Empty land is a valuable commodity. In some parts of the country, it’s worth more than homes—simply because there’s always a market for land for building a new structure or something else.
It’s also easier for wholesalers to find buyers for vacant land than for houses, as there is less competition in the market for land deals. As a result, you’ll find better deals on properties ripe for development than those with established homes.
So, if you want to learn how to get into this small real estate niche, we’ve got tips to get you started in the wholesaling process.
5 Steps to Wholesale Empty Lots
We’ve all seen those empty gravel lots in our neighborhood. But now, you’ll see them as more than just a pile of dirt. Instead, they’re an opportunity. While the land is valuable everywhere, some lots are worth more than others—highly sought after by the buyers you want to attract.
So, here are 5 ways you can start wholesaling land:
1. Look for Developing Areas
Look for areas that are being developed or zoned for development, as it’ll give you a good sign of where the market will move to in the coming years.
You can attend city council meetings to get a sense of which areas are being approved for rezoning or development variances. Search online for local land auctions—being good indicators of where the market is moving, and scan MLS listings for “raw land” or “vacant land” to identify hotspots.
2. Research the Title and Zoning
Do your due diligence when researching a piece of property. Check the title to see if there are any liens or encumbrances, and ensure that the property is zoned for the type of development your buyers have in mind. It’s also essential to determine if easements or rights-of-way could affect your prospective buyer’s development plans.
3. Get a Professional Opinion
Before making an offer on a piece of property, it’s always a good idea to get a professional opinion. Have a real estate attorney look over the contract, and have a land surveyor assess the property to determine its potential uses. You can also use the information to market the land to potential buyers.
4. Make an Offer
Once you’ve decided that a piece of property is a good fit for your portfolio, it’s time to make an offer. When making an offer on vacant land, it’s important to be realistic about the value of the property and the costs of development.
Remember: It may take longer to sell vacant land than it would to sell a finished home in some areas, so you’ll need to take the additional waiting time into account.
5. Close the Deal
With a buyer now confirmed, close the deal using a professional team to help with the process. Ensure that all the necessary inspections have been conducted and that the property is free of any environmental hazards, secure the appropriate permits for development from the local municipality, and verify that the title is clear and there are no outstanding liens or encumbrances on the property.
Turn Empty Lots into Enticing Deals
Next time you walk by an empty lot, remember that it’s more valuable than you think. By following these steps, you can successfully wholesale vacant lots in no time. Just remember to be patient, do your research, and work with a professional team to get the best results.
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Are you interested in real estate wholesaling? Great!
But are you ready to start now?
Many would-be real estate wholesalers are afraid of the risks that this industry is notorious for. After all, who would want to pour their time, money, and effort into a project that’ll take months or even years to see returns?
Well, you’ve come to the right place because, in this article, we’ll walk you through the whole process of how to get your first wholesale deal in just 30 days. From finding the property to negotiating its price and closing the sale, we’ll give you the exact steps you need to take so you don’t waste any time committing rookie mistakes.
Ready? Let’s dive in!
1. Find a Property: 8 Days
The first step to landing a wholesale deal is to find a property you can acquire at a discount. This stage of the process will usually mean finding distressed properties that have motivated sellers, which you can easily find via the following techniques:
“Driving for dollars” or going around your area to spot vacant and abandoned properties
Checking tax lien or foreclosure records to find homeowners that are desperate to sell
Placing bandit signs in high-traffic areas that contain a short message and your contact details
Direct mailing or sending out postcards and flyers to potential sellers
Leveraging your network by joining real estate investment clubs and associations
Checking expired listings for properties that weren’t sold by the date specified in the contract
Finding distressed properties and motivated sellers will take some time but don’t let this challenge stop you from trying to succeed in this industry. Keep in mind that real estate wholesaling is all about generating leads––the better and faster you get at doing so, the more you’ll become successful.
2. Negotiate for the Right Price: 5 Days
Once you’ve found potential properties, negotiate with the seller to determine a good price.
As a real estate wholesaler, the money you make will depend on how well you negotiate. Moreover, you can’t be too selfish while negotiating. Instead, you have to create and reframe the situation for the seller to see the benefits of agreeing to a lower price.
Your goal is to find the sweet spot price that’s low enough for the seller to approve, but high enough for you to generate a hefty fee without struggling to find a buyer.
If you aren’t confident in your negotiation skills, consider taking a seminar, reading books on the subject, or working with a trusted friend who has experience in real estate wholesaling.
Pro tip: Pay close attention to your tone of voice, body language, and behavior throughout the entire transaction, as it’ll indirectly affect the property’s selling and a purchase price as well—tampering with your potential profit.
3. Find Buyers for Your Property: 10 Days
Once you’ve got a good price with the seller, it’s time to find potential buyers. Doing this may seem like an insurmountable challenge, but thanks to the Internet, it’s now easier than ever. Here are a few tips:
Create a website: Showcase your past work and customer testimonials so it’s easy to get new sellers and buyers to trust you. You can create simple websites with WiX or WordPress, or get in touch with a web developer friend to help you out.
Scan forums and social media: Online forums, wholesaling Facebook groups, and social media platforms are also rich sources of potential buyers. So join groups dedicated to helping people find their next home, and establish your trustworthiness and expertise as a real estate wholesaler there.
Work with agents: Ideally, you want cash buyers that wouldn’t need a loan to purchase a home, so the transaction is quicker and easier for you. The best way to find them is by working with real estate agents, as they’ll usually have a list of financially capable buyers.
Cold calling: In the real estate industry, cold calling is one of the most effective ways to find potential buyers. Reach out to your current connections and find out if they know someone on the market for a new property. Then, give those prospects a call to explain your deal.
Put up bandit signs: Another popular method of lead generation, bandit signs are poster-sized signs that contain an attention-grabbing message and your contact details. For a better shot at success, place them in high-traffic areas, like shopping malls and busy streets.
As challenging as this stage may be, know that there are many tried-and-tested strategies that will help you out. By leveraging your existing network and being creative with your methods, you’ll have a list of potential buyers in no time at all.
4. Close the Deal: 7 Days
After receiving confirmation from your buyer, you can now officially start closing the deal. Now, real estate wholesaling relies on short-term funding and compressed timelines, which means you’ll have to pay close attention to every part of this process to make sure that nothing goes wrong.
There are two types of contracts in real estate wholesaling. The type of contract you choose should largely depend on your risk tolerance and how fast you want to close the deal:
Assignment Contracts: Find a buyer and sell them the contract without buying the property yourself, so you won’t have to put down any of your own money. This entire process can take as long as a week to complete.
Double Close Contracts: Buying the property and immediately selling it off to a buyer will give you bigger profits as the two parties won’t know what you bought and sold the property for. This process usually takes longer and can even last a few weeks.
Each type of contract has its own set of advantages and disadvantages so evaluate your situation before picking which one to go with. For instance, assignment contracts may be simpler and quicker but they also mean that both parties will know how much you’re making on the deal, which doesn’t give you a lot of negotiating power.
On the other hand, double-close contracts may mean more anonymity and privacy, in terms of the profits you’ll potentially walk away with. However, the process takes longer, is more complicated, and involves financial risks. With this type of contract, you’ll have to pay closing costs two different times—-when you buy the property and when you sell it off.
There isn’t a right or wrong type of contract to execute. Rather, the best option will depend on your risk appetite, financial assets, and how much you ultimately want to earn on the sale.
One Month Richer with Real Estate Wholesaling
Real estate wholesaling relies on short-term funding and compressed timelines, which means you’ll have to pay close attention to every part of this process so nothing takes too long. Ultimately, your goal is to have strong negotiation skills and the determination to find people looking to purchase the property.
If you can do these things fast and effectively, you’ll be reaping significant wholesaling profits within 30 days—we guarantee!
If you want more tips on navigating the world of real estate wholesaling, subscribe to our email newsletter. You can also check out our website, where you’ll find the date of our next meeting and an application form to become a member of REIA.
Many people in the real estate industry frown upon wholesalers. In general, it seems that wholesalers have developed a bad reputation because many investors and sellers think they can find each other without an expensive middleman pocketing some of the profits.
But the reality is far more complicated than just that…
The truth is real estate wholesalers make everyone’s lives easier, helping sellers to actually sell their unwanted homes and connecting buyers with properties they actually want. In a way, they fill a gap in the real estate investment game that nobody else can, providing genuine value to both seller and the investor.
Still, not everyone thinks that and so we wanted to address the question: Are wholesale real estate transactions ethical?
Let’s take a closer look at the issue.
When Is Real Estate Wholesaling Unethical?
Here’s how we see it: Real estate wholesaling is only unethical if someone conducts their business for the wrong reasons. After all, real estate wholesaling is legal in all 50 states—although with many local and state rules governing it.
Here are two situations where real estate wholesaling becomes unethical:
#1 – Deceiving the Seller
If a wholesaler deceives the seller into thinking that their property is worth less than it actually does, they’re effectively tricking them so they can earn more profits. But if the wholesaler tells them the actual value of their home and is clear about the extra cost they’ll pay for their expertise, then everything is done ethically.
As a wholesaler, the goal is to convince the seller that your list of buyers and connections will help them greatly, so they can sell their homes as soon and as easily as possible. After all, most sellers have the following problems:
They don’t have access to interested investors or buyers.
They don’t have real estate knowledge to handle the transaction.
They don’t want to take care of the property anymore and would rather liquidate it.
They don’t have the time and finances necessary to repair the property.
They don’t have time to waste as the property is near foreclosure already.
Another situation is if the property is already in foreclosure and the bank just wants to liquidate it. A real estate wholesaler can then step in, offer their expertise and knowledge, and get the job done quickly and efficiently.
#2 – Deceiving the Buyer
Another example of an unethical situation happens when the wholesaler underestimates the repairs needed and oversells the property to a buyer.
Sure, the wholesaler will certainly gain a hefty profit, but that effectively pushes the problem to the investor—where they have to repair and renovate the property at a much higher cost than expected. With a bloated after-repair value (ARVs) and inaccurately estimated repair costs (ERC), they’ll have lower their profits and struggle to bring the home up to standards or find another exit plan before they sink too deep.
Unethical situations like these are what fuel the negative reputation wholesalers have today.
Instead, you want to be known as an expert deal finder. Give accurate ARVs and ERCs, and put in the effort to build your experience, knowledge, and reputation in the community. The more you do this, the more buyers will see your added value to their investments—becoming an irreplaceable asset to them.
Ultimately, it boils down to the quality of deals you provide. If you offer pathetic deals for hefty profits and push problems to other parties, you’re only fueling the negative reputation that wholesalers already have to deal with in this industry.
Wholesalers = Real Estate Pawn Shops
Pawn shops also have a bad name, but they also fill a niche in local economies. Someone in need of quick cash chooses to sell their item at a pawn shop, usually for less than they could get by selling the item on Facebook Marketplace, Craigslist, etc.
Doing Real Estate Wholesaling Ethically
Many real estate agents look down on wholesalers as predatory, when they should actually look at them as another avenue for a quick sale in certain situations.
As long as you conduct your transactions the right way, you’re wholesaling real estate ethically and shouldn’t have any problems. After all, when you can build trust and credibility as a wholesaler, you’ll get far more recommendations from other buyers and sellers as well.
And when it comes to real estate wholesaling—networking is more important in the long run than acting out of your own self-interest for short-term profits.
What else do you want to know about wholesaling? Drop us a comment below!
If you’re a real estate wholesaler, then you’re already aware that your success depends on the trust you build with potential sellers and buyers. Unfortunately, many scammers try to take advantage of people by misrepresenting their intentions or promising impossibly high profits.
As they’re on the way to the bank, the unfortunate wholesaler must deal with the fallout, which frequently involves unhappy clients and a ruined reputation. Nevertheless, there are things you can do to gain their trust, seal deals, and earn wholesale profits.
Here are 3 few things you can do to assure sellers and buyers that you’re a legitimate real estate wholesaler with their best interests at heart.
1. Know the common types of real estate scams.
Apart from posing as agents or homebuyers, some con artists go the extra mile by pretending to be home inspectors, lenders, or landlords. To protect your customers from fraud, familiarize yourself with common real estate wholesaling scams.
Besides protecting yourself and the people you’re working with, in-depth knowledge of common scams shows that you really know the ins-and-outs of the industry. Without a doubt, this will help build your reputation, where buyers and sellers will feel more confident partnering with an expert.
The Foreign Buyer Scam
In this real estate scam, the seller will usually receive an email from someone claiming to be a prospective buyer living abroad. Then they’ll say that they’re planning to move to the United States.
They’ll send a check for the down payment only to say that they accidentally paid too much and ask the seller to wire back the difference. Only later will the seller realize that the check is fake—they’ve received no money. By that time, the buyer will have vanished along with the cash that was “returned” to them.
The “Bait and Switch” Scam
This scam occurs when a prospective buyer makes an offer that’s above the property’s market value, its sale price, or both. The seller then excitedly accepts the deal, only to learn that the buyer isn’t signing the contract yet because of “delays”.
They eventually come back; although, this time with a much lower price and a list of demands. Unfortunately, the seller will have paid thousands in ongoing taxes, insurance, and utility bills by this time, and feel they have to honor the sale regardless.
The Duplicated Listing Scam
Scouring through websites like Craigslist may lead you to great properties with incredibly low prices—but be warned! Some scammers copy legitimate rental listings and re-publish them with altered contact details and price tags. Unfortunately, some innocent buyers are so excited to grab the deal that they immediately wire a down payment to secure the purchase.
Needless to say, the scammer disappears upon receiving the payment, leaving the poor buyer with thousands of dollars lost and no property to show for it. They can try approaching the authorities for help but sadly, they often never get their money back.
2. Cultivate a robust online presence.
On the flip side, you want to show buyers that you’re not like the scammers we listed already. So, as a seller, you should establish a strong online presence is to convince buyers that you’re legitimate. After all, real estate scammers use fake names and likely won’t be as active on social media platforms.
Here are two ways to have an online presence:
Social Media: Create social media profiles on popular platforms like Facebook, Instagram, Twitter, and more to help prove your credibility and trustworthiness.
Website: Go the extra mile and build a website. Other than giving you a platform to display the properties you’re currently holding, you’ll also have a place to show past client testimonials, success stories, and positive reviews.
The more you cultivate your online presence, the more you can establish a strong brand and reputation. You also look more professional and differentiate yourself from scam websites that are often unorganized and hard to understand.
3. Avoid dominating the conversation.
As a real estate wholesaler, you’re probably aiming to grab all the opportunities you come across. There’s nothing wrong with this goal, but being too fixated on it could lead to being pushy or too eager when talking with buyers and sellers.
Instead, when speaking with buyers and sellers, stick to the basic facts—who you are, the name of your business, and how exactly you can help them. It’s completely alright to dig deeper and discuss their current situation and the property in more detail, but the key is to let them lead the conversation.
Constantly interrupting or talking over them will make you appear unprofessional and untrustworthy.
Build Trust, Land Sales, Earn Fortunes
Given how valuable an asset property is, buyers and sellers alike will only work with someone they trust. Therefore, if you want to land wholesale deals, you must focus on strengthening your brand and credibility. Only then will you find success in the real estate industry—one that’s largely built on trust.
We’ve been serving the Metro Detroit real estate market for more than two decades now and have everything you need to succeed in the area. We can help you with anything, from building an online presence to keeping track of your buyers and sellers.
When conducting wholesale deals, contract negotiations become an everyday occurrence in your life. This means that if you aren’t knowledgeable about the requirements and details of wholesale contracts—you can end up losing a deal.
You have to be exceptionally familiar with contracts to be a successful wholesaler, which is why we’re writing this article to dive deep into the key paperwork you’ll need. Nail these on the head, and you can navigate through the world of real estate wholesaling with ease.
What is A Buy and Sell Contract?
Otherwise known as a purchase agreement, this is the contract you enter with the seller of the property. It acts as a legally binding agreement and outlines the terms of the offer between a buyer and seller in real estate transactions.
Your job as the wholesaler is to act as a middleman and find a willing investor to buy the property. That means to need to know how this is the contract permits them to purchase the home. Once you find a buyer, this contract transfers from you—the wholesaler—to the buyer.
The content of the buy and sell contract should have the following:
The date of the agreement
The name of the seller/individuals listed on the property’s title
The buyer’s name
The earnest money deposit.
The total purchase price of the property
Closing date and transfer of title
Escrow and closing fees
The buyer can be assigned to pay the fees
Or it can be the seller
Or they can pay equally
Or they can pay their respective escrow and closing fees
Signatures of you and the sellers
Date of signature
This list isn’t exhaustive, but these are the most relevant things you should pay attention to in buy and sell contracts. As long as you have these covered, you should be good to go.
Note that your buyer will also thoroughly examine the agreement before getting into the deal with you. As such, it’s best that you know your way around these contracts well enough to answer their questions and successfully close the sale.
What Is A Seller’s Disclosure?
The State of Michigan requires a seller to complete and sign this disclosure to accompany any and all purchase transactions. It’s meant to protect a buyer from seller misrepresentation about the condition of a residential property.
Since most sellers aren’t aware of this form, you’ll want to keep a copy with your buy-sell contracts. Do NOT ever complete the form though, for a seller—legally they must complete it.
The next one to know is an assignment agreement.
What is An Assignment Agreement?
An assignment agreement is a real estate contract that transfers your rights and responsibilities listed in the purchase agreement to your investor—the new buyer. Often, this can also be referred to as an “Assignment of Real Estate Purchase and Sale” agreement.
After signing this contract, the buyer will take over the purchase agreement, and you’ll be awarded an assignment fee. Only you and the buyer will receive copies of an assignment agreement since the seller is not involved in completing an assignment contract.
An assignment contract needs to contain the following:
The agreed-upon assignment fee
The assignor’s name
The assignee’s name
The date of agreement on the purchase contract
The names on the purchase agreement
Location of the property
Assignee to pay the security deposit in escrow
Signatures of you and the buyer
Date of signature
Once the assignment contract has been signed and fulfilled, the investor will then take over the purchase agreement. After that, the buyer closes on the property and you’ll be awarded your assignment fee.
Wholesaling Contracts Made Easy
There’s a lot of paperwork that comes with wholesaling in the real estate business. If you get in over your head and gloss over every other contract you get into, you can end up losing your wholesale deals—or worse—alienating your potential buyers.
If you ask us, it’s just not a risk worth taking if you want to grow your wholesaling business.
With our help, you’ll have a good idea of how the contracts you’ll be dealing with regularly are done. If you need more help with wholesaling paperwork, feel free to reach out to us!
Have any questions about wholesaling contracts? Let us know in the comments below!
New investors are attracted to real estate wholesaling because it’s an investment strategy that doesn’t need a large amount of upfront capital. Moreover, wholesaling real estate helps newbies become more familiar with the industry and gain valuable negotiation skills.
So, if you’re one of those aspiring beginners, you’re in luck. This article will teach you an essential skill that every successful wholesaler perfects: running comps to price your wholesale deals correctly.
What are Real Estate Comps?
Comparable sales, or “comps”, refer to recently sold houses similar to the property you’re interested in wholesaling. They are similar in terms of:
Neighborhood or location
Property size (square footage)
Property condition and age
Property type (e.g., single-house home)
Property features (e.g., a garage, swimming pool, and number of rooms)
Real estate comps can either be calculated manually or with online tools, as we’ll discuss later on.
Why is Running Comps Important?
To understand the importance of running comps, we have to review a typical wholesaling process:
A homeowner decides to sell their distressed home to avoid foreclosure.
They approach a wholesaler (or the wholesaler approaches them), and the two of them decide to put the house under contract. The value the wholesaler typically pays is 60-70% of ARV (after repair value), minus the estimated repair costs (ERC)..
After agreeing on the terms, the wholesaler finds an eager buyer to sell the contract at a higher price—that is, at or nearer to market value.
The buyer checks out the house, runs the numbers, and sees that it’s a good deal. They will then agree to purchase the property, and the wholesaler will assign the purchase contract to them.
The homeowner is glad to have sold their house; the buyer is thrilled to have acquired a profitable fixer-upper project. And, of course, the wholesaler is satisfied to have facilitated the transaction, since they pocket the difference as profit.
So, where do running comps come in?
Running comps is part of determining the ARV or the market value of a fully renovated home. This is important because it helps you price the property correctly.
If the price tag you put on a contract is incorrect, one of these two situations will likely happen:
If you price it too high, it won’t attract or convince any buyers.
If you price it too low, it won’t give you the margin needed for a significant profit.
Instead, you need to figure out the ideal selling price for you to find motivated buyers and earn a decent wholesaling profit. With this goal in mind, let’s get into the details of how you can run comps yourself.
3 Ways to Run Comps for Wholesale Deals
We’ll show you three simple ways on how you can pull up comps on the internet. Then, once you’ve done your research, our advice is for you to drive by the comps to verify their details.
Method #1: Using the MLS
A multiple listing service (MLS) is an information database established by cooperating local real estate brokers to provide data on properties for sale. Only licensed real estate agents and brokers that pay a membership fee can access an MLS. That said, if you know somebody who can access one for you (or you’re a licensed individual yourself), it’ll offer you the most comprehensive list of properties in a specific area.
Here’s how you can use an MLS to run comps:
Select your property type.
Enter the address of the property you’re wholesaling.
Define your radius. You can start with 0.5 miles and adjust according to property density (e.g., if there are too many properties within half a mile, narrow down the coverage).
Change the “sold” parameter to sold within six months.
Input the size range of your property (the parameter can be 300 square feet above and below the property you’re wholesaling).
Plug in the city and zip code of the property. You don’t want to consider the properties in another city or state, even if they’re within the radius you’ve selected.
Tap the “count” button, and the comps will show up.
Pull up the map to see if any comps are near a feature or school, as they will likely jack up the ARV—even if they’re only a street away from your property.
Assess the property condition and features of the comps, singling out the ones most similar to your home. Make sure to look around the neighborhood using Google Street View to match its location to yours.
Once you’ve narrowed it down to a couple of comps, you can send the results to yourself via email.
Method #2: Using Real Estate Websites
If you can’t access the MLS, the next best thing is to use real estate websites. They may not be as exhaustive as an MLS, but they can certainly help in pulling up comps.
Start with these three websites:
Zillow: Plug in your property’s address, filter the results to recently sold in six months, find the location of where your property would be on Zillow’s map, and use the same criteria as the ones listed in the MLS process to find your comps.
Redfin: You can also pull comps on Redfin based on recently sold houses. They use the data that real estate agents use to estimate the “lowest published error rate” in the market. And, unlike other appraisal estimators, Redfin Estimate considers all the homes on the MLS for an accurate property market value.
Homesnap: Yet another option is the Homesnap app, which provides the ARV of the properties listed on their platform. The number they give is usually a mid-price between the highest and lowest value. Homesnap also gives additional information like school ratings, average days on the market, and market scores.
These are just three of the many real estate websites you can run comps in. Others include Trulia, Realtor.com, Property Shark, and RealQuest. It’s best to run comps on more than one of them, so your ARV is based on various properties listed on each website.
Method #3: Manual Calculation
Lastly, if you prefer to run comps yourself, here are the steps for you to do so:
Look at the properties within 0.25 to 0.5 miles from the home you’re looking to wholesale.
Find at least three comps of similar property size, type, and age. The more comps you find, the more accurate the results would be.
Single out the homes that have sold in the last three to six months. The idea is to determine the average purchase price under current market conditions.
With the comps you’ve identified, calculate their average price per square foot.
Multiply the number by the square footage of your wholesaling property. Now you have your estimated ARV or fair market value.
Running comps manually does take more brainpower, but it’s always helpful to keep these steps in mind, even if you’re planning to run comps with online tools.
And there you have it! You now know how to run comps for a wholesaling deal. You can use any or a combination of these methods to identify the ideal price for a specific home—even if you’re not so familiar with the local area’s property values.
By knowing how to pull up comps three different ways, you can adapt to any situation whether the home is in a remote location, volatile market, or has the most unique of features. You’re now equipped to analyze and correctly price any wholesaling deals you come across for a successful investment.
The answer is, you can wholesale anything that has buyers!
That’s what makes things tricky.
There is a multitude of real estate property types you can potentially wholesale. But which one should you focus on? Which are more suited for the wholesaling technique?
Consider that the ultimate goal in a real estate wholesaling business is to generate profit by locating distressed properties that are owned by motivated sellers, putting their houses under contract, then assigning the contracts to buyers who want them. You don’t renovate or take ownership of the property. Instead, you find good deals, estimate repair costs and ARV, and collect a wholesaler fee when buyers sign purchase contracts.
Two crucial things here: the potential profit you can make from the properties, and the speed it takes to match them with buyers. The whole process should take only 30-45 days because the faster you close deals, the more successful you’ll be.
But which type of real estate should you focus on?
SFHs are plentiful in all states. A quick search of US housing statistics shows that 60.3% of housing structures in the country are SFHs (1-unit, detached). This makes them familiar to most, including wholesalers, and the obvious preference of most buyers.
You can find plenty of distressed SFHs under market value. In places like the City of Detroit, which was hit hard by the housing crisis and has lots of blighted areas, foreclosure-related sales are common.
Here, you can scoop up distressed SFHs with minimal capital, but do people want to buy them? Especially in blighted neighborhoods? It’s all about location, location, location, so no matter how good some deals are, they’re probably not suited to wholesaling. You want to find sweet spot houses that are both affordable and marketable. Cheap, tear-down houses in undesirable neighborhoods are not marketable.
With single-family homes, you can typically seal 5-10 deals per month, each of them giving you $5,000-$10,000 in profit. This makes them the bread and butter of the wholesaling business. They’re easy to find and easy to earn from.
While mobile homes aren’t the most popular, there are wholesalers who swear by them.
Mobile homes are the third most popular (7.6%) housing structure in the US. Most of them are in the southern states: Florida, Texas, North Carolina, Georgia, South Carolina, and Alabama.
There will always be a market for a cost-efficient living, so it is possible to find buyers for mobile home wholesale contracts. You’ll experience less competition, a stable demand, and get your name is known in the market fast (the community of mobile homeowners is often close-knit).
In terms of margins, mobile homes are low. You’ll earn around $500-$2,000 as an assignment fee for most deals you find. (Though it’s not unheard of to make $30,000 in high-demand areas, those come rarely!) In general, it’s going to take at least 6 mobile home deals to equate to 1 SFH deal.
In terms of volume, there are fewer mobile homes than SFHs across the country, too. So it depends on how much leg work you’re prepared to do, and which properties are in higher demand in your area/the people on your buyers’ list.
Apartment Buildings (and Multi-family Homes)
Most beginners are intimidated by wholesaling multifamily properties, due to their size and difference in buyer criteria (versus the usual SFHs). Instead of basing the value on ARV, apartment buildings and MFHs depend on the net operating income (NOI) or cash flow that it will produce.
Apartment buildings range in units sizes from studio to 4-bedroom, and in building sizes from a few floors to dozens of stories. In general, they are most in-demand in metropolitan areas. Because of this, apartments are not as preferred in smaller towns as in big cities. Keep this in mind, as apartments that attract fewer tenants will have a smaller buyer base, taking more time and marketing costs to seal deals.
Larger properties and buildings also take a lot of time to analyze. You will spend more time on these deals than you will with smaller properties. This means you’ll have lower volumes, so will need to make more profit from a smaller number of deals, most likely.
Nevertheless, MFHs are still in demand today, due to how much income they can provide on a monthly basis. There is also ease of managing them and higher ROI per unit compared to SFHs.
Wholesaling one building can bring in five to seven figures per deal, making the higher time investment on your part potentially worthwhile. Higher prices, bigger profits! Just make sure you’re prepared to put in the legwork and find the right location to wholesale apartment buildings or MFHs.
Wholesaling commercial real estate includes office buildings, retail malls, warehouses, or buildings with mixed usage. You’ll be sealing deals with investors who are looking to make money from overhauling and repositioning the building to attract businesses or tenants, focusing on NOI instead of ARV (just like with MFHs).
The pros of wholesaling commercial properties are bigger profit margins, less competition, and easier financing.
Their values are usually in the millions of dollars, therefore, the assignment fee you’ll make will also be high. Most real estate agents are also more comfortable with residential properties, so there isn’t much competition in the field, allowing you to negotiate with investors.
The range you can earn from commercial properties is wide (a small office will vary greatly from a retail mall). But with the right connections and buyer’s criteria, most of them are also easily sourced. In fact, some have experienced a larger pool of distressed commercial properties out there than residential ones (if you count construction REO properties).
Vacant Land and Lots
Empty lands can be wholesaled, too. Parking lots, infill lots, demolished buildings, acreage, and lots that are great for building new structures are fairly easy to wholesale. Given their variety, buyers for land wholesale deals will also come in all shapes and sizes.
If there is a market for new construction in an area, there will be a demand for buildable lots. Some home investors, for example, are constantly on the lookout for new lots to build on. Wholesaling empty land that meets their criteria is as straightforward as it sounds. These potential markets can be found by searching for areas that have sold newly-built structures recently. Chances are, those are the areas where houses are being (and will continue to be) built. That’s where you should look to wholesale vacant lots.
Flipping vacant lots can mean a teardown (usually done where the land is more valuable than the house) or a cleanup. Once you turn the land around, selling it can be fast – if it’s in a desirable area. The margins are smaller than with SFHs, however, unless you’re dealing in larger, more expensive plots of land.
Each property type has its pros and cons–and this list does not cover it all. At the end of the day, it boils down to what you want, how many deals you want to do, and how much you want to make off each deal.
If you’re looking for straightforward wholesaling, go for SFHs.
For beginners, start by understanding your market and building your buyer list. You can do this by joining local real estate investor clubs. It’s easier to find properties that match buyers’ criteria than getting stuck with properties that nobody is interested in, so make sure you research the level of demand in your area for each property type before getting started.
What are your preferred property types to wholesale? What are you curious to wholesale next?
the best thing a wholesaler can do is find a class C property in a Class B area. Second best option: find one very close to a B area.
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.
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.
Should real estate wholesalers operate with or without a real estate license? There are a lot of mixed opinions about this, and legality varies by state, but as long as you make sure that you abide by the law, you may not need to have a real estate license to wholesale properties. Let’s look at some of the pros and cons of acquiring a real estate license, as opposed to operating as a real estate wholesaler without one.
Benefits of Wholesaling with a Real Estate License
May offer increased credibility with sellers, buyers and associates in the industry.
Gets you access to the Multiple Listing Service (MLS), although most wholesale deals are done on off-market properties, meaning you won’t find them listed on the MLS.
You could use your RE license to earn additional income, if you want to earn commissions on selling properties, but this is a whole different beast to wholesaling, so ask yourself – do you want to be a real estate agent, or a wholesaler?
Being a licensed agent also serves as a good starting point when growing your network, by giving you the chance to connect with brokers and agents, who could potentially bring you future wholesale deals. This is also a great way for beginners to learn more about the ins and outs of the industry.
Not worrying about state requirements which the number of annual transactions you can do without a license.
Drawbacks of Wholesaling with a Real Estate License
Acquiring a real estate license requires ongoing time and money.
Bear in mind that if you’re a licensed agent, you can only work if you’re employed by a brokerage, which means that they are entitled to a commission from each sale you make. What’s more, being part of a brokerage means you’re limited by the policies set out by the firm, and therefore you might not be able to conduct business in the same way that you would independently.
By law, you are also required to disclose that you are a licensed agent, which could negatively impact your ability to source deals and put you at a disadvantage, when compared to an unlicensed wholesaler. This isn’t necessarily always the case, but it’s worth being aware of.
Potentially getting fined, or worse, for exceeding state limitations on the number of annual transactions one can do without a license.
Regardless of whether you decide to operate as a wholesaler with or without a real estate license, there are certain risks you should always be aware of. To safeguard your credibility, as best practice, it’s always important to carry out proper due diligence by staying informed about your state laws. We highly recommend consulting a real estate attorney for their legal opinion. Also, be extra mindful of the language you use when sourcing deals and marketing them, so that all parties involved understand what your participation in the transaction is.
You know those ugly signs you see when you’re sitting at stoplights that offer to BUY YOUR HOUSE FOR CA$H — those are called bandit signs. They are a disputed tactic in real estate circles, some people swear by them while others shun them.
Why They Work
Do you ever think to yourself, “Who keeps putting up these stupid signs?” Or better yet, “Who actually calls these numbers?” You might be surprised by the answers to both questions.
Answer #1 – Property wholesalers are responsible. Wholesalers look for motivated sellers to buy their (usually) distressed homes. Then they mark the price up and try to sell them off was quickly as possible without making any repairs.
Answer #2 – It should come as no surprise, but motivated property owners. They’re lured by the idea of getting quick cash and getting rid of a property they don’t really want.
So why are they so effective? The signs are purposefully designed to be simple and non-threatening. They target motivated sellers who want or need to get rid of their homes fast. The message is simple and clear. That’s why they look like some guy with a magic marker scribbled his number on some poster board and nailed it to a utility pole or stuck it on someone’s front lawn. And that’s not far from the truth, except for most of them are made from corrugated plastic. By being ugly and straightforward, homeowners are less intimidated to phone an “average Joe” than some real estate agent.
They are called bandit signs for a reason — they violate city ordinances in almost every community across the country. They are considered litter, so city crews just throw them away. That’s also why they usually pop up on Fridays after city offices close. Hefty fines can be levied per infraction and increase with the number of violations. Clearly, wholesalers remain unfazed by the threat of fines.
How To Profit From Them (Without Getting Caught)
1) Keeping your message simple and
2) Not using your company
3) Taking the proper steps to avoid
Only use prepaid cell phones
Never use your own name.
Place your signs on the weekends, most
city employeesonly work Monday thru Friday.
If possible, use private property to
place your signs. Ask the owner first.
4) Placing them in high traffic areas for maximum exposure.
Wholesaling is YOUR business, only you can determine what strategies to implement to meet your income goals. Bandit signs have been proven to be excellent lead magnets, but they aren’t the only tool at your disposal. If you decide to use them, it’s best to incorporate them into your overall marketing strategy.