking, and wear shoes that are going to be comfortable while you do all of that walking. It would also be helpful to bring some energy bars and bottles of water with you to help you keep up your energy.

Marketing Materials

If you're intention with door knocking is to walk around empty handed, then you are preparing to waste your time. When you go door knocking, you should always bring:

A pad of paper and a pen to make notes A stack of business cards A stack of business fliers that explain what you do Door hangers to leave on the doors of people who are not home It is a federal offense for you to put your business fliers in a person's mailbox, which is why you should bring door hangers instead. Not only are door hangers legal, but they will catch the homeowner's eye when they get home. You can put your flier in the door for people who are not home, but one strong gust of wind will ensure that the homeowner never sees your information. Door hangers are the best marketing pieces to leave for homeowners who are not at home when you go door knocking.

Develop A System

As we mentioned earlier, door knocking is something you want to make a regular part of your business marketing plan. You will do a lot of marketing for your real estate wholesaling business, but few marketing methods give you more benefits than door knocking. When you have new lists of prospects created, then make it a point to get out into the neighborhoods and visit those properties as often as you can. Your door knocking activities are guided by the lists you create from hours of research. Time is of the essence in real estate wholesaling, and the sooner you introduce yourself to distressed property owners, the sooner you can make money by helping them to sell their properties.

The chances that you will close a deal to represent a property while door knocking depend on the quality of your list. But the more door knocking you do, the larger your referral network will get and the more goodwill you will establish with all of the homeowners in your geographic area. It might take some time for door knocking to really pay off, but when it does pay off it could be one of the most successful types of marketing you will ever do.

How to Start Wholesaling Real Estate

0% Show Index