When you wholesale real estate, the only thing more important than securing deals for the right price is finding cash buyers in your market. Otherwise, you could end up stuck with a property under contract that you have no intention of closing on.
But finding reliable cash buyers in the last few months has become more difficult as the market begins to shift. While the past two years practically turned the real estate market into feeding frenzy, wholesalers are now being greeted with much more uncertainty.
However, that doesn’t mean you should worry or give up on wholesaling. While there are fewer investors ready to purchase contracts, there are still a lot of favorable opportunities. Here are 6 tips that will help you build a cash buyers list even in a shifting market.
Sell to individual buyers
In wholesale real estate, there are usually two options when assigning a contract: working with an individual buyer or working with a real estate business.
Real estate companies bought a lot of properties over the past two years when interest rates were at historic lows and property prices were on the rise, but not at their peak. Now, interest rates have more than doubled and property prices have likely peaked. With an uncertain economy looming, many large real estate holdings companies are backing off and waiting before they begin buying again.
But there are many smaller real estate businesses or individual buyers who have slowed down but haven’t stopped buying. Focus on building relationships with these buyers and finding out what kind of properties they are looking for. You’ll have a lot more luck with this strategy than trying to target the large real estate companies that were buying left and right a few months ago.
Start reverse wholesaling
Reverse wholesaling is the process of finding out what kind of property a cash buyer wants and then finding it for them at a below-market price.
Because of the shifts we’re seeing in today’s market, putting earnest money on a property and signing a contract on a wholesale deal before identifying a buyer is a risky endeavor. There are still active buyers out there, but there’s no guarantee that one will bite at your deals. But if you form relationships with them and find out what they’re looking for first, you gain two advantages over your competition: you know exactly what kind of property to look for and you have a buyer once you can find it.
Of course, you have to be careful when reverse wholesaling, because laws forbid you from bringing a buyer to the deal before you have a contract on it (this is considered acting as an unlicensed agent). But if you obey the laws you can continue operating at a high level regardless of any economic downturn that comes your way.
Work with real estate agents
Good real estate agents know everyone in the local real estate game. It’s as much a requirement of the trade as having a real estate license. If you’re struggling to find cash buyers, start forming relationships with real estate agents and ask them about active cash buyers.
Even if they don’t know anyone they can put you in contact with, they likely know another agent who does. From there, you can continue expanding your network and growing your real estate business.
Once the economic downturn ends, you’ll come out with invaluable connections to cash buyers. You’ll also have a network of real estate agents who can point you in the direction of distressed properties that are better fit for wholesaling than listing on the MLS.
Charge less for deals
Brent Daniels recently joined BatchService CEO Jesse Burrell on a webinar where they discussed the shifting market, and he shared that most cash buyers were temporarily leaving the market. His advice to wholesalers: buy even deeper and expect to do double the work to make the same amount of money.
There’s still a lot of room to make good money wholesaling, but you need to expect lower assignment fees because cash buyers aren’t paying wholesalers $100,000 for a house right now.
If you want to build relationships with cash buyers and sell fast, keep this in mind when you go into negotiations. If you price your contracts right, you’ll sell faster, meaning you can move on to the next deal and pocket more money in a shorter period of time.
Find cash buyers with multiple properties
BatchLeads just introduced a quick filter that will allow you to search for cash buyers based on the number of homes in their portfolio, and it’s saving wholesalers significant amounts of time. Simply put, cash buyers with multiple properties are more likely to have the capital to afford your deals than one-time cash buyers.
If you want to focus your efforts on the real estate investors who are most likely to buy your deals, skip the ones with only one or two cash purchases. Not only will you avoid dealing with homeowners and small rental investors, but you’ll also avoid dealing with people who may not have the cash on hand to purchase your deal.
In today’s market, the time you save by focusing on the right real estate investors could be the difference between assigning a contract and watching someone else get to your cash buyers first.
Take up wholetailing
Wholetailing, a new wholesaling strategy that’s growing in popularity, may be the way to convince cash buyers to work with you. When you wholetail, you don’t assign contracts. Instead, you close on the deal yourself and purchase the property. Then you make small, low-effort repairs before finding a cash buyer who is interested in taking on the other repairs.
Wholetailing is a great option if you can get a property that doesn’t need many repairs but has to be sold at a low price. The most likely distressed properties to fit this strategy are high equity pre-foreclosures, foreclosures, tired landlords, and recent divorces. You can usually buy these properties at a great price and identify quick and easy repairs or renovations (like replacing cabinets, flooring, and applying a fresh coat of paint).
If the property is in good enough condition, your cash buyer won’t have to do anything to it before flipping it or listing it as a rental property. You can sell it to them for a low price and still make a significant profit, simply because you solved a problem and made the process easier for them.
Finding cash buyers is growing more difficult as the market shifts, but that doesn’t mean you should stop wholesaling. You just need to change your investment strategy so that you can identify and build relationships with the cash buyers who are still buying.
Thankfully, you still have several options that ensure you can continue making money no matter what happens with the economy. Many individual buyers are still working with real estate wholesalers, and if you learn what they’re looking for before you sign wholesale real estate contracts, you can make your job a lot easier.
Real estate agents also usually know several cash buyers, and if they don’t, they can put you in contact with someone who does. You can also look for cash buyers who have made multiple cash real estate purchases to weed out buyers who don’t have the capital to buy from you, or simply charge less for deals. Finally, if you have the capital on hand to close on a property yourself, you can wholetail to create easier purchases for the cash buyers in your list.