Wholesaling Houses Step by Step Guide for Beginners
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 strategy 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 houses.
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Wholesaling Houses Process
The process of wholesaling involves someone like you, finding a home that is not yet listed for sale and the homeowner is ready to sell it quickly for a deep discount. These types of sellers are better known as motivated sellers.
Motivated sellers are people that may be behind on their mortgage payments, need to move or relocate quickly, inherited a home, in foreclosure, tired landlord, the house needs repairs they can’t afford, etc. Once you find the property, you make a cash offer to buy it from the seller.
If the seller accepts your cash offer, next you send them a simple contract to purchase the house at the agreed purchase price. Once the seller signs the agreement and you have the property under contract. You then find an interested cash buyer who wants to purchase the home at a higher price. This may be a fix and flip investor or a landlord who wants to fix and rent the home out.
Once your end buyer closes on the property, you collect your assignment 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:
Guide to wholesaling real estate
Total Time: 14 days
Build a powerful 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:
• Craigslist
• Networking events
• Real estate auctions
• Other real estate wholesalers
• Attending real estate meetings or events
• Joining Facebook real estate investing groups
• Generate leads online with a cash buyer website
• Asking business professionals whom you already know
Start searching for wholesale opportunities
There are many techniques you can use to find motivated sellers. They may have inherited a house they don’t want, perhaps they are behind on their mortgage, or any number of other reasons they just need 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 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:
• Place yard sale signs that say WE BUY HOUSES (you have likely seen them before, they work and are inexpensive)
• 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.
• Knocking on the doors of homes you think may qualify (be tactful as not everyone will appreciate your offer to purchase!)
Once you find a deal, 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 protect you and secures the home.
You will want to agree on an exact purchase 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 wholesale deal out there and find an interested cash 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 cash 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 wholesale 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 assignment 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 wholesale deal from you.
Supply:
- Computer with internet access
- Phone
Tools:
- Mode of transportation
- Real estate wholesaling software
- Motivated seller leads
- Cash buyers list
- Lock box
- Video recorder
- Camera
Materials: Wholesaling real estate contracts and business cards.
Conclusion
Certainly, there is some work involved in making money via real estate wholesaling, but in reality, it is as simple as the wholesaling real estate for beginners guide above.
Find a house, make an offer, put it under contract, find a cash buyer, assign the contract and collect your fee! As you become more experienced with the process. You may even establish your own real estate investor 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!
About Author
The South Texas Wholesaler
JR Medrano is a real estate investor who specializes in wholesaling inherited homes. He has been wholesaling real estate in the Corpus Christi, TX area for the past 7 years. If you would like some honest advise about wholesaling houses. Feel free to contact him at anytime.
I was wondering something. Do I need to buy the house first? My understanding is that you make a contract with the seller then find a buyer and charge a higher price than the seller agreed upon. The buy buys it and your money is the difference in cost. So if the seller wants to sell a house for 100,000 you charge a buyer for 110,000 and you earn 10,000.
Hey JR, let’s say I find a seller and we agree to a certain price… let’s say 180k do I discount the wholesale fee from that 180k or is it added?
& that wholesale fee will go on contract correct?
One more question.. when finding a seller do I tell them the honest truth that I’m a wholesale real estate investor?
Sorry for all the questions.. I’m a beginner taking in all the info I can right now.
Thank you JR!
Hey Pablo,
– What I would do is run the numbers.
ARV X .70 – repairs – assignment free = MOA
Lets say my MOA is $100k. I offer the seller $100k and they except it. I would write up a PSA for $100k and get the seller to sign it.
Once I have the property under contract. I start marketing the property with my mark up price to my cash buyers list.
– When I talk to sellers I tell them the truth. I tell them that me and my partners are looking for houses to buy.
Hope this helps.
J.R. Medrano
Hi J.R.
Thanks so much for this post plus the Q&A, I have a quick question.
Is there a contract template? Or do I need to hire a lawyer to draft one up? If there’s a template, where do I find it to download or purchase it?
Hey Eddie,
Your welcome.
– If you use real estate investor software like FreedomSoft, contracts should be included ready to edit and print.
– You can purchase real estate wholesaling contracts → HERE ←
– A real estate attorney can draft one up for you as well.
I hope this helps.
J.R. Medrano
you can’t sign a legal contract until you are 18.
I am 16 years old and I want to start wholesaling, The problem I am running into is how do I talk to the sellers and can I get a contract and then sell it to a company on craigslist that buys houses?
Hey Jrayen,
I think you might be interested in this free training webinar:
☞ How To Find and Flip Houses On Craigslist ☜
Good Luck!
Hello , I have a quick question do you need cash to make an offer to them? And what do I write on the paper?
Hello Tamata,
If you are talking about making a cash offer to motivated sellers. The way I do it is give sellers a verbal cash offer over the phone.
As far as having cash in hand to make a cash offer. No you don’t have to have cash in hand. You will need cash at the closing table. This can be your own cash, hard money, or private money.
The way I do it is assign my purchase contract that I have with the seller to a cash buyer. My cash buyer will bring the cash to the closing table and close on the property.
Let me know if I can help with anything further,
J.R. Medrano
Hi JR,
I’ve been searching for information about the best way to get started in wholesaling. Even the pros and cons. How to be successful at wholesaling. I’m willing to do what it takes. Can you help me? I’m in the midwest. Thanks
Hi Ellice,
The way I learned how to wholesale houses was by watching a ton of YouTube videos for about 2 weeks. Then I took action and found my first motivated seller on craigslist.
Then I got the property under contract and sent the house information to a cash buyer that I found on craigslist a week before.
That was the very 1st deal I ever closed. It only took me 2 weeks to close the deal from the 1st day I started taking action.
I made $7,500 on that 1st wholesale deal!
So maybe you could learn how to wholesale houses like I did. Or if not, here are 2 other options you may be interested in:
CLICK HERE ➜ Download step by step training
or
CLICK HERE ➜ Join How to find & flip houses on craigslist webinar.
Let me know if I can help with anything further.
Good Luck!
J.R. Medrano