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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

Categories
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.