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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 Aleksejs Bergmanis

Categories
Wholesaling

How Wholesalers Can Monetize Land and Increase Value

Land leasing is a good option for achieving long-term returns on your investment

Land is a form of real estate often neglected by wholesalers. Most wholesalers flip properties, but flipping undeveloped land has unique advantages of its own. It requires less upfront capital, and there is less competition.

The typical land wholesaling model is the same as property wholesaling: you enter into a contract with a motivated seller to purchase the land below current market value, and then either flip the land or sell the rights to the purchase contract to a third party for a profit. But one added benefit of land wholesaling is there are options to further increase the value of raw land while you have it under contract, by subdividing it into multiple parcels or applying for a change in zoning.

Rezoning to Add Value

Rezoning, or changing the use district of a particular parcel of land, is a common way to increase the value of non-residentially zoned land. By changing the use district of industrial or agricultural land to residential or commercial use, you can increase the value of your land by anywhere from 100-400% of its original value. You don’t have to own the land outright to apply for rezoning – just make sure that rezoning is permitted in your contract with the seller if you intend to change its use district before flipping it.

The process of applying for rezoning can take a few months or up to 2-3 years, and in addition to meeting all the requirements set by your local authority, it’s also important that you research and understand your city’s plans for development in the future. For example, changing from a residential to commercial use district could either increase or decrease the value of land, depending on whether or not the city has plans to prioritize commercial development in that area in the coming years.

Splitting Parcels

Subdividing land, or splitting a single plot of land into two or more parcels, can increase the value of land and the total amount of rental income you receive from it. Legally subdividing a property can be a lengthy process – it usually takes several weeks or months from start to finish, and will require that you submit an application to the local authority for approval. You also have to take into account the zoning restrictions and specific rules in your area (such as the minimum permitted plot size) when splitting your land into parcels, and will need to hire a surveyor to plat the land. Usually it costs between $1,000-$3,000 to subdivide a piece of land into two parcels, but the benefits of doing so can be considerable. Smaller parcels are more affordable, and thus appeal to a larger number of buyers and tenants, and it’s possible to increase profits on a single piece of land by as much as 100% when selling or renting it out as two smaller parcels.

As long as it’s permitted in your contract with the seller, you can subdivide land while still under contract, but you will need to close with the seller before selling the individual subdivided parcels outright. The major benefit of this wholesaling strategy is that you can subdivide a plot into 4 parcels, for example, and sell 2 of them outright, leaving you with 2 parcels that you own free and clear.

Don’t be scared off if you find a great piece of land to wholesale and you’re worried it will take too long to rezone or split. Instead, negotiate with the seller on a longer purchase contract as it doesn’t hurt to ask. If that doesn’t work, you can also try more of a partnership agreement with the seller, where you do all the work and then split the profits.

How to Monetize Undeveloped Land

Once you’ve sold some of your subdivided parcels and closed the contract on a land wholesale deal, you can sell the remainder of the parcels outright, or monetize them in other ways.

Developing raw land yourself can be a costly and time-consuming process which may not be feasible for wholesalers operating in different states. There are other ways you can generate income from land without having to develop it. These options do take more time and energy than simply selling your land immediately, but the result is higher profits on each plot you own in the long term.

Rent your land to a small business venture

Land leasing is a good option for achieving long-term returns on your investment. If you market your property to the right audience, you’ll find there are a whole range of unexpected business plans which only require raw land to get started. Archery ranges, escape rooms, and drone race tracks are just a few examples of businesses that will pay to rent land, even without any structures or facilities in place. These businesses generally require plots anywhere from .2 – 3 acres in size, so even if you don’t have a huge amount of land, this can still be a viable option for you.

Put up a parking lot (without paving paradise)

Having a parking lot can be an inexpensive way of monetizing your land. Even if your land isn’t near a very transited area, you shouldn’t necessarily discard this option.

Try to think of who may have parking needs and may want to pay lower fees than those charged in downtown areas. A perfect example would be truck, bus and coach companies, since these usually prefer inexpensive options to keep their vehicles overnight, as opposed to expensive central locations. For some of these clients, you won’t even need to pave the land, and they usually pay somewhere around $10 per vehicle for parking overnight.

Rent-to-own

Rent-to-own is a type of transaction in which the tenant is given the opportunity to buy the property outright after a maximum lease period of 5 years. The tenant usually pays you an initial deposit of 3-5% of the property’s value as a purchase option. A portion of the monthly rent then goes towards the purchase price of the land, and after the initial leasing period, the tenant can exercise the purchase option. If they choose not to proceed with the purchase, you can begin the process over again with a new tenant once the agreement ends. It’s also possible to monetize land using a lease-to-own agreement while you still have the land under contract. With a sandwich lease agreement, you can sign a lease-to-own contract with the seller, then sign a separate lease-to-own agreement with a tenant-buyer of your own, who pays a higher rental rate. Once the lease term concludes, you can complete the agreement with the seller and close the deal with your tenant-buyer.

Partner Up!

If you’ve got a free and clear piece of land, it’s an asset, that like cash, you can invest in a deal. In this case you can put up your land as your part of an investment in a new construction or development project. Look for active builders and developers in the area of the land and see what they’re interested in doing.

If you subdivide into parcels, wholesaling land could lead to you owning some plots essentially for free. Whether you decide to sell these outright or pursue a long-term monetization strategy for the land you own, any revenue you receive will be 100% profit, and that’s perhaps the biggest advantage of the land wholesale investment model.

Image Courtesy of Marek Mucha