Category: Wholesaling

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Wholesaling

Bandit Signs — Lead Magnet or Eyesore

Image by: Collis

You know those ugly signs you see when you’re sitting at stoplights that offer to BUY YOUR HOUSE FOR CA$H — those are called bandit signs. They are a disputed tactic in real estate circles, some people swear by them while others shun them. 

Why They Work

Do you ever think to yourself, “Who keeps putting up these stupid signs?” Or better yet, “Who actually calls these numbers?” You might be surprised by the answers to both questions.

  • Answer #1 – Property wholesalers are responsible. Wholesalers look for motivated sellers to buy their (usually) distressed homes. Then they mark the price up and try to sell them off was quickly as possible without making any repairs.
  • Answer #2 – It should come as no surprise, but motivated property owners. They’re lured by the idea of getting quick cash and getting rid of a property they don’t really want.

So why are they so effective? The signs are purposefully designed to be simple and non-threatening. They target motivated sellers who want or need to get rid of their homes fast. The message is simple and clear. That’s why they look like some guy with a magic marker scribbled his number on some poster board and nailed it to a utility pole or stuck it on someone’s front lawn. And that’s not far from the truth, except for most of them are made from corrugated plastic. By being ugly and straightforward, homeowners are less intimidated to phone an “average Joe” than some real estate agent. 

Legality

They are called bandit signs for a reason — they violate city ordinances in almost every community across the country. They are considered litter, so city crews just throw them away. That’s also why they usually pop up on Fridays after city offices close. Hefty fines can be levied per infraction and increase with the number of violations. Clearly, wholesalers remain unfazed by the threat of fines.

How To Profit From Them (Without Getting Caught)

1) Keeping your message simple and brief. 

2) Not using your company name. 

3) Taking the proper steps to avoid getting fined:

  • Only use prepaid cell phones (burners).
  • Never use your own name.
  • Place your signs on the weekends, most city employeesonly work Monday thru Friday.
  • If possible, use private property to place your signs. Ask the owner first. 

4) Placing them in high traffic areas for maximum exposure.

Wholesaling is YOUR business, only you can determine what strategies to implement to meet your income goals. Bandit signs have been proven to be excellent lead magnets, but they aren’t the only tool at your disposal. If you decide to use them, it’s best to incorporate them into your overall marketing strategy.

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Wholesaling

Where To Find Leads For Wholesaling Houses

A woman in a suit.

Depending on your budget and goals, wholesaling deals can be found anywhere where you have motivated sellers, even in wealthier neighborhoods. Let’s be honest, though, most opportunities present themselves in more distraught communities where there are more distressed homes and foreclosures. 

Tips For Locating Wholesaling Opportunities

  • Homes facing foreclosure or that already are in foreclosure, bank-owned properties, and property auctions present excellent opportunities for wholesalers. Foreclosures, however, are not limited to low-income areas, the crash of 2008 is a good example where millions of people faced losing their homes. People lost jobs, had medical events, or got divorced, even in affluent neighborhoods. These life-changing events affected anyone who wasn’t prepared with an emergency fund.
  • Characteristic signs of potential opportunities often include boarded up windows and entryways and unkempt landscaping.

If you’re having trouble finding properties to wholesale, look in areas where other, more experienced, wholesalers are buying.

  • Low-income areas and neighborhoods where many of the homes are rented present a good opportunity. They are prime breeding grounds for flippers or landlords who own houses in the area. These people are often looking for new opportunities. Many investors don’t know how to find deals, are too busy or just aren’t interested in hunting them out. That’s good for you. This gives you a chance to put a property under contract and to offer it to a local investor looking to add to their portfolio.
  • Neighborhoods with one or two homes per block are areas you want to avoid, there’s little upside and low probability that you’ll be able to move them. As they say in real estate — location, location, location. As a wholesaler, you want to get your property sold as quickly as possible. A flipper will only buy the property if they’re confident they can sell it after renovations. And a landlord won’t see the point of purchasing a property if there is no potential for renting it out.
  • Hot Tip of the Day: Look for areas with newly built government housing. Not only do these areas typically have fewer vacant properties, they generally have plenty of homes in need of rehab. Finding neighborhoods where people are investing is promising. New home construction is a sign of stability or even growth. 
  • The internet age means it’s possible to find sellers without ever having to leave your couch. Digital “bandit signs” and pay-per-click ads on Google or Facebook are highly effective at honing in on a specific demographic. Using layered options and detailed targeting, you’re able to get your ads in front of an audience that will be more interested in hearing about your offer. 

Running any business has its challenges, it’s your job to be creative and stay abreast of market trends. Finding properties to wholesale isn’t that difficult, but it does take some work. As you gain experience, build your buyer’s list, and hone your negotiating skills, it will get easier. Combining strategies will increase your odds of locating profitable deals.

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Wholesaling

When To Walk Away From A Wholesale Deal

When To Walk Away From A Wholesale Deal.

When wholesaling properties, transactions don’t always run smoothly, sooner or later you’re bound to come across some deals that don’t go your way

The more experience you get as a wholesaler, the more will you be able to manage these imperfect situations. Other times, however, you’ll find that the deal just isn’t going to be worth your time, that’s when it’s time to walk away.

Sometimes you can’t agree on a price, other times circumstances change, that’s why you have to have an ironclad contract with contingencies that will allow you to get out if needed. Having something in writing will protect you when you’re faced with adversity or a worst-case scenario. To be a profitable wholesaler, you need to stick to your plan. Hold firm to your requirements and don’t allow yourself to be taken advantage of.

A good buy will ultimately depend on how well you negotiate the terms and conditions of the contract, it’s a give and take. Do not bend on your principles or agree to terms that don’t fit your strategy. On the flip side, this is a negotiation, so avoid being too hard-nosed, as well. If you can’t agree on critical criteria, it’s time to walk away.

When you locate a property, you’re eager to get the property under contract so you can find a buyer and collect your check. As with any other business transaction, when there are multiple people involved, timetables can get messy. Inspection dates and closings get bumped all the time, so you should allow for a reasonable amount of flexibility. One of the keys to successful wholesaling is seller motivation. When deadlines are not being kept or if you feel like the seller is stalling, it’s time to walk away. 

This sounds like a no-brainer, but if you won’t make enough money, then don’t waste your time.

There are a couple of reasons for little or no profit. First, the After Repair Value (ARV) is too low. There’s no point in buying a property if won’t be able to sell it for a profit. Second, there isn’t enough equity. Sellers want to walk away with at least a little cash in their pockets, but if they’re upside down, you’d have to configure a short sale. A short sale brings an extra hassle, but it is possible. However, very often, sellers don’t have the money to bring to closing. So if either of these is true for you, it’s best to walk away.

The world of real estate is forever changing. New laws, new code requirements, new zoning ordinances are changing the face and landscape of real estate. Stay abreast of current changes to avoid getting stuck with a property under contract and not being able to find a buyer for it. If any newly introduced factor will prevent you from being able to turn a profit, it’s time to walk away. 

As you grow your wholesaling business, you’ll learn to spot warnings signs that will trigger your instincts. You’ll have a sense when there isn’t enough upside to make the deal worthwhile. Not all of your transactions are going to be home runs, but do your due diligence and stick your plan. There will always be another property that will fit your parameters. When you see that things are headed south, it’s just best to walk away. 

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Wholesaling

How to Wholesale Houses with Mortgages

A row of houses.

To be a successful wholesaler, you have to be prepared to work every deal you find, even when they aren’t ideal situations

A motivated seller is a motivated seller. If there is money to be made, don’t let a small glitch prevent you from considering a deal. Wholesaling houses with mortgages is part of that deal.One of the burdens of home ownership is the mortgage. Even homes in affluent neighborhoods go into foreclosure. Remember the crash of 2008? Millions of homeowners lost or were at risk for losing their home because they were underwater on their loans. 

Equity Is King

Some wholesaling deals will involve houses with debt. What matters to you as a wholesaler is the amount of equity the seller has in their home. It’s much easier to close a deal if you can offer them more than what is owed. They’ll simply use the proceeds from the sale to pay off their loan. 

Some homeowners are still hesitant because they aren’t motivated enough. When the seller needs some convincing, remind them of the cash they’ll have in their pocket when this is all over. Look, the seller wants two things from the sale of their home, 1) to get out from under their home debt, and 2) to walk from the deal with some cash in their pocket. If your offer price is higher than what they owe, then the latter is true, but that’s not always the case.

The Short Sale

A less desirable option is the short sale. This type of transaction occurs when a seller owes more on the house than it’s worth. Though this is not ideal, anything is possible. Many wholesalers would, instead, not get involved with short sales because of the extra hassle involved and find it not worth their time, so they move on. This presents you with an opportunity. The seller would already have to be in default on their loan, be willing to take a hit to their credit score AND be able to bring cash to the closing table.

It’s important to realize that there are many reasons why a seller might be eager to sell or why they are behind on their mortgage payments. They may have inherited the home or suffered a job loss. Just because they are underwater on their mortgage, doesn’t mean that they don’t have cash in the bank. They may be going through a divorce or being relocated for work. The takeaway here is, don’t presume anything, your goal is to make money. If the deal presents an opportunity to do so, don’t make assumptions about the seller’s motivation.

Wholesaling houses with mortgages is really no different than most real estate transactions. It is far more common to find a seller that still owes on their home than one who owns it outright. As a wholesaler, that is the leverage you want. Your only concern is, can you find a buyer? It doesn’t matter to you how much the seller owes if you can strike a deal that turns a profit. 

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Wholesaling

How To Find Cash For Your Flipping Deals.

You have a found a great property for a fix-n-flip, but you don’t have the money, or it’s tied up elsewhere, perhaps another flipping project. Though those gurus on late-nite TV will rant about how you can buy a home with no money down, it’s tricky and much more complicated than they make it seem. In a more realistic scenario, you will need to come up some cash or collateral to fund your next project.  

Here are the most common ways to raise cash for your next house flipping deal:

Private Investors or Partners

Look to friends and family when preparing for your initial funding

If you have close friends, family members, or business associates, who either have the money or have the ability to access a loan, they can be a good place to start. Don’t expect them to do it for free. If you have a bit of cash, you can pay them interest on the loan and pay it back in full after the sale.

If you’re confident that you can make it work, prepare a business plan and a contract that outlines the details including purchase price, rehab costs, ARV, and how the proceeds are going to be divided in the end. Both of you need to have realistic expectations of what kind of profit is available to each of you.

Full disclosure: if you haven’t done so before, know that doing business with family and friends can be a delicate situation and put pressure on your existing relationship. If the investments run into problems or fails, it can cause a rift or worse yet, you’ll fall entirely out of contact.

Another option is to find an investor that will allow you to work off your end with sweat equity. If you have the knowledge and skills to do some or all of the work on a property flip, you may find an investor willing to trade you for your portion of the labor. After the sale, you’ll split the money according to your agreement. You won’t make as much money as doing it all yourself, but it’s a good place to start. This strategy will provide you with the means to save up some cash to eventually, fund your own deals.

Hard Money Lenders

If you feel more comfortable keeping it impersonal, you can contact a hard money lender. They are real estate investors willing to provide you with a short-term loan. Because these lenders are familiar with the industry, there are some advantages:

  • Will provide approval for distressed, investment-grade properties that require work
  • Credit rating and other loan requirements are more lenient than a bank
  • Loan approval is quicker, allowing you to bid on deals and compete with other buyers
  • National companies make loans all over the country

Real Estate Investment Associations & Groups (REIA)

Most cities have real estate investment associations or groups, so join several in your area and start regularly attending meetings. REIAs bring together people with expertise that you can benefit from, including not only investors but lawyers, accountants, and contractors. Free advice is worth its weight in gold. These like-minded folks may be willing to fund your rehab, or at least be able to recommend someone.  

Raising money and structuring your next rehab isn’t horribly difficult, but it may take some creativity. It may mean combining strategies to get the deal done. After flipping your first property, you’ll be able to roll-over any profits to fund your next deal. In time, you’ll be able to finance your own deals, and perhaps, greenhorn investors will start coming to you when raising cash for the next flip.

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Wholesaling

5 Reasons To Start Wholesaling

You want to get into real estate investing, but you don’t know how to start because you’re short on cash, nor do you have access to borrow funds.

If real estate is really what you want to do, then you have to find a way to do your first deal. One way is to start packing away money for a down payment – but, who knows how long that’ll take. Another option is to get started wholesaling properties. 

We’re not going to get into explaining what wholesaling is here, you can Google that or read our previous posts. So, let’s cover why you should consider Wholesaling.

There’s no reason why you can’t start wholesaling right away, but there is a lot that goes into it. Before you start searching for a house to put under contract, you’ll want to study up or find yourself a mentor, as there is a bit of a learning curve. By the way, the best place to find a local mentor that knows the market you’ll be working in is by attending REIA meetings!

Let’s take a look at some of the advantages of starting your real estate career in wholesaling.

1) It doesn’t take a lot of money. There aren’t many businesses that can offer you a low-cost barrier to entry accompanied by low overhead. Since that was keeping you from buying your first property, wholesaling allows you to kick-off a new business venture with very little of your own cash. You’re not purchasing the property, only getting it under contract, so you don’t need a large lump of cash to put down.

2) A low credit rating won’t hold you back. Since you’re not actually taking possession of the property, you need very little cash on hand. Your buyer is the one who would need to apply for a loan or pay cash for the property. 

3) There are always distressed sellers to target. No matter the area or economy, people are always looking to get rid of properties. You aren’t concerned with the condition of the property because you’re not paying to fix it up. Eager sellers provide the leverage you need to find money-making opportunities.

4) The potential for quick profits is high. Since you’re not waiting to find tenants nor for renovations to be completed, the faster you find a buyer, the sooner you cash your check. This is where having the proper contacts and a reliable buyer’s list comes in. 

5) It’s a free real estate education. Wholesaling allows you to learn the real estate business from the ground up. By not being “cursed” with having a lot of money, you’re forced to learn the complex aspects of real estate investing using other people’s money. You’ll learn to vet properties, instead of buying them blindly hoping to turn a profit until your bank account runs dry. By starting at the bottom, you’ll also acquire a gift for spotting new opportunities.

Wholesaling requires motivation and an ability to network with people. Many wholesalers use it as a stepping stone to flipping or landlording, but many successful wholesalers choose to just stick to wholesaling. 

Image courtesy of David McBee

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