Tag: Wholesale

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Wholesale Wholesaling

Pro Tips on How to Wholesale Real Estate in an Uncertain Market

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Every real estate investor knows how volatile the market can be. It’s not as crazy as stocks or crypto, but the real estate investment environment isn’t completely protected against shifts.

For example, the International Monetary Fund recently announced that they’ll be more aggressive on funding now. So, combined with the uncertainty we see in the economy, bond yields increased, directly correlating to a rise in mortgage rates for the real estate market.

But even with things like this, you can still invest in real estate and come out victorious.

How? Well, try wholesaling properties.

Real estate wholesaling is finding a deeply discounted property and then selling it to another investor, usually for a quick profit. And since you’re not the one who’ll fix it up or hold on to it for the long term, you don’t need to worry about market conditions as much.

Of course, wholesaling has its challenges in an uncertain market. But knowledgeable wholesale real estate investors deviate them easily—simply as they know how to play the game. Read on to know!

1. Increase Your Lead Conversion Rate

Finding motivated sellers is key to a real estate wholesaling business. You must constantly find people who need to sell their properties fast (usually because they’re facing foreclosure or divorce), as they present an opportunity for you to swoop in and make an offer.

In an uncertain market, looking for motivated sellers should be easy, as more people want to sell their homes quickly to free up cash. You can find them by networking with real estate professionals, driving around neighborhoods with distressed properties, and more.

But it’s not just about finding motivated sellers; it’s also about increasing your conversion rate:

Number of deals closed / Total number of motivated sellers = Conversion rate

The higher your conversion rate, the better you can weather any uncertain market storms. You already spend so much time and money on marketing and generating leads; you’ll do yourself a favor by optimizing your closing process to convert more leads into closed deals.

Continue to find motivated sellers, and improve your chances of closing deals with them.

2. Get Your Financing in Order

If you’re going to wholesale real estate, you need to have your financing in order before you start looking for properties. Getting your ducks in a line is important because, most of the time, the properties you’ll find will require some form of creative financing, like using:

  • Hard money loans: Loans based on property’s value instead of the borrower’s creditworthiness
  • Private money loans: Loans from private investors if you can’t qualify for traditional financing
  • Partner with another investor: Pooling resources together with a partner to finance a property

If you don’t have your financing set up beforehand, it’ll be hard to take advantage of these opportunities when they come up, especially when dealing with uncertain market conditions simultaneously.

For example, if the market crashes and you’re trying to get a loan from a bank, they’ll be much more hesitant to give you the money. Whereas if you have a hard money lender lined up, they’ll be much more willing to finance your deal.

3. Know Your Numbers

In an uncertain market where things can change rapidly, you need to be extra conscious of unnecessary business costs harming your cash flow. Are you spending too much on lead generation? Can you do without the tech subscriptions? Have an honest conversation on how you can keep expenses down to protect your cash flow in an unstable market.

Moreover, know your numbers well enough to make quick and sure deals without costing you dearly. Things like being clear on your maximum offer price, estimated repairs, and expected profit margin all play into the success of your wholesaling investment opportunities.

Say the market crashes and property values drop significantly—you’ll find yourself in a situation where the property is worth less than what you paid, depleting your chances of any profit margin. Only by knowing your numbers well can you adjust accordingly and still come out ahead.

4. Have a Plan B

Having a plan B when wholesaling real estate is always a good idea. And in an uncertain market, that truth is all the more true, where things might change quicker than you expect. There’s always the possibility that something could go wrong, whether it’s the deal falling through, the market taking a turn for the worse, property values dropping significantly, or all of the above.

So, what should your Plan B be? Well, that depends on your situation.

But some things you might want to consider include: having another property lined up to sell, having extra cash on hand in case of emergency, being able to lower your prices to sell, or partnering with another investor to share the risk. The bottom line is to be prepared for the worst, while expecting the best.

Being Certainly Profitable in Wholesale Real Estate Investing

By following the tips we’ve outlined in this article, you can ensure that your business is as resilient as possible to market fluctuations. So whether you’re a seasoned investor or just starting, remember to increase your lead conversion rate, get your finances in order, know your numbers, and have a plan B.

With these strategies, you’ll weather any storm and continue making money by wholesaling.

Do you need more help? Then, get a membership, subscribe to our newsletter, and join our upcoming meeting! We’ll discuss key industry trends and expert tips—you wouldn’t want to miss out.

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Wholesale Wholesaling

How Much Should Real Estate Wholesalers Offer on a House?

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As a real estate wholesaler, you always look for the best deals to offer your clients. But how do you know how much to offer on a wholesaling agreement? And what factors should you take into account when negotiating with the motivated seller before they lose interest?

Let’s discuss what you should consider when deciding how much to offer on a property.

Cost Considerations for Real Estate Wholesalers

In general, wholesale real estate investors should aim to offer around 50-70% of the property’s “After Repair Value” (ARV). By doing so, you leave room for them to make a decent profit after necessary repairs and improvements.

However, you also have to consider:

  • The market conditions in your area
  • The condition of the property
  • Your own investment goals and objectives

The costs of repairs and improvements can vary widely depending on the scope of work required. In some cases, getting away with a lower offer may be possible if you are confident that you can complete the repairs yourself at a low cost. Conversely, if the property requires significant work, you may need to increase your offer accordingly.

Ultimately, the amount you offer on a property will come down to your risk tolerance and goals.

For example, if you’re looking to make a quick profit, you may need to offer less than 50% of the ARV. However, if you’re willing to take on more risk (and potentially hold the property for a more extended period), you can offer a bit less. It’s up to you to decide what works best for your business.

4 Tips on Wholesale Real Estate Investing

To wholesale a house, you need to find a property worth more than what you offer to pay for it. Here are 4 tips to go about wholesale real estate investing:

  1. Do your research. As we mentioned, it’s essential to know the local market conditions and the estimated ARV of the property before making an offer. This will give you a good starting point for negotiation with the motivated seller.
  2. Don’t get emotionally attached. It can be easy to get emotionally attached to a property, especially if it’s your first deal. However, it’s important to remember that this is a business transaction and you should approach it as such.
  3. Know your numbers. To make a smart offer, you must know your numbers. Have a clear understanding of the estimated costs of repairs and improvements, as well as your expected return on investment (ROI). Once you have all of this information, you can start to play around with different offer prices until you find one that makes sense for your business.
  4. Be prepared to walk away. If the sellers are not willing to budge on price, be prepared to walk away from the deal. There’s no point in overpaying for a property, even if it started as a potential opportunity to reap great returns.

Making an offer on a house can be a tricky business, but if you follow these tips, you should be able to negotiate a fair price that works for both parties involved.

Offer the Right Price for the Right Real Estate Wholesaling Business

When wholesaling a house, it’s key to find the balance between offering too much and not enough. You want to make sure that you are making a profit on the property, but you also don’t want to scare off potential sellers with an unreasonably high offer. By doing your research and understanding the market conditions in your area, you should be able to come up with a fair offer that leaves everyone happy.

Become a REIA member today! Join our upcoming meeting and sign up to our newsletter to stay ahead of the real estate wholesaling game in your area. Equip yourself with the knowledge that’ll bring you to wholesaling success—one property at a time.

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Wholesaling

Is Wholesaling Real Estate for You? 5 Questions to Ask Yourself

Man standing in front of a house

Wholesaling appeals to newbies in real estate because you don’t need any personal finances of your own to get started. It’s also possible to close a deal in as little as 30-45 days—giving many the impression it’s a quick and easy way to make money.

But that doesn’t paint the full picture.

While it may sound easy, many aspiring real estate investors end up quitting when the reality of wholesaling really dawns on them. Although the idea of finding a motivated seller and connecting one to a serious buyer sounds simple, it’s easier said than done. There’s so much more to it than that.

You aren’t just going to find a buyer and seller walking down the street. Wholesalers need to have good people skills because real estate is a social profession by nature. What’s more, unlike other real estate ventures, wholesaling is very time-sensitive. As a wholesaler, you have to be up-to-date with current real estate market trends, build a network, determine what’s a good deal, negotiate the deal, and so on.

So, before you go into the wholesale business and start investing yourself, you have to make sure it’s right for you. Let’s take a look at how you can figure that out by answering 5 questions.

5 Questions to Determine If Wholesaling is for You

Wholesaling is often seen as more beginner-friendly than other real estate investment strategies. Of course, it still comes without its own unique difficulties. Ask yourself the following questions to get a clearer idea if you’ll enjoy wholesaling, or if you might be better off trying something else.

  1. Do you have a big enough network to find deals?

Wholesaling takes a lot of work, doesn’t have a regular income, and deals in progress don’t always close. To make it easier, you need to regularly build your network. As a beginner, you might not have enough connections to sustain yourself and find deals, making it far more difficult than someone with experience and connections.

But it’s not all bad. For those who power through and successfully grow their network, wholesaling can be a very rewarding career. With familiarity in the real estate market, a grown network, and a good grasp of the wholesaling process, it gets easier as wholesalers become more seasoned.

2. Are you willing to put in the work to close deals?

In wholesaling, to find success, you have to actively work for it.
Closing deals takes a lot of effort. From finding a motivated seller to an actual buyer and everything in between—it all needs to be accomplished under time pressure. Wholesaling can therefore be very demanding, especially when the market isn’t hot.

Another thing you need to take note of is that income in wholesaling isn’t consistent. You earn only if you close deals. However, it’s also important to note that your income isn’t fixed. If you close more deals, you earn more, but if you don’t close any, you won’t make any money, either.

If you’re going to pursue wholesaling, you’ve got to be ready for all the mental and physical work it entails—and for the income to be less consistent than other real estate investments.

3. Do you have the necessary people skills?

Closing deals relies heavily on your ability to be persuasive to sellers and buyers. Remember, they’re also making major financial decisions, and they’re not likely to do business with someone they don’t feel comfortable with.

In wholesaling, you need to be persuasive, but also trustworthy, so you can show that you have their best interests in mind. If you have good people skills, you have a better chance of convincing sellers and buyers to do business with you. And more importantly, increase your chances of closing more deals.

4. Are you up to date with the real estate market?

Wholesaling isn’t just a matter of finding any random property and convincing sellers and buyers to make a transaction. Wholesaling also entails that you do your homework.

You need to know the market values of different properties and what kind of properties buyers are looking for. Research and staying up to date with the current market trends are crucial. When you’re looking for wholesale properties, you should also always consider the buyer and make sure you are finding properties that they’re actually interested in.

5. Can you properly assess and make financial computations for properties?

Wholesaling relies on a lot of math. You’ll have to determine the right selling and buying price, the expected repair costs, profit margins, and so on. Getting the right figures is important to make sure that everything is done fairly. That way when any questions on the pricing come up, you can justify these with numbers and the correct figures.

Make Sure Wholesaling Works for You

If you want to excel in your career, you have to like your work and it has to be right for you. As Steve Jobs—American entrepreneur and co-founder of Apple—once said, “The only way to do great work is to love what you do. If you haven’t found it yet, keep looking. Don’t settle.”

If after asking yourself the questions you mostly answered yes, then congratulations! You’ve got what it takes to pursue wholesale real estate. But if after asking yourself the questions, you mostly answered no, then you may want to re-evaluate your plans. 

Is there anything more about getting into wholesaling you want us to discuss? Let us know in the comments below!

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Wholesaling

Wholesalers: Clauses you want in your contracts!

An attractive perk of wholesaling real estate is how you can flip houses with no money of your own, or even good credit. People hear about this and want to jump into the business right away! However, most of them don’t even know how to properly structure wholesaling contracts – so what clauses do you need to include in yours? 

Let’s take a look at one kind of wholesaling agreement – an Assignment of Contract – and the types of language these documents should contain to protect wholesalers during deals. 

How Assignment of Contract Works

There are three players in every wholesale transaction: The wholesaler, the seller, and the buyer. The steps are:

  1. The wholesaler finds a good property at a good price, and signs a Purchase Agreement with the Seller (the owner of the house).
  2. The Purchase Agreement gives the wholesaler entitlement to ‘assign’ or sell the property agreement to a buyer.
  3. To assign the agreement to the new buyer, the wholesaler finalizes an Assignment Agreement to legally transfer their purchase rights to the buyer. 
  4. Handing over the baton to the buyer may cancel out the wholesaler’s legal liability and/or obligation towards the seller. 
  5. Now, the buyer can purchase the property directly from the seller, as per the original terms of the Purchase Agreement.

In this process, your job as a wholesaler is to be the middleman. You find a good deal, secure the rights to it (using a Purchase Agreement contract with the seller), then assign the contract to a real estate investor or owner-occupier (using an Assignment Agreement with the buyer). Your goal is to at least make sure that each of these agreements includes the important clauses–which we’ll be going through below.

The Purchase Agreement

  1. CONVEYANCE – This term refers to the act of legally transferring property from one entity to another. So what you want is to ensure that the property’s fee simple will be delivered to the buyer (or a representative they assign) by a General Warranty Deed. It should be free from any liens, restrictions, encumbrances, easements, or encroachments (even those not specifically referenced in this contract).
  2. PRORATIONS – This clause is to ensure that property taxes and rents will be prorated based on the current year’s tax (without any exemptions, like discounts). All taxes should be current.
  3. DEFECTS – Have this clause to hold the seller accountable for any defects that might be found. Essentially, this clause should state that the seller assures the property to be without hazardous substances, any violation of zoning, environmental, building, health, or other governmental ordinances or codes; and that the seller affirms there are no known facts regarding this property that could adversely affect its value.
  4. NO JUDGEMENTS – The seller should confirm that there is nothing threatening the equity of the property. There should be no bankruptcy pending, or contemplation by any other title-holder.
  5. POSSESSION – The contract should state that possession of the property, its occupants, and all the keys, will be handed over to the buyer when the title is transferred. If the property is vacant, then possession and all the keys to the property will be given to the buyer once the contract is executed. All leases, advance rents, and security deposits should be transferred to the buyer as well.
  6. RIGHT TO ASSIGN – This clause, along with the next ones, are where you should dictate your intention to wholesale the property. Without this clause, you can’t legally wholesale the deal, so this is a pretty important one. It should say that you, the buyer intends to assign the contract to a new buyer and the seller’s approval is not needed. Then have the seller initial the provision. Assure them that they will still get the purchase amount as agreed.
  7. NO RECOURSE AGAINST BUYER – Upon default, the seller’s only solution is to retain what the buyer had put down as earnest money – they have no legal recourse to take any action beyond that against you, should you back out of the deal. 
  8. CLOSING DATE – You want to give yourself as much time as possible to find someone to buy your contract. So negotiate at least 45 days or more. 
  9. “AS IS” and INSPECTIONS – Make sure that this contract is contingent upon your inspection and approval of the property, before they transfer the title. The seller should provide you access and opportunity to inspect the property thoroughly (including all the power and utilities). If you accept the property, the contract should indicate that it’s in “As Is” condition. If you decline, then the buyer should notify the seller within 10 days from the day of the contract signing. 
  10. PROHIBITIONS – You don’t want to limit yourself to just this property or to one buyer, so make sure there is a clause that allows you to still accept future assignments. You should not have any prohibitions to do so. 
  11. ABILITY TO RENEGOTIATE – State that you can renegotiate the price. For example, specify a certain amount to be deducted for repairs. But if the property exceeds $20,000 in repairs, you should have the ability to back out, or renegotiate the asking price. 

With that contract done, next, you need an Assignment Agreement to govern the second half of the wholesaling process. 

The Assignment Agreement WHERE DOES WHOLESALER MAKE THEIR MONEY?

  1. This contract should say that you are “transferring” or assigning your right as the buyer to another party. The new party will now become the new buyer, and this now effectively closes the Purchase Agreement contract. 
  2. In an assignment, the buyer can see the purchase price you have with the seller, so they could be put off when they see you’re making money off the deal. In this case, they may try to negotiate their own deal with the seller. 

There’s a way you can try to protect against buyers cutting you out as the middleman and going directly to the seller instead: 

a.) In the purchase agreement, there should be a clause that allows the wholesaler to immediately file a claim of interest against the property. 

b.) Then, go right away to the local county and file that claim of interest. 

c.) Now it’s recorded in the chain of title for the property, so if a buyer tries to go around you and go straight to the seller, they can’t get a clean title, because your claim of interest will be on record.

3. If the purchase contract gave you more leeway, this time, you want to be as strict as you can with the buyer, to prevent them from backing out at the last minute and compromising your deal with the seller. 

Here’s one clause you might find useful for keeping your buyer on schedule. This clause penalizes them for any delay in closing. If they feel uncomfortable with agreeing to a $300-500 penalty, then they might not be very serious in the first place, so it’s not really that big of an ask. Here’s an example of how you can word this: 

ASSIGNEE  must close title on the property subject to the AGREEMENT by ____________, 20____. If seller of property subject to said AGREEMENT is ready, willing and able to close title on the above date but ASSIGNEE  fails to close title on or before said date, ASSIGNEE  will pay ASSIGNOR a per diem of $____________ until and including date of closing.

3. Aside from this, you’ll also want clauses which will make it as difficult as possible for the buyer to back out of fulfilling their Purchase Agreement, so ensure things like the property condition and price are clearly articulated and non-negotiable. 

4. Finally, your assignment contract should also say “X is the amount I’m being paid as an assignment fee” – this is your profit, which the buyer pays to you when you sign the assignment contract. Only then do you sign over the purchase agreement to them. This way, it doesn’t matter if the buyer closes on the house or not, because you’re now out of the deal and have made your money already.

Once you’ve drafted your contracts up, have them reviewed by a local attorney who’s familiar with wholesaling contracts to see if it complies with your local laws. Not a lot of companies are used to dealing with wholesalers, so make sure you work with a lawyer who is. 

Any other clauses we’ve missed? Share with us below!

Image Courtesy of Anna Shvets

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Landlords

Pros and Cons of Assignment of Contract

The most attractive thing about wholesaling as a real estate investment strategy is that you can do it with no money of your own and none of the headaches that generally come with owning a property.

There are two ways to wholesale real estate: double-closing and assignment of contract. We covered the down and dirty of double-closing a few months ago, but now let’s take a look at the pros and cons of wholesaling using the assignment of contract method.

What is Assignment?

An assignment of contract is when a wholesaler enters into a purchase agreement with a seller, giving them the right to sell the contract to a buyer for a fee. The good thing about this is there’s no capital gains tax involved (but you still need to pay about 30% ordinary income tax, depending on your tax bracket, if you’re holding it for less than one year).

Pros

  • Assignment is cheaper than double-closing: Because there’s only one set of closing costs to pay, this is the most cost-effective wholesaling method.
  • It’s a good selling point: You can negotiate a better price from sellers by assuring them that it will be a smooth and easy transaction, you will cover all their closing costs, pay off their lenders, and then deliver their remaining profits to them.
  • It’s simple: You find a buyer, sign an agreement, put the ‘earnest money’ into escrow, then step back and let the deal go through. It’s also easier to explain to titles companies than a double-closing, if the company you’re using isn’t experienced in wholesale deals.
  • Assignment can be done quickly: The process doesn’t require much time from your end – often just the amount of time it takes you to market and find a buyer. Because there’s only a single closing, that part of the process is usually faster than with double-closing, also.
  • It can create opportunities for repeat business: If done right, this can allow you to establish a relationship with the buyer and do repeat business with them over time. The most important thing here is to remain transparent, so that all parties are aware that you’re making money and are bringing value to the deal, whereas this is less clear with a double-close.

Cons

  • Your assignment fee is visible to all: One of the cons about this arrangement is that your fee will appear on the settlement statement. As we said, this kind of transparency can help you form lasting business relationships with your buyers, but it also can make some buyers and sellers wary. If you’re making a hefty sum, the seller might be taken aback or begin to rethink whether they’re getting a good deal or being ripped off by you. By the same token, buyers might think they could get a better price elsewhere, so it’s possible either party could try to back out of the deal once they realize you’re making money off of the transaction.
  • State legalities could be an issue: Realtors lobby hard to keep laws tight against wholesalers so they can avoid losing business in their respective states, so you need to remain vigilant and politically active to safeguard your rights and your business.
  • It can limit your options: You need to verify with your buyer if they intend to pay in cash or use bank financing. Keep in mind that some properties, like short sales and bank-owned homes, can have no-assignment clauses in place, which means you can’t use this method to wholesale these properties.

Assignment of contract is a good way to approach wholesaling if you’re looking for quick, relatively easy transactions and the opportunity to develop long-term relationships in the industry. However, this method might not be the best for those who want to make large profits off of each deal they do, as it can put off buyers and sellers alike. A good rule of thumb is to use assignment only if you’re making less than $10k off a deal, and to always be upfront with all parties about your fee and the benefits you bring to the table in exchange for this fee.

Ultimately, the efficiency of assigning a contract means that you can complete more transactions in a shorter period of time, which can make up for the fact that your fee will be smaller than in a double-close scenario. If you’re uncomfortable with the idea of being transparent about how much you’re making, or if you want to get bigger returns from each deal, then opting for a double-close is probably the better choice.

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Wholesaling

7 Steps to Real Estate Wholesaling

People outside the real estate industry don’t realize how difficult it is to source wholesale deals. They might think this kind of investing is relatively easy, since wholesalers don’t have to do renovations or deal with tenants, but the difficulty of this strategy is actually in sourcing good deals.

So what tools can wholesalers use to source good deals quickly and consistently? Let’s look at 7 ways you can find both buyers and sellers for your wholesale deals:

  1. Find Motivated Sellers – Many wholesale deals are sourced from owners who haven’t even thought about selling before you, the wholesaler, came into the picture – so their properties won’t be listed on the MLS or traditional real estate listing sites. You need to find and directly contact them, and one way of doing this is to build a professional network of deal-hunting “bird dogs” to track down motivated sellers and look for distressed houses to pass along to you.

2. Get Properties Buyers Want – Look for distressed properties, or ones with delinquent taxes–most homeowners of those are eager to sell, and only a little negotiating from you could help secure a deal at a reasonable price. However, you also need to look for properties with desirable features in locations that you know are attractive to investors and other potential buyers, otherwise your contract could expire before you find a suitable purchaser. Find target neighborhoods that fit your criteria and drive around them to find distressed houses, or contact the county records office to get a list of tax-delinquent properties.

3. Promote Yourself Online – If you don’t have an online presence, you’re missing out on perhaps one of the most crucial channels for potential customers to find you. Have a website or page with a Lead Capture Form where visitors can submit their contact details, and keep these for sending out future email blasts with details of your available deals. Then you can increase the reach of your website by promoting it to targeted markets on multiple online platforms, helping passively bring you more potential sellers and buyers.

4. Connect with Hard Money Lenders –  Sometimes cash buyers don’t have the total purchase price of a property upfront, so they call up a hard money lender. That means hard money lenders also know a lot of cash buyers that they can refer to you. (Plus, they’re incentivized to connect you to these buyers, in case one of your future deals would require their services to close!

5. Build a Large Network – Having a community of investors at your disposal who are interested in buying wholesale deals makes it faster and easier to market your deals. Network with real estate agents, investors, and landlords in your area – either online, or through in-person groups, like your local REIA.

6. Visit Courthouse Auctions – Since buyers need to have all cash in courthouse auctions, this is a great source for finding cash buyers. Try to drop by courthouse auction sessions early and regularly to network with the people there, and add them to your email mailing lists.

Wholesaling real estate is a great way to get into the property business without any upfront capital. All you need are the tools listed above, persistence, and great negotiating skills to become a successful wholesaler.

Any other tools we missed? Tell us in the comments section below

Image Courtesy of Deva Darshan

Categories
Wholesaling

Wholesaling Real Estate during COVID-19

The coronavirus pandemic has had a serious impact on real estate investors, even if (this time) the economic downturn isn’t tied to the housing market. 

Already-low inventory has been thinned even further by sellers choosing to wait out the crisis, buyers are reluctant to invest amidst this economic uncertainty, and many have taken a hit to their liquid assets (and are now prioritizing liquidity more than ever before). 

So, what does all of this mean for wholesalers in the current market? Here are some points to consider when brokering wholesale deals during the coronavirus pandemic:

Focus on Inbound Marketing

Wholesalers traditionally rely on outbound marketing methods to source new deals and secure buyers – things like sending email blasts, making cold calls, and attending networking events. All of these strategies involve a lot of time and energy on the wholesaler’s part to track down new leads.

However, with people stuck at home and spending more time on the internet than ever before, wholesalers should consider optimizing their inbound marketing to enhance their sales funnel during this crisis. Having your own website, blog, or YouTube channel, running digital ads, and boosting your social media presence are all ways you can get noticed by buyers and sellers who are actively searching for properties in your area. It takes a considerable initial time investment to get these up and running, but if you’re stuck at home now, too, then what better way to spend your time than building funnels which will bring leads to you passively?

More Conservative Offers

Panic in the markets, combined with desperate sellers, creates an opportunity to get good wholesale deals, which means you can and should be more conservative with your offers in the current environment. Buyers will also be looking for a deal, so 70% of ARV minus repairs might not leave you with enough room to make a decent profit wholesaling in this market. 

COVID Extension Clause 

To protect their contracts against extenuating circumstances due to the pandemic, many wholesalers are now including an option to extend their agreements with the seller if necessary. If your contract stipulates that you need to find a buyer within 60 days, add a two-week extension that can be triggered to give you more time to close deals during the crisis.

Wholesaler Collaboration

Inventory was already at an all-time low in most parts of the country prior to the outbreak, and now it can be even harder to find enough suitable properties to keep your wholesaling business running consistently. 

We’ve seen wholesalers respond to this by reaching out to the competition – other wholesalers – in order to work together, rather than against one another. Wholesalers operating in the same area put together a shared spreadsheet of all of their current deals, and offer a finder’s fee to anyone who’s able to bring them a buyer for it. This can help you both fast-track deals in this uncertain market, and generate a steady stream of income from the finder’s fees you receive on other wholesalers’ deals. 

Real estate wholesaling is still alive and well in the era of COVID-19, but wholesalers have had to adapt and innovate in order to keep turning a profit during these unprecedented times. 

Many of these trends will likely continue in the age of the new normal, so if you want your wholesaling business to thrive both during and after the pandemic, consider incorporating these areas into your strategy now. 

Image Courtesy of Curtis Adams

Categories
Wholesaling

How To Market Wholesale Deals.

How to market deals without large adcertising budgets?

The two most important skills that real estate wholesalers can have are sourcing great deals on properties for sale and finding solid buyers for their purchase contracts. In order to maximize the number of potential buyers you reach, it’s therefore crucial to know how to advertise contracts for sale in an efficient way (without running into any legal issues).

Wholesaling itself is legal, but keep in mind when marketing your deals that selling someone else’s property without a license is not permitted in many states. You should always make it clear in all marketing materials that you are selling a purchase contract, not the home itself, otherwise you could run into legal issues. If you’re unsure, talk to a specialist real estate lawyer to make sure you are doing everything above-board.

With that in mind, here are some of the best ways to market wholesale deals to potential buyers without the need for a large advertizsing budget:

Networking Events

One of the best tools a wholesaler can have is a great network of potential sellers and buyers. When you have an extensive network, you open up greater possibilities for word-of-mouth advertizsing. Up to 50% of word-of-mouth referrals lead to a successful sale, which makes it the most powerful kind of marketing, and what’s more, it costs basically nothing.

Going to local networking events is a great way to meet people in your area who could one day become your customers, or help bring you potential leads. You can find networking events taking place in your city on Eventbrite.com or Meetup.com.

You could also consider joining industry-specific groups, like your local REIA, or a business club, such as Business Network International (BNI). Alternatively, there are also one-off real estate industry events which you could attend to find buyers and sellers in your area.

Linkedin

Linkedin has become an essential online marketing tool for sourcing leads and generating sales across a variety of industries. Its free version allows you to filter searches based on a person’s type of job, position, location, company size, and more, meaning you can target your marketing messages at potential buyers in your area.

Linkedin allows you to send a connection request with a message to those who fit your target customer profile. If you don’t have enough time to sift through hundreds of professional profiles and contact them individually, don’t worry – there are many tools, such as Scrab.in, which you can use to automate your marketing efforts through Linkedin.

Cold calls

You may think cold calling sounds fairly last century, but the truth is that cold calls are still an effective marketing technique – although less effective than referrals, cold calls still have a 2% successful closing rate.

If you’re nervous about the idea of calling up strangers, there are tools you can use to send potential customers a ringless voicemail instead, meaning you won’t have to speak to leads one-on-one until they call you back and express interest in the property. You can find contact details for your target market by using paid tools, like Skip Trace Lists.

Social Media

Social media is one of the best options for marketing wholesale deals, because it provides a huge potential reach and requires less time and effort than other forms of advertizsing. You can upload a description of the deal and pictures of the house to attract buyers, while also helping you build visibility for your company or personal brand. Having a dedicated Facebook, Instagram or other social media page to promote your wholesale deals will also make you easier to find for buyers searching for homes in your area.

In wholesale deals, communication is key when dealing with both the seller and the buyer, so always communicate clearly and honestly about the fact that you intend to market the property deal. When advertizsing deals, you should disclose the current state of the property, and provide an estimate on any necessary renovation costs, as well as the estimated property value after repairs.

Image Courtesy of Martine Savard

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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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