One of the most popular ways to get started in the real estate investing business is by wholesaling. Even if you aren’t new to the business, but are looking for a way to grow, wholesaling can be a viable option. A wholesale deal consists of finding a property for an end investor. You could either assign the contract or simply pass it off and be done with it. Most wholesale investors work off a flat fee, but you can negotiate to get a piece of the deal or any other pay arrangement that works for you. The best part about wholesaling is that you are not putting up any of your own money and have little at risk. While this may sound too good to be true, there is plenty of work required and not everyone can do it. If you want to get the most out of your wholesaling business, there are a few simple tips you can follow.
Like most businesses, the key to survival is keeping leads coming in. Having a successful wholesale business is no different, in that you will have to constantly find new deals. Fortunately, there are a few ways you can do this. The most popular is by making connections with local realtors. If your realtor has access to real estate owned properties, there may be enough margins to wholesale out. With short sales on the decline, there is less bank owned inventory available, especially with spreads enough to pass along. The more realtor contacts you have, the higher chance you can find good deals. In addition to realtors, you can also conduct marketing aimed at finding deals on your own. This step will require a budget and plenty of effort on your part. Sending out a few postcards a week will not get the job done. You will need a good list, a good letter or postcard and the time to handle incoming phone calls. If you are not following up on your leads, you will not grow your pipeline like you need to.
Once you get homeowners calling, the next step is negotiating the best price. Even if a homeowner is late and facing foreclosure, they are not going to accept the first low-ball offer you throw at them. Negotiating with homeowners that have equity and just want to get out is one thing, but dealing with a bank is another. To get the lowest price from the bank, you need to justify your offer. This means getting a signed authorization from the homeowner to submit documentation on their behalf. This documentation should include anything negative about the property, a list of repairs needed, cost of repairs and anything else damaging that you find. If it is a new listing, you will have a hard time getting approval in the first thirty to sixty days. If the property has been on the market for months without much activity, the lender may be willing to take a cash offer with a quick closing. If the accepted offer is low enough you may be able to attract investors to your property.
If you are fortunate to have leads and deals, you need to be able to do something with them. Building a pool of end buyers is almost as important as getting new leads. This is something you should work on every day and at every event you are at. Real estate investment groups and networking clubs can give you a jumpstart on this, but there are also many other ways to find buyers. Every time you drive by a “we buy houses cash” sign, you can jot down the number or email address. Craigslist is also another easy way to find buyers. Most areas have numerous real estate listings daily and most of these are from investors. Just like dealing with realtors the more buyers you have access to the more options you have. Sending your contact list email updates on any new properties will keep them interested in you and your business. Take the time and find out what they are looking for and how they want to do business. If you can find one end investor that will offer consistent business you are ahead of the game.
The wholesale business will offer its share of challenges. For every deal you get accepted, you may have nine others that are rejected. This is part of the business. The sooner you can come to grips with that, the better you will be. Regardless if you are a realtor, attorney or end investor, you want to work with people that you feel comfortable with and can get the job done. Many wholesaling relationships in a given area are built by people that have taken the time to establish a network and deliver what they say they will. It can be easy to get started on this side of the business, but you will only stay in it as long as the people you work with trust what you are saying. Not every property can offer $100,000 profit after repairs. If you are realistic with what you have, you will get a chance at repeat business which will keep you in the industry for a very long time.
