Categories
Wholesaling

Top 6 Ways to Increase Real Estate Wholesaling Leads and Grow Your Buyers List

Consistent lead generation is paramount to your success in the real estate wholesaling business. Finding a seller begins the wholesale process while finding a buyer closes the deal. 

However, generating valuable leads does not come easy. 

Even when you already have a long list of leads, you’ll still have to trim it down to the quality ones. After all, you don’t want to have just any leads—you want to garner high-quality leads to close more deals. And this can only be achieved by mastering the methods for consistent lead generation.

In this article, we’re going to tackle some real estate lead generation ideas so you can keep growing your buyer’ list. By having consistent growth in your buyers’ list, you can be confident that you’ll keep closing wholesale deals—and keep your income stream flowing. 

6 Ways to Generate More Leads

Generating leads in wholesale real estate requires diligence. That said, even a wholesaler’s time and effort are an investment. To ensure that your work pays off, you’ll have to work smart—not hard. 

For example, if your current method isn’t giving you the desired results, you need to try different lead generation strategies. Remember what Albert Einstein said, “Insanity is doing the same thing over and over and expecting different results.” 

And you don’t want to fall into that frustrating trap.

So, consider using these wholesale lead generation strategies to fill up your list, so you can spend time closing more deals.

1. Multiple Listing Service (MLS)

The Multiple Listing Service is an exclusive online database for licensed real estate agents, featuring properties available and sold on the market. What’s great about this is that it can automatically send leads to your inbox, among many other perks. More importantly, this real estate lead generation strategy is completely free—as long as you find access to it. 

Another benefit of this is that it can also connect you to other real estate investors in the market. As you grow your buyer’s list, you can also grow your business network.

Still, using MLS requires some dedication to be effective. Since a lot of agents use this strategy, posts can easily get lost among thousands. You’ll also need to go through many real estate leads until you find quality ones. 

So, yes, MLS comes with a few challenges. But, it’s comprehensive, affordable, and convenient—making it a terrific real estate lead generation method. 

2. Leverage Networking

Connecting with other real estate investors and helping each other out can keep you consistently closing deals. Now, some wholesalers are looking for sellers while others are looking for buyers. But by pooling together your resources, you can establish a mutually beneficial relationship. 

Nevertheless, this setup requires you to split profits. You’ll earn a bit less, which means you need more leads to compensate. This strategy is still great for growing your buyers’ list, as well as your network, so the pros outweigh the cons.

Apart from the real estate community, you can also look at your personal network. You never know which one of your friends or family members is looking to invest in. A quick post on social media sites or asking around might seal you some great—unexpected—deals. 

In other words, think out of the box and use your current network to generate wholesaling leads.

3. Cold Calling

This method is a popular one, as it kills two birds with one stone. By cold calling, you use your existing leads to generate new ones. 

The idea behind this is that people with similar interests usually gather together. Similar to how there is a network of wholesalers, there is also a network of buyers. So, take advantage of your current connections to see if they know others who are interested in your deals, even if they aren’t interested themselves.

Once you’ve identified some prospects, give them a quick call. Then, keep all of these individuals in mind and remember to follow up whenever you have something to offer. You can then continuously assess which ones are willing to make a deal, giving you very high-quality leads more willing to make a deal with you.

4. Drive for Dollars

Driving for dollars is a tried and tested strategy for real estate lead generation. There are many leads out there in the world—and sometimes all it takes is a quick drive around town to spot the right signs, literally. Yes, your car’s mileage will increase, but so will your buyer’s list.

Many real estate investors are also renters. In other words, you might find a house with “for rent” signs and contact details. 

Once you see these potential clients, give them a call to ask if they’re investors looking for properties. Investors are always looking for the next opportunity, so you might just get lucky and land on a willing prospect. And even if the person is an agent, that still works, because they might be looking for properties on the market as well.

5. Real Estate Agents

If there’s anyone that’s knowledgeable about the local real estate market, it’s the real estate agents. 

If you’re considering doing future investments in a certain area, a real estate agent can help you start. Real estate agents can be very helpful in building your buyers list and growing your own network. When you’re investing in a new area, they can help you close your first few deals by linking you to local sellers, investors, and properties in the local market.

Once you gain a grasp of the local market, you can start doing deals on your own. Alternatively, if you establish a good business relationship, you can even consider becoming long-term business partners. Real estate agents won’t only help you grow your buyers’ list, but they can help you land consistent deals.

6. Bandit Signs

Bandit signs are poster-sized signs with a short, direct message and contact details. You usually see a dozen of these signs near a property, often in high-traffic areas like local markets, shopping malls, and busy streets. It’s a common practice in real estate since it’s an effective form of real estate marketing. 

After all, leads can come from all sorts of places. And this method is a great way for you to cover multiple areas and expand your reach. Also, it’s usually quite affordable to put up bandit signs making this a more cost-effective way to strategically grow a buyer’s list.

Conclusion

Real estate wholesaling takes time, effort, and commitment. As a wholesaler, you have to strategize, think ahead, and be ready to face challenges head-on. Yes, generating wholesale leads does take a lot of work. But if you do it right, all that hard work pays off. The more leads you generate, the higher your chances of closing deals. 

With these strategies at your disposal, you’re now ready to generate consistent leads to propel your real estate wholesaling journey to the next level.

Got tips of your own or stories to share? Let us know in the comments below!

Image courtesy of RODNAE Productions

Categories
Shortterm Rentals

Feeling Invisible? Here’s How to Manage Multiple Airbnb Listings for Increased Visibility

Airbnb owner on her cell phone

As COVID-19 slowly loosens its grip on our society, Airbnb’s popularity is reemerging from the ashes. 

While the company saw a 72% drop in its services at the height of the pandemic, Airbnb is now seeing an increase in bookings once more, thanks to significant restructuring.

With this post-pandemic growth, short-term rental landlords are now looking at ways to optimize their vacation rental business to take advantage of the boom. And, more importantly, stand out from the competition. 

One of these techniques is using multiple Airbnb accounts for your various properties, as we’ll see in this article. Of course, there are a few things to keep in mind, but the strategy proves to be a great way to show up more in Airbnb’s search results, increase your property’s visibility, attract more guests, and secure more bookings.

Let’s take a closer look.

Can I Have Multiple Airbnb Accounts?

You may be thinking, “Is it even legal to list the same property on multiple Airbnb accounts?” After all, you don’t want to go against any of Airbnb’s rules and regulations and risk getting banned altogether. The company can track single IP addresses or cross-reference your contact information to prevent its users from having  multiple accounts

Since they do regularly crackdown on users trying to flood Airbnb listings with the same property, we advise against it. However, if you have multiple properties, then you can have a different account for each different property. 

While it is a lot more work, it can be alright if you are operating an Airbnb business with different properties in vastly different areas. We’ll explain why you might do that in a bit. 

Of course, if you don’t want to deal with multiple accounts for your listings, consider posting your properties on multiple platforms instead of just Airbnb. There are plenty of other options today like VRBO, Booking.com, and TripAdvisor. You can even try social media sites like Facebook and Instagram to expand your reach.

Next up, let’s explore the situations where you can have multiple Airbnb accounts. 

When Should I Have Multiple Airbnb Accounts?

As we said, Airbnb doesn’t allow users to manage multiple accounts for the same listings. Although, managing multiple accounts for other situations can be beneficial for your short-term rental properties. Keep in mind, this advice is for people with multiple properties.

Now, here are a few reasons why you might need multiple Airbnb accounts, you can:

  • Have separate accounts for the properties that are in different locations. They’ll have unique addresses that will help potential guests see that your rentals are in a specific area, rather than thinking you’re spread across multiple locations (and might not have expertise in the local area). Plus, if you have Superhost status and get a bad review on a different property, it won’t affect your status on your other accounts.
  • Have separate accounts if you’re running a property management company. This way, your team can oversee several properties across the Airbnb platform. You can have one account for guest bookings and another for hosting services, although this might complicate things for your team.

As you can see, there are some cases where you have multiple Airbnb accounts. But, make sure that you are always following the rules on the platform, so you don’t get banned and miss out on additional income. 

How Can I Manage Multiple Airbnb Accounts?

Now, managing multiple Airbnb accounts isn’t easy. You’ll have to figure out a way to do the following across different accounts, logging in and out of each profile to:

  • Stay on top of your messages and communication with guests
  • Update your calendar to avoid double-bookings
  • Change your prices, post new information, or pick new photos for your listings

It’s a lot to do, but you can use smart tools to streamline daily property management operations and control the many aspects of your short-term rental business. 

Here are a few ways to do so:

  • Hire a property management company to handle properties on your behalf. Get in touch with us if your short-term rental properties are in the Metro Detroit area!
  • Use a vacation rental software solution like AirGMS to automate operations.
  • Bring in a co-host to double your workforce and combine Airbnb techniques.

Follow these tips to help you take care of multiple Airbnb accounts and lessen your chances of going against Airbnb’s rules. Additionally, having a property management company or co-host means you’ll be logging in to Airbnb via different IP addresses, which helps your case.

Level Up Your Airbnb Strategy

Take the time to consider whether you can manage different Airbnb accounts and if it makes sense for your portfolio of short-term rentals. The better you plan for it, the greater the chances of your properties ranking higher in Airbnb’s search results—being more visible to potential guests.

Once everything is running smoothly, you can sit back, relax, and watch your bookings increase alongside Airbnb’s post-pandemic revival. 

Got any thoughts on this listing strategy? Comment down below, and let’s get a conversation going.

Image courtesy of Andrea Piacquadio

Categories
Flipping

Why You Should Always Target Distressed Properties to Flip (And Where to Find Them)

Creepy old mansions may be a nightmare for most people, but they’re hidden gems for a house flipper. These oldie-but-goodie properties are examples of how distressed properties have great value within them, giving real estate investors opportunities to gain massive flipping profits.

Why are there distressed properties in the first place?

Well, there are a lot of reasons why a home could become neglected. Here are a few examples:

  • The home could’ve been a foreclosed home left to someone as inheritance, but it’s located far from where the person currently lives. The home left behind will often go into probate for a year, during which time the new owner cannot touch it. That means it’ll sit for a year, quickly deteriorating.
  • The home could’ve gone through a natural disaster like a flood or tornado, and the owner doesn’t have the funds to repair it. It’ll also sit there rotting away.
  • The home could’ve been a rental that a tenant trashed and the landlord can’t take it anymore—not bothering to fix the home up again.
  • The home could’ve been owned by a hoarder with low income. They pay taxes, sure, but they don’t have the money, skill, or energy to keep the house in good condition.

Any of these situations leave many homes neglected and, eventually, distressed. However, while these homes are someone’s problem, they’re certainly your investment opportunity.

Here are a few reasons you should buy distressed properties, and how you can find these lucrative deals.

The Flipping Opportunity with Distressed Properties

To understand how the concept works, we need to first discuss how a home becomes a distressed property. So, here’s what usually happens:

  1. Owner Hardship and/or Neglect: Owner of a property loses their job, becomes ill or perhaps relocates. They may also inherit the property.
  2. Property Deteriorates: The issues above lead to the property falling into disrepair. At a certain point, potential buyers either don’t want to take on the repairs or can’t get a standard mortgage on it due to the poor condition.
  3. Cash Opportunity: At some point the homeowner will try to sell the property. Or maybe a motivated flipper can convince them they should sell. Either way, they will have to sell at a discount due to the lack of market demand for the property when it’s in poor condition. 

Situations like these give you opportunities to buy properties at a low price. These distressed properties are ideal for flipping because they’re rundown homes with tons of hidden value. Yes, they’re cheap because they’re in poor condition, but the lack of market demand will drive the market value even lower than the cost of repairs. 

The Risks and Benefits of Flipping Distressed Properties

Now, while the benefits of flipping distressed properties sound exciting, there are certain risks you’ll need to consider before committing to one. Here’s a chart to help you see the full picture:

The benefits are great, but the risks are inevitable. By anticipating the potential issues that sometimes arise with distressed properties, you’ll be ready to handle high-risk, high-reward fix-and-flip projects without a hitch.

Ways to Find Distressed Properties

You won’t find “distressed property” a common label in the real estate industry. Instead, you’ll need to think more strategically about how to find situations that will have motivated sellers. 

Thankfully, there are several ways to seek out distressed properties. Here are some of them:

  • Drive For Dollars: Select a neighborhood and look for homes with obvious signs of neglect. These can be signs like multiple notices on the front door, peeling and faded paint, an unkempt yard, broken windows, or uncollected mail.
  • Access the Multiple Listing Service (MLS): If you can find a way to access the MLS (say, if you have a real estate license or a friend who can help you), you can find distressed properties with remarks like,  “handyman special” or “fixer upper”. The longer the property stays in the MLS, the higher the motivation of the seller.
  • Find Foreclosed Properties (REOs): Peruse REO and bank-owned properties to find good opportunities. Lenders and banks aren’t in the business of keeping properties, and want to get rid of these non-performing assets as soon as possible. They will likely sell the homes to you at a discount.
  • Identify Homes with Delinquent Mortgage Payments: You can find public records of delinquent mortgages at your local courthouses. Individuals who can’t pay their mortgage are likely willing to sell their home to avoid foreclosure. 

You can also try to find motivated sellers with delinquent property taxes, as they’re likely behind on mortgage payments as well.

  • Consider Probate Options: You can visit the probate court to find properties left behind by situations such as divorce or death in the family. In some cases, the family left behind might not want the home. That said, keep in mind that you’ll need a special process to make an offer, since the property will be sold through an executor or attorney.
  • Get in Touch with Out-Of-State (OOS) Owners: Whatever the reason is for them moving to another state, some homeowners struggle to maintain the properties they can’t visit often. The result is distressed properties with highly motivated sellers. You can identify these people through direct mail or networking.
  • Check City Records for Code Enforcement Tickets: A property getting numerous tickets for neglect is a sign of an owner not taking care of their property and may be interested in selling.

Conclusion

Distressed properties are the perfect choice for house flippers since your goal is to acquire undervalued properties with the highest flipping profit. By buying valuable properties at a low price point, you’ll set yourself up to gain a large margin for a profitable fix-and-flip project.

What is your experience with buying distressed properties? Do you have any tips on successfully flipping them for a high profit?

Image courtesy of Malte Luk

Categories
Wholesaling

How to Virtually Wholesale Real Estate

Like everything else, the real estate industry has drastically changed during the pandemic. The combination of people trying to avoid foreclosures and digital transformation allowing every real estate investor to tap markets nationwide has resulted in the rise of virtual real estate wholesaling—a trend that is likely to continue post-pandemic.

In fact, the National Association of REALTORS® said 51% of home buyers today found their home online—more than they do through real estate agents! This means there are many people out there who are willing to buy and sell homes online. Therefore, the virtual wholesaling process is an opportunity for you to take advantage of the digital transformation happening in the real estate industry.

Are you interested in becoming a virtual wholesaler? Here’s what you need to know.

The Benefits of Virtual Real Estate Wholesaling

Virtual real estate wholesaling follows the same idea as traditional wholesaling, except your involvement is completely done through digital means. Using digital technologies such as emails, digital signatures, and online databases, you can close wholesale real estate deals without showing up in person. 

Here are the three biggest benefits of this arrangement:

  • Expand to Multiple Markets: You can venture into multiple new markets without increasing your costs, making your wholesaling business scalable. Operate in the hottest markets, grow your buyers list, and even use digital marketing strategies to expand your business.
  • Save Precious Time: It takes weeks to visit all the properties you want to wholesale. With virtual wholesaling, however, you can check out multiple locations in a day. Chat with motivated sellers and make blind offers in varied investment areas easily.
  • Build a Virtual Team: You can build a virtual network to operate your wholesaling business online. Bring in real estate agents, virtual assistants, contractors, and vendors to help you analyze and close deals in all the markets you want to sell in.

All of these real estate investing benefits sound great, but can you really operate without physical appearance? Let’s take a look.

The Steps to Virtual Real Estate Wholesaling

Here are the points in the home buying process when physical presence is typically required:

  • Scouting areas with real estate agents
  • Negotiating with motivated sellers
  • Inspecting and conducting due diligence
  • Estimating the repairs
  • Signing documents

Your goal is to turn these points into digital processes. How? 

  • Use Websites to Find Profitable Areas: Use Mashvisor’s heat map for analysis. As they say, in the real estate industry, it’s all about location, location, location. You won’t need to meet with real estate agents when you can do initial research yourself.
  • Use Websites to Connect with Sellers: Instead of elbowing your way through the MLS, Mashboard provides homeowner data for you to contact the potential seller. Through this tool, you can get their property address, email address, and phone number to start negotiating.
  • Use Virtual Walkthroughs: Browse through Zillow and you’ll see properties that offer virtual tours. If the property you’re eyeing is there, book a digital tour to simulate a walkthrough and check the property out. If the property doesn’t have a virtual tour, you can tap your virtual wholesaling team to conduct due diligence.
  • Conduct Real Estate Analysis: Once you find a good deal, conduct real estate investing analysis to ensure that the after repair value (ARV) and estimated repair cost (ERC) is favorable to market prices. Run comps for the ARV through Zillow or Redfin, and use online calculators by Home Advisor or Kukun to get the ERC.
  • Use Digital Apps to Sign Documents: Got yourself a wholesale deal to close? Download Docusign and DotLoop to sign the real estate contract electronically, send it through email, and get the property under contract without any physical contact. 

Lastly, collect your wholesaling fee either by including it as a line item on the settlement statement, or having the buyer send you a check. Either way, you can do this without meeting anybody in person.

Conclusion

Becoming a virtual wholesaler allows you to tap into lucrative markets with tremendous flexibility and agility. As our world evolves into a highly digitized system, virtual wholesaling is your opportunity to take advantage of digital transformation and get ahead of your competitors—expanding your wholesaling business in all possible locations.

Any other tips or tools for virtual real estate wholesalers?

Categories
Wholesaling

6 Things Beginner Wholesalers Wish They Knew

Remember Carlton Sheets—that real estate guy who was always on TV in the late 1980s?

He was a legend in the industry, and one of the key influencers who popularized real estate wholesaling. He had a course on wholesaling that customers took through a toll-free phone number, where his iconic line encouraged people, “You can get started in real estate with no money!”

Sheets isn’t as famous nowadays, but the excitement he created for wholesaling is still alive and well. He inspired many people then and now to get involved in real estate wholesaling even if they didn’t have any background in it.

While the process can differ from case to case, the typical wholesaling procedure goes like so:

People get into wholesaling because it sounds so simple, but they don’t realize how difficult it is. While all beginners will face common pitfalls and inevitable challenges, our goal is to equip you with the knowledge to tackle them, head-on.

Read on to learn the seven things beginner wholesalers should know before getting started!

1. Generating Wholesale Leads is Harder than You Think

Most people read about real estate wholesaling and think it’s easy, as there’s little capital involved in the investment. However, research shows that most real estate agents fail in their first year because they can’t find enough good deals or buyers.

The reality is that generating wholesaling leads is difficult. And, like new real estate agents, most new wholesalers don’t have a network and don’t spend enough time building one.

Beginner wholesalers will typically call all their friends and family, get a deal or two, and immediately exhaust their options. Relying on friends and relatives isn’t a scalable strategy, so many wholesalers get through their first year and quickly fizzle out.

That’s why the most important thing to know as a new wholesaler is how to generate deals and build a pipeline that provides a consistent flow of deals.

Here are six of the ways you can generate wholesaling deals:

  • Make offers on the Multiple Listing Service (MLS)
  • Make offers on the United States Department of Housing and Urban Development (HUD)
  • Make offers at auctions, both offline and online
  • Make networking a priority
  • Make time to drive by neighborhoods and find distressed properties
  • Make your own website or Facebook page to get inbound deals

We’ve gone over the details of these methods in our article about finding wholesaling deals if you want to know more about the specifics of each one.

Once you get some momentum going, you can also hire an assistant to help you make offers, find listings, and close deals.

With your deal generation system set up, the next step is to learn how to analyze the deals properly, because…

2. Analyzing Deals Correctly Will Make or Break Your Success

Wholesalers need to position themselves as expert deal finders who make buyers’ lives easier. Your goal is to build a good reputation for yourself and establish your business towards growth and expansion.

To do so, you’d need to learn how to properly analyze wholesaling deals and become a master in creating value for buyers and investors.

Here’s how to accurately analyze your deals:

  1. Determine the After Repair Value (ARV): Run comparables (comps) in the area using websites such as Zillow or Redfin to see how a property will be worth AFTER it’s been fully renovated (AKA the “after repair value”). Comps are the properties within ¼ – ½ a mile of your property that are of similar size, type, beds/baths, and age, and have sold within the last 6 months.

Here’s the formula for determining your ARV:

  1. Evaluate the Estimated Repair Costs (ERC): As properties for wholesaling are often distressed, you need to understand the rehabilitation costs to know whether or not a particular property is really a good deal or not.

Here are some quick tips for estimating the repair costs accurately:

  1. Finalize the Ideal Purchase Price (The 65% Rule): After determining your ARV and ERC, you’ll now calculate the ideal purchase price for your investment property. You can use The 65% Rule to compute this, where the formula is as such:

The 65% Rule is the wholesaler’s adaptation of the flipper’s 70% Rule—a rule of thumb that tells the flipper to purchase properties at a maximum price of 70% of its ARV. As a wholesaler, you can have a 5% difference that enables you and the buyer to make a profit—especially when you’re selling to flippers. Investors are likely to steer clear from a price that is more than 65% of the ARV (minus the ERC).

Keep in mind that the opposite is true: if you don’t know how to analyze properties and offer great deals, you will struggle with building your reputation and growing your network of buyers and investors.

3. Having the Right Documents and Contracts is Key

Wholesaling is basically buying and selling contracts, so getting this part right is pretty important! However, a LOT of new wholesalers don’t even have the appropriate paperwork in place before getting started, and that can lead to them getting burned.

You need to have the right paperwork with a contract that is assignable:

Let’s take a look at the key factors a wholesale contract needs to have:

  • The Wholesale Real Estate Assignment Contract: This is the legal document that makes it possible to transfer the right to purchase a property from the wholesaler to an end buyer. Once you and the seller enter an equitable conversion (making the eventual buyer the owner of the property once they sign the contract), you need to draft an Assignment of Real Estate Purchase and Sale Agreement:
    • The Assignment of Real Estate Purchase should have a copy of the original purchase and sale agreement between you and the seller, informing the end buyer of all the terms, contingencies, conditions, and payment terms involved in the deal.
    • The Sale Agreement should say that the buyer will purchase the home from the seller and assume property ownership—effectively absolving you from all responsibility.
  • The Wholesale Real Estate Purchase Agreement: There are many components in this agreement. The Wholesalers Toolbox have shared their templates to get you started on your contracts and agreements. There are also other sources you can find on the internet, just make sure that include the parts highlighted in this sample:

Make sure you have all of this in place before finding your first deal so you don’t waste time or end up scrambling to pull the documents together when an opportunity comes along.

4. Keep Your Profit Margin Private by Following the Double Closing Technique

The double closing technique in wholesaling is a popular strategy, because it allows you to keep your wholesaler fee private. In other words, it lets you hide your profit margin. You won’t have to explain to potential buyers about the price differences between your contract and the seller’s, thus saving you the headache of being cut out of the transaction.

This method contrasts with contract assigning because you won’t have to purchase the property—you only facilitate the transferring of contracts. In a nutshell, the technique is closing two independent deals that happen almost simultaneously, sometimes within a few hours or weeks. One of them is with the property’s original seller, and another is with the end buyer.

As the wholesaler in both these transactions, you need to treat them as individual deals with their settlement statements:

  • Statements with the seller are referred to as HUD-1, and outlines the purchase price you have negotiated and settled on. HUD-1 includes any prepaid interest charges, homeowners’ insurance fees, title insurance, property taxes, and closing agent fees.
  • Statements with the buyer identify the final purchase price you have agreed to sell the property. This deal is contingent on the first closing with the original property owner.

For more information on this technique, you can visit here. But simply put, the process goes like so:

It’s not rocket science, but it does take a lot of leg work. There is also the stress of indecisive parties, people backing out suddenly, and aligning the schedules of everybody involved in the deal.

The double closing technique is a good alternative to contract assigning, especially when used as an exit strategy. Of course, you would need to put “more skin in the game” by taking legal possession of the property for all of five seconds, but if contract assigning doesn’t work, double closing can increase the chances of a deal transpiring.

5. How to Turn Any Lead Into a Deal

Now, how do you handle “imperfect deals” or deals that seem tough to profit from?

The good thing about real estate investing is that there are many ways in which you can still make a profit. As long as the seller is motivated, you can find a way to make money off the property.

For example, if the seller owes more than the house is worth (i.e., upside down in the mortgage), you could find a lender that will agree to wholesaling the property as a short sale. These deals are rare but entirely possible.

Here are two nontraditional ways to wholesale a short sale property:

  • Buy in a Land Trust: This agreement is where a Trustee agrees to hold the property title for the benefit of other parties, known as the Beneficiaries. The name you’ll put in the purchase contract is the Trustee (the primary buyer). The buyer will then submit copies of the trust documents to the bank, as lenders will require the buyer’s LLC documentation to be submitted along with the offer. Once you get to closing, the beneficial interest of the trust gets assigned to the end buyer for a wholesaling, assignment fee.
  • Create an LLC: You can also create an LLC with the end buyer (typically costing anywhere from $100 to $500), buy the property as an LLC, and sell it to the end buyer. The LLC’s name on the short sale approval letter will not change when the buyers change hands, and you’ll still charge a wholesaling fee.

Alternatively (and, if you ask me, the better way to earn money from real estate long-term), you can take ownership of the property and turn it into a cash flow generating rental. Thus, you’ll extend yourself into becoming a rental property investor—and still make money off the property.

6. Adapting to Shifting Markets is How to Scale & Sustain Your Wholesaling Business

Just like any other business, you need to stay updated with market shifts that affect your business. Real estate is a dynamic industry that requires you to spot market trends early, collect relevant insights, and adjust the way you conduct your wholesaling business constantly.

Take the recent pandemic, for example, that changed the industry for years to come. We noticed four trends for wholesalers to keep watch of to stay successful in 2021 onwards:

  1. Work-from-home Becoming Mainstream: Many office workers move out of dense cities and into residential areas with more freedom and space. Wholesalers, therefore, need to pay more attention to the rural areas where buyers are now increasingly interested in.
  2. People Upgrading Their Current Homes: With the pandemic forcing people to stay indoors, people are now willing to invest in comfortable homes with larger rooms, backyards, bigger patios, and more. Wholesalers need to pay attention to the evolving preferences of homeowners and their heightened attraction to certain home features.
  3. More People Purchasing Homes: Interest rates hit an all-time low in 2020, and the forecast for 2021 reflects similarly. With these low mortgage and interest rates for properties, people want to own homes more than before. While wholesalers will have a harder time finding properties, determined wholesalers that do secure homes will sell faster and at top dollar.
  4. Decrease in Housing Inventory: Given the ongoing transmission of COVID-19, people have put off selling their houses to minimize contact with strangers. Competition within the housing market then increases—decreasing the chances of wholesalers getting properties at a discount. Nevertheless, it also makes exiting deals much easier and at a higher profit—where supply is low, demand is high (due to low mortgage rates), and home prices are soaring.

The pandemic might be a one-time thing, but disruptions and changes will always happen in the industry. The only thing constant is change—which means wholesalers should stay updated!

Conclusion

Wholesaling real estate is deceptively easy… And it is if you know what you’re doing.

Start on the right footing, and you’ll set yourself up for real estate success in the wholesaling business. Continue to learn from successful investors who freely share their best tips, join networking groups to discuss with other wholesalers in your local area[3] , and get familiar with:

  • Generating wholesale leads
  • Analyzing properties properly
  • Securing the right documents and contracts
  • Learning how to double close wholesale deals
  • Turning any lead into an investment opportunity
  • Adapting to shifting markets

With these in your back pocket, you can be just as excited as Carlton Sheets about real estate investing. You’ll have the knowledge required to truly become a successful wholesaler and “start on your own path toward financial independence” today.

Image courtesy of Djordje Petrovic


Categories
Wholesaling

5 Wholesaling Myths —Debunked!

Real estate wholesaling often gets a bad rap, but is it fair to call this an illegal or shady form of real estate investing? How did it get this reputation in the first place?

The problem is, wholesaling is usually chosen by first-time investors as a way of getting into the industry with little or no upfront capital required – which is great. But it also means that newbie investors get into this field and make a lot of mistakes, and that has led to some serious misconceptions about wholesaling over the years.

If you’re an investor who’s excited to get started as a wholesaler but is hesitant because of things you might have heard about it, this article will pull back the curtain on five of the most pervasive wholesaling myths. 

Wholesaling real estate is not outright illegal, but it’s governed by specific laws that require you to have certain contracts and documents before you can proceed. Wholesaling gets its bad rap largely due to the illegal practice of unlicensed brokering, which isn’t the same as wholesaling.

1. “It’s illegal to wholesale real estate.”

To ensure full compliance with local real estate law, here are some steps to take when wholesaling properties:

  • Have a bilateral contract with the seller that stipulates your acquisition of the equitable interest.
  • Have a proof of funds letter to prove your intent to purchase.
  • Wait until the house is under contract with the original seller before finding new buyers.

In the event of needing to defend your wholesaling activities in real estate commission hearings, having everything documented is essential for proving you’ve acted within the law.

2. “Wholesaling is only for beginner investors.”

Just because it takes minimal capital to get started with wholesaling, doesn’t mean it’s easy. For example, since you’re the middleman in deals, a buyer or seller can easily get rid of you to avoid paying an additional wholesaler’s fee—effectively taking you out of the equation altogether.

Secondly, while there is a low barrier to entry, wholesaling has a high barrier to sustainability. People tend to think that wholesaling fulfills a need in the market, where investors are looking for people to help them find their next deal. In reality, the investors themselves are already good at finding deals themselves. This makes finding good deals extremely hard. Plus, investors don’t want to subcontract finding deals to wholesalers, and those who do certainly don’t want to pay top dollar. 

Wholesaling can be a stepping stone for beginners to get into real estate investing, but that doesn’t discount the fact that it’s highly lucrative for experienced wholesalers. Mastering the skills and acquiring the connections for a steady flow of good deals enables you to earn as much as other investment strategies.

3. “Wholesaling is inferior to house flipping.”

Let’s put the two investment strategies side-by-side for an accurate comparison:

Depending on your reason and goals for investing in real estate, you might choose one over the other. Either way, based on these key differences, wholesaling isn’t inferior to house flipping at all, it’s just a very different approach with a lot less maintenance required.

4. “Focus on buyers who’ve already bought from you.”

Often called the “easy button buyer” mistake, this refers to the tendency for beginners to send future deals only to the buyers that were willing to close on earlier deals. This is a common myth that wholesalers believe to be effective, but in reality, limits your potential returns.

Think of it this way: businesses thrive on supply and demand. After closing a couple of deals, you now know the area, the numbers, and what features attract more particular buyers. In other words, you have the supply to meet the demand in more than a couple of markets.

Position yourself as an opportunity to as many potential buyers as possible, and you’ll ensure you have a scalable wholesaling business for years to come.

5. “A buyer’s list is necessary to be successful.”

Many investors will say that you need a buyer’s list to be successful in wholesaling, but this is not exactly true. 

The typical buyer’s lists are full of investors who do a lot of deals on a regular basis, meaning they’re serious buyers who can close with cash in 10 days. This is exactly what you want as a wholesaler, but you don’t need to have a buyer’s list to do this.

Instead, new wholesalers should focus on finding quality deals, rather than quality buyers. If you can find a great property, serious buyers will follow.

We’ve written elsewhere on how to find buyers for your wholesale deals, should you need further tips.

Conclusion

All these myths surrounding wholesaling real estate may give some the impression that this investment strategy is shady and unsustainable. However, with these common myths easily debunked, you can see there are actually many solid reasons that prove why wholesaling is an excellent way to invest in real estate. 

If you want to learn more about wholesaling in the current market, we’ve also written an article that explains the top five insights you need to successfully wholesale real estate after a year of COVID-19.

Image courtesy of Monstera

Categories
Wholesaling

Where to Find the Best Real Estate Wholesaling Deals

Like plenty of new investors, you may have decided to try out real estate wholesaling.

Using this investment method, the turnaround period is short, and you don’t need a lot of money (if any) to start—this is why a lot of first-time investors gravitate towards wholesaling.

However, to be successful at it, you do need to find the best properties for wholesaling. After all, not all deals have an equal potential for giving you the returns you desire. You’ll need to source houses significantly (ideally around 50%) under market value, and for that, you’ll also need to be dealing with motivated sellers. 

Finding these kinds of properties isn’t easy – that’s why not everyone and their mother is out there working as a successful wholesale. But to get you started, here’s a guide to help you source profitable wholesaling deals.

Offline Methods

There are two main kinds of wholesale deal sources: offline and online. Though many will consider online methods to be more efficient—especially in today’s digitally driven world—offline techniques also have their benefits.

Those who were successful at real estate wholesaling started their careers with these old-fashioned methods. Though these methods often require more time and resources to set up, you have a good chance of sealing your first deal with the help of these proven techniques:

Driving for Dollars

Before the internet, driving for dollars was one of the most popular ways to hunt for wholesale leads. If you’re tight on budget, this old-fashioned way can still work wonders.

You simply hop into your car and drive through target neighborhoods (i.e. places where buyers actually want to live or invest), looking for properties that show signs of neglect. Some signs to look for are the following:

  • Abandonment or vacancy
  • Overgrown lawn and plants
  • Boarded-up windows
  • Visible damages
  • Uncollected trash

Once you spot a potential property, use public records to find the name of the registered owner, and contact them to make an offer. Often, an unused property could be more of a burden to the owner than a boon – like the unwanted home of a deceased relative, for example – and they’ll be fairly motivated to consider letting someone take it off their hands.

Bandit Signs

Bandit signs are another low-cost and effective way to find deals in your local housing market. Often spotted on random street corners or busy traffic areas, these signs say things like “We Buy Houses” or “Sell Your House for Cash”. Place them in the neighborhoods you want to target for your real estate wholesaling deals.

However, before you start putting up your own, just make sure that these signs aren’t illegal in your area!

Direct Mail Campaigns

This involves sending out postcards or letters to potential sellers, expressing your interest in buying their property. Direct mail campaigns can be effective, though they’re a bit pricier and slower to generate leads than their equivalent online methods.

You’ll need to secure mailing lists and be persistent with getting a response. To increase your success rate, only target owners of pre-foreclosure properties, high equity or delinquent mortgages, probates, and other types of motivated sellers.

Networking

Joining local real estate investment clubs is a great way to find deals. There may be sellers that just haven’t listed their properties yet, which a network of agents, investors, and attorneys can inform you about. Making connections in the industry will also grow your buyers’ list, increasing your chances of closing deals on both ends.

Newspapers

Old-fashioned newspaper advertising can help you reach sellers who aren’t online. After all, 10% of all Americans aren’t online—equating to nearly 33 million Americans!

To avoid missing an opportunity for a real estate wholesaling deal, you can reach more people by posting “I Buy Houses!” ads in local newspapers.

Online methods

Online methods are often more convenient and faster at producing results, though they may not always be as effective as offline methods—and there’s plenty of competition online that you have to contend with, too! Nevertheless, you can still discover a lot of good deals online that you wouldn’t find otherwise.

Here’s how:

Wholesaling Website

Creating a website allows you to target a larger customer audience. With a single click, you can reach thousands more people—a lot more than you can reach with local signages.

Your website should sell yourself as a willing and capable real estate wholesaler, convincing people to trust you with their property. You should optimize your website with SEO, PPC advertising, and social media marketing (as well as retargeting ads) to generate leads and seal more deals.

Expired MLS listings

Expired MLS (Multiple Listing Service) listings are properties that weren’t sold by the date specified in the listing contract between the seller and the listing agent. There aren’t a lot of properties that get this far, but a real estate agent or broker should be able to help you find these deals.

To do this, focus on a particular city or neighborhood, check the properties within, and get in touch with the owners of the expired listings to show your interest in their property. Usually, they’re pretty motivated to sell, since the property has already sat on the market for a long time with no buyers coming forward.

Online Forum and Auction Sites

Craigslist, Hubzu, ForSaleByOwner, and Auction.com are places where people often post to sell quickly. This makes them potential gold mines for real estate investors, and wholesalers in particular. If you move faster than your competition, you can snag some great deals from these websites.

Final Thoughts

For you to be successful in real estate wholesaling, you have to make numerous offers to seal enough deals—both online and offline.

Once you find a motivated seller with a distressed property, make sure to move fast to get them under contract. Then, follow through with assigning the rights to your buyer and collecting your fee, before beginning your search anew!

Any other sources we’ve missed? Which one’s your go-to strategy to find deals?

Image Courtesy of PhotoMIX

Categories
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.

Image Courtesy of Cytonn Photography

Categories
DIY

How Much Should You Pay Yourself vs. Reinvest in Your Next Flip?

A common question flippers have is: “How much should I reinvest in my next flip out of what I make in profit?”

The usual answer? “However much it takes!”

Instead, let’s try reframing this question in a different way: “How much should you pay yourself from each flip?” Answering this might be a better way to gauge if you need to take out just enough to cover living expenses, or if you need to be giving yourself some kind of salary.

Here are some things to consider, if your goal is to maximize your profits and flip more houses:

For New Flippers:

Flippers usually aim to make about 20-30% ROI for every house flipped, although this figure is dependent on costs and how long it takes for each sale to go through. But here are some guidelines to follow when deciding how much profit you want to reinvest in your business vs. keep for personal use:

What are Your Revenue Streams?

Do you have a full-time job that can cover your daily living expenses? If so, then consider reinvesting all the profits back into your next flip – this is the way to achieve the fastest growth in your portfolio.

If you’re flipping full-time, you could choose to keep 10-30% of the profits for yourself, which is how some flippers choose to operate. Alternatively, you could work out what your living expenses are, just keep that amount back, and reinvest the rest, but keep in mind that this will slow down your growth rate.Imagine you paid yourself 30% of the $60k in profit from the example above – that would leave you with just $42,000 to reinvest. Is this enough to help you move up the property ladder with your next flip?

Consider a Live-In Flip

Alternatively, you could consider live-in house flips as another way to “pay yourself,” by negating your own housing costs and writing off expenses, such as tax deductions and double  mortgages.

Experienced Flippers:

If you have a partnership structure, there are more complex issues to think about, like how to divide profits and disperse them in a way that makes sense, tax-wise .

Work Out a Profit-Sharing Agreement

Some calculate profit sharing depending on the number of hours they put in, while others go for an even split (like 50-50, for two partners), regardless of the division of labor. There’s no “one size fits all” formula to this, so you should set clear targets ahead of time for  how much you’d be willing to pay someone else for the skills and/or resources they bring to the partnership.

Know the Tax Implications

Find a knowledgeable CPA to work with and discuss your partnership agreement with them, before you decide how to disburse profits. If you pay yourself a salary, any earned income could be subject to self-employment tax at a rate of 15.3%. That being the case, it might make more financial sense if the profits come to you as dividends, instead.

Know Your Value

The terms of your partnership agreement will determine how much you yourself get paid vs. your co-investors or flipping partners. So, when working out this arrangement (whether you go for a limited partnership or an LLC), make sure you’re being valued appropriately, relative to what you bring to the partnership. Again, it’s always best to seek out an attorney and a tax specialist for guidance here.

Ultimately, the decision is yours. But one good model is to flip 4 properties, then keep the 5th as a rental for steady income. This approach lets you diversify between long- and short-term revenue streams, giving you small amounts of income in steady increments (in the form of rents), as well as larger amounts of income in more irregular intervals (from the sale of flipped homes). Having a balance like this can help you to achieve financial stability in the long run – and this is the same way many traditional businesses structure their revenue streams, too.

Image Courtesy of Rodolfo Quiros