In this episode of the FortuneBuilders Real Estate Investing Show, Jeff Rutkowski discusses the current state of the real estate market and provides tips and strategies about the process of reverse wholesaling.
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Strategies for Reverse Wholesaling
Everyone welcome to this week’s episode of the FortuneBuilders Real Estate Investing Show. Jeff Rutkowski here coming to you on the road, excited to get into a solo episode today talking about one of my favorite topics in real estate, and that is wholesaling. Now, you might be thinking, man, I’ve heard that before. The market is so competitive right now, that doesn’t work. I’m out to prove you wrong today. So stick with me. I think you’re going to be just as excited about this way of making money in real estate as I am.
Word of the Week
Before we get into it though, the Word of the Week. That’s the reverse wholesaling. A lot of people would like to make this sound off complicated and fancy, but it’s very, very simple. It’s just simply starting with the end in mind. Starting with your buyer. Starting with your rehabber. Starting with your buy and hold investor. Finding out what type of properties they want, where they want them, and then target your marketing in those areas. Pretty simple, pretty easy. But many people don’t take this approach and I don’t understand why. Let’s get into today’s episode. It’s going to be awesome
Find Cash Buyers
Step one guys is finding the cash buyers. So can you wholesale to a buyer that is going to get a traditional mortgage? Yes, but it’s risky and too many things that could go wrong. They have to get approved for the mortgage. They have to do an appraisal. They have to do a home inspection, and all of these different things. So if if I’m wholesaling you a property, one of the things I’m going to find out is basically, are you a cash buyer? I don’t care if it’s your own cash. I don’t care if you have hard money or private money in place, but I want to make sure that you have the cash to perform.
Remember, the whole premise with wholesaling is when you find a property, you’re making a promise to a seller that you’re going to close on this property in 30 days or less, or seven days or whatever you promise so I need to know that my buyer has the ability to meet the criteria that I gave to the seller. So we’re gonna get into that in a moment. But step one is if you’re wise, you’re going to start with finding and building your buyers list, and then getting to know the buyers on your list and knowing exactly what they’re looking for and where they’re looking.
I’m going to target this area with my marketing, whether it’s paid marketing, free marketing, or whatever method that you’re using. So we know we have buyers there. Now cash buyers, building your list guys is so easy to do. There are so many different ways of doing it. But this is going to be easy. There are so many people out there looking to buy real estate, to renovate, looking to buy real estate to buy and hold, they’re going to be happy to be on your list as a wholesaler somebody finding properties for them really doing the heavy lifting, and bringing them an opportunity on a silver platter that they didn’t spend a penny for in marketing.
It was just their relationship with you that is bringing them to deal. I’ve been investing for 17 years, and I’m always happy to put my information on somebody’s buyer’s list. And, I see I have another way of finding a property. So what am I looking for in a cash buyer? I’m looking for somebody that has the cash, hard money, private money, or, preferably their own cash who can provide proof of funds on that money and can close in seven days or sooner. Someone who has completed at least 20 deals of their own already, and is looking to buy at least one deal per month.
That would be kind of what I would refer to as like my inner circle buyer list. So when I have a property under contract, I’m gonna give it to those buyers. First, you don’t need a whole lot of buyers to do damage. As a real estate wholesaler, if you don’t have a good list of maybe five or 10 buyers that meet the criteria that I just mentioned, you could do some damage and do very well. Now, we always want to build that list bigger and it will build we’re doing this business the right way and will grow over time.
That will be step one: finding the cash buyers, and there are many different ways of finding them. You could find them all online. You could find them on meetups. You could just post an ad on your Facebook accounts and say hey, would you like to be added to my buyer’s list to be the first to know about opportunities in our market, to make money fixing and flipping or buying and holding a property. You’ll attract people very easily doing it that way.
Find Motivated Sellers
Step number two would be finding motivated sellers. We talk about this all the time on this show. There are so many ways to find motivated sellers I wouldn’t recommend this nowadays because there are so many easier ways of doing it, but when I got started I would go down to town hall and I would pull the properties that are facing foreclosure or properties that were in bankruptcy and I would go door knocking. I got a lot of doors shut in my face and things like that.
Thankfully, through technology and a lot of software available, we could have that at our fingertips. Network marketing is fantastic. Bandit signs in some markets will still work for you. Direct mail has been really tried and true. When you learn how to acquire properties subject to and owner financing you can actually approach other wholesalers that don’t know how to execute those strategies and ask them for their dead leads. A lot of those dead leads you can acquire subject to or owner financing and throw them in assignment fees for basically going through their garbage and taking advantage of an opportunity that they weren’t educated enough to take advantage of.
So obviously I’m not getting into marketing today but so many different ways of finding motivated sellers, but what works best for me is absentee owner lists. I love an absentee owner. If you’re not familiar with that term, it is somebody that owns a property in Atlanta, Georgia, but live in Texas. So they have a rental property or an extra property and they live in another state. Most people don’t hire professional management companies to manage their assets. And then they own property out of state, they’re trying to manage it themselves, or they’re trying working with some low-budget local manager. That’s not very good. Maybe they are having trouble with attendance, a lot of different headaches that can happen.
For the average person without good quality management, when they own an asset out of state, I love that list. I’m doing very well with that list over time. I do very well with realtors, too. I know working with agents it’s very competitive right now. Take agents to lunch or take agents to coffee and just spend some time with them on the phone get to know them. Let them get to know you. You want to do this with as many agents as possible and get to where you’re the one they start sending their pocket listings to. The whole key is when an agent sends you the first pocket listing and that deal makes sense for you. You just want to make sure you perform and you perform well, that you make their lives as easy as possible. Agents typically are going to bring the deals to the people that they know will make their lives easy. When they say they’re going to buy the property they’re able to back it up by performing. So that’s a couple of tips for finding motivated sellers.
Make an Offer
Let’s start with number three: make an offer and get it under contract. Once you get a property under contract, you now have nonbinding ownership of that property. They call it a contractual interest or an equitable interest in the property. To me the best way of looking at it to where you own that property, you own the rights to buy that property. You own the property technically, but you own the rights to buy that property. Nobody else can have the rights to that except for you. Once you place a property under contract you know how to run your numbers, you have created an asset. You have created something of value.
So the wholesaler that I was talking about at the beginning of the show found a property in Virginia Beach, actually Newport News to be exact, Newport News, Virginia. And it’s funny I used to live out in Newport News. When I joined the Navy, I was stationed out in dry docks in Newport News for six months and then moved over to Norfolk, but this particular kind of is like two miles from the shipyards where I used to live when I was 18 years old. Anyway, this wholesaler found the property and got it under contract. He called me up and I was willing to pay an assignment fee to take over that contract, step into his shoes, and then pay the seller what he agreed to pay the seller.
So it’s really that simple, guys. This is when you hear people talking about getting started in real estate with no money, no credit, and no financials. This is what they’re referencing. 99.9% of the time, is if you learn how to become a finder of motivated seller leads, and then learn how to evaluate those properties and quickly get them under contract.
“That is, in my opinion, one of the most valuable skill sets you can develop in this business.”
And then you have a line of people like myself waiting up waiting to buy those properties from you.
Summary
That is it for today, folks, just wanted to share with you something just because like I said, I’ve heard a lot of people out there kind of beating up on wholesaling and saying it is not an effective strategy. I’m just thinking, my gosh, to me, it’s one of those tried and true pillars that has been all in my business from the very beginning, up until most recently securing that property just a week ago. But again, if you’re interested in getting started with real estate, no better place to learn than FortuneBuilders. I’m not just saying that because I host their show. I’m saying that because I’m a product. I started as a student, and it changed my life. So I encourage you to jump in, get yourself educated, and get out there and start buying properties. I appreciate you guys tuning in. Like us, subscribe, and share us with a friend. And we’ll see you next week at the FortuneBuilders Real Estate Investing Show. Thanks, guys. Take care.
