It’s Simple! Wholesale Real Estate Step By Step
Key Takeaways
If you want to start making money in real estate quickly, it’s time to consider wholesaling. Closing a wholesale deal for the first time is a major accomplishment for any investor, due to the fact that the wholesale process is different from more traditional types of real estate transactions.
Not sure how to get started? Our easy-to-follow wholesaling real estate step by step guide has everything you need to ensure your first wholesale deal runs smoothly.
The Anatomy Of A Wholesale Deal
The reason a wholesale deal differs so much from rehabbing and buy and holds is because the wholesale investor never actually owns the property. Sounds strange, right? Fortunately, it’s not as strange as it sounds once the approach has been broken down. Below we will review how to wholesale real estate step by step, which will help even the most beginner investors get a better grasp on the process.
When it comes down to it, a wholesale investor is both an expert marketer and savvy networker. For instance, a wholesaler builds relationships with other professionals in the industry in order to create a buyers list. They then utilize their marketing skills to find wholesale properties in their desired market. Once they’ve secured a property, they contact a buyer from their buyers list and assign the property’s contract to that end buyer.
Wholesaling has become common practice for many very successful investors, which begs the question: How does a wholesale investor make money?” Simply put, when a wholesaler assigns his or her contract over to the end buyer, they are given an assignment fee (similar to a finder’s fee), which is usually a small percentage of the property’s value.
Still sound confusing? It won’t be after you consult with our seven-step beginner’s guide to closing a wholesale deal.
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How Does Wholesaling Work In Real Estate?
In real estate, wholesaling serves as a versatile exit strategy that can suit several different investor personality types. For starters, the wholesale process is known to have one of the shortest completion timelines, compared to other investing strategies. When done correctly, an investor can receive their assignment fee in less than a month (sometimes in as little as a few days). For this reason, wholesaling can be a great fit for investors who prefer to make profits in the least amount of time possible.
Another appealing aspect of wholesaling is that investors get to have complete control over the volume of wholesale deals that they process over a given period of time. For example, those who want to pursue wholesaling full-time can pursue a high volume of deals, while others who wish to wholesale on the side can process as many deals as their schedule allows. Be sure to read this guide to part time real estate investing to get more ideas on how to get into real estate investing on the side.
Finally, wholesaling serves as a great entry point for beginners who want to learn how to invest, but have no prior real estate knowledge. In the process of delivering a wholesale deal from beginning to end, a beginner will become immersed in skills vital to any investing operation such as marketing, networking, minding due diligence, and coordinating a real estate transaction. In addition, they will be sure to learn the ins and outs of the real estate market as they hunt for wholesale deals. Beginner investors who have limited access to capital, or are still working to build their credit, can also participate in wholesaling. Find out why in the following section.
Do You Need Money To Wholesale Real Estate?
If you have ever felt discouraged from getting started in real estate investing because you don’t have a lot of cash, or because you have a less-than-perfect credit score, you should know that you can get your start wholesaling real estate today. Because a wholesaler assigns purchase contracts directly from sellers to end buyers, they are not required to purchase property themselves. Because of this, meeting the various eligibility requirements of financing, such as income level or credit score, doesn’t pose as a barrier. For these reasons, wholesaling is a great way to gain valuable skills and learn about the real estate market, while you save up money and build up your credit score.
Even experienced investors might turn to wholesaling to finance other types of real estate deals. For example, an investor who prefers to make all-cash offers on their rehab deals might turn to wholesaling to replenish their personal capital in a short amount of time. For these reasons, understanding how to wholesale real estate step by step is a credible way to segue into other types of investment strategies.
How To Wholesale Real Estate Step By Step
Now that you understand the various benefits of becoming a wholesaler, you may be wondering exactly how the wholesaling process works, and what kind of skills and resources are required to successfully complete your first deal. The following wholesaling real estate step by step guide will help answer your questions:
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Mind your due diligence
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Build a buyers list
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Market to motivated sellers
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Get a property under contract
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Find your end buyer
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Assign the contract
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Close the deal and cash your check
Mind Your Due Diligence
The first step to any wholesale deal involves researching and strategizing. Spend time educating yourself on the overall process, so you know what to expect before you start searching for properties. Reading through this wholesale real estate step by step is a great place to start, but additional resources can be helpful as well. A great place to start is by attending a real estate event in your area. Network with other investors, and sit down with someone who has experience wholesaling in your area. This will help you get a better feel for the process, and it could lead to a helpful industry connection down the road. As you learn what to expect, you will be better prepared to start conducting local market research and devising a business plan.
Build A Buyer’s List
A buyer’s list is essentially a category of potentially interested investors, entrepreneurs and homebuyers. Building a list of usable names will certainly put your networking skills to the test, but it will be well worth it. A strong buyer’s list will make sure you always know where to go with deals. Buyers can be found in a few places ranging from direct mail to bandit signs, though one of the best ways to build a list is through personal connections. Connect with other real estate professionals to expand your network, and don’t forget to jot down the contact information of anyone you see as a potential lead.
Market To Motivated Sellers
After crafting a solid buyer’s list, it’s time to start searching for motivated sellers. A motivated seller is any homeowner eager to get rid of their property. This situation can happen for a number of reasons: they could be behind on mortgage payments and hoping to move or maybe they recently inherited a property they aren’t sure what to do with. No matter the reason, motivated sellers are your best bet at getting a property under contract for a good price. To find motivated sellers, try targeting lists of delinquent taxpayers, homeowners in pre-foreclosure and absentee owners. Once you have created target lists, design your marketing campaign. Even in this digital age, direct mail has been proven to be the most successful marketing strategy when targeting motivated sellers.
[ If you want to learn more about the best way to contact motivated sellers, check out this script. ]
Get A Property Under Contract
When you successfully acquire a motivated seller, come to an agreement on the correct price and terms for the property at hand. Make sure you are on the same page as you negotiate the contract, and include all information in the agreement. It can be helpful to educate yourself on the legal process of a real estate transaction at this time. Some investors will even consider working with a legal professional to ensure they leave nothing out.
Find Your End Buyer
As soon as you get a property under contract, the real work begins. Your end goal at this stage will be to assign that contract to an interested buyer. If all goes to plan, it will be one from the list you created earlier in the process. Put together a list of comparable properties, estimate the potential cost of repairs and get a title report done. Then, start reaching out to potential buyers from your list. Keep in mind that different types of properties will attract different types of buyers. Properties requiring significant restoration may attract rehabbers, while homes in need of a few minor repairs may be suitable for a rental property investor. Familiarize yourself with different real estate exit strategies to get a better idea of what type of buyer your deal will warrant.
Assign The Contract
Once you’ve identified the end buyer, create an assignment of contract agreement. Be sure to agree upon your assignment fee and deposit amount, and include this information in your final agreement. While the contracting stage may sound complicated, it is actually relatively easy to navigate. Your final contract should simply state that you are assigning the contract for X amount of money. In doing so, you will make sure all parties are on the same page (and that you are paid accordingly).
Close The Deal & Cash Your Check
On the day of closing, make sure your end buyer is present so they can sign the appropriate documents. They should arrive with the correct forms and payment to purchase the property, including your assignment fee. Once the title company accepts the payment, they will cut you a check for the amount of your fee. Finally, if you plan on completing more wholesale deals in the future, consider asking for a testimonial for your portfolio. Congratulations, you just completed a step by step guide to wholesaling real estate.
Summary
By following our wholesaling real estate step by step guide, you’re already miles ahead of most beginner wholesalers. That’s because many individuals make the mistake of throwing themselves in without minding their due diligence and educating themselves on the wholesale process. By immersing yourself in research on the art of the deal before you get started, you’re already setting yourself up for success.
Were you surprised to learn that you don’t need money or perfect credit to become a wholesaler? Feel free to share your thoughts on wholesaling in the section below:
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