There are many ways that this can be accomplished and today we’re going to talk wholesaling properties to other investors.
Wholesaling is the process of finding real estate deals well below market price (usually 50-65% of market value), putting the deal with a contract, and then flipping the contract to another investor. That investor will then rehab, hold, or resell the house. The most important thing about wholesaling is getting you numbers right. You want to make sure that your list trusts you, and they know that you did your homework before sending them the deal.
Knowing your numbers in real estate can be tricky. You are pretty much forced to have access to the MLS (Multiple Listing Service) or become an agent yourself. This is because the real estate market is moving so fast right now that you can’t just rely on sold properties that you can find on online real estate sites. You have to look hard at the pending transactions because they will tell you what’s sell RIGHT NOW!
Finding your property deals will need to become a science for you! Some of the main techniques are putting up bandit signs around the neighborhoods that you want to work in, sending out direct mail campaigns to list of specific sellers, and networking with other investors that might have deals.
The amount of profit that can be made on each wholesaling deal will vary depending on the real estate market that you’re in and the deal itself. Usually the profit on each deal is $5,000-$10,000, but can be much more if the deal is really good and the numbers make sense for the buyer.
Wholesaling real estate action plan
- Buy 100 bandit signs that say something along the lines of “we buy houses” (or whatever catchy phrase you come up with) and put them up 33 signs at a time for 3 fridays in a row. Make sure that you put them up in heavily trafficked areas. This will be your testing phase. When you get calls on the signs you’ll need to evaluate the deals and decide if you’ll be able to lock them up at a number that will work for you and your potential buyers. If at the end of 3 weeks you haven’t received many leads you’ll have to consider either targeting another area for your real estate marketing campaign or focusing your time on another form of marketing.
- Do a google search for “real estate list providers”, then pick a list that will support people with equity in their houses. Some list providers will have the amount that people owe on their mortgages. If you have this you can target people that have equity in their houses. When wholesaling real estate you’ll need to find the people with equity because you can’t buy the property low if there’s no equity in the property. Once you have your list write 5-7 letters that that you’ll send to your list one each week. Ideally you want to have a return address (that isn’t your home address!) so you can track bounces. If letters come back then you need to take that person off your list. We’ve found that direct mail always works, so if it isn’t working for you it’s either because your list is bad or your copy is bad. Keep adjusting until you get 5% or more of your list calling your as leads.
When you get calls try to get as much info about the house as possible before going out to the house. You should really know if the house is a potential deal before going out. Some key questions are:
- What are you looking to sell the house for?
- Is that the best you can do?
- Are there any repairs needed?
- Who’s on the title?
- Who’s on the mortgage?
- How many beds/baths.
- What’s the square footage?
- How soon do you need to sell?
- How much do you owe on the house?
- If I could make you an offer today what’s the lowest you could go?
The major reason for asking these question is for you to gauge motivation. If their just trying to figure out how much you’ll pay for their house then it probably isn’t a deal, and you won’t want to waste your time going out to the property. After determining that the seller is motivated then take some time to pull your comps (or have your agent pull them). You’ll need to come up with a solid quick sale price for the property, then subtract the repair costs, and multiply by 70%. That number (or below) is what an investor will want to buy the property for, so you’ll have to get your purchase price below that number to make a profit. You NEVER want to send out bad deals to your investor buyers!
Now let’s circle back around to your making $100,000 in 2011. If you’re wholesaling real estate you’ll need to do 10-20 wholesale transactions in 2011 to hit your number. This is all about marketing and knowing your numbers. When I say knowing your numbers I mean tracking your marketing numbers so you now what’s working and what’s not working, and knowing your real estate values so you can make solid offers on properties.
If you have any questions about this process or how you can work with us to make life easier shoot us an email at [email protected]