Have you ever seen an infomercial about real estate and heard something along the lines of: “You can invest in real estate, without using your own money, with little to no risk, and still make HUGE profits!”
Your first thought may have been “sure, sounds too good to be true, then it probably is.” Well, in many cases, yes, it can be very difficult to make serious money in real estate with very little risk, but, there is definitely one technique that pretty much fits this bill, is completely legitimate, and you can get started doing it with little to no money at all. It’s called WHOLESALING.
Wholesaling Houses Process
The process of wholesaling involves someone like you, finding a home that is not yet listed for sale but whose homeowners are ready to sell it quickly for a discount (these people may be behind in their mortgage, need to move quickly, the house needs repairs they can’t afford, etc.) Once you find the property, you make an offer to buy it from the owner.
If they accept, you create a simple contract to purchase the house. Then you find an interested cash buyer who wants to purchase to rehab and flip or rent, and you collect your fee. It really IS that simple, but there is certainly some work involved.
Wholesaling Houses Step by Step
In order to really educate you on the process, below is a more detailed breakdown of the steps:
Time needed: 14 days.
Wholesaling Houses Step by Step
- Build the cash buyers lists
Your buyers list is your MONEY list. This is a list of real estate investors who are looking for the exact types of properties that you have to offer them. They may want to tear them down and rebuild a new house, simply fix up the existing structure and sell, or do a light rehab and put it on the market for rent. While the process of creating a buyers list can take a little time, it is time well spent. You want to find qualified buyers who can pay cash for deals quickly. You can find cash buyers via
a. Networking events
b. Attending real estate meetings or events
c. Joining Facebook groups
d. Asking business professionals whom you already know
- Start searching for wholesale opportunities
There are many techniques you can use to find motivated sellers who have homes they are ready to get rid of. They may be relatives who inherited a house they don’t want, are behind on their mortgage, or any number of other reasons they just want to get rid of the house quickly. While you CAN market to these folks for little or no money, having at least a modest marketing budget here will yield the best results. You want to target people who are delinquent on property taxes, own a home but live out of state, or are nearing foreclosure because of missed mortgage payments. Here are a few ways to contact these folks to secure your first (of many) wholesale deals:
a. Place yard sale signs that say WE BUY HOUSES (you have likely seen them before, they work and are inexpensive)
b. Send postcards and letters to homeowners you have discovered searching for the criteria above. Include your info and that you are interested in buying their home quickly for cash.
c. Knocking on the doors of homes you think may qualify (be tactful as not everyone will appreciate your offer to purchase!)
- Once you secure one, lock it under contract
Once you find a motivated seller, it is time to write up a contract offer. It is best to look online for legal templates that pertain to your state or even consult with an attorney to ensure the documents protects you and secures the home. You will want to agree on an exact price and a proposed settlement date for sale. This is NOT a closing, but simply locks up the house as your INTENT to purchase it in the future.
- Contact your cash buyers list to find an interested investor
Once you have a property locked up with a contract, it’s time to hit your buyers list. You can make phone calls, send emails, post in a private Facebook group, whatever your heart desires. The goal is to get the deal out there and find an interested buyer ASAP. If the margins are good, then it shouldn’t be hard. The better the deal, the more investors who will be vying for it. Again, taking the time to build a valuable buyers list will have made this step MUCH easier. If you don’t get anyone interested immediately. Start reaching out to your buyers list individually to go over the specifics of the property. Provide pictures of the property and highlight the reasons the deal could be profitable for them.
- Assign the contract & collect your fee
Once a buyer steps up and is interested in the deal, it is time for you to ASSIGN the contract. This is a legal process that involves you assigning the contract you have with the seller to the new buyer. This new buyer will be the one who actually purchases the house at settlement. This is the time where you make YOUR fee. Because you found the house and originally locked it into a contract, you are entitled to the WHOLESALE fee. The amount can be dependent on just how much money is to be made by the end investor, but anywhere between $5,000 and $10,000 is common. You may collect this fee upon assigning the contract, or you may collect it at settlement. That is between you and the investor who purchases the deal from you.
Certainly, there is some work involved in making money via real estate wholesaling, but in reality, it is as simple as the wholesaling houses step by step guide above.
Find a house, make an offer, put it under contract, find a buyer, assign the contract and collect your fee! As you become more experienced with the process. You may even establish your own website and consistent advertising that will result in sellers bringing their deals to YOU.
This is an amazing place to be and through some hard work and due diligence. You can make a significant income wholesaling houses following the step by step guide above. Good luck in finding your first deal and securing your first wholesaling fee!