Do you want to get into real estate wholesaling as a realtor? If YES, here are 5 best places to find highly motivated buyers and a few success tips to help.
The main goal in real estate wholesaling is to sell the home to an interested party before the contract with the original home owner closes. It simply means no money exchanges hands between the wholesaler and the seller, not at least until a buyer is found by the wholesaler. So how does the wholesaler make money?
The wholesaler makes their money by charging the end buyer more than they get the house under contract for. How much they make depend greatly on the wholesaler, the deal, and other factors. Some wholesalers may only make a couple of thousand dollars on each deal while others can make as much as $200,000 on a large multi-million dollar deal.
Just like most professions, there are those that work hard, work smart, and make a lot of money and those who don’t and fail. The real estate investors who are successful with wholesaling have systems in place to find deals and buyers. The wholesalers doing a lot of deals have an already established business names.
They also don’t handle everything on their own. They will have an acquisitions person, a contract manager, a marketer, a bookkeeper, etc. The wholesalers doing that many deals are also spending a lot of money on marketing.
Some wholesalers will send out 10,000 to 20,000 pieces of mail each month. However, you might not make any money for months after you first start. It takes time to market to sellers, get them under contract, and for the end buyer to purchase the house.
The wholesalers who are super successful did not do it overnight. If you are just messing around a couple of hours each week hoping to make $100,000 per year, you will be disappointed.
Where to Find Buyers When Wholesaling Real Estate
Knowing where to find buyers is crucial because they are the people who will be buying the property and making you money. These buyers will be found from real estate sites, marketing flyers, and signs and from real estate investor groups.
Wholesalers typically build their buyers list through a combination of networking and direct marketing. Eventually, establishing strong business relationships can lead to repeat business, helping to take out a lot of the guesswork. Below are a few strategies used by wholesalers to target cash buyers:
Craigslist has grown into a great resource for placing ads for wholesale deals, as well as identifying potential buyers. In the “Housing” section, peruse the hundreds of “for sale” or “for rent” properties to identify owners and landlords who may be interested in a future wholesale deal.
Remember, networking with local real estate investors, landlords and real estate agents can lead you to meaningful encounters, as well as help you develop long-lasting business relationships.
It is advisable you become an active member of your local real estate investing club, where you may meet active cash buyers, a fellow investor who may introduce you to interested buyers, or even someone who wants to partner with you on a future project. In addition, connecting with real estate agents will help you gain access to lists of recent cash sales.
- Lead Capture Forms
In this modern era, anyone looking to grow a successful business is expected to have an online presence. It is easy to set up a lead capture form on your business website where visitors can submit their personal contact information. To increase traffic to your website, promote your brand through social media, blogging, advertising and marketing.
- Courthouse Auctions
Note that buyers are required to have all cash at courthouse auctions, so this is a direct approach to finding cash buyers. Visit courthouse auction sessions early and regularly to network with this group of active cash buyers. Don’t forget to hand out business cards and to follow up with any connections made.
- Hard Money Lenders
Have it in mind that not all cash buyers will actually have the total purchase price of a property readily available. When that is the case, they will often enlist the help of a hard money lender to help close a deal. Because of this, hard money lenders can be an excellent source of cash buyer referrals. Indeed, their best interest is to help you so that they can assist in the funding of future deals in return.
Tips on How to Successfully Wholesale Real Estate and Make Profits
Succeeding in this business takes more than just finding a property or a buyer. It involves a whole lot of processes and pitfalls. Here are five important tricks to maximize your real estate wholesaling success:
- Always Consider the Seller
Note that one of the key goals of wholesale real estate is to get the property contracted under the lowest possible price. But, negotiating a favorable price can be a challenge, even if a seller is facing foreclosure. They may have other options to explore, including other wholesalers or cash buyers.
That is why it is of utmost importance to put yourself in the seller’s shoes when making your presentation. By explicitly communicating the wholesaling process, and conveying that you understand their pain points, you will help your chances of striking up a deal.
- Always be Transparent
This characteristic is important when trying to acquire wholesale deals, as honesty will always be the best policy for anything you do as an investor. As a wholesaler, you will need to explain your position, the risks associated, and what your intentions are. Sellers often want to work with people that they feel they can trust, regardless of price. This is why it is important to answer questions directly and fully, even if they may not like the answer.
- Create An Exit Strategy
An exit strategy is how an investor plans to remove themselves at the end of a deal, and how they plan to make their profit. For a wholesaler, the typical exit strategy is being able to quickly assign contracts to end buyers, for a wholesaling fee.
In order to do so effectively, wholesalers should dedicate time to routinely build and maintain their wholesale buyers list. The more buyers you have on your list, the greater the chance that you will be able to turn over a property.
As previously mentioned, many wholesalers grow their list by attending networking and investment club meetings; and they maintain these relationships by getting to know each investor’s buyer preferences. In addition, following up regularly is a great way to know when investors on your list are actively looking to buy.
- Know the Rules
Although it all depends on the jurisdiction where you live, wholesaling can be tricky. There are lots of rules and regulations governing who is legally able to make a commission. For instance, in Maryland, only licensed real estate agents can earn a commission in a real estate transaction.
In that case, you could set up an LLC for the specific property and indicate that the buyer (you, the wholesaler) is that LLC “and its assigns.” This allows you to enter into a separate contract with an investor who will purchase the LLC, and therefore the assignment of the contract, from you.
Consider talking to a qualified real estate attorney to learn how you can wholesale legally in your state before entering into a contract with a seller. Also, make sure your contract has plenty of outs in case things go south and you can’t find a buyer.
- Research is Important
Before you strike your first deal, you need to know the markets you want to work in like the back of your hand. You have got to make sure you are getting properties at a price desirable enough for a fix-and-flipper (including your profit).
To set a desirable price, you should have a good handle on how to estimate construction costs – a friend or two in the business can help a lot with this. You also need a firm grasp on what a property’s conservative after repair value (ARV) is.
Real estate wholesaling isn’t for everyone. It needs a lot of time, commitment, and patience. You also need to have great communication and marketing skills. And it doesn’t hurt if you have a network of investors at your disposal who may be interested in buying the properties you wholesale.
Wholesale real estate presents itself as an excellent opportunity for beginners to enter the real estate investing arena, as it can require little to no capital, and is a great way to learn the ropes of the real estate industry. Some individuals like wholesaling so much that they make it their full-time career. Either way, if you are driven, disciplined and organized, there is no limit to how much money you can make in your wholesaling career.
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