Wholesaling real estate is unlike any other business model in the real estate industry. For starters, there’s very little risk involved because you don’t actually buy any property. You simply sign contracts on houses and then assign them to cash buyers.
However, many wholesalers don’t understand that this seemingly small difference has a large impact on how the industry works. They approach wholesale real estate as they would any other investment opportunity, and then they struggle to understand why they aren’t doing as many deals as some of the industry’s top names.
The good news is that there are changes you can make right now to fix your approach and put your business on the path to success. So if you’re ready to maximize your effectiveness and increase your production volume, here are 6 time-tested tactics that you can use to close deals more consistently.
Change 1: Identify areas differently
There are two common mistakes that wholesalers make: moving into a new market too soon and investing in a market without realizing they know nothing about it. Both mistakes can slow down your business and leave you stuck with properties you can’t assign to cash buyers.
When you’re new to wholesaling, we recommend selecting an area close to home and then working through the process there until you’re comfortable. Doing this in your own market will force you to become a better real estate investor and dig deep to find deals when they don’t seem to exist. It will also save you the headache of making costly mistakes in a neighborhood you don’t know well.
Once you’re ready to expand into new markets, make sure you pick an area that people want to live in. These areas are usually near attractions like universities or colleges, business and employment opportunities, or shopping centers. They also usually have low crime rates and growing economies.
After you take those features into account, analyze the area well, and don’t forget that you’re not a local. It’s better to ask for insights than to assume you know what’s happening in a neighborhood. You should also take your comps very seriously. If they aren’t obvious or if you have to do some mental gymnastics to make a deal work, you need to move on.
Change 2: Understand your lead generation strategy
If you want to build a lasting real estate business, you need a way to find promising leads on a consistent basis. Otherwise, you’ll find yourself grasping at straws and jumping on every opportunity that comes your way, even if they aren’t good ones.
To do this, you need to understand what makes a good real estate lead. In wholesaling, a good lead is someone who is interested in selling quickly (usually within the next 30 days) and is willing to do so for less than the property is worth. These homeowners are called motivated sellers, and they’re usually facing some financial crisis that leaves them no choice but to sell their homes.
Then you need to pick a lead generation strategy. If you want to find motivated seller leads, real estate lead generation software is the most efficient option. If you want to find distressed properties, driving for dollars or a software with driving for dollars tools, will help you find the properties you’re searching for.
Finally, spend time getting to know your lead generation strategy. If you’re using software, attend training, ask the support team for assistance, and read help articles to explore everything you can do with the platform. If you’re driving for dollars, watch videos from industry experts, find a mentor, and attend local meet-ups to learn about the property characteristics you should be looking for.
Change 3: Seeing is believing
Investors buy properties when they can see something that proves a house is worth their time and money. So don’t rush buyers into assignment agreements. Instead, take the time to show them why a deal is worth investing in.
The most obvious way to do this is to take them to the deal after you have a contract on it. However, most buyers will want to do this anyway. If you really want to show them why a property is a good deal, take them on a tour of the surrounding area. Bring them to the comparable properties you used to determine how much your deal is worth. Sit down with them and show them your math.
As a wholesaler, you know that the appearance of a house isn’t the full story, so take the time to show your buyers that you have an excellent real estate investment opportunity under contract. If you have compelling evidence, it will do the convincing for you.
Now if you’re ready to take this strategy up another level, you can introduce some competition. After you sit down with several investors and show them your math, play the role of a real estate agent and host an open house. By introducing other potential buyers into the equation, you’ll encourage them to make moves. They may even bid against each other, driving the price of your deal up!
Change 4: Match the cash buyer to the property
Most buyers aren’t simply looking for any property they can get their hands on. They want something specific and if you can help them find it, you’ll set yourself up for a large assignment fee and build a nice reputation.
There are two ways to go about doing this. First, you can reverse wholesale, which is the process of building relationships with cash buyers, learning about their investment strategy, and then finding investment properties that match their preferences.
Another strategy is to wholesale normally but build a large cash buyers list and then segment it based on what you know buyers are looking for. If you have a selection of buyers who have a rental portfolio, focus on sending them potential rental properties. If you have buyers who like to buy houses and rehab them, then send them distressed properties that need some work. Much like segmenting an email marketing campaign, this approach will help focus your efforts, which could increase your assignment fees as a result.
Change 5: Investigate your titles first
It’s a great feeling to get a wholesale deal under contract, but finding out that there’s a lien or some other title issue can quickly turn the entire ordeal into a nightmare. Simply put, title issues can stop a deal in its tracks immediately. So do your due diligence and research the property before signing any contracts. Then, once you sign a contract, work with a title company immediately to ensure the sale can go through as planned.
This is an important step when wholesaling real estate that you never skip. If there are issues, the title company can clear them as soon as possible and give you a timeline of when the deal can be closed. But if you don’t do this step and a title issue emerges after you’ve assigned the contract, you could forfeit your assignment fee and damage your own reputation.
Change 6: Don’t be afraid of failure
One of the greatest things that holds wholesalers back is the fear of failure. Surprisingly, it affects investors of all skill levels, from the new wholesaler who’s never made an offer to the expert with a massive company. It’s completely natural to be afraid of making mistakes, but you don’t have to let it hold you back.
The most important things you can do are also the most daunting: cold call, make offers, and make a mess of things. Mistakes are the greatest teachers in real estate, and wholesaling is forgiving to those who are getting started. However, inactivity is never forgiving, and if you don’t take action, you’ll never improve your skills. If you want to become a real estate wholesaler, you simply have to jump in head first and learn on the job. Embrace your fear of failure and let it drive you to work hard and perfect your processes.
As you implement these changes into your business, you’re going to see some positive developments. We’ve picked each one because we’ve seen them work in wholesaling businesses across the US, and we know they can work for you.
However, just because we’ve compiled a list of six changes, that doesn’t mean you need to revolutionize your business overnight. In fact, doing so may increase your problems rather than decrease them. So instead of making radical changes, implement these tips where you can, when you can.
Don’t worry too much about doing everything perfectly; instead, just look for opportunities to improve your operations and your skillset every day. That’s the true spirit of entrepreneurship, and if you take that approach to your business, you’ll build up to an unbelievable level of success in time.