Real estate investors are an assorted lot. I’ve met some who came from construction backgrounds and others who left their corporate jobs to be their own bosses. But, one thing we all have in common is that we all started our real estate investing dream somewhere. And, often, it is with wholesaling.
That was the case with Sarah, my friend from college. She was looking for a way to build a business buying, renovating and selling houses but didn’t want to commit too much capital as she learned the ins and outs of the trade. So, she came to me asking how to get started wholesaling real estate.
Steps For How To Get Started Wholesaling Real Estate
Wholesaling, I told her, is a pretty straightforward process: buy a distressed property, find an investor-buyer, and sell it for a reasonable price that leaves margins for both you and the buyer who rehabs the house. But, putting all the pieces together to make a smooth transaction can be tricky unless you have the right resources in place. Let me run you through it the same way I did with Sarah.
Step 1: Get Started Wholesaling Real Estate With Solid Leads
It goes without saying that your best wholesaling opportunities come via houses that are in need of TLC. The more work that the house needs, the better the potential upside will be for your investor-buyer. But, finding a house that needs work at a price that makes sense is sometimes easier said than done. Here are a few ways you can find distressed properties to wholesale.
- Join a Club. Real estate investment clubs have regularly scheduled meetings in which real estate agents, contractors, appraisers, and investors mingle. But, be aware that you won’t be the only one looking for leads here. You’ll have competitors.
- Buy From an Auction. Buying a distressed property at an auction is a viable option, but it requires a lot of work on your part. You can expect to spend hours pouring over auction listings and looking up records to identify potential liens or other title issues just to pinpoint one house that you might be interested in buying. And, even after all that work, the house might not even still be for sale when auction day comes.
- Hit the Pavement. A time-tested way to find distressed properties is to walk or drive the streets of neighborhoods you’re interested in to identify fixer-uppers. This strategy can be effective if you’re looking for one-off properties, but it’s not a sustainable way to find several opportunities. You have to spend a lot of time searching for houses in a neighborhood, doing due diligence on back taxes and liens, and then putting together some comps to see if it’s even worth looking into further. That’s all before you even see if the home is up for sale.
Like many other investors, I’ve tried all of these real estate investing lead generation strategies and more. We do it because they work—sometimes. But, to be really effective at finding distressed properties to wholesale, you need a way to find qualified leads. Otherwise, you’ll spend too much time stuck on this step of the wholesaling process.
Step 2: Approach Distressed Homeowners With a Fair Offer
Negotiating with a distressed homeowner requires a lot of professionalism. They are likely stressed out already so, to gain their trust, you need to show tact and empathy for their “ugly” situation. Highlighting how selling the home will remove some of their financial friction can be powerful messaging.
Another big selling point that you can offer the homeowner, is handling the process for them from start to finish. If the homeowner knows they don’t have to shell out any money, fill out reams of paperwork, or contact an appraiser, they may feel less overwhelmed about selling.
You’ll want to make a fair offer and help the homeowner understand how you got the numbers. Communicate what you believe it will take to make the house marketable to new homeowners and what it will cost. I’ve seen too many investors make a low-ball offer without backing up their rationale and immediately lose credibility with the homeowner.
The key to approaching distressed homeowners is to be clear about your intentions for wholesaling the house. You don’t want to damage your professional reputation by assigning the contract to another investor before closing without telling the homeowner and adding an assignment provision to your purchase contract. They’ll end up feeling taken advantage of—and, you’ll be less likely to attract more wholesaling deals in the community.
Step 3: Find a Wholesale Investor-Buyer
One of the biggest challenges you’ll face if you don’t have a network of other real estate investors is getting the property sold once it’s purchased. Finding a buyer has to be done quickly so your margins don’t get displaced by your holding costs. You can run ads on real estate websites or tap real estate investment groups to try to get the property sold. Posting your deal on social media can also be a good way to expand your reach. Eventually, you’ll want to create a strong website to attract buyers and build a list to offer your wholesale deals to.
Thankfully, there’s already one available to you.
Get Access to Investors Looking For Your Wholesale Deals
Like Sarah—and many of you—I started my professional real estate investing career by wholesaling houses. Initially, it was a bit stressful. I would find a good investment opportunity, leap on it, and then worry about finding another investor-buyer quick enough. That changed for me when I joined the nationwide network of independently owned and operated HomeVestors® franchisees.
There are over 1,100 of us across the country who are buying and selling “ugly” houses everyday, which means that I always have a network of potential buyers for my wholesale deals on the DealVestors® website. And, I often have plenty of them on hand because of the effectiveness of the nationally-known and trusted “We Buy Ugly Houses®” marketing campaign. In fact, these days, I do it because I simply have more properties on my hands than I can reasonably rehab.
If that sounds like a problem you’d like to have, too, get in touch with HomeVestors today.
Each franchise office is independently owned and operated.