Breaking into the wholesaling business can be challenging. Many real estate investors look at it as a way to build up enough cash to move on into the fix and flip market or to begin amassing rental properties. But before any of that can happen, you need to learn how to find wholesale deals. And the worst part of this is that no one can give you a step-by-step process to follow to land deals.
You need to be willing to go out and really put in the time and effort to learn what works in your area and in the niche that you have chosen. And in the first few months, you will need to focus on just a few fundamental aspects of the wholesaling business to get your early few deals in motion.
What is Wholesaling?
If you’re ready to start investing in real estate but don’t know where to start, wholesaling may be for you. Wholesaling is the practice of entering into a sales contract on a property to sell that contract to another buyer. The wholesaler thus acts as a middleman and does not exchange any funds with either party. The property is sold, with you representing the owner and pocketing the profit. The profit comes from the difference between the initial sales price you agreed to and the contract buyout price the new seller agrees to.
Successful wholesaling relies on your ability to find the best properties. There are plenty of rehab-ready homes and thousands of vacant land parsels on the market, but wholesalers often look elsewhere for their leads. They may use skip tracing or data verification strategies to find properties that fly under the radar. These properties often offer promising opportunities that other real estate investors may not know about.
Why You Should Wholesale
There are many reasons why you may be drawn to wholesaling. It’s an excellent opportunity for a beginner real estate investor. It doesn’t require a lot of experience, and it can offer impressive profit with minimal investment. In fact, in many cases, the only investment is the wholesaler’s time. Because you do not complete the property purchase, you never supply funds, and you don’t exchange funds with the eventual buyer, either. You can effectively set up a wholesale deal and earn a profit with no real financial investment.
This is ideal for anybody who wants to invest in real estate but doesn’t have the cash or credit to start buying properties. Buying investment properties outright requires a large amount of readily available capital, and even many experienced investors don’t have this. Similarly, financing properties requires a well-established credit history – and usually a high income – which precludes many beginning investors from qualifying. Neither of these is a concern when you start wholesaling real estate.
It’s also great for beginners because it’s a skill that anybody can learn. There is a low barrier to entry, and anybody interested can work hard, study the market, and develop the ability to pick out profitable properties. This ability is the key to success, and it may seem like a difficult skill to hone, but it can be done if you have the right data. A lead generation program can provide you with details about properties in your area and contact information for the property owners. This information makes it simple to reach out and pursue leads. As a wholesaler, you’ll also need to master the art of following up with leads. Expect to send hundreds of texts and letters every month.
Analyze Your Market
Before you go looking for deals, you need to know what is selling and what other investors are looking for from your deal. Think of it as working in a restaurant. The chef does not just prepare food and send it out to the patrons. First, the guest places an order. Then the chef can cook what the guest would like. You are going to be doing the same thing. You want to find and prepare what your buyer is looking for. And the only way to know what that might be is to understand the local market.
And the best way to know what other real estate investors are looking for is to network. You need to be attending meetups, connecting with local real estate Wholesaling business clubs and organizations, and attending networking events. Not only will this help you by increasing the number of people in your network, but it will provide a wealth of information as well. Before attending any event, be sure to have a list of questions prepared to ask the people that you meet. In the case of other real estate investors, the following questions will provide you with some valuable insight into the market.
- Tell me about your most recent deals.
- What neighborhoods or zip codes have you found to be in demand or desirable?
- What square footage or the number of bedrooms do you find to be the best in your target area?
- If you don’t mind me asking, What did you pay for your last deal in that area?
- Did you renovate? How much was your reno budget?
Gathering this information from several investors will provide you with a good idea of what is hot in the market and where investors what to purchase.
Apply What You Learned
Now that you know the areas that are drawing the interest of other real estate investors, it is time to go out and find your own deals. Jump in your car and begin driving the high interest areas. Look for properties that look like the owner needs to sell. It could be overgrown grass and landscape, broken windows and doors, homes that look vacant, or just a house in disrepair. Write a list of all of the properties that you find that could fit into this category.
Next, check out the county tax website to get the owner’s name so that you can begin making contact and an offer. You might also consider buying a high equity absentee list to gather more owners to add to your contact list. Next, it is time to create an introduction letter to mail to all of these property owners.
What you need to focus on is your call to action. State your name and number and that you are interested in buying their property. Don’t go into too much detail. You want to grab their interest and drive them to call you ASAP to learn more.
Letters will be best received when they are handwritten. If that is not something that you want to undertake, hire someone to write the notes for you so that they have a personal touch. You can also consider hiring a professional company to complete this process if you are looking at processing a large number of letters in a short period of time. This will take a small amount of capital, but the rewards will be worth it. Consider sending at least 500 letters per month and keeping the process active for 6 to 8 months for the best result in Wholesaling. With any luck, you will be swamped with responses and have more opportunities than you ever expected.
Key Takeaways
There are many ways to make a profit in real estate, but wholesaling is one of the best for beginners. It’s also one of the easiest if you don’t have the capital or credit to start buying properties. You can jumpstart your wholesaling career by investing in a data verification and lead generation program that can provide you with actionable data points with just a few clicks. This allows you to maximize your reach while optimizing your efforts and ultimately maximizing your profit.
Suppose you have aspirations to eventually own income property or branch out into other forms of real estate investment. In that case, wholesaling is a great way to gain experience and build the capital you need to make more significant investments. Gain experience and learn how to pursue leads by investing in wholesaling today.
